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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) JULY 30, 1997
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SAFETY 1ST, INC.
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(Exact Name of Registrant as Specified in Its Charter)
MASSACHUSETTS
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(State or Other Jurisdiction of Incorporation)
0-21404 04-2836423
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(Commission File No.) (I.R.S. Employer Identification No.)
210 BOYLSTON STREET, CHESTNUT HILL, MASSACHUSETTS 02167
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(Address of Principal Executive Offices) (Zip Code)
(617) 964-7744
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
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On July 30, 1997, the Company entered into a $55 million refinancing of its
business that replaces the Company's previous credit facility with Goldman Sachs
Credit Partners LP. The refinancing is comprised of a $15 million equity
investment and a $40 million credit facility.
The equity investment is represented by a $15 million private placement of
15,000 shares of Series A Redeemable Preferred Stock, $1.00 par value per share
(the "Preferred Shares"), and warrants to purchase 1,268,346 shares of the
Company's Common Stock (the "Warrants"). The investment was made 50% by BT
Capital Partners, Inc. ("BT Capital"), an affiliate of Bankers Trust New York
Corporation, and 50% by Bear, Stearns & Co. Inc. ("Bear Stearns"). BT Capital
and Bear Stearns are collectively herein called the "Investors".
Dividends on the Preferred Shares are payable, at the option of the
Company, either in cash at the annual rate of 10% compounded quarterly or in the
form of an increase of the liquidation value of the Preferred Shares at an
annual rate of 13.25% compounded quarterly; however, the Company is prohibited
by covenants in its credit facility from paying cash dividends so long as the
term loan under the credit facility is outstanding, and thereafter unless at
least $3 million of Unused Availability (as defined in the credit facility)
would remain after dividend payment. The Preferred Shares have a liquidation
preference of $1,000 per share plus all accrued but unpaid dividends. In
addition, the Preferred Shares are redeemable at the option of the Investors at
the earlier of: (i) six years from the closing date, (ii) six months after
repayment of the Company's term loan under the credit facility (but, in any
event, not earlier than the fifth anniversary of the closing), (iii) immediately
subsequent to certain changes in control of the Company or (iv) ninety days
after the occurrence of an event of default (as defined). In addition, the
Preferred Shares are redeemable at the option of the Company at any time after
the second anniversary of the closing or, prior to the second anniversary of the
closing, upon a merger or certain changes in control of the Company. The holders
of the Preferred Stock have no voting rights except as required by law.
The Warrants are exercisable through July 30, 2007 at an exercise price of
$.01 per share of Common Stock to be acquired, and contain provisions which
adjust the number of shares of Common Stock underlying the Warrants to protect
the Investors from dilution arising from certain events, as defined. Of the
Warrants for 634,173 shares of Common Stock issued to each Investor, Warrants
for 63,418 shares (subject to such adjustment) to each Investor will revert to
the Company if the Company's 1998 earnings before interest and taxes exceeds
$16 million (and if prior to the determination of such amount, there has not
been a change in control). Each Investor has been granted one demand
registration right for the Common Stock underlying the Warrants (subject to
customary timing limitations) as well as piggyback registration rights. Each
Investor is entitled to designate one person to be nominated to the Company's
Board of Directors so long as that Investor owns Common Stock (or Warrants to
purchase Common Stock) which in the aggregate represents 5% or more of the
Common Stock Equivalents (as defined) outstanding at closing. As long as any
Investor has a right to designate a person to the Board of Directors, the Board
of Directors shall not exceed 10 members. Michael Lerner and Michael Bernstein,
who collectively own approximately 52% of the Company's issued and outstanding
Common Stock, have entered into a Voting Agreement to vote in favor of the
persons designated by the Investor(s) to the extent such Investor is entitled
to designate a person.
Effective with the closing of the equity investment, the Company's Board
of Directors increased its size from six to eight members and added James M.
Dworkin and John D. Howard, designees of BT Capital and Bear Stearns,
respectively, as directors.
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The Company's new credit facility with BT Commercial Corporation ("BTCC"),
also an affiliate of Banker's Trust New York Corporation, consists of a
$27,500,000 revolving credit facility and a $12,500,000 term loan, both of which
expire on July 30, 2002. The annual rate of interest for the revolving credit
facility is, at the Company's option, either prime plus 1.75% or LIBOR plus
2.75%. The annual rate of interest for the term loan is, at the Company's
option, either prime plus 2.00% or LIBOR plus 3.00%. The credit facility is
secured primarily by all corporate assets of the Company and contains certain
financial covenants. Advances under the revolving credit facility, which
includes standby and documentary letters of credit, are calculated based on an
asset-based borrowing formula. The credit agreement requires the Company to pay
certain fees to BTCC, as Agent, including, without limitation, a monthly unused
line fee equal to 0.50% per annum of the average unused commitment during the
preceding month and letter of credit fees in an amount equal to 2.50% per annum
of the daily average amount of standby letter of credit obligations outstanding
during the previous month and 1.375% per annum of the daily average amount of
documentary letter of credit obligations outstanding during the previous month.
The Company and BTCC have also entered into a separate letter agreement that
requires the Company to pay to BTCC a one-time, up- front fee of $1,000,000, an
annual agent's fee of $75,000 and letter of credit facing fees equal to 0.25%
per annum on the undrawn amount of each letter of credit.
In conjunction with the termination of the Company's previous credit
facility, Michael Lerner's limited guaranty and related pledges of Company
Common Stock and other collateral were terminated and released.
The above descriptions of the equity investment and credit facility are
qualified in their entirety by reference to the definitive documents of such
transactions which are filed herewith as Exhibits 4.1 and 10.1 through 10.11 and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(c) The following Exhibits are filed as part of this Report.
EXHIBIT DESCRIPTION
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4.1. Designation of Series A Preferred Stock of the Company
10.1. Stock and Warrant Purchase Agreement dated as of July
30, 1997, among the Company and the Investors
10.2. Warrant dated July 30, 1997, for 63,418 shares of the
Company's common stock issued to BT Capital
10.3. Warrant dated July 30, 1997, for 63,418 shares of the
Company's common stock issued to Bear Stearns
10.4. Warrant dated July 30, 1997, for 570,755 shares of the
Company's common stock issued to BT Capital
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10.5. Warrant dated July 30, 1997, for 570,755 shares of the
Company's common stock issued to Bear Stearns
10.6. Registration Rights Agreement dated as of July 30, 1997,
among the Company, the Investors and Michael Lerner
10.7. Voting Agreement dated as of July 30, 1997, among the
Company, Michael Lerner, Michael S. Bernstein and the
Investors
10.8. Letter dated July 30, 1997, from BT Capital to the
Company regarding compliance with certain regulations of
the United States Small Business Administration
10.9. Credit Agreement dated as of July 30, 1997, among the
Company and Safety 1st Home Products Canada Inc., as
Borrowers, BTCC, as Lender and Agent, and Bankers Trust
Company, as Issuing Bank
10.10. $27,500,000 Revolving Note dated July 30, 1997, executed
by the Company and Safety 1st Home Products Canada Inc.
in favor of BTCC
10.11. $12,500,000 Term Note dated July 30, 1997, executed by
the Company and Safety 1st Home Products Canada Inc. in
favor of BTCC
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAFETY 1ST, INC.
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(Registrant)
Date AUGUST 5, 1997 By /s/ Michael Lerner
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Michael Lerner, Chief
Executive Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
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4.1. Designation of Series A Preferred Stock of the Company
10.1. Stock and Warrant Purchase Agreement dated as of
July 30, 1997, among the Company and the Investors
10.2. Warrant dated July 30, 1997, for 63,418 shares of
the Company's common stock issued to BT Capital
10.3. Warrant dated July 30, 1997, for 63,418 shares of
the Company's common stock issued to Bear Stearns
10.4. Warrant dated July 30, 1997, for 570,755 shares of
the Company's common stock issued to BT Capital
10.5. Warrant dated July 30, 1997, for 570,755 shares of
the Company's common stock issued to Bear Stearns
10.6. Registration Rights Agreement dated as of July 30, 1997,
among the Company, the Investors and Michael Lerner
10.7. Voting Agreement dated as of July 30, 1997, among
the Company, Michael Lerner, Michael S. Bernstein and
the Investors
10.8. Letter dated July 30, 1997, from BT Capital to the
Company regarding compliance with certain regulations
of the United States Small Business Administration
10.9. Credit Agreement dated as of July 30, 1997, among the
Company and Safety 1st Home Products Canada Inc., as
Borrowers, BTCC, as Lender and Agent, and Bankers Trust
Company, as Issuing Bank
10.10. $27,500,000 Revolving Note dated July 30, 1997,
executed by the Company and Safety 1st Home Products
Canada Inc. in favor of BTCC
10.11. $12,500,000 Term Note dated July 30, 1997, executed by
the Company and Safety 1st Home Products Canada Inc.
in favor of BTCC
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DESIGNATION OF
SERIES A PREFERRED STOCK
SECTION 1. DESIGNATION OF AMOUNT; RANKING.
The issuance of Fifteen Thousand (15,000) shares of the Series A
Preferred Stock is hereby authorized. The Series A Preferred Stock shall rank
senior to all other classes and series of equity securities of the Corporation
now existing or hereafter created (collectively, the "Junior Stock") with
respect to dividend rights, rights of redemption, rights of conversion and
rights of Liquidation (as hereinafter defined).
SECTION 2. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
"Affiliate" means, with respect to any specified Person, (1) any
other Person who, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(2) any other Person who is an executive officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity Securities, of the specified Person or a Person described in clause (1)
above, (3) any other Person of whom the specified Person is an executive officer
or partner or is, directly or indirectly, the beneficial owner of ten percent
(10%) or more of any class of equity Securities, (4) any other Person in whom
the specified Person has a substantial beneficial interest or as to whom the
specified Person serves as trustee or in a similar capacity, or (5) any relative
or spouse of the specified Person or any of the foregoing Persons, any relative
of such spouse or any spouse of any such relative. 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. As used in this definition, the
term "relative" means any parent, grandparent, great-grandparent, child,
grandchild, great-grandchild, sibling, first uncle, first aunt or first cousin
(in each case, whether natural or adoptive).
"Applicable Dividend Rate" means, for each Dividend Period (i) for
dividends paid in cash on the last day of such period, at a rate of 10.0% per
annum and (ii) in all other circumstances, at a rate of 13.25% per annum.
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"Bear Stearns" shall have the meaning ascribed thereto in the Stock
and Warrant Purchase Agreement.
"Best Knowledge" shall have the meaning ascribed thereto in the
Stock and Warrant Purchase Agreement.
"Board" shall mean the Board of Directors of the Corporation.
"BT Capital" shall have the meaning ascribed thereto in the Stock
and Warrant Purchase Agreement.
"Business" shall have the meaning ascribed thereto in the Stock and
Warrant Purchase Agreement.
"Change of Control" means the occurrence of any of the following
events: (i) any Person or any Persons, excluding Lerner and the Investors,
acting together which would constitute a "group" for purposes of Section 13(d)
of the Exchange Act, together with any Affiliates thereof, shall beneficially
own, directly or indirectly, 30% or more of the total voting stock of the
Corporation; (ii) all or substantially all of the Corporation's assets, on a
consolidated basis, are sold as an entirety to any Person or related group of
Persons or there shall be consummated any consolidation or merger of the
Corporation (A) in which the Corporation is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly-owned Subsidiary
of the Corporation in which all shares of Common Stock outstanding immediately
prior to the effectiveness thereof are changed into or exchanged for the same
consideration) or (B) pursuant to which the Common Stock would be converted into
cash, securities or other property, in any case, other than a consolidation or
merger of the Corporation in which the holders of the Common Stock immediately
prior to the sale of assets or consolidation or merger have, directly or
indirectly, at least a majority of the Common Stock of the transferee or
continuing or surviving corporation immediately after such sale of assets or
consolidation or merger or (iii) Lerner shall cease to beneficially own at least
30% of the total voting stock of the Corporation.
"Common Equivalents" shall have the meaning ascribed thereto in the
Voting Agreement.
"Common Stock" means, collectively, the Common Stock, $.01 par
value, of the Corporation.
"Designations" means, with respect to the Series A Preferred Stock
of the Corporation, the designations, powers, preference and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof.
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"Dividend Period" means (a) the period commencing on the Original
Issuance Date and expiring on September 30, 1997 or the date of redemption of a
share of Series A Preferred Stock, if earlier, and (b) thereafter each period
commencing on a Preferred Dividend Payment Date and expiring on the day
immediately preceding the next Preferred Dividend Payment Date or the date of
redemption of a share of Series A Preferred Stock, if earlier.
"Encumbrance" shall have the meaning ascribed thereto in the Stock
and Warrant Purchase Agreement.
"Equity Offering" shall mean any underwritten public offering for
the account of the Corporation of Common Stock pursuant to a registration
statement filed under the Securities Act.
"Event of Default" means a material breach of any of the
representations, warranties or covenants in any of the Related Documents that
continues (x) with respect to payment defaults, 10 days and (y) with respect to
all other defaults, 30 days after Notice from any holder of Series A Preferred
Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" means the Indebtedness of the Corporation
under the Credit Agreement.
"Guaranty" means any obligation, contingent or otherwise, of any
Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation of any other Person in any manner, whether
directly or indirectly, including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness or other obligation, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (iii) to purchase or otherwise pay for
merchandise, materials, supplies, services or other property under an
arrangement which provides that payment for such merchandise, materials,
supplies, services or other property shall be made regardless of whether
delivery of such merchandise, materials, supplies, services or other property is
ever made or tendered, or (iv) to maintain the working capital, equity capital
or other financial statement condition of any primary obligor, provided,
however, that the term Guaranty shall not include endorsement of instruments for
deposit and collection in the ordinary course of business.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed
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money or with respect to deposits or advances of any kind, (b) all obligations
of such Person evidenced by (or which customarily would be evidenced by) bonds,
debentures, notes or similar instruments, (c) all reimbursement obligations of
such Person with respect to letters of credit and similar instruments, (d) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (e) all
obligations of such Person incurred, issued or assumed as the deferred purchase
price of property or services other than accounts payable incurred and paid on
terms customary in the business of such Person (it being understood that the
"deferred purchase price" in connection with any purchase of property or assets
shall include only that portion of the purchase price which shall be deferred
beyond the date on which the purchase is actually consummated), (f) all
obligations secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (g) all obligations of such Person under forward sales,
futures, options and other similar hedging arrangements (including interest rate
hedging or protection agreements), (h) all obligations of such Person to
purchase or otherwise pay for merchandise, materials, supplies, services or
other property under an arrangement which provides that payment for such
merchandise, materials, supplies, services or other property shall be made
regardless of whether delivery of such merchandise, materials, supplies,
services or other property is ever made or tendered, (i) all Guaranties by such
Person of obligations of others and (j) all capitalized lease obligations of
such Person.
"Investors" shall have the meaning ascribed thereto in the Stock and
Warrant Purchase Agreement.
"Lerner" means Michael Lerner and any Affiliate of Michael Lerner.
"Liability" means, to the Best Knowledge of the Corporation, 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" means any security interest, lien, pledge, claim, charge,
escrow, encumbrance, option, right of first offer, right of first refusal,
preemptive right, mortgage, indenture, security agreement or other similar
agreement, arrangement, contract, commitment, understanding or obligation,
whether written or oral and whether or not relating in any way to credit or the
borrowing of money.
"Liquidation" shall mean any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation.
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"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.
"Original Cost" initially means, with respect to any share of Series
A Preferred Stock, $1,000. In the event of any change (by way of any
recapitalization, subdivision or recombination) in the number or kind of shares
of Preferred Stock, the Original Cost of such shares of Preferred Stock
immediately prior to such change shall be allocated ratably among such shares of
Preferred Stock immediately after such change.
"Original Issuance Date" shall mean July 30, 1997.
"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 venture, an unincorporated organization and a Governmental
Authority.
"Qualified Holder" means (i) each Person who initially acquires
Series A Preferred Stock from the Corporation and (ii) any other holder of
Series A Preferred Stock who, together with its Affiliates, owns at least 25% of
the outstanding shares of Series A Preferred Stock at the time in question.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of July 30, 1997 among the Corporation and the Investors
named therein, as amended from time to time.
"Related Documents" means, this Certificate of Designation, the
Stock and Warrant Purchase Agreement, the Warrants, the SBA Letter, the Voting
Agreement, the Registration Rights Agreement and the Credit Agreement.
"Requisite Holders" shall mean, at any time, Persons holding a
majority of the shares of Series A Preferred Stock outstanding at such time.
"SBA Letter" shall have the meaning ascribed thereto in the Stock
and Warrant Purchase Agreement.
"Securities" means "securities" as defined in Section 2(1) of the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
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"Credit Agreement" shall have the meaning ascribed thereto in the
Stock and Warrant Purchase Agreement.
"Stock and Warrant Purchase Agreement" means the Stock and Warrant
Agreement dated as of July 30, 1997 among the Corporation and the Investors
named therein, as amended from time to time.
"Stock Option Plans" shall have the meaning ascribed thereto in the
Stock and Warrant Purchase Agreement.
"Subsidiary" shall have the meaning ascribed thereto in the Stock
and Warrant Purchase Agreement.
"Voting Agreement" means the Voting Agreement dated as of July 30,
1997 among the Corporation, the Investors and the Stockholders named therein, as
amended from time to time.
"Warrants" shall have the meaning ascribed thereto in the Stock and
Warrant Purchase Agreement.
SECTION 3. DIVIDENDS AND DISTRIBUTIONS.
(a) When, as, and if declared by the Board, out of funds legally available
for that purpose, the holders of Series A Preferred Stock shall be entitled to
receive dividends, which shall accrue on a daily basis at the Applicable
Dividend Rate on the sum of the Original Cost of a share of Series A Preferred
Stock plus all accumulated and unpaid dividends thereon, payable on each March
31, June 30, September 30 and December 31 (each, a "Preferred Dividend Payment
Date"), the first such Preferred Dividend Payment Date being September 30, 1997.
Dividends shall accrue at the Applicable Dividend Rate regardless of whether the
Board has declared a dividend payment or whether there are any profits, surplus
or other funds of the Corporation legally available for dividends. Any dividends
which accrue pursuant to this Section 3(a) and which are not paid on the next
succeeding Preferred Dividend Payment Date shall be classified as "accumulated
dividends" and shall remain "accumulated and unpaid dividends" until paid or
otherwise satisfied pursuant to this Certificate of Designation. Dividends on
each share of Preferred Stock shall accrue pursuant to this Section 3(a) from
and including the Original Issuance Date to and including the date such share is
redeemed in full and all accrued but unpaid dividends thereon are also paid in
full. All payments due under this Section 3(a) to any holder of shares of Series
A Preferred Stock shall be made to the nearest cent.
(b) The dividends payable with respect to the Series A Preferred Stock on
each Preferred Dividend Payment Date shall be paid to the holders of shares of
the Preferred Stock as they appear on the stock records of the Corporation on
such date (the "Preferred Record Date") as shall be fixed by the Board, which
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Preferred Record Date shall not be more than 60 days prior to the applicable
Preferred Dividend Payment Date and shall not precede the date upon which the
resolution fixing such Preferred Record Date is adopted, and if the Board shall
not fix a Preferred Record Date, the Preferred Record Date shall be deemed to be
the same date as the applicable Preferred Dividend Payment Date.
(c) No dividend or distribution shall be paid to the holders of any class
of Series A Preferred Stock pursuant to this Section 3 in any form of
consideration other than cash (or the accumulation thereof in accordance with
the provisions of this Certificate) unless the Requisite Holders, at the time of
the distribution, approve such distribution (including the valuation of the
consideration being distributed).
(d) Except as otherwise provided herein, if at any time the Corporation
pays less than the total amount of dividends then accrued with respect to the
Series A Preferred Stock, such payment shall be distributed ratably among the
holders of the Series A Preferred Stock based upon the number of shares of
Series A Preferred Stock then held by each holder.
SECTION 4. LIQUIDATION.
In the event of any Liquidation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to receive, out of the assets
of the Corporation legally available for distribution to its stockholders,
before any payment shall be made to the holders of any stock ranking on
Liquidation junior to the Series A Preferred Stock, an amount per share equal to
the Original Cost of such share plus an amount equal to all accrued and unpaid
dividends (whether or not declared) on each share, if any, to the date of
payment (the "Series A Preferred Liquidation Preference"). If, upon any
Liquidation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of the Series A
Preferred Stock the full amounts to which they respectively shall be entitled,
the holders of shares of Series A Preferred Stock shall share ratably in any
distribution of assets according to the respective amounts which would be
payable with respect to the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in full. In the
event of any Liquidation, after payment shall have been made to the holders of
shares of Series A Preferred Stock in the full amount to which they are
entitled, the holders of shares of capital stock ranking junior to the Series A
Preferred Stock on Liquidation shall be entitled, to the exclusion of the
holders of the Series A Preferred Stock, to share, according to their respective
rights and preferences, in all remaining assets of the Corporation available for
distribution to its stockholders.
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SECTION 5. REDEMPTION.
(a) Redemption at the Corporation's Option. The Corporation may redeem at
any time after the second anniversary of the Original Issuance Date and at its
option, any or all of the shares of Series A Preferred Stock then outstanding.
(b) Other Redemptions. At any time on or after the first to occur of (A)
the sixth anniversary of the Original Issuance Date, (B) 180 days after the date
upon which the Corporation repays all its indebtedness under the Credit
Agreement (but not earlier than the fifth anniversary of the Original Issuance
Date), (C) a Change of Control, (D) an Equity Offering or (E) 90 days after the
occurrence or continuation of an Event of Default, the Requisite Holders may
elect to have the Corporation redeem all (but not less than all) of the
outstanding shares of Series A Preferred Stock (except in the case of either the
occurrence of the situation described in (i) of the definition of Change of
Control with respect to 51% (and not 30%) or more of the total voting stock or
of the occurrence of any of the situations described in (ii) of the definition
of Change of Control, and in any such case all of the outstanding shares of
Series A Preferred Stock shall, at the election of the Corporation by service of
notice to the holders of shares of Series A Preferred Stock, be mandatorily
redeemed, in which case the Corporation shall be required to redeem all
outstanding shares of Series A Preferred Stock) at a price per share equal to
the Original Cost thereof plus all accrued and unpaid dividends thereon, by
giving written notice to the Corporation of such election (which written notice
shall be deemed to have been given in the case of the occurrence of any of the
situations described in the prior parenthetical provided that the Corporation
shall previously have served prior notice as required by the provisions
contained in the prior parenthetical) (the "Investor Notice of Election"),
whereupon the Corporation shall be obligated to repurchase such shares of Series
A Preferred Stock on such date (the "Investor Redemption Date") as shall be
determined by the Corporation, but in any event not earlier than 10 days and not
later than 30 days after the date on which the Investor Notice of Election is
delivered (or deemed to be delivered, as the case may be) to the Corporation.
Promptly (but in no event later than five days) after the delivery of the
Investor Notice of Election to the Corporation (or its deemed delivery, as the
case may be), the Corporation shall send written notice (the "Redemption
Notice") to each of the holders of the Series A Preferred Stock. The Redemption
Notice shall specify the Investor Redemption Date and the location of the
Corporation's principal executive office or place of business where the closing
will occur.
(c) Redemption Closing.
(i) The closing of the Corporation's redemption of the Series A
Preferred Stock pursuant to Sections 5(a) and
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5(b) above shall take place at 11:00 a.m. New York City time on the date
upon which the Change of Control is consummated or the Investor Redemption
Date (as applicable) at the Corporation's principal executive office or
place of business. At the closing, the Corporation shall pay to each of
the holders of the Series A Preferred Stock, against the Corporation's
receipt from such holder of the certificate or certificates representing
the shares of such series of Series A Preferred Stock then held by such
holder, an amount equal to the aggregate payment due pursuant to this
Section for all such shares. All such payments shall be made by wire
transfer of immediately available funds, or if such holder shall not have
specified wire transfer instructions to the Corporation prior to the
closing, by certified or official bank check made payable to the order of
such holder.
(ii) In the event of a redemption pursuant to clause (D) of Section
5(b) above, the Series A Preferred Stock shall be redeemable only to the
extent of the net proceeds to the Corporation from such Equity Offering
after repayment, if applicable, of sums contractually payable, if any, by
the Corporation pursuant to the Credit Agreement. If the funds of the
Corporation legally available subsequent to an Equity Offering for
redemption of shares of Series A Preferred Stock are insufficient to
redeem the total number of such shares to be redeemed on such date, (A)
those funds which are legally available shall be used to redeem the
maximum possible number of shares ratably among the holders of such shares
based upon the aggregate number of such shares held by each such holder
and (B) the net proceeds to the Corporation from any subsequent Equity
Offerings shall be used to redeem the remaining number of shares left
outstanding after the ratable redemption contemplated under clause (A)
hereunder.
(iii) If the funds of the Corporation legally available (and without
rendering the Corporation insolvent) for redemption of shares of Series A
Preferred Stock on any Investor Redemption Date are insufficient to redeem
the total number of such shares to be redeemed on such date, those funds
which are legally available (and which will not render the Corporation
insolvent) shall be used to redeem the maximum possible number of shares
ratably among the holders of such shares based upon the aggregate number
of such shares held by each such holder. At any time thereafter when
additional funds of the Corporation are legally available (and which will
not render the Corporation insolvent) for the redemption of shares
(including, without limitation, funds from any Equity Offerings) such
funds shall immediately be used to redeem the balance of the shares which
the Corporation has become obligated to redeem
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<PAGE> 10
on any Investor Redemption Date but which it had not redeemed.
(iv) No shares of Series A Preferred Stock are entitled to any
dividends accruing after the date on which the full redemption price for
such share is paid to the holder thereof. On such date all rights of the
holder of such share shall cease, and such share shall not be deemed to be
outstanding.
(v) Any shares of Series A Preferred Stock which are redeemed or
otherwise acquired by the Corporation shall be canceled and shall not be
reissued (as treasury shares), sold or transferred.
(vi) Neither the Corporation nor any subsidiaries of the Corporation
shall offer to purchase, redeem or acquire any shares of Series A
Preferred Stock other than pursuant to the terms of this Certificate of
Designation or pursuant to a purchase offer made to all holders of Series
A Preferred Stock pro rata based upon the number of such shares owned by
each such holder.
SECTION 6. VOTING.
(a) Except as otherwise required by law and by paragraph (b) below, the
holders of Series A Preferred Stock shall not be entitled to vote such shares on
any matter on which the stockholders of the Corporation shall be entitled to
vote, and shares of Series A Preferred Stock shall not be included in
determining the number of shares voting or entitled to vote on any such matters.
(b) So long as any shares of Series A Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the holders of at least a
majority of the shares of Series A Preferred Stock then outstanding, or the
unanimous written consent of the holders of all the outstanding shares of Series
A Preferred Stock, in each case with holders of Series A Preferred Stock being
entitled to one vote for each share held on any matter as to which they shall be
entitled to vote, change the Designations with respect to the Series A Preferred
Stock so as to affect such stock adversely.
SECTION 7. COVENANTS.
(a) As long as any shares of Series A Preferred Stock remain outstanding,
the Corporation shall, and shall cause its Subsidiaries, as applicable, to:
(i) pay or accrue, as the case may be, the required dividends on the
shares of Series A Preferred Stock and any
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<PAGE> 11
other amounts payable under the Related Documents in accordance with the
terms of this Certificate.
(ii) 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 Corporation nor any of its
Subsidiaries shall be required to pay 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.
(iii) shall preserve and maintain, and cause each of its
Subsidiaries to preserve and maintain, its corporate existence; provided,
however, that any Subsidiary may merge or consolidate with any other
Subsidiary or the Corporation. The Corporation 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.
(iv) 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 Corporation and each such Subsidiary in
accordance with generally accepted accounting principles.
(v) 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.
(vi) conduct, and cause each of its Subsidiaries to conduct, all
transactions otherwise permitted under the Related 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.
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<PAGE> 12
(b) The Corporation shall not, without the affirmative consent or approval
of the Requisite Holders:
(i) in any manner authorize, create, designate, issue or sell any
class or series of capital stock of the Corporation (including any shares
of treasury stock) or rights, options, warrants or other Securities
convertible into or exercisable or exchangeable for capital stock or any
debt security which by its terms is convertible into or exchangeable for
any equity security or has any other equity participation feature or any
security that is a combination of debt and equity, which, in each case as
to the equity or convertible component thereof, as to the payment of
dividends, distribution of assets or redemptions, including, without
limitation, distributions to be made upon the liquidation, dissolution or
winding up of the Corporation or a merger, consolidation or sale of the
assets thereof, is senior to or pari passu with the Series A Preferred
Stock;
(ii) reclassify any Securities of the Corporation into shares of any
class or series of capital stock of the Corporation (A) ranking, either as
to payment of dividends, distributions of assets or redemptions,
including, without limitation, distributions to be made upon the
liquidation, dissolution or winding up of the Corporation or a merger,
consolidation or sale of the assets thereof, senior to or pari passu with
the Series A Preferred Stock or (B) which in any manner adversely affects
the rights of the holders of Series A Preferred Stock in their capacity as
such;
(iii) in any manner authorize, issue or sell any shares of Series A
Preferred Stock other than as contemplated by the Stock and Warrant
Purchase Agreement or this Certificate;
(iv) reclassify, cancel or in any manner alter or change the terms,
designations, powers, preferences or relative, optional or other special
rights, or the qualifications, limitations or restrictions thereof, of the
Series A Preferred Stock;
(v) amend, repeal or modify any provision of this Certificate of
Designation that adversely affects the powers, preferences or special
rights of the Series A Preferred Stock;
(vi) redeem or repurchase any shares of capital stock of the
Corporation or any warrants, options or other derivative Securities or
rights to acquire any shares of capital stock of the Corporation (other
than (x) pursuant to the Stock and Warrant Purchase Agreement, (y) the
redemption of capital stock of the Corporation pursuant to the
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<PAGE> 13
provisions of this Certificate of Designation and (z) the "cashless
exercise" of employee stock options pursuant to the Stock Option Plans);
(vii) incur any Indebtedness or create any Lien on the assets of the
Corporation in connection therewith except for (i) the Existing
Indebtedness or Indebtedness used to refinance the Existing Indebtedness
or (ii) funded Indebtedness incurred for normal, ordinary course working
capital requirements which is only secured (if at all) by current assets;
(viii) enter to any commitment to a third party, or otherwise bind
the Corporation to a third party, concerning any single or series of
related capital expenditures in excess of a limit set annually by the
Board;
(ix) declare, pay or set aside or reserve amounts for the payment of
any dividend on or with respect to any Common Stock or other capital stock
issued by the Corporation that is junior to or on a par with the Series A
Preferred Stock;
(x) enter into any transaction with any Affiliate of the Corporation
(an "Affiliate Transaction") on terms more favorable to such Affiliate
than would have been obtainable in a transaction with an unrelated third
party on an arms-length basis in the ordinary course of business;
(xi) enter into or engage in any business or activity other than the
Business;
(xii) enter into any agreement or commitment or otherwise become
bound or obligated to do or perform any of the foregoing actions; or
(xiii) permit the number of members of the Board (other than members
appointed or selected by the Investors) of the Corporation to exceed ten
(10) and the Corporation agrees to use its best efforts to add the
respective designees of BT Capital and Bear Stearns to the extent it is
obligated to do so pursuant to the Voting Agreement.
SECTION 8. INFORMATION RIGHTS.
(a) Financial Reports. The Corporation shall furnish each Qualified Holder
with the following:
(i) Quarterly Statements. (a) Upon the request of such Qualified
Holder, within 45 days after the end of each quarterly accounting period,
except after the end of the fourth quarterly accounting period in the
Corporation's fiscal year in which case the time period shall be 90 days,
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<PAGE> 14
an unaudited financial report of the Corporation, which report shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and which shall include the following:
(A) 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;
(B) a balance sheet as at the last day of such quarterly
accounting period;
(C) a cash flow analysis for such quarterly accounting period
on a cumulative basis for the fiscal year to date;
(D) a schedule showing all expenditures of a capital nature in
excess of $250,000 individually during such quarterly accounting period;
and
(E) 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.
(ii) Copies of all financial statements, reports, press releases,
notices, proxy statements and other documents sent by the Corporation to
its stockholders generally or released to the public and copies of all
regular and periodic reports filed by the Corporation with the SEC, or any
securities exchange.
(iii) Upon the request of such Qualified Holder, copies of all
reports prepared for or delivered to the management of the Corporation by
its Accountants;
(iv) Upon the request of such Qualified Holder, any other routinely
collected financial or other information available to management of the
Corporation (including, without limitation, routinely collected
statistical data);
(v) Upon the request of such Qualified Holder, 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
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<PAGE> 15
(vi) 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 Corporation at the time, to have a material adverse effect on the
financial condition and operations of the Corporation, the Corporation
shall deliver a written notice to each Qualified Holder describing in
reasonable detail such proceeding.
(b) Access to Records and Properties.
(i) The Corporation shall afford to any Qualified Holder and its
employees, counsel and other authorized representatives, during normal
business hours, access, upon reasonable advance notice, to all of the
books, records and properties of the Corporation and to make copies of
such records and permit such Persons to discuss all aspects of the
Corporation with any officers, employees or accountants of the
Corporation; provided, however, that such investigation shall not
unreasonably interfere with the operations of the Corporation. The
Corporation will instruct its independent public accountants to discuss
such aspects of the financial condition of the Corporation with any such
holder and its representatives as such holder may reasonably request, and
to permit such holder 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 Corporation
as such holder may reasonably request. All costs and expenses incurred by
such holder 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 Corporation in complying with any
extraordinary requests by such holder and its representatives in
connection with exercising such access rights shall be borne by such
holder.
(ii) Each Qualified Holder shall use best efforts to maintain the
confidentiality of any confidential and proprietary information obtained
by it under this Section 8 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 such holder or such authorized representatives to
disclose any such information concerning the Corporation which it may be
required to disclose (i) to its partners or limited partners to the extent
required to satisfy its
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<PAGE> 16
fiduciary obligations to such persons or (ii) otherwise pursuant to or as
required by law.
(c) Observer Rights.
(i) The Corporation hereby covenants that the holders of Preferred
Stock shall have the right to have that number of representatives (each
such representative, an "Observer") determined as hereinafter provided
present at all meetings of the Board. Such right shall from time to time
be exercisable by delivery to the Corporation of written notice from the
Requisite Holders specifying the names of such Observers. The number of
Observers shall at all times and from time to time be equal to that number
of members of the Board that the holders of the Common Equivalents are
then entitled to designate pursuant to the Voting Agreement but whose
seats on the Board are at the time vacant.
(ii) The Corporation will give each Observer reasonable prior notice
(it being agreed that the same prior notice given to the Board shall be
deemed reasonable prior notice) in any manner permitted in the
Corporation's By-laws for notices to directors of the time and place of
any proposed meeting of the Board, such notice in all cases to include
true and complete copies of all documents furnished to any director in
connection with such meeting. Each such Observer will be entitled to be
present in person as an observer at any such meeting or, if a meeting is
held by telephone conference, to participate therein for the purpose of
listening thereto.
(iii) The Corporation will deliver to each Observer copies of all
papers which may be distributed from time to time to the directors of the
Corporation at such time as such papers are so distributed to them,
including copies of any written consent.
SECTION 9. MISCELLANEOUS.
(a) Registration of Transfer. The Corporation shall keep at its principal
office (or such other place as the Corporation reasonable designates) a register
for the registration of shares of the Series A Preferred Stock. Upon the
surrender of any certificate representing shares of the Series A Preferred Stock
at such place, the Corporation shall, at the request of the registered holder of
such certificate, execute and deliver a new certificate or certificates in
exchange therefor representing in the aggregate the number of shares of the
Series A Preferred Stock represented by the surrendered certificate, and the
Corporation forthwith shall cancel such surrendered certificate. Each such new
certificate will represent such number of shares of
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<PAGE> 17
the Series A Preferred Stock as is requested by the holder of the surrendered
certificate and will be substantially identical in form to the surrendered
certificate. Subject to any other restrictions on transfer to which such holder
or the Series A Preferred Stock may be bound, the Corporation will also register
such new certificate in such name as requested by the holder of the surrendered
certificate.
(b) Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of the Series A Preferred Stock, and in the case
of any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided, however, that if the holder is a
nationally-chartered financial institution or other institutional investor, its
own agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such number of shares of the Series A Preferred Stock
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
(c) Notices. All notices referred to herein shall be in writing, shall be
delivered personally or by first class mail, postage prepaid, and shall be
deemed to have been given when so delivered or mailed to the Corporation at its
principal executive offices and to any stockholder at such holder's address as
it appears in the stock records of the Corporation (unless otherwise specified
in a written notice to the Corporation by such holder).
* * * * *
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<PAGE> 1
STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 30, 1997
AMONG
SAFETY 1ST, INC.
(THE "COMPANY"),
AND
THE INVESTORS NAMED HEREIN
(THE "INVESTORS")
<PAGE> 2
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
<PAGE> 3
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
<PAGE> 4
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 Stearns" means Bear, Stearns & 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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<PAGE> 5
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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<PAGE> 6
"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, Goldman Sachs Credit Partners L.P. and
O'Melveny & Myers 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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<PAGE> 7
"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 Goldman Sachs 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 mark 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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<PAGE> 8
"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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
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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<PAGE> 12
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 O'Sullivan Graev & Karabell, LLP, 30 Rockefeller
Plaza, New York, New York, on 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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<PAGE> 14
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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<PAGE> 16
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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<PAGE> 17
(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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<PAGE> 18
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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<PAGE> 19
(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 mark 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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<PAGE> 23
(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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<PAGE> 24
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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<PAGE> 25
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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<PAGE> 27
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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<PAGE> 28
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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<PAGE> 29
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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<PAGE> 30
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 Stearns 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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<PAGE> 31
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 Michael Lerner, 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 Richard Wenz, 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.
Kassler & Feuer, PC, Phillips, Friedman, Kotler, and Bracher
Rawlins, 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 Stearns 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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<PAGE> 47
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 Stearns
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 O'Sullivan 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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<PAGE> 48
(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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<PAGE> 49
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.
210 Boylston Street
Chestnut Hill, Massachusetts 02167
Telephone: (617) 964-7744
Telecopier: (617) 928-3205
Attention: Michael Lerner;
with a copy to:
Kassler & Feuer, PC
101 Arch Street
Boston, Massachusetts 02110-1103
Telephone: (617) 439-3800
Telecopier: (617) 439-0060
Attention: Stanley Cygelman, 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:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 408-2400
Telecopier: (212) 408-2420
Attention: Harvey M. Eisenberg, 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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<PAGE> 50
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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<PAGE> 51
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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<PAGE> 52
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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<PAGE> 53
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/ Richard E. Wenz
----------------------------
Name: Richard E. Wenz
Title: President
INVESTORS:
BT CAPITAL PARTNERS, INC. BEAR, STEARNS & CO. INC.
By: /s/ James M. Dworkin By: /s/ Allan B. Ruchman
--------------------------- ---------------------------
Name: James M. Dworkin Name: Allan B. Ruchman
Title: Vice President Title: Managing Director
<PAGE> 54
SCHEDULE I
INVESTORS
<TABLE>
<CAPTION>
Name and Address Purchased Unconditional Conditional Aggregate
for Notices Shares Warrants Warrants Purchase
----------- ------ -------- -------- --------
<S> <C> <C> <C> <C>
BT Capital Partners, Inc.
130 Liberty Street
25th Floor
New York, New York 10006
Telecopier: (212) 250-7651
Telephone: (212) 250-9609
Attention: James M. Dworkin 7,500 570,755 63,418 7,500,000
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167
Telecopier: (212) 272-3092
Telephone: (212) 272-6785
Attention: John Howard 7,500 570,755 63,418 7,500,000
------ --------- ------- ----------
TOTAL 15,000 1,141,510 126,836 15,000,000
====== ========= ======= ==========
</TABLE>
<PAGE> 1
WARRANT
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES WHICH MAY BE ACQUIRED ON THE EXERCISE HEREOF ARE
SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 30, 1997 AMONG SAFETY 1ST, INC., A MASSACHUSETTS CORPORATION
(THE "ISSUER"), BT CAPITAL PARTNERS, INC. AND BEAR, STEARNS & CO. INC., AS SUCH
AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF SUCH AGREEMENT IS
ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF SUCH AGREEMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH MAY BE
ACQUIRED ON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY,
SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
No. of Shares Warrant No. C-1
of Common Stock: 63,418
WARRANT
to Purchase Common Stock of
SAFETY 1ST, INC.
THIS IS TO CERTIFY THAT BT Capital Partners, Inc., or its registered
assigns, is entitled to purchase in whole or in part from time to time from
Safety 1st, Inc., a Massachusetts corporation (the "Issuer"), at any time on and
after the Effective Date (as hereinafter defined), but not later than 5:00 p.m.,
New York time, on July 30, 2007 (the "Expiration Date"), 63,418 shares of Common
Stock (as hereinafter defined) at a purchase price of $0.01 per share (the
"Exercise Price"), subject to the terms and conditions provided herein and in
the Purchase Agreement (as hereinafter defined). The number of shares of Common
Stock for which this Warrant shall be exercisable and the Exercise Price are
subject to adjustment from time to time as provided herein.
This Warrant is issued pursuant to the Stock and Warrant Purchase
Agreement dated as of July 30, 1997 (as modified and supplemented and in effect
from time to time, the "Purchase Agreement") among the Issuer, BT Capital
Partners, Inc. and Bear, Stearns & Co. Inc. and is subject to the provisions of
the
<PAGE> 2
Purchase Agreement and the Registration Rights Agreement (as hereinafter
defined).
SECTION 1. Certain Definitions. (a) Each capitalized term used
herein without definition shall have the meaning assigned thereto (or
incorporated by reference) in the Purchase Agreement and in the Exhibits
thereto.
(b) As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1 or in other provisions of this
Warrant in the singular to have the same meanings when used in the plural and
vice versa):
"Accountants" shall have the meaning given to such term
in Section 5(a).
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, controls, is under common control with, or
is owned or controlled by, such specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, the power
to direct the management or policies of the specified Person through the
ownership of voting securities, by contract, voting agreement or otherwise, and
(ii) the terms "controlling", "control with" and "controlled by", etc. shall
have meanings correlative to the foregoing.
"Appraisal Procedure", if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for purposes
of the definition of "Current Market Price" or the fair market value, as to any
other property (in either case, the "valuation amount"). The valuation amount
shall be determined in good faith jointly by the Board and the Majority Holders;
provided, however, that if such parties are not able to agree on the valuation
amount within a reasonable period of time (not to exceed twenty (20) Business
Days) the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board and
the Majority Holders. If the Board and the Majority Holders are unable to agree
upon an acceptable investment banking firm within ten (10) Business Days after
the date either party proposed that one be selected, the investment banking firm
will be selected by an arbitrator located in New York City, New York, selected
by the American Arbitration Association (or if such organization ceases to
exist, the arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of his
appointment) from a list, jointly prepared by the Board and the Majority
Holders, of not more than six investment banking firms of national standing in
the United States, of which no more than three may be named by the Board and no
more than three may be named by the Majority Holders. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties
-2-
<PAGE> 3
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
and the Majority Holders shall submit to the investment banking firm their
respective determinations of the valuation amount, and any supporting arguments
and other data as they may desire, within ten (10) days of the appointment of
the investment banking firm, and the investment banking firm shall as soon as
practicable thereafter make its own determination of the valuation amount. The
final valuation amount for purposes hereof shall be the average of the two
valuation amounts closest together, as determined by the investment banking
firm, from among the valuation amounts submitted by the Issuer and the Majority
Holders and the valuation amount calculated by the investment banking firm. The
determination of the final valuation amount by such investment banking firm
shall be final and binding upon the parties. The fees and expenses of the
investment banking firm and arbitrator (if any) used to determine the valuation
amount shall be paid by the Issuer or the applicable Warrant Holders (on a pro
rata basis), whichever party's valuation amount is excluded from the average
referred to above, unless the investment banking firm's valuation amount is
excluded from the average, in which case such fees and expenses will be divided
evenly between the Issuer and such Warrant Holders. If required by any such
investment banking firm or arbitrator, the Issuer shall execute a retainer and
engagement letter containing reasonable terms and conditions, including, without
limitation, customary provisions concerning the rights of indemnification and
contribution by the Issuer in favor of such investment banking firm or
arbitrator and its officers, directors, partners, employees, agents and
Affiliates.
"Articles of Organization" means the Restated Articles of
Organization of the Issuer, as amended and restated and in effect at the time in
question.
"Board" shall mean the Board of Directors of the Issuer.
"By-laws" means the by-laws of the Issuer, as amended
and in effect at the time in question.
"Capital Stock" means any and all shares, interests, participation
or other equivalents (however designated) of corporate stock, including all
common stock and preferred stock.
"Certificate of Designation" shall have the meaning ascribed to such
term in the Purchase Agreement.
"Change of Control" shall have the meaning ascribed to such term in
the Certificate of Designation.
"Common Stock" shall mean the Issuer's Common Stock, par value $.01
per share.
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<PAGE> 4
"Convertible Securities" shall have the meaning given to such term
in Section 4(d).
"Current Market Price" shall mean, as to any security, the average
of the closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York City
time, on such day, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar or successor organization (and in each such
case (i) averaged over a period of 21 days consisting of the day immediately
preceding the day as of which "Current Market Price" is being determined and the
20 consecutive Business Days prior to such immediately preceding day and (ii)
excluding any trades that are not bona fide, arm's length transactions). If at
any time such security is not listed on any domestic securities exchange or
quoted in the NASDAQ System or the domestic over-the-counter market, the
"Current Market Price" of such security shall be the fair market value thereof
as determined in accordance with the Appraisal Procedure, using an appropriate
valuation method, assuming an arms-length sale to an independent party. In
determining the fair market value of the Common Stock, a sale of all of the
issued and outstanding Common Stock of the Issuer will be assumed, without
giving regard to the lack of liquidity of such stock due to any restrictions
(contractual or otherwise) applicable thereto or any discount for minority
interests and assuming the conversion or exchange of all securities then
outstanding that are convertible into or exchangeable for Common Stock and the
exercise of all rights and warrants (including the Warrants) then outstanding
and exercisable to purchase shares of such stock or securities convertible into
or exchangeable for shares of such stock. Common Stock issued in an underwritten
public offering shall be deemed to be issued for fair market value.
"EBIT" means, for Fiscal 1998, the Net Income of the Issuer and its
consolidated Subsidiaries plus (without the duplication) (a) Interest Expense,
net of interest income and (b) income tax expense, refunds or credits for such
period all determined in accordance with GAAP.
"EBIT Target" shall mean $16,000,000 as adjusted pursuant to Section
5(b).
"Effective Date" shall mean the earlier to occur of (i) the date of
the determination by the Accountants pursuant to
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<PAGE> 5
Section 5(a) that EBIT for Fiscal 1998 is less than the EBIT Target and (ii) the
occurrence of an Exercise Condition.
"Equity Interest" means (a) with respect to a corporation, any and
all Capital Stock or warrants, options or other rights to acquire Capital Stock
(but excluding any debt security which is convertible into, or exchangeable for,
Capital Stock) and (b) with respect to a partnership, limited liability company
or similar Person, any and all units, interests, rights to purchase, warrants,
options or other equivalents of, or other ownership interests in, any such
Person.
"Excluded Stock" shall mean (i) any shares of Common Stock issuable
upon the exercise of any options granted pursuant to the Stock Option Plans and
(ii) any shares of Common Stock issuable upon exercise of any Warrants.
"Exercise Condition" shall have the meaning assigned to it in
Section 2 hereof.
"Exercise Notice" shall have the meaning assigned to such term in
Section 2 hereof.
"Exercise Price" shall have the meaning assigned to such term in the
first paragraph of this Warrant.
"Expiration Date" shall have the meaning assigned to such term in
the first paragraph of this Warrant.
"Fiscal 1998" shall have the meaning assigned to such term in
Section 5 (a) hereof.
"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 Issuer are the Articles of
Organization and By-laws.
"GAAP" means generally accepted accounting principles in the United
States and statements and interpretations (if applicable) issued by the
Financial Accounting Standards Board, or any successor body, as in effect from
time to time, unless otherwise stated.
"Guaranty" has the meaning set forth in the Certificate of
Designation.
"Holder" shall mean the registered holder of this Warrant and the
registered holder of any Warrant Stock issued upon exercise hereof.
"Include" and "Including" shall be construed as if followed by the
phrase ", without being limited to,".
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<PAGE> 6
"Indebtedness" has the meaning set forth in the Certificate of
Designation.
"Interest Expense" means, for Fiscal 1998, all interest (including
capitalized interest) and all amortization of debt discount and expense on any
particular Indebtedness (including, without limitation payment-in-kind, zero
coupon and other like securities and the interest component of capital lease
obligations applicable to such period) of the Issuer and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Investment" in any Person, means any loan or advance to such
Person, any purchase or other acquisition of any Equity Interest or other
ownership or profit interest, warrants, rights, options, obligations or other
securities of such Person, any capital contribution to such Person or any other
investment in such Person, including any arrangement pursuant to which an
investing Person incurs Indebtedness of the types referred to in clause (f) or
(i) of the definition of "Indebtedness" in respect of such Person.
"Issuer" shall have the meaning assigned to such term in the first
paragraph of this Warrant.
"Majority Holders" shall mean those Warrant Holders holding (or
having the right to receive upon exercise of Warrants) Warrant Stock
representing a majority of the total amount of Warrant Stock held by, or
issuable to, all Warrant Holders.
"NASDAQ System" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Net Income" means, for Fiscal 1998, the gross revenues of the
Issuer and its consolidated Subsidiaries for such period less all expenses and
other proper charges, including returns and allowances, in each case determined
in accordance with GAAP, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets or from any transaction classified as
extraordinary under GAAP, any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
(c) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings and losses of any corporation, substantially all the
assets of which have been acquired in any manner by the Company and its
consolidated
-6-
<PAGE> 7
subsidiaries, realized by such corporation prior to the date of such
acquisition;
(d) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings and losses of any corporation which shall have merged
into the Issuer or any of its consolidated Subsidiaries prior to the date of
such merger;
(e) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings of any business entity in which the Issuer or its
consolidated Subsidiaries has an ownership interest unless such net earnings
actually shall have been received by the Issuer or its Subsidiaries in the form
of cash distributions;
(f) earnings resulting from a reappraisal, revaluation or write-up
of assets;
(g) any charge to net earnings resulting from the amortization of
the value of stock options given to employees to the extent required by APB 25;
(h) to the extent not reflected in adjustments made pursuant to
Section 5(b), any increase or decrease of net income arising from a change in
the Issuer's accounting methods;
(i) any gains resulting from the forgiveness of Indebtedness or the
retirement of Indebtedness at a discount;
(j) any gain arising from the acquisition of any securities of the
Issuer or its consolidated subsidiaries; and
(k) any reversal of any contingency reserve, except that provision
for such contingency reserve shall have been made from income arising during
such period.
"Options" shall have the meaning given to such term in Section 4(d).
"Person" shall be construed in its broadest possible sense and shall
include any individual, corporation, general or limited partnership, joint
venture, association, limited liability company, joint stock company, trust,
business trust, bank, trust company, estate (including any beneficiaries
thereof), unincorporated organization, cooperative, association or governmental
branch, authority, agency or political subdivision thereof.
"Purchase Agreement" shall have the meaning assigned to such term in
the second paragraph of this Warrant.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of July 30, 1997 between
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<PAGE> 8
the Issuer and the Holders, as modified and supplemented and in effect from time
to time.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series A Preferred Stock" shall mean the Issuer's Series A
Preferred Stock, par value $1 per share.
"Stock Option Plans" shall have the meaning assigned to such term in
the Purchase Agreement and any other stock option plans adopted by the Issuer
and any other grants of stock options made by the Issuer, in each case granted
to employees, directors and independent contractors of the Issuer or its
subsidiaries.
"Subsidiaries" shall have the meaning given to such term in the
Purchase Agreement.
"Voting Agreement" shall mean the Voting Agreement dated as of July
30, 1997 among the Issuer, the Holders and the other signatories thereto, as
modified and supplemented and in effect from time to time.
"Warrant" shall mean this Warrant and all other warrants originally
issued by the Issuer pursuant to the Purchase Agreement and all warrants issued
upon transfer, division, or combination of, or in substitution for, this Warrant
or any such other warrant. All Warrants shall be substantially in the form of
Exhibit C attached to the Purchase Agreement except that the Warrants need not
bear the legends appearing on the first page of this Warrant from and after such
time as the restrictions set forth therein no longer apply.
"Warrant Holder" shall mean any Person who acquires Warrants or
Warrant Stock pursuant to the provisions of the Purchase Agreement or any
Warrant, including any transferees of Warrants or Warrant Stock.
"Warrant Stock" shall mean (a) all shares of Common Stock issued or
issuable from time to time upon exercise of this Warrant, (b) all other
securities or other property issued or issuable upon any such exercise and (c)
any securities distributed with respect to the securities referred to in the
preceding clauses (a) and (b); provided, however, that the term "Warrant Stock"
shall not include shares of Common Stock or other securities following the time
such shares or other securities have been sold in a public offering registered
under the Securities Act or sold under Rule 144 promulgated thereunder. As used
in this Warrant, the phrase "Warrant Stock then held" shall mean Warrant Stock
held at the time of determination by the Holder, and shall include Warrant Stock
issuable upon exercise of any Warrants held at the time of determination by such
Holder.
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<PAGE> 9
SECTION 2. Exercise of Warrant. (a) On and after the Effective Date
and until 5:00 p.m., New York City time, on the Expiration Date, the Holder may
exercise this Warrant, on one or more occasions, on any Business Day, in whole
or in part, by delivering to the Issuer, at its office maintained for such
purpose pursuant to Section 6 hereof, (i) a written notice of the Holder's
election to exercise this Warrant, which notice shall be substantially in the
form of Annex A attached hereto and shall be properly completed (the "Exercise
Notice"), (ii) payment of the Exercise Price (payable as set forth in Section
2(b) below) for the Warrant Stock as to which this Warrant is being exercised,
and (iii) this Warrant. Except to the extent necessary to cause the number of
shares of Common Stock deliverable as provided in Section 2(b) to be a whole
number of shares, this Warrant shall be exercisable in part only for a whole
number of shares.
(b) At the option of the Holder, the Exercise Price shall be payable
(i) in cash or by certified or official bank check payable to the order of the
Issuer or (ii) by exchange of this Warrant in accordance with the further
provisions of this Section 2(b). In exchange for the portion of this Warrant
that is being exercised at such time, the Holder shall receive the number of
shares of Common Stock determined by multiplying (A) the number of shares of
Common Stock for which this Warrant is being exercised at such time by (B) a
fraction, (1) the numerator of which shall be the difference between (x) Current
Market Price per share of Common Stock at such time and (y) the Exercise Price
per share of Common Stock, and (2) the denominator of which shall be the Current
Market Price per share of Common Stock at such time. The Issuer shall issue a
new Warrant for the portion, if any, of this Warrant not being exercised as
provided in Section 2(f).
(c) Subject to the provisions of Section 2(d), upon receipt of an
Exercise Notice, the aggregate Exercise Price payable and this Warrant, the
Issuer shall, as promptly as practicable and in any event within five (5)
Business Days thereafter, issue to the Holder one or more stock certificates
representing the aggregate number of shares of Common Stock to which the Holder
is entitled and transfer to the Holder of this Warrant appropriate evidence of
ownership of other securities or property (including any cash) to which the
Holder is entitled, in such denominations, and registered or otherwise placed
in, or payable to the order of, such name or names, as may be directed in
writing by the Holder, and shall deliver such stock certificates, evidence of
ownership and any other securities or property (including any cash) to the
Person or Persons entitled to receive the same, together with an amount in cash
in lieu of any fraction of a share (or fractional interest in any other
security), as hereinafter provided. The Issuer shall pay all expenses in
connection with, and any and all documentary, stamp or similar issue or transfer
taxes of the United States or any state thereof payable in respect of, the issue
or delivery of the
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<PAGE> 10
Warrant Stock upon exercise of this Warrant. However, the Issuer shall not be
required to pay any tax or other charge imposed in connection with any
assignment or transfer involved in the issue of any certificate or other
evidence of ownership of Warrant Stock.
(d) The Holder's election to exercise this Warrant may, in the sole
discretion of the Holder, be conditioned upon, and in such event, the exercise
shall be subject in all respects to a Change of Control, the Issuer ceasing to
be a reporting company under the Securities and Exchange Act of 1934, as
amended, the consummation of a sale of the Issuer, any public offering of the
Issuer's Common Stock registered under the Securities Act or other similar
transaction involving the Issuer (each of the foregoing referred to herein as an
Exercise Condition and collectively referred to herein as the "Exercise
Conditions"), as specified in the Exercise Notice, and the Issuer shall provide
the Holder with written notice no less than 20 business days prior to the
occurrence of an Exercise Condition. If any exercise of this Warrant is so
conditioned, then, subject to delivery of the items required by Section 2(b),
the Issuer shall deliver the certificates and other evidence of ownership of
other securities or other property in such manner as the Holder shall direct as
required in connection with the consummation of the transaction upon which the
exercise is conditioned. At any time that the Issuer shall give notice to the
Holder that such transaction has been abandoned or the Issuer has withdrawn from
participation in such transaction, the Issuer shall return the items delivered
pursuant to Section 2(c) and the Holder's election to exercise this Warrant
shall be deemed rescinded.
(e) The stock certificate or certificates or other evidence of
ownership of Warrant Stock to be delivered pursuant to Section 2(c) hereof shall
be deemed to have been issued, and the Holder or any other Person so designated
to be named therein shall, to the extent permitted by law and the Purchase
Agreement, be deemed to have become a holder of record of the Warrant Stock
represented thereby, including having the right to vote any voting securities
included therein or to consent or to receive notice as a shareholder, as of the
date on which the last of the Exercise Notice, payment of the Exercise Price and
this Warrant is received by the Issuer as aforesaid (subject, in the case of an
exercise to which Section 2(d) applies, to the consummation of the transaction
upon which such exercise is conditioned), notwithstanding that the transfer
books of the Issuer shall then be closed or that such certificates or other
evidence of ownership shall not then actually have been delivered to the Holder.
(f) If this Warrant shall have been exercised only in part, the
Issuer shall, at the time of delivery of the certificate or certificates or
other evidence of ownership of Warrant Stock, execute and deliver to the Holder,
without charge,
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<PAGE> 11
a new Warrant evidencing the rights of the Holder to purchase the unpurchased
Warrant Stock called for by this Warrant, which new Warrant shall in all other
respects be identical to this Warrant, or, at the request of the Holder,
appropriate notation may be made on this Warrant and the same returned to the
Holder.
(g) The Issuer shall not be required to issue any fractional share
of Common Stock (or fractional interest in any other security) upon exercise of
this Warrant. As to any fraction of a share (or fractional interest in any other
security) that the Holder would otherwise be entitled to receive upon such
exercise, the Issuer shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction of the Current Market Price per share of
Common Stock (and/or other security) on the date of exercise; provided, however,
that in the event that the Issuer undertakes a reduction in the number of shares
of Common Stock or other securities outstanding, it shall be required to issue
fractional shares or fractional interests in such other securities to the Holder
if the Holder exercises all or any part of this Warrant, unless the Holder shall
have consented in writing to such reduction and provided the Issuer with a
written waiver of its right to receive fractional shares or interests in
accordance with this paragraph. If the Holder shall exercise more than one
Warrant in the same transaction, any payment in respect of fractional shares (or
other fractional interests) shall be based on the final fraction resulting from
aggregating all such exercises.
(h) The Issuer hereby agrees at all times to keep reserved for
issuance and delivery upon exercise of this Warrant such number of its
authorized but unissued shares (or treasury shares) of Common Stock or other
securities of the Issuer from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares and other securities shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable, free
and clear of all liens, security interests, charges and other encumbrances or
restrictions on sale (except to the extent of any applicable provisions set
forth in the Purchase Agreement, Voting Agreement, Registration Rights Agreement
or the Issuer's Fundamental Documents) and free and clear of all preemptive or
similar rights.
(i) If the issuance of any shares of Common Stock or other
securities required to be reserved for purposes of the exercise of this Warrant
requires the registration with, or approval of, any governmental authority or
requires listing on any national securities exchange or national market system
before such shares or other securities may be so issued, the Issuer shall at its
expense use its best efforts to cause such shares to be duly registered,
approved or listed, as the case may be, so that such shares or other securities
may be issued in accordance with the terms hereof; provided, however, that this
provision
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<PAGE> 12
shall not obligate the Issuer to register such shares or other securities under
the Securities Act or qualify them under state securities or blue sky laws.
SECTION 3. Transfer, Division and Combination. (a) This Warrant, all
rights hereunder and any Warrant Stock issued or issuable upon exercise hereof
are assignable and transferable, at any time in whole or in part, to any Person
or Persons subject in all cases to the provisions of Article VII of the Purchase
Agreement. Any such transfer shall not require the consent of any security
holder of the Issuer.
(b) Upon a transfer permitted by Section 3(a), this Warrant shall be
transferable upon surrender of this Warrant to the Issuer, together with a
written assignment of this Warrant substantially in the form of Annex B attached
hereto, duly executed by the Holder hereof or such Holder's agent or attorney.
Upon such surrender, the Issuer shall, without charge, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees (and, if the
Holder's entire interest is not being assigned, in the name of the Holder), and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled.
(c) This Warrant may be exchanged for, or combined with, other
Warrants upon presentation of this Warrant and any other Warrants with which
this Warrant is to be combined to the Issuer, together with a written notice
specifying the denominations in which a new Warrant or Warrants are to be
issued, signed by the Holder. The Issuer shall execute and deliver a new Warrant
or Warrants to the Holder in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(d) The Issuer shall maintain books for the registration and
transfer of the Warrants, and shall allow each Warrant Holder to inspect such
books at such reasonable times as such holder shall request.
SECTION 4. Adjustments.
(a) Dividends and Distributions. If at any time the Issuer shall pay
any dividend or make any other distribution to holders of its Common Stock of
any cash, evidence of indebtedness or other property (including any rights or
warrants to purchase any securities of the Issuer) of any nature whatsoever
(other than as contemplated by subsections (b), (c)(i)(A) and (d)(i)(A) of this
Section 4), the Issuer shall at the same time pay or distribute to the Holder
(whether or not the Holder exercises this Warrant) the cash, evidence of
indebtedness or other property the Holder would have been entitled to receive if
such Holder would have been entitled to receive if such had exercised
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<PAGE> 13
this Warrant immediately prior to the record date for such dividend or
distribution.
(b) Subdivisions and Combinations. If at any time the Issuer shall
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution of Common
Stock;
(ii) subdivide, split or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then immediately after the occurrence of any such event (A) the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted so as
to equal the number of shares of Common Stock such holder would have held
immediately after the occurrence of such event (in the case of an event referred
to in clause (i), after giving effect to such dividend or distribution) if such
holder had exercised this Warrant immediately prior to the occurrence of such
event and (B) the Exercise Price shall be adjusted to be equal to (x) the
Exercise Price immediately prior to the occurrence of such event multiplied by
(y) a fraction (1) the numerator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to the adjustment
in clause (A) and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
clause (A).
(c) Issuance of Common Stock. If at any time the Issuer (i) shall
(A) take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock or (B) otherwise sell or issue any shares of any class or series of
Common Stock (other than Excluded Stock) and (ii) the consideration per share of
Common Stock paid or to be paid upon such subscription, purchase, sale or
issuance is less than the Current Market Price per share of Common Stock
immediately before such record date or immediately before the date of such sale
or issuance, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying (x) the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such record date or sale or
issuance date, as the case may be, by (y) a fraction (not to be less than one)
(i) the numerator of which shall be equal to the product of (A) the number of
shares of Common Stock outstanding (determined on a fully-diluted basis) after
giving effect to such subscription, purchase, sale or issuance (and assuming all
such subscription or
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<PAGE> 14
purchase offers are exercised) and (B) the Current Market Price per share of
Common Stock determined immediately before such record date or sale or issuance
date, as the case may be, and (ii) the denominator of which shall be equal to
the sum of (A) the product of (1) the number of shares of Common Stock
outstanding (determined on a fully-diluted basis) immediately before such record
date or sale or issuance date, as the case may be, and (2) the Current Market
Price per share of Common Stock determined immediately before such record date
or sale or issuance date, as the case may be, and (B) the aggregate
consideration received or to be received by the Issuer for the total number of
shares of Common Stock to be subscribed for or purchased, sold or issued.
Simultaneously with the adjustment in the preceding sentence, the Exercise Price
shall be adjusted to be equal to (x) the Exercise Price immediately prior to the
occurrence of such event multiplied by (y) a fraction (1) the numerator of which
is the number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the adjustment in the preceding sentence and (2) the
denominator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately after the adjustment in the preceding
sentence.
(d) Issuance of Convertible Securities or Options. If at any time
(i) the Issuer shall (A) take a record of the holders of its Common Stock for
the purpose of entitling them to subscribe for or purchase options to purchase
or rights to subscribe for Common Stock, securities directly or indirectly
convertible into or exchangeable for Common Stock ("Convertible Securities") or
options or rights with respect to Convertible Securities (options or rights with
respect to Common Stock or Convertible Securities being referred to as
"Options") or (B) otherwise issue or sell any Options or Convertible Securities
(other than Options exercisable for Excluded Stock) and (ii) the consideration
per share paid or to be paid for the Common Stock deliverable upon exercise of
such Options and/or conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount received or receivable by the
Issuer in consideration of the subscription, purchase, sale or issuance of such
Options or Convertible Securities plus any amount payable to the Issuer upon
such exercise and/or conversion or exchange, by (y) the total maximum number of
shares of Common Stock necessary to effect the exercise and/or conversion or
exchange of all such Options or Convertible Securities) shall be less than the
Current Market Price per share of Common Stock on such record date or sale or
issuance date, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such date by a fraction (not to be
less than one) (i) the numerator of which shall be equal to the product of (A)
the total maximum number of shares of Common Stock outstanding (determined on a
fully diluted basis) after giving
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<PAGE> 15
effect to the assumed exercise and/or conversion of all such Options or
Convertible Securities and (B) the Current Market Price per share of Common
Stock determined immediately before such record date or sale or issuance date,
as the case may be, and (ii) the denominator of which shall be equal to the sum
of (A) the product of (1) the number of shares of Common Stock outstanding
(determined on a fully-diluted basis) immediately before such record date or
sale or issuance date, as the case may be, and (2) the Current Market Price per
share of the Common Stock determined immediately before such record date or sale
or issuance date, as the case may be, and (B) the aggregate consideration for
which Common Stock is deliverable upon exercise and/or conversion or exchange
for such Options or Convertible Securities. Simultaneously with the adjustment
in the preceding sentence, the Exercise Price shall be adjusted to be equal to
(x) the Exercise Price immediately prior to the occurrence of such event
multiplied by (y) a fraction (1) the numerator of which is the number of shares
of Common Stock issuable upon exercise of this Warrant immediately prior to the
adjustment in the preceding sentence and (2) the denominator of which is the
number of shares of Common Stock issuable upon exercise of this Warrant
immediately after the adjustment in the preceding sentence. The adjustment of
the exercise price of an Option shall not be deemed to be the issuance or sale
of an Option at less than the Current Market Price per share of Common Stock if
the exercise price as adjusted is not less than the Current Market Price per
share of Common Stock on the date of such adjustment.
(e) Superseding Adjustment. If, at any time after any adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant
shall have been made on the basis of the issuance of any Options or Convertible
Securities:
(i) any such Options shall expire prior to exercise or the
right to convert or exchange any such Convertible Securities shall
terminate prior to conversion or exchange; or
(ii) the consideration per share for which shares of Common
Stock are issuable pursuant to the terms of such Options or
Convertible Securities shall be increased or decreased;
then such previous adjustment shall be rescinded and annulled (without affecting
any other adjustments resulting from any other events). Thereupon, a
recomputation shall be made of the adjustment in the number of shares of Common
Stock issuable upon exercise of this Warrant on the basis of
(A) treating the number of shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the
previous exercise,
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<PAGE> 16
conversion or exchange of such Options or Convertible
Securities as having been issued on the date or dates of
such exercise and/or conversion or exchange and for the
consideration actually received and receivable therefor,
and
(B) treating any such Options or Convertible
Securities that then remain outstanding as
having been granted or issued immediately
after the time of such increase or decrease
for the consideration per share for which
shares of Common Stock are issuable upon
exercise and/or conversion or exchange of
such Options or Convertible Securities,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled. For purposes of the computation of such new adjustment, the Current
Market Price shall be deemed to be the Current Market Price used in computing
the previous adjustment.
(f) Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock issuable upon exercise of this Warrant:
(i) The sale or other disposition of any issued shares of
Common Stock owned or held by or for the account of the Issuer shall
be deemed to be an issuance thereof for purposes of this Section.
(ii) In computing adjustments under this Section, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(iii) If the Issuer shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase rights and shall,
thereafter and before the payment of such dividend or distribution
or the granting of such subscription or purchase rights, legally
abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall
be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and
annulled.
(iv) Aggregate consideration for purposes of Sections 4(c) and
4(d) shall be determined as follows: In case any Common Stock,
Options, or Convertible Securities shall be issued or sold, or be
exercisable,
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<PAGE> 17
convertible or exchangeable for cash, the consideration received
therefor shall be deemed to be the amount payable to the Issuer
therefor, after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts or, in the case
of a private placement thereof, finders' fees or commissions paid or
allowed by the Issuer in connection therewith. In case any such
Common Stock, Options, or Convertible Securities shall be issued or
sold, or be exercisable, convertible or exchangeable for a
consideration other than cash payable to the Issuer, the
consideration received therefor shall be deemed to be the fair
market value of such consideration (as determined in accordance with
the Appraisal Procedure), after deduction therefrom of any expenses
incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Issuer in connection therewith. In case any
such Common Stock, or Options, Convertible Securities shall be
issued or sold, or be exercisable, convertible or exchangeable in
connection with any merger of another corporation into the Issuer,
the amount of consideration therefor shall be deemed to be the fair
market value (as determined in accordance with the Appraisal
Procedure) of such portion of the assets of such merged corporation
as the Board shall reasonably determine (such determination to be
reasonably acceptable to the Majority Holders) in good faith to be
attributable to such options, rights or securities.
(g) Merger, Consolidation or Disposition of Assets. If the Issuer
shall merge, consolidate or effect a share exchange with another entity, or
shall sell, transfer or otherwise dispose of all or substantially all of its
assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of Common
Stock or other securities of the successor or acquiring entity, or property of
any nature is to be received by or distributed to the holders of Common Stock of
the Issuer, then the Holder shall be entitled to receive in respect of the
Warrant Stock issuable upon exercise of this Warrant, and upon delivery to the
Issuer of this Warrant for cancellation, the amount of cash, shares of Common
Stock, other securities or other property that it would have been entitled to
receive if such Holder had exercised this Warrant in full immediately prior to
the occurrence of such merger, consolidation, share exchange or disposition of
assets. In the case of any such merger, consolidation, share exchange or
disposition of assets, the successor or acquiring entity (and any Affiliate
thereof issuing securities) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Issuer and all of the obligations
and liabilities hereunder, subject to such modifications as may be deemed
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<PAGE> 18
appropriate (as determined by resolution of the Board and reasonably acceptable
to the Majority Holders) in order to provide for adjustments of the Warrant
Stock issuable upon exercise of this Warrant that shall be as nearly equivalent
as practicable to the adjustments provided for in this Section 4. The foregoing
provisions shall similarly apply to successive mergers, consolidations, share
exchanges and dispositions of assets.
(h) Capital Reorganization or Capital Reclassification. If the
Issuer shall effect any capital reorganization or any reclassification of its
capital stock (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the Issuer
shall cause effective provision to be made so that this Warrant shall be
exercisable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the Warrant Stock deliverable upon
exercise of this Warrant would have been entitled upon such reorganization or
reclassification and any such provision shall include adjustments in respect of
such stock, securities or other property that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4 with
respect to this Warrant.
(i) Other Action Affecting Common Stock. If at any time or from time
to time the Issuer shall take any action affecting its Common Stock, other than
any action described in this Section 4, then, unless such action will not have
an adverse effect upon the Holder's rights, the number of shares of Warrant
Stock issuable upon exercise of this Warrant and the Exercise Price shall be
adjusted in such manner and at such time as the Board shall in good faith
determine (such determination to be reasonably acceptable to the Majority
Holders) to be equitable in the circumstances, but no such adjustment shall
decrease the number of shares of Warrant Stock issuable upon exercise of this
Warrant or increase the Exercise Price.
(j) If at any time the Issuer shall issue any shares of its Common
Stock pursuant to the exercise of an option granted under a Stock Option Plan,
then the number of shares of Common Stock issuable upon the exercise of this
Warrant shall be increased by an amount equal to the product of (x) the number
of such shares issued pursuant to the option exercise and (y) 0.1764. The
provisions of this Section 4(j) shall only apply to issuances after the date
hereof of the first 1,300,000 shares of Common Stock pursuant to the Stock
Option Plans, as such number may be adjusted pursuant to any stock splits,
divisions, combinations or similar adjustments.
(k) Notice of Adjustments. Whenever the number of shares of Warrant
Stock issuable upon exercise of this Warrant
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<PAGE> 19
shall be adjusted pursuant to this Agreement, the Issuer shall forthwith obtain
a certificate signed by a firm of independent accountants of recognized national
standing selected by the Issuer setting forth, in reasonable detail, the event
requiring the adjustment the method by which such adjustment was calculated and
specifying the number of shares of Warrant Stock issuable upon exercise of this
Warrant after giving effect to such adjustment (except in the case of
adjustments pursuant to Section 4(j) in which event a certificate shall be
obtained on December 31 and June 30). The Issuer shall promptly cause a signed
copy of such certificate to be delivered to the Holder. The Issuer shall keep at
its office maintained for purposes of Section 7(a) hereof copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of a
Warrant designated by the registered Holder hereof.
(l) Notice of Certain Corporate Action. If the Issuer shall propose
(i) to pay any dividend to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock; (ii) to offer to the holders of
its Common Stock rights to subscribe for or to purchase any additional shares of
Common Stock or any Options or Convertible Securities; (iii) to effect any
reorganization or reclassification of its Common Stock; (iv) to otherwise issue
any Common Stock, Options, or Convertible Securities; (v) to effect any other
capital reorganization; (vi) to effect any consolidation, merger or share
exchange or any sale, transfer or other disposition of all or substantially all
of its assets; or (vii) to effect the liquidation, dissolution or winding up of
the Issuer, then, in each such case, the Issuer shall give to the Holder a
notice of such proposed action, which shall specify the date on which a record
is to be taken for the purposes of such dividend, distribution or rights offer,
or the date on which such reclassification, issuance, reorganization,
consolidation, merger, share exchange, sale, transfer, disposition, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of Common Stock, if any such date is to be fixed, and shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Common Stock, and the number of shares
of Warrant Stock that are issuable upon exercise of this Warrant after giving
effect to any adjustment that will be required as a result of such action. Such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Common Stock for purposes of such action, and in the case of any other such
action, at least 10 days prior to the date of the taking of such proposed
action.
(m) No Impairment. The Issuer will not, by amendment of its Articles
of Organization or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or
-19-
<PAGE> 20
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Issuer, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the exercise
rights of the Holder against impairment.
(n) Miscellaneous. The computations of all amounts under this
Section 4 shall be made assuming all other anti-dilution or similar adjustments
to be made to the terms of all other securities resulting from the transaction
causing an adjustment pursuant to this Section 4 have previously been made so as
to maintain the relative economic interest of this Warrant vis a vis all other
securities issued by the Issuer.
SECTION 5. EBIT Condition
(a) As promptly after the expiration of the Issuer's fiscal year for
1998 ("Fiscal 1998") as reasonably practicable, the Issuer's independent public
accountants (the "Accountants) shall calculate the Issuer's EBIT for Fiscal 1998
and the Accountants shall notify the Holder and the Issuer in writing of their
determination of EBIT for Fiscal 1998. The determination of the Accountants with
respect to any calculations pursuant to this Section 5 (absent manifest error)
shall be final and binding on the Issuer and all Holders. If EBIT for Fiscal
1998 is equal to or exceeds the EBIT Target, the Holder shall, promptly
following receipt of a written request from the Issuer, surrender this Warrant
to the Issuer for cancellation for no consideration.
(b) In the event the Issuer makes any capital expenditures not
contemplated by the projections upon which the EBIT Target is based, or
consummates any mergers or acquisitions (whether of assets or equity or other
interests) or other extraordinary transactions, the Issuer and the Majority
Holders will determine in good faith an appropriate adjustment to the EBIT
Target.
SECTION 6. Miscellaneous.
(a) Office of Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in the continental United States where the
Warrants may be presented for exercise, transfer, division, combination or
cancellation as provided in this Warrant. Such office shall be at 210 Boylston
Street, Chestnut Hill, MA 02167, unless and until the Issuer shall designate and
maintain some other office for such purposes and give notice thereof to the
Holder.
(b) Notices Generally. Any notices and other communications pursuant
to the provisions hereof shall be sent in
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<PAGE> 21
accordance with the provisions of Section 10.6 of the Purchase Agreement.
(c) Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflicts of laws rules. The Issuer agrees that it may be served with process in
the State of New York and any action for breach of this Warrant may be
prosecuted against it in the courts of such State or any Federal court located
in such State.
(d) Limitation of Liability. Except as otherwise provided herein,
this Warrant does not entitle the Holder to any voting rights or other rights of
a shareholder of the Issuer, as a shareholder. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the Exercise Price or as a
shareholder of the Issuer, whether such liability is asserted by the Issuer, by
any creditor of the Issuer or any other Person.
(e) Loss or Destruction of Warrant. Upon receipt by the Issuer of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant and (in the case of
loss, theft or destruction), if requested by the Issuer, of reasonably
satisfactory indemnification (if the Holder is a financial institution or an
Affiliate thereof, its own agreement being satisfactory), or (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Issuer shall,
without charge, execute and deliver a new Warrant exercisable for the same
amount of Warrant Stock; provided, however, that (in the case of loss, theft or
destruction) no indemnity bond shall be required unless the Issuer has a class
of securities registered pursuant to the Securities Exchange Act of 1934, as
amended, and the Issuer's transfer agent requires such indemnity bond as a
condition to the issuance of a new Warrant.
(f) Amendments and Waivers. Any provision of this Warrant may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Issuer and the Holders and, in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
* * *
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<PAGE> 22
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: July 30, 1997
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
-------------------------------
Name: Richard E. Wenz
Title: President
<PAGE> 23
ANNEX A
FORM OF EXERCISE NOTICE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant exercises this
Warrant for the purchase of ________ shares of Common Stock of Safety 1st, Inc.,
a Massachusetts corporation, and herewith makes payment therefor of $__________
(such payment being made [check one] (x) [ ] in cash or by certified or official
bank check or (y) [ ] by acceptance of a reduced number of shares of Common
Stock upon cancellation of this Warrant as provided in Section 2(b) of this
Warrant, all on the terms and conditions specified in this Warrant, and requests
that (i) certificates and/or other instruments covering such shares of Common
Stock be issued in accordance with the instructions given below and (ii) if such
shares of Common Stock shall not include all of the shares of Common Stock to
which the Holder is entitled under this Warrant, that a new Warrant for the
unpurchased balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned. References in this Exercise Notice to "Common
Stock" shall include other securities or other property to the extent included
in Warrant Stock.
[This Exercise Notice is being delivered contingent upon the
consummation of [describe transaction] as contemplated by Section 2(d) of this
Warrant].*
Dated:
________________________________________
(Signature of Registered Holder)**
Instructions for issuance and
registration of shares of
Common Stock:
_____________________________ Social Security or Other
Name of Registered Holder Identifying Number:_____________________
(please print)
- --------
* Include if applicable.
** The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE> 24
Please deliver certificate to the following address:
______________________________________
Street
______________________________________
City, State and Zip Code
<PAGE> 25
ANNEX B
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all the rights of the
undersigned under this Warrant with respect to the number of shares of Common
Stock covered thereby set forth below to:
<TABLE>
<CAPTION>
Number of
Shares of
Name of Assignee Address Common Stock
- ---------------- ------- ------------
<S> <C> <C>
</TABLE>
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
Dated:
---------------------
--------------------------------------
(Signature of Registered Holder)*
--------------------------------------
Name of Registered Holder
(Please Print)
Witness:
- ----------------------------
- --------
* The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE> 1
WARRANT
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES WHICH MAY BE ACQUIRED ON THE EXERCISE HEREOF ARE
SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 30, 1997 AMONG SAFETY 1ST, INC., A MASSACHUSETTS CORPORATION
(THE "ISSUER"), BT CAPITAL PARTNERS, INC. AND BEAR, STEARNS & CO. INC., AS SUCH
AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF SUCH AGREEMENT IS
ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF SUCH AGREEMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH MAY BE
ACQUIRED ON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY,
SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
No. of Shares Warrant No. C-2
of Common Stock: 63,418
WARRANT
to Purchase Common Stock of
SAFETY 1ST, INC.
THIS IS TO CERTIFY THAT Bear, Stearns & Co. Inc., or its registered
assigns, is entitled to purchase in whole or in part from time to time from
Safety 1st, Inc., a Massachusetts corporation (the "Issuer"), at any time on and
after the Effective Date (as hereinafter defined), but not later than 5:00 p.m.,
New York time, on July 30, 2007 (the "Expiration Date"), 63,418 shares of Common
Stock (as hereinafter defined) at a purchase price of $0.01 per share (the
"Exercise Price"), subject to the terms and conditions provided herein and in
the Purchase Agreement (as hereinafter defined). The number of shares of Common
Stock for which this Warrant shall be exercisable and the Exercise Price are
subject to adjustment from time to time as provided herein.
This Warrant is issued pursuant to the Stock and Warrant Purchase
Agreement dated as of July 30, 1997 (as modified and supplemented and in effect
from time to time, the "Purchase Agreement") among the Issuer, BT Capital
Partners, Inc. and Bear, Stearns & Co. Inc. and is subject to the provisions of
the
<PAGE> 2
Purchase Agreement and the Registration Rights Agreement (as hereinafter
defined).
SECTION 1. Certain Definitions. (a) Each capitalized term used
herein without definition shall have the meaning assigned thereto (or
incorporated by reference) in the Purchase Agreement and in the Exhibits
thereto.
(b) As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1 or in other provisions of this
Warrant in the singular to have the same meanings when used in the plural and
vice versa):
"Accountants" shall have the meaning given to such term
in Section 5(a).
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, controls, is under common control with, or
is owned or controlled by, such specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, the power
to direct the management or policies of the specified Person through the
ownership of voting securities, by contract, voting agreement or otherwise, and
(ii) the terms "controlling", "control with" and "controlled by", etc. shall
have meanings correlative to the foregoing.
"Appraisal Procedure", if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for purposes
of the definition of "Current Market Price" or the fair market value, as to any
other property (in either case, the "valuation amount"). The valuation amount
shall be determined in good faith jointly by the Board and the Majority Holders;
provided, however, that if such parties are not able to agree on the valuation
amount within a reasonable period of time (not to exceed twenty (20) Business
Days) the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board and
the Majority Holders. If the Board and the Majority Holders are unable to agree
upon an acceptable investment banking firm within ten (10) Business Days after
the date either party proposed that one be selected, the investment banking firm
will be selected by an arbitrator located in New York City, New York, selected
by the American Arbitration Association (or if such organization ceases to
exist, the arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of his
appointment) from a list, jointly prepared by the Board and the Majority
Holders, of not more than six investment banking firms of national standing in
the United States, of which no more than three may be named by the Board and no
more than three may be named by the Majority Holders. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties
-2-
<PAGE> 3
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
and the Majority Holders shall submit to the investment banking firm their
respective determinations of the valuation amount, and any supporting arguments
and other data as they may desire, within ten (10) days of the appointment of
the investment banking firm, and the investment banking firm shall as soon as
practicable thereafter make its own determination of the valuation amount. The
final valuation amount for purposes hereof shall be the average of the two
valuation amounts closest together, as determined by the investment banking
firm, from among the valuation amounts submitted by the Issuer and the Majority
Holders and the valuation amount calculated by the investment banking firm. The
determination of the final valuation amount by such investment banking firm
shall be final and binding upon the parties. The fees and expenses of the
investment banking firm and arbitrator (if any) used to determine the valuation
amount shall be paid by the Issuer or the applicable Warrant Holders (on a pro
rata basis), whichever party's valuation amount is excluded from the average
referred to above, unless the investment banking firm's valuation amount is
excluded from the average, in which case such fees and expenses will be divided
evenly between the Issuer and such Warrant Holders. If required by any such
investment banking firm or arbitrator, the Issuer shall execute a retainer and
engagement letter containing reasonable terms and conditions, including, without
limitation, customary provisions concerning the rights of indemnification and
contribution by the Issuer in favor of such investment banking firm or
arbitrator and its officers, directors, partners, employees, agents and
Affiliates.
"Articles of Organization" means the Restated Articles of
Organization of the Issuer, as amended and restated and in effect at the time in
question.
"Board" shall mean the Board of Directors of the Issuer.
"By-laws" means the by-laws of the Issuer, as amended and in effect
at the time in question.
"Capital Stock" means any and all shares, interests, participation
or other equivalents (however designated) of corporate stock, including all
common stock and preferred stock.
"Certificate of Designation" shall have the meaning ascribed to such
term in the Purchase Agreement.
"Change of Control" shall have the meaning ascribed to such term in
the Certificate of Designation.
"Common Stock" shall mean the Issuer's Common Stock, par value $.01
per share.
-3-
<PAGE> 4
"Convertible Securities" shall have the meaning given to such term
in Section 4(d).
"Current Market Price" shall mean, as to any security, the average
of the closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York City
time, on such day, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar or successor organization (and in each such
case (i) averaged over a period of 21 days consisting of the day immediately
preceding the day as of which "Current Market Price" is being determined and the
20 consecutive Business Days prior to such immediately preceding day and (ii)
excluding any trades that are not bona fide, arm's length transactions). If at
any time such security is not listed on any domestic securities exchange or
quoted in the NASDAQ System or the domestic over-the-counter market, the
"Current Market Price" of such security shall be the fair market value thereof
as determined in accordance with the Appraisal Procedure, using an appropriate
valuation method, assuming an arms-length sale to an independent party. In
determining the fair market value of the Common Stock, a sale of all of the
issued and outstanding Common Stock of the Issuer will be assumed, without
giving regard to the lack of liquidity of such stock due to any restrictions
(contractual or otherwise) applicable thereto or any discount for minority
interests and assuming the conversion or exchange of all securities then
outstanding that are convertible into or exchangeable for Common Stock and the
exercise of all rights and warrants (including the Warrants) then outstanding
and exercisable to purchase shares of such stock or securities convertible into
or exchangeable for shares of such stock. Common Stock issued in an underwritten
public offering shall be deemed to be issued for fair market value.
"EBIT" means, for Fiscal 1998, the Net Income of the Issuer and its
consolidated Subsidiaries plus (without the duplication) (a) Interest Expense,
net of interest income and (b) income tax expense, refunds or credits for such
period all determined in accordance with GAAP.
"EBIT Target" shall mean $16,000,000 as adjusted pursuant to Section
5(b).
"Effective Date" shall mean the earlier to occur of (i) the date of
the determination by the Accountants pursuant to
-4-
<PAGE> 5
Section 5(a) that EBIT for Fiscal 1998 is less than the EBIT Target and (ii) the
occurrence of an Exercise Condition.
"Equity Interest" means (a) with respect to a corporation, any and
all Capital Stock or warrants, options or other rights to acquire Capital Stock
(but excluding any debt security which is convertible into, or exchangeable for,
Capital Stock) and (b) with respect to a partnership, limited liability company
or similar Person, any and all units, interests, rights to purchase, warrants,
options or other equivalents of, or other ownership interests in, any such
Person.
"Excluded Stock" shall mean (i) any shares of Common Stock issuable
upon the exercise of any options granted pursuant to the Stock Option Plans and
(ii) any shares of Common Stock issuable upon exercise of any Warrants.
"Exercise Condition" shall have the meaning assigned to it in
Section 2 hereof.
"Exercise Notice" shall have the meaning assigned to such term in
Section 2 hereof.
"Exercise Price" shall have the meaning assigned to such term in the
first paragraph of this Warrant.
"Expiration Date" shall have the meaning assigned to such term in
the first paragraph of this Warrant.
"Fiscal 1998" shall have the meaning assigned to such term in
Section 5 (a) hereof.
"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 Issuer are the Articles of
Organization and Bylaws.
"GAAP" means generally accepted accounting principles in the United
States and statements and interpretations (if applicable) issued by the
Financial Accounting Standards Board, or any successor body, as in effect from
time to time, unless otherwise stated.
"Guaranty" has the meaning set forth in the Certificate of
Designation.
"Holder" shall mean the registered holder of this Warrant and the
registered holder of any Warrant Stock issued upon exercise hereof.
"Include" and "Including" shall be construed as if followed by the
phrase ", without being limited to,".
-5-
<PAGE> 6
"Indebtedness" has the meaning set forth in the Certificate of
Designation.
"Interest Expense" means, for Fiscal 1998, all interest (including
capitalized interest) and all amortization of debt discount and expense on any
particular Indebtedness (including, without limitation payment-in-kind, zero
coupon and other like securities and the interest component of capital lease
obligations applicable to such period) of the Issuer and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Investment" in any Person, means any loan or advance to such
Person, any purchase or other acquisition of any Equity Interest or other
ownership or profit interest, warrants, rights, options, obligations or other
securities of such Person, any capital contribution to such Person or any other
investment in such Person, including any arrangement pursuant to which an
investing Person incurs Indebtedness of the types referred to in clause (f) or
(i) of the definition of "Indebtedness" in respect of such Person.
"Issuer" shall have the meaning assigned to such term in the first
paragraph of this Warrant.
"Majority Holders" shall mean those Warrant Holders holding (or
having the right to receive upon exercise of Warrants) Warrant Stock
representing a majority of the total amount of Warrant Stock held by, or
issuable to, all Warrant Holders.
"NASDAQ System" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Net Income" means, for Fiscal 1998, the gross revenues of the
Issuer and its consolidated Subsidiaries for such period less all expenses and
other proper charges, including returns and allowances, in each case determined
in accordance with GAAP, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets or from any transaction classified as
extraordinary under GAAP, any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
(c) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings and losses of any corporation, substantially all the
assets of which have been acquired in any manner by the Company and its
consolidated
-6-
<PAGE> 7
subsidiaries, realized by such corporation prior to the date of such
acquisition;
(d) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings and losses of any corporation which shall have merged
into the Issuer or any of its consolidated Subsidiaries prior to the date of
such merger;
(e) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings of any business entity in which the Issuer or its
consolidated Subsidiaries has an ownership interest unless such net earnings
actually shall have been received by the Issuer or its Subsidiaries in the form
of cash distributions;
(f) earnings resulting from a reappraisal, revaluation or write-up
of assets;
(g) any charge to net earnings resulting from the amortization of
the value of stock options given to employees to the extent required by APB 25;
(h) to the extent not reflected in adjustments made pursuant to
Section 5(b), any increase or decrease of net income arising from a change in
the Issuer's accounting methods;
(i) any gains resulting from the forgiveness of Indebtedness or the
retirement of Indebtedness at a discount;
(j) any gain arising from the acquisition of any securities of the
Issuer or its consolidated subsidiaries; and
(k) any reversal of any contingency reserve, except that provision
for such contingency reserve shall have been made from income arising during
such period.
"Options" shall have the meaning given to such term in Section 4(d).
"Person" shall be construed in its broadest possible sense and shall
include any individual, corporation, general or limited partnership, joint
venture, association, limited liability company, joint stock company, trust,
business trust, bank, trust company, estate (including any beneficiaries
thereof), unincorporated organization, cooperative, association or governmental
branch, authority, agency or political subdivision thereof.
"Purchase Agreement" shall have the meaning assigned to such term in
the second paragraph of this Warrant.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of July 30, 1997 between
-7-
<PAGE> 8
the Issuer and the Holders, as modified and supplemented and in effect from time
to time.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series A Preferred Stock" shall mean the Issuer's Series A
Preferred Stock, par value $1 per share.
"Stock Option Plans" shall have the meaning assigned to such term in
the Purchase Agreement and any other stock option plans adopted by the Issuer
and any other grants of stock options made by the Issuer, in each case granted
to employees, directors and independent contractors of the Issuer or its
subsidiaries.
"Subsidiaries" shall have the meaning given to such term in the
Purchase Agreement.
"Voting Agreement" shall mean the Voting Agreement dated as of July
30, 1997 among the Issuer, the Holders and the other signatories thereto, as
modified and supplemented and in effect from time to time.
"Warrant" shall mean this Warrant and all other warrants originally
issued by the Issuer pursuant to the Purchase Agreement and all warrants issued
upon transfer, division, or combination of, or in substitution for, this Warrant
or any such other warrant. All Warrants shall be substantially in the form of
Exhibit C attached to the Purchase Agreement except that the Warrants need not
bear the legends appearing on the first page of this Warrant from and after such
time as the restrictions set forth therein no longer apply.
"Warrant Holder" shall mean any Person who acquires Warrants or
Warrant Stock pursuant to the provisions of the Purchase Agreement or any
Warrant, including any transferees of Warrants or Warrant Stock.
"Warrant Stock" shall mean (a) all shares of Common Stock issued or
issuable from time to time upon exercise of this Warrant, (b) all other
securities or other property issued or issuable upon any such exercise and (c)
any securities distributed with respect to the securities referred to in the
preceding clauses (a) and (b); provided, however, that the term "Warrant Stock"
shall not include shares of Common Stock or other securities following the time
such shares or other securities have been sold in a public offering registered
under the Securities Act or sold under Rule 144 promulgated thereunder. As used
in this Warrant, the phrase "Warrant Stock then held" shall mean Warrant Stock
held at the time of determination by the Holder, and shall include Warrant Stock
issuable upon exercise of any Warrants held at the time of determination by such
Holder.
-8-
<PAGE> 9
SECTION 2. Exercise of Warrant. (a) On and after the Effective Date
and until 5:00 p.m., New York City time, on the Expiration Date, the Holder may
exercise this Warrant, on one or more occasions, on any Business Day, in whole
or in part, by delivering to the Issuer, at its office maintained for such
purpose pursuant to Section 6 hereof, (i) a written notice of the Holder's
election to exercise this Warrant, which notice shall be substantially in the
form of Annex A attached hereto and shall be properly completed (the "Exercise
Notice"), (ii) payment of the Exercise Price (payable as set forth in Section
2(b) below) for the Warrant Stock as to which this Warrant is being exercised,
and (iii) this Warrant. Except to the extent necessary to cause the number of
shares of Common Stock deliverable as provided in Section 2(b) to be a whole
number of shares, this Warrant shall be exercisable in part only for a whole
number of shares.
(b) At the option of the Holder, the Exercise Price shall be payable
(i) in cash or by certified or official bank check payable to the order of the
Issuer or (ii) by exchange of this Warrant in accordance with the further
provisions of this Section 2(b). In exchange for the portion of this Warrant
that is being exercised at such time, the Holder shall receive the number of
shares of Common Stock determined by multiplying (A) the number of shares of
Common Stock for which this Warrant is being exercised at such time by (B) a
fraction, (1) the numerator of which shall be the difference between (x) Current
Market Price per share of Common Stock at such time and (y) the Exercise Price
per share of Common Stock, and (2) the denominator of which shall be the Current
Market Price per share of Common Stock at such time. The Issuer shall issue a
new Warrant for the portion, if any, of this Warrant not being exercised as
provided in Section 2(f).
(c) Subject to the provisions of Section 2(d), upon receipt of an
Exercise Notice, the aggregate Exercise Price payable and this Warrant, the
Issuer shall, as promptly as practicable and in any event within five (5)
Business Days thereafter, issue to the Holder one or more stock certificates
representing the aggregate number of shares of Common Stock to which the Holder
is entitled and transfer to the Holder of this Warrant appropriate evidence of
ownership of other securities or property (including any cash) to which the
Holder is entitled, in such denominations, and registered or otherwise placed
in, or payable to the order of, such name or names, as may be directed in
writing by the Holder, and shall deliver such stock certificates, evidence of
ownership and any other securities or property (including any cash) to the
Person or Persons entitled to receive the same, together with an amount in cash
in lieu of any fraction of a share (or fractional interest in any other
security), as hereinafter provided. The Issuer shall pay all expenses in
connection with, and any and all documentary, stamp or similar issue or transfer
taxes of the United States or any state thereof payable in respect of, the issue
or delivery of the
-9-
<PAGE> 10
Warrant Stock upon exercise of this Warrant. However, the Issuer shall not be
required to pay any tax or other charge imposed in connection with any
assignment or transfer involved in the issue of any certificate or other
evidence of ownership of Warrant Stock.
(d) The Holder's election to exercise this Warrant may, in the sole
discretion of the Holder, be conditioned upon, and in such event, the exercise
shall be subject in all respects to a Change of Control, the Issuer ceasing to
be a reporting company under the Securities and Exchange Act of 1934, as
amended, the consummation of a sale of the Issuer, any public offering of the
Issuer's Common Stock registered under the Securities Act or other similar
transaction involving the Issuer (each of the foregoing referred to herein as an
Exercise Condition and collectively referred to herein as the "Exercise
Conditions"), as specified in the Exercise Notice, and the Issuer shall provide
the Holder with written notice no less than 20 business days prior to the
occurrence of an Exercise Condition. If any exercise of this Warrant is so
conditioned, then, subject to delivery of the items required by Section 2(b),
the Issuer shall deliver the certificates and other evidence of ownership of
other securities or other property in such manner as the Holder shall direct as
required in connection with the consummation of the transaction upon which the
exercise is conditioned. At any time that the Issuer shall give notice to the
Holder that such transaction has been abandoned or the Issuer has withdrawn from
participation in such transaction, the Issuer shall return the items delivered
pursuant to Section 2(c) and the Holder's election to exercise this Warrant
shall be deemed rescinded.
(e) The stock certificate or certificates or other evidence of
ownership of Warrant Stock to be delivered pursuant to Section 2(c) hereof shall
be deemed to have been issued, and the Holder or any other Person so designated
to be named therein shall, to the extent permitted by law and the Purchase
Agreement, be deemed to have become a holder of record of the Warrant Stock
represented thereby, including having the right to vote any voting securities
included therein or to consent or to receive notice as a shareholder, as of the
date on which the last of the Exercise Notice, payment of the Exercise Price and
this Warrant is received by the Issuer as aforesaid (subject, in the case of an
exercise to which Section 2(d) applies, to the consummation of the transaction
upon which such exercise is conditioned), notwithstanding that the transfer
books of the Issuer shall then be closed or that such certificates or other
evidence of ownership shall not then actually have been delivered to the Holder.
(f) If this Warrant shall have been exercised only in part, the
Issuer shall, at the time of delivery of the certificate or certificates or
other evidence of ownership of Warrant Stock, execute and deliver to the Holder,
without charge,
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a new Warrant evidencing the rights of the Holder to purchase the unpurchased
Warrant Stock called for by this Warrant, which new Warrant shall in all other
respects be identical to this Warrant, or, at the request of the Holder,
appropriate notation may be made on this Warrant and the same returned to the
Holder.
(g) The Issuer shall not be required to issue any fractional share
of Common Stock (or fractional interest in any other security) upon exercise of
this Warrant. As to any fraction of a share (or fractional interest in any other
security) that the Holder would otherwise be entitled to receive upon such
exercise, the Issuer shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction of the Current Market Price per share of
Common Stock (and/or other security) on the date of exercise; provided, however,
that in the event that the Issuer undertakes a reduction in the number of shares
of Common Stock or other securities outstanding, it shall be required to issue
fractional shares or fractional interests in such other securities to the Holder
if the Holder exercises all or any part of this Warrant, unless the Holder shall
have consented in writing to such reduction and provided the Issuer with a
written waiver of its right to receive fractional shares or interests in
accordance with this paragraph. If the Holder shall exercise more than one
Warrant in the same transaction, any payment in respect of fractional shares (or
other fractional interests) shall be based on the final fraction resulting from
aggregating all such exercises.
(h) The Issuer hereby agrees at all times to keep reserved for
issuance and delivery upon exercise of this Warrant such number of its
authorized but unissued shares (or treasury shares) of Common Stock or other
securities of the Issuer from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares and other securities shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable, free
and clear of all liens, security interests, charges and other encumbrances or
restrictions on sale (except to the extent of any applicable provisions set
forth in the Purchase Agreement, Voting Agreement, Registration Rights Agreement
or the Issuer's Fundamental Documents) and free and clear of all preemptive or
similar rights.
(i) If the issuance of any shares of Common Stock or other
securities required to be reserved for purposes of the exercise of this Warrant
requires the registration with, or approval of, any governmental authority or
requires listing on any national securities exchange or national market system
before such shares or other securities may be so issued, the Issuer shall at its
expense use its best efforts to cause such shares to be duly registered,
approved or listed, as the case may be, so that such shares or other securities
may be issued in accordance with the terms hereof; provided, however, that this
provision
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<PAGE> 12
shall not obligate the Issuer to register such shares or other securities under
the Securities Act or qualify them under state securities or blue sky laws.
SECTION 3. Transfer, Division and Combination. (a) This Warrant, all
rights hereunder and any Warrant Stock issued or issuable upon exercise hereof
are assignable and transferable, at any time in whole or in part, to any Person
or Persons subject in all cases to the provisions of Article VII of the Purchase
Agreement. Any such transfer shall not require the consent of any security
holder of the Issuer.
(b) Upon a transfer permitted by Section 3(a), this Warrant shall be
transferable upon surrender of this Warrant to the Issuer, together with a
written assignment of this Warrant substantially in the form of Annex B attached
hereto, duly executed by the Holder hereof or such Holder's agent or attorney.
Upon such surrender, the Issuer shall, without charge, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees (and, if the
Holder's entire interest is not being assigned, in the name of the Holder), and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled.
(c) This Warrant may be exchanged for, or combined with, other
Warrants upon presentation of this Warrant and any other Warrants with which
this Warrant is to be combined to the Issuer, together with a written notice
specifying the denominations in which a new Warrant or Warrants are to be
issued, signed by the Holder. The Issuer shall execute and deliver a new Warrant
or Warrants to the Holder in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(d) The Issuer shall maintain books for the registration and
transfer of the Warrants, and shall allow each Warrant Holder to inspect such
books at such reasonable times as such holder shall request.
SECTION 4. Adjustments.
(a) Dividends and Distributions. If at any time the Issuer shall pay
any dividend or make any other distribution to holders of its Common Stock of
any cash, evidence of indebtedness or other property (including any rights or
warrants to purchase any securities of the Issuer) of any nature whatsoever
(other than as contemplated by subsections (b), (c)(i)(A) and (d)(i)(A) of this
Section 4), the Issuer shall at the same time pay or distribute to the Holder
(whether or not the Holder exercises this Warrant) the cash, evidence of
indebtedness or other property the Holder would have been entitled to receive if
such Holder would have been entitled to receive if such had exercised
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<PAGE> 13
this Warrant immediately prior to the record date for such dividend or
distribution.
(b) Subdivisions and Combinations. If at any time the Issuer shall
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution of Common
Stock;
(ii) subdivide, split or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then immediately after the occurrence of any such event (A) the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted so as
to equal the number of shares of Common Stock such holder would have held
immediately after the occurrence of such event (in the case of an event referred
to in clause (i), after giving effect to such dividend or distribution) if such
holder had exercised this Warrant immediately prior to the occurrence of such
event and (B) the Exercise Price shall be adjusted to be equal to (x) the
Exercise Price immediately prior to the occurrence of such event multiplied by
(y) a fraction (1) the numerator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to the adjustment
in clause (A) and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
clause (A).
(c) Issuance of Common Stock. If at any time the Issuer (i) shall
(A) take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock or (B) otherwise sell or issue any shares of any class or series of
Common Stock (other than Excluded Stock) and (ii) the consideration per share of
Common Stock paid or to be paid upon such subscription, purchase, sale or
issuance is less than the Current Market Price per share of Common Stock
immediately before such record date or immediately before the date of such sale
or issuance, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying (x) the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such record date or sale or
issuance date, as the case may be, by (y) a fraction (not to be less than one)
(i) the numerator of which shall be equal to the product of (A) the number of
shares of Common Stock outstanding (determined on a fully-diluted basis) after
giving effect to such subscription, purchase, sale or issuance (and assuming all
such subscription or
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<PAGE> 14
purchase offers are exercised) and (B) the Current Market Price per share of
Common Stock determined immediately before such record date or sale or issuance
date, as the case may be, and (ii) the denominator of which shall be equal to
the sum of (A) the product of (1) the number of shares of Common Stock
outstanding (determined on a fully-diluted basis) immediately before such record
date or sale or issuance date, as the case may be, and (2) the Current Market
Price per share of Common Stock determined immediately before such record date
or sale or issuance date, as the case may be, and (B) the aggregate
consideration received or to be received by the Issuer for the total number of
shares of Common Stock to be subscribed for or purchased, sold or issued.
Simultaneously with the adjustment in the preceding sentence, the Exercise Price
shall be adjusted to be equal to (x) the Exercise Price immediately prior to the
occurrence of such event multiplied by (y) a fraction (1) the numerator of which
is the number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the adjustment in the preceding sentence and (2) the
denominator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately after the adjustment in the preceding
sentence.
(d) Issuance of Convertible Securities or Options. If at any time
(i) the Issuer shall (A) take a record of the holders of its Common Stock for
the purpose of entitling them to subscribe for or purchase options to purchase
or rights to subscribe for Common Stock, securities directly or indirectly
convertible into or exchangeable for Common Stock ("Convertible Securities") or
options or rights with respect to Convertible Securities (options or rights with
respect to Common Stock or Convertible Securities being referred to as
"Options") or (B) otherwise issue or sell any Options or Convertible Securities
(other than Options exercisable for Excluded Stock) and (ii) the consideration
per share paid or to be paid for the Common Stock deliverable upon exercise of
such Options and/or conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount received or receivable by the
Issuer in consideration of the subscription, purchase, sale or issuance of such
Options or Convertible Securities plus any amount payable to the Issuer upon
such exercise and/or conversion or exchange, by (y) the total maximum number of
shares of Common Stock necessary to effect the exercise and/or conversion or
exchange of all such Options or Convertible Securities) shall be less than the
Current Market Price per share of Common Stock on such record date or sale or
issuance date, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such date by a fraction (not to be
less than one) (i) the numerator of which shall be equal to the product of (A)
the total maximum number of shares of Common Stock outstanding (determined on a
fully diluted basis) after giving
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<PAGE> 15
effect to the assumed exercise and/or conversion of all such Options or
Convertible Securities and (B) the Current Market Price per share of Common
Stock determined immediately before such record date or sale or issuance date,
as the case may be, and (ii) the denominator of which shall be equal to the sum
of (A) the product of (1) the number of shares of Common Stock outstanding
(determined on a fully-diluted basis) immediately before such record date or
sale or issuance date, as the case may be, and (2) the Current Market Price per
share of the Common Stock determined immediately before such record date or sale
or issuance date, as the case may be, and (B) the aggregate consideration for
which Common Stock is deliverable upon exercise and/or conversion or exchange
for such Options or Convertible Securities. Simultaneously with the adjustment
in the preceding sentence, the Exercise Price shall be adjusted to be equal to
(x) the Exercise Price immediately prior to the occurrence of such event
multiplied by (y) a fraction (1) the numerator of which is the number of shares
of Common Stock issuable upon exercise of this Warrant immediately prior to the
adjustment in the preceding sentence and (2) the denominator of which is the
number of shares of Common Stock issuable upon exercise of this Warrant
immediately after the adjustment in the preceding sentence. The adjustment of
the exercise price of an Option shall not be deemed to be the issuance or sale
of an Option at less than the Current Market Price per share of Common Stock if
the exercise price as adjusted is not less than the Current Market Price per
share of Common Stock on the date of such adjustment.
(e) Superseding Adjustment. If, at any time after any adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant
shall have been made on the basis of the issuance of any Options or Convertible
Securities:
(i) any such Options shall expire prior to exercise or the
right to convert or exchange any such Convertible Securities shall
terminate prior to conversion or exchange; or
(ii) the consideration per share for which shares of Common
Stock are issuable pursuant to the terms of such Options or
Convertible Securities shall be increased or decreased;
then such previous adjustment shall be rescinded and annulled (without affecting
any other adjustments resulting from any other events). Thereupon, a
recomputation shall be made of the adjustment in the number of shares of Common
Stock issuable upon exercise of this Warrant on the basis of
(A) treating the number of shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the
previous exercise,
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<PAGE> 16
conversion or exchange of such Options or Convertible
Securities as having been issued on the date or dates of
such exercise and/or conversion or exchange and for the
consideration actually received and receivable therefor,
and
(B) treating any such Options or Convertible
Securities that then remain outstanding as
having been granted or issued immediately
after the time of such increase or decrease
for the consideration per share for which
shares of Common Stock are issuable upon
exercise and/or conversion or exchange of
such Options or Convertible Securities,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled. For purposes of the computation of such new adjustment, the Current
Market Price shall be deemed to be the Current Market Price used in computing
the previous adjustment.
(f) Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock issuable upon exercise of this Warrant:
(i) The sale or other disposition of any issued shares of
Common Stock owned or held by or for the account of the Issuer shall
be deemed to be an issuance thereof for purposes of this Section.
(ii) In computing adjustments under this Section, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(iii) If the Issuer shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase rights and shall,
thereafter and before the payment of such dividend or distribution
or the granting of such subscription or purchase rights, legally
abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall
be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and
annulled.
(iv) Aggregate consideration for purposes of Sections 4(c) and
4(d) shall be determined as follows: In case any Common Stock,
Options, or Convertible Securities shall be issued or sold, or be
exercisable,
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<PAGE> 17
convertible or exchangeable for cash, the consideration received
therefor shall be deemed to be the amount payable to the Issuer
therefor, after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts or, in the case
of a private placement thereof, finders' fees or commissions paid or
allowed by the Issuer in connection therewith. In case any such
Common Stock, Options, or Convertible Securities shall be issued or
sold, or be exercisable, convertible or exchangeable for a
consideration other than cash payable to the Issuer, the
consideration received therefor shall be deemed to be the fair
market value of such consideration (as determined in accordance with
the Appraisal Procedure), after deduction therefrom of any expenses
incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Issuer in connection therewith. In case any
such Common Stock, or Options, Convertible Securities shall be
issued or sold, or be exercisable, convertible or exchangeable in
connection with any merger of another corporation into the Issuer,
the amount of consideration therefor shall be deemed to be the fair
market value (as determined in accordance with the Appraisal
Procedure) of such portion of the assets of such merged corporation
as the Board shall reasonably determine (such determination to be
reasonably acceptable to the Majority Holders) in good faith to be
attributable to such options, rights or securities.
(g) Merger, Consolidation or Disposition of Assets. If the Issuer
shall merge, consolidate or effect a share exchange with another entity, or
shall sell, transfer or otherwise dispose of all or substantially all of its
assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of Common
Stock or other securities of the successor or acquiring entity, or property of
any nature is to be received by or distributed to the holders of Common Stock of
the Issuer, then the Holder shall be entitled to receive in respect of the
Warrant Stock issuable upon exercise of this Warrant, and upon delivery to the
Issuer of this Warrant for cancellation, the amount of cash, shares of Common
Stock, other securities or other property that it would have been entitled to
receive if such Holder had exercised this Warrant in full immediately prior to
the occurrence of such merger, consolidation, share exchange or disposition of
assets. In the case of any such merger, consolidation, share exchange or
disposition of assets, the successor or acquiring entity (and any Affiliate
thereof issuing securities) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Issuer and all of the obligations
and liabilities hereunder, subject to such modifications as may be deemed
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<PAGE> 18
appropriate (as determined by resolution of the Board and reasonably acceptable
to the Majority Holders) in order to provide for adjustments of the Warrant
Stock issuable upon exercise of this Warrant that shall be as nearly equivalent
as practicable to the adjustments provided for in this Section 4. The foregoing
provisions shall similarly apply to successive mergers, consolidations, share
exchanges and dispositions of assets.
(h) Capital Reorganization or Capital Reclassification. If the
Issuer shall effect any capital reorganization or any reclassification of its
capital stock (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the Issuer
shall cause effective provision to be made so that this Warrant shall be
exercisable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the Warrant Stock deliverable upon
exercise of this Warrant would have been entitled upon such reorganization or
reclassification and any such provision shall include adjustments in respect of
such stock, securities or other property that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4 with
respect to this Warrant.
(i) Other Action Affecting Common Stock. If at any time or from time
to time the Issuer shall take any action affecting its Common Stock, other than
any action described in this Section 4, then, unless such action will not have
an adverse effect upon the Holder's rights, the number of shares of Warrant
Stock issuable upon exercise of this Warrant and the Exercise Price shall be
adjusted in such manner and at such time as the Board shall in good faith
determine (such determination to be reasonably acceptable to the Majority
Holders) to be equitable in the circumstances, but no such adjustment shall
decrease the number of shares of Warrant Stock issuable upon exercise of this
Warrant or increase the Exercise Price.
(j) If at any time the Issuer shall issue any shares of its Common
Stock pursuant to the exercise of an option granted under a Stock Option Plan,
then the number of shares of Common Stock issuable upon the exercise of this
Warrant shall be increased by an amount equal to the product of (x) the number
of such shares issued pursuant to the option exercise and (y) 0.1764. The
provisions of this Section 4(j) shall only apply to issuances after the date
hereof of the first 1,300,000 shares of Common Stock pursuant to the Stock
Option Plans, as such number may be adjusted pursuant to any stock splits,
divisions, combinations or similar adjustments.
(k) Notice of Adjustments. Whenever the number of shares of Warrant
Stock issuable upon exercise of this Warrant
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shall be adjusted pursuant to this Agreement, the Issuer shall forthwith obtain
a certificate signed by a firm of independent accountants of recognized national
standing selected by the Issuer setting forth, in reasonable detail, the event
requiring the adjustment the method by which such adjustment was calculated and
specifying the number of shares of Warrant Stock issuable upon exercise of this
Warrant after giving effect to such adjustment (except in the case of
adjustments pursuant to Section 4(j) in which event a certificate shall be
obtained on December 31 and June 30). The Issuer shall promptly cause a signed
copy of such certificate to be delivered to the Holder. The Issuer shall keep at
its office maintained for purposes of Section 7(a) hereof copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of a
Warrant designated by the registered Holder hereof.
(l) Notice of Certain Corporate Action. If the Issuer shall propose
(i) to pay any dividend to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock; (ii) to offer to the holders of
its Common Stock rights to subscribe for or to purchase any additional shares of
Common Stock or any Options or Convertible Securities; (iii) to effect any
reorganization or reclassification of its Common Stock; (iv) to otherwise issue
any Common Stock, Options, or Convertible Securities; (v) to effect any other
capital reorganization; (vi) to effect any consolidation, merger or share
exchange or any sale, transfer or other disposition of all or substantially all
of its assets; or (vii) to effect the liquidation, dissolution or winding up of
the Issuer, then, in each such case, the Issuer shall give to the Holder a
notice of such proposed action, which shall specify the date on which a record
is to be taken for the purposes of such dividend, distribution or rights offer,
or the date on which such reclassification, issuance, reorganization,
consolidation, merger, share exchange, sale, transfer, disposition, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of Common Stock, if any such date is to be fixed, and shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Common Stock, and the number of shares
of Warrant Stock that are issuable upon exercise of this Warrant after giving
effect to any adjustment that will be required as a result of such action. Such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Common Stock for purposes of such action, and in the case of any other such
action, at least 10 days prior to the date of the taking of such proposed
action.
(m) No Impairment. The Issuer will not, by amendment of its Articles
of Organization or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or
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sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Issuer, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the exercise
rights of the Holder against impairment.
(n) Miscellaneous. The computations of all amounts under this
Section 4 shall be made assuming all other anti-dilution or similar adjustments
to be made to the terms of all other securities resulting from the transaction
causing an adjustment pursuant to this Section 4 have previously been made so as
to maintain the relative economic interest of this Warrant vis a vis all other
securities issued by the Issuer.
SECTION 5. EBIT Condition
(a) As promptly after the expiration of the Issuer's fiscal year for
1998 ("Fiscal 1998") as reasonably practicable, the Issuer's independent public
accountants (the "Accountants) shall calculate the Issuer's EBIT for Fiscal 1998
and the Accountants shall notify the Holder and the Issuer in writing of their
determination of EBIT for Fiscal 1998. The determination of the Accountants with
respect to any calculations pursuant to this Section 5 (absent manifest error)
shall be final and binding on the Issuer and all Holders. If EBIT for Fiscal
1998 is equal to or exceeds the EBIT Target, the Holder shall, promptly
following receipt of a written request from the Issuer, surrender this Warrant
to the Issuer for cancellation for no consideration.
(b) In the event the Issuer makes any capital expenditures not
contemplated by the projections upon which the EBIT Target is based, or
consummates any mergers or acquisitions (whether of assets or equity or other
interests) or other extraordinary transactions, the Issuer and the Majority
Holders will determine in good faith an appropriate adjustment to the EBIT
Target.
SECTION 6. Miscellaneous.
(a) Office of Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in the continental United States where the
Warrants may be presented for exercise, transfer, division, combination or
cancellation as provided in this Warrant. Such office shall be at 210 Boylston
Street, Chestnut Hill, MA 02167, unless and until the Issuer shall designate and
maintain some other office for such purposes and give notice thereof to the
Holder.
(b) Notices Generally. Any notices and other communications pursuant
to the provisions hereof shall be sent in
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accordance with the provisions of Section 10.6 of the Purchase Agreement.
(c) Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflicts of laws rules. The Issuer agrees that it may be served with process in
the State of New York and any action for breach of this Warrant may be
prosecuted against it in the courts of such State or any Federal court located
in such State.
(d) Limitation of Liability. Except as otherwise provided herein,
this Warrant does not entitle the Holder to any voting rights or other rights of
a shareholder of the Issuer, as a shareholder. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the Exercise Price or as a
shareholder of the Issuer, whether such liability is asserted by the Issuer, by
any creditor of the Issuer or any other Person.
(e) Loss or Destruction of Warrant. Upon receipt by the Issuer of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant and (in the case of
loss, theft or destruction), if requested by the Issuer, of reasonably
satisfactory indemnification (if the Holder is a financial institution or an
Affiliate thereof, its own agreement being satisfactory), or (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Issuer shall,
without charge, execute and deliver a new Warrant exercisable for the same
amount of Warrant Stock; provided, however, that (in the case of loss, theft or
destruction) no indemnity bond shall be required unless the Issuer has a class
of securities registered pursuant to the Securities Exchange Act of 1934, as
amended, and the Issuer's transfer agent requires such indemnity bond as a
condition to the issuance of a new Warrant.
(f) Amendments and Waivers. Any provision of this Warrant may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Issuer and the Holders and, in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
* * *
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IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: July 30, 1997
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
-----------------------------
Name: Richard E. Wenz
Title: President
<PAGE> 23
ANNEX A
FORM OF EXERCISE NOTICE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant exercises this
Warrant for the purchase of ________ shares of Common Stock of Safety 1st, Inc.,
a Massachusetts corporation, and herewith makes payment therefor of $__________
(such payment being made [check one] (x) [ ] in cash or by certified or official
bank check or (y) [ ] by acceptance of a reduced number of shares of Common
Stock upon cancellation of this Warrant as provided in Section 2(b) of this
Warrant, all on the terms and conditions specified in this Warrant, and requests
that (i) certificates and/or other instruments covering such shares of Common
Stock be issued in accordance with the instructions given below and (ii) if such
shares of Common Stock shall not include all of the shares of Common Stock to
which the Holder is entitled under this Warrant, that a new Warrant for the
unpurchased balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned. References in this Exercise Notice to "Common
Stock" shall include other securities or other property to the extent included
in Warrant Stock.
[This Exercise Notice is being delivered contingent upon the
consummation of [describe transaction] as contemplated by Section 2(d) of this
Warrant].*
Dated:__________________________
_________________________________________
(Signature of Registered Holder)**
Instructions for issuance and
registration of shares of
Common Stock:
_________________________________ Social Security or Other
Name of Registered Holder Identifying Number:______________________
(please print)
- --------
* Include if applicable.
** The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE> 24
Please deliver certificate to
the following address:
____________________________________
Street
____________________________________
City, State and Zip Code
<PAGE> 25
ANNEX B
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all the rights
of the undersigned under this Warrant with respect to the number of shares of
Common Stock covered thereby set forth below to:
<TABLE>
<CAPTION>
Number of
Shares of
Name of Assignee Address Common Stock
- ---------------- ------- ------------
<S> <C> <C>
</TABLE>
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
Dated:
---------------------
---------------------------------------
(Signature of Registered Holder)*
---------------------------------------
Name of Registered Holder
(Please Print)
Witness:
- --------------------------
- ------
* The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE> 1
WARRANT
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES WHICH MAY BE ACQUIRED ON THE EXERCISE HEREOF ARE
SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 30, 1997 AMONG SAFETY 1ST, INC., A MASSACHUSETTS CORPORATION
(THE "ISSUER"), BT CAPITAL PARTNERS, INC. AND BEAR, STEARNS & CO. INC., AS SUCH
AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF SUCH AGREEMENT IS
ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF SUCH AGREEMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH MAY BE
ACQUIRED ON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY,
SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
No. of Shares Warrant No. U-1
of Common Stock: 570,755
WARRANT
to Purchase Common Stock of
SAFETY 1ST, INC.
THIS IS TO CERTIFY THAT BT Capital Partners, Inc., or its registered
assigns, is entitled to purchase in whole or in part from time to time from
Safety 1st, Inc., a Massachusetts corporation (the "Issuer"), at any time on and
after the Effective Date (as hereinafter defined), but not later than 5:00 p.m.,
New York time, on July 30, 2007 (the "Expiration Date"), 570,755 shares of
Common Stock (as hereinafter defined) at a purchase price of $0.01 per share
(the "Exercise Price"), subject to the terms and conditions provided herein and
in the Purchase Agreement (as hereinafter defined). The number of shares of
Common Stock for which this Warrant shall be exercisable and the Exercise Price
are subject to adjustment from time to time as provided herein.
This Warrant is issued pursuant to the Stock and Warrant Purchase
Agreement dated as of July 30, 1997 (as modified and supplemented and in effect
from time to time, the "Purchase Agreement") among the Issuer, BT Capital
Partners, Inc. and Bear, Stearns & Co. Inc. and is subject to the provisions of
the Purchase Agreement and the Registration Rights Agreement (as hereinafter
defined).
<PAGE> 2
SECTION 1. Certain Definitions. (a) Each capitalized term used
herein without definition shall have the meaning assigned thereto (or
incorporated by reference) in the Purchase Agreement and in the Exhibits
thereto.
(b) As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1 or in other provisions of this
Warrant in the singular to have the same meanings when used in the plural and
vice versa):
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, controls, is under common control with, or
is owned or controlled by, such specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, the power
to direct the management or policies of the specified Person through the
ownership of voting securities, by contract, voting agreement or otherwise, and
(ii) the terms "controlling", "control with" and "controlled by", etc. shall
have meanings correlative to the foregoing.
"Appraisal Procedure", if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for purposes
of the definition of "Current Market Price" or the fair market value, as to any
other property (in either case, the "valuation amount"). The valuation amount
shall be determined in good faith jointly by the Board and the Majority Holders;
provided, however, that if such parties are not able to agree on the valuation
amount within a reasonable period of time (not to exceed twenty (20) Business
Days) the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board and
the Majority Holders. If the Board and the Majority Holders are unable to agree
upon an acceptable investment banking firm within ten (10) Business Days after
the date either party proposed that one be selected, the investment banking firm
will be selected by an arbitrator located in New York City, New York, selected
by the American Arbitration Association (or if such organization ceases to
exist, the arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of his
appointment) from a list, jointly prepared by the Board and the Majority
Holders, of not more than six investment banking firms of national standing in
the United States, of which no more than three may be named by the Board and no
more than three may be named by the Majority Holders. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
and the Majority Holders shall submit to the investment banking firm their
respective determinations of the valuation amount, and any supporting arguments
and other data as they may desire, within ten (10) days
-2-
<PAGE> 3
of the appointment of the investment banking firm, and the investment banking
firm shall as soon as practicable thereafter make its own determination of the
valuation amount. The final valuation amount for purposes hereof shall be the
average of the two valuation amounts closest together, as determined by the
investment banking firm, from among the valuation amounts submitted by the
Issuer and the Majority Holders and the valuation amount calculated by the
investment banking firm. Such determination of the final valuation amount by
such investment banking firm shall be final and binding upon the parties. The
fees and expenses of the investment banking firm and arbitrator (if any) used to
determine the valuation amount shall be paid by the Issuer or the applicable
Warrant Holders (on a pro rata basis), whichever party's valuation amount is
excluded from the average referred to above, unless the investment banking
firm's valuation amount is excluded from the average, in which case such fees
and expenses will be divided evenly between the Issuer and such Warrant Holders.
If required by any such investment banking firm or arbitrator, the Issuer shall
execute a retainer and engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Issuer in favor of such
investment banking firm or arbitrator and its officers, directors, partners,
employees, agents and Affiliates.
"Articles of Organization" means the Restated Articles of
Organization of the Issuer as amended and restated and in effect at the time in
question.
"Board" shall mean the Board of Directors of the Issuer.
"By-laws" means the by-laws of the Issuer, as amended and in effect
at time in question.
"Common Stock" shall mean the Issuer's Common Stock, par value $.01
per share.
"Convertible Securities" shall have the meaning given to such term
in Section 4(d).
"Current Market Price" shall mean, as to any security, the average
of the closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York City
time, on such day, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National
-3-
<PAGE> 4
Quotation Bureau, Incorporated, or any similar or successor organization (and in
each such case (i) averaged over a period of 21 days consisting of the day
immediately preceding the day as of which "Current Market Price" is being
determined and the 20 consecutive Business Days prior to such immediately
preceding day and (ii) excluding any trades that are not bona fide, arm's length
transactions). If at any time such security is not listed on any domestic
securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Current Market Price" of such security shall be
the fair market value thereof as determined in accordance with the Appraisal
Procedure, using an appropriate valuation method, assuming an arms-length sale
to an independent party. In determining the fair market value of the Common
Stock, a sale of all of the issued and outstanding Common Stock of the Issuer
will be assumed, without giving regard to the lack of liquidity of such stock
due to any restrictions (contractual or otherwise) applicable thereto or any
discount for minority interests and assuming the conversion or exchange of all
securities then outstanding that are convertible into or exchangeable for Common
Stock and the exercise of all rights and warrants (including the Warrants) then
outstanding and exercisable to purchase shares of such stock or securities
convertible into or exchangeable for shares of such stock. Common Stock issued
in an underwritten public offering shall be deemed to be issued for fair market
value.
"Effective Date" shall mean the date set forth on the signature page
of this Warrant.
"Excluded Stock" shall mean (i) any shares of Common Stock issuable
upon the exercise of any options granted pursuant to the Stock Option Plans, and
(ii) any shares of Common Stock issuable upon exercise of any Warrants.
"Exercise Condition" shall have the meaning assigned to it in
Section 2 hereof.
"Exercise Notice" shall have the meaning assigned to such term in
Section 2 hereof.
"Exercise Price" shall have the meaning assigned to such term in the
first paragraph of this Warrant.
"Expiration Date" shall have the meaning assigned to such term in
the first paragraph of this Warrant.
"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 Issuer are the Articles of
Organization and By-laws.
-4-
<PAGE> 5
"Holder" shall mean the registered holder of this Warrant and the
registered holder of any Warrant Stock issued upon exercise hereof.
"include" and "including" shall be construed as if followed by the
phrase ", without being limited to,".
"Issuer" shall have the meaning assigned to such term in the first
paragraph of this Warrant.
"Majority Holders" shall mean those Warrant Holders holding (or
having the right to receive upon exercise of Warrants) Warrant Stock
representing a majority of the total amount of Warrant Stock held by, or
issuable to, all Warrant Holders.
"NASDAQ System" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Options" shall have the meaning given to such term in Section 4(d).
"Person" shall be construed in its broadest possible sense and shall
include any individual, corporation, general or limited partnership, joint
venture, association, limited liability company, joint stock company, trust,
business trust, bank, trust company, estate (including any beneficiaries
thereof), unincorporated organization, cooperative, association or governmental
branch, authority, agency or political subdivision thereof.
"Purchase Agreement" shall have the meaning assigned to such term in
the second paragraph of this Warrant.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of July 30, 1997 between the Issuer and the Holders, as
modified and supplemented and in effect from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series A Preferred Stock" shall mean the Issuer's Series A
Preferred Stock, par value $1 per share.
"Stock Option Plans" shall have the meaning assigned to such term in
the Purchase Agreement and any other stock option plans adopted by the Issuer
and any other grants of stock options made by the Issuer, in each case granted
to employees, directors and independent contractors of the Issuer or its
subsidiaries.
"Voting Agreement" shall mean the Voting Agreement dated as of July
30, 1997 among the Issuer, the Holders and the
-5-
<PAGE> 6
other signatories thereto, as modified and supplemented and in effect from time
to time.
"Warrant" shall mean this Warrant and all other warrants originally
issued by the Issuer pursuant to the Purchase Agreement and all warrants issued
upon transfer, division, or combination of, or in substitution for, this Warrant
or any such other warrant. All Warrants shall be substantially in the form of
Exhibit D attached to the Purchase Agreement except that the Warrants need not
bear the legends appearing on the first page of this Warrant from and after such
time as the restrictions set forth therein no longer apply.
"Warrant Holder" shall mean any Person who acquires Warrants or
Warrant Stock pursuant to the provisions of the Purchase Agreement or any
Warrant, including any transferees of Warrants or Warrant Stock.
"Warrant Stock" shall mean (a) all shares of Common Stock issued or
issuable from time to time upon exercise of this Warrant, (b) all other
securities or other property issued or issuable upon any such exercise and (c)
any securities distributed with respect to the securities referred to in the
preceding clauses (a) and (b); provided, however, that the term "Warrant Stock"
shall not include shares of Common Stock or other securities following the time
such shares or other securities have been sold in a public offering registered
under the Securities Act or sold under Rule 144 promulgated thereunder. As used
in this Warrant, the phrase "Warrant Stock then held" shall mean Warrant Stock
held at the time of determination by the Holder, and shall include Warrant Stock
issuable upon exercise of any Warrants held at the time of determination by such
Holder.
SECTION 2. Exercise of Warrant. (a) On and after the Effective Date
and until 5:00 p.m., New York City time, on the Expiration Date, the Holder may
exercise this Warrant, on one or more occasions, on any Business Day, in whole
or in part, by delivering to the Issuer, at its office maintained for such
purpose pursuant to Section 5 hereof, (i) a written notice of the Holder's
election to exercise this Warrant, which notice shall be substantially in the
form of Annex A attached hereto and shall be properly completed (the "Exercise
Notice"), (ii) payment of the Exercise Price (payable as set forth in Section
2(b) below) for the Warrant Stock as to which this Warrant is being exercised,
and (iii) this Warrant. Except to the extent necessary to cause the number of
shares of Common Stock deliverable as provided in Section 2(b) to be a whole
number of shares, this Warrant shall be exercisable in part only for a whole
number of shares.
(b) At the option of the Holder, the Exercise Price shall be payable
(i) in cash or by certified or official bank check payable to the order of the
Issuer or (ii) by exchange of this Warrant in accordance with the further
provisions of this
-6-
<PAGE> 7
Section 2(b). In exchange for the portion of this Warrant that is being
exercised at such time, the Holder shall receive the number of shares of Common
Stock determined by multiplying (A) the number of shares of Common Stock for
which this Warrant is being exercised at such time by (B) a fraction, (1) the
numerator of which shall be the difference between (x) Current Market Price per
share of Common Stock at such time and (y) the Exercise Price per share of
Common Stock, and (2) the denominator of which shall be the Current Market Price
per share of Common Stock at such time. The Issuer shall issue a new Warrant for
the portion, if any, of this Warrant not being exercised as provided in Section
2(f).
(c) Subject to the provisions of Section 2(d), upon receipt of an
Exercise Notice, the aggregate Exercise Price payable and this Warrant, the
Issuer shall, as promptly as practicable and in any event within five (5)
Business Days thereafter, issue to the Holder one or more stock certificates
representing the aggregate number of shares of Common Stock to which the Holder
is entitled and transfer to the Holder of this Warrant appropriate evidence of
ownership of other securities or property (including any cash) to which the
Holder is entitled, in such denominations, and registered or otherwise placed
in, or payable to the order of, such name or names, as may be directed in
writing by the Holder, and shall deliver such stock certificates, evidence of
ownership and any other securities or property (including any cash) to the
Person or Persons entitled to receive the same, together with an amount in cash
in lieu of any fraction of a share (or fractional interest in any other
security), as hereinafter provided. The Issuer shall pay all expenses in
connection with, and any and all documentary, stamp or similar issue or transfer
taxes of the United States or any state thereof payable in respect of, the issue
or delivery of the Warrant Stock upon exercise of this Warrant. However, the
Issuer shall not be required to pay any tax or other charge imposed in
connection with any assignment or transfer involved in the issue of any
certificate or other evidence of ownership of Warrant Stock.
(d) The Holder's election to exercise this Warrant may, in the sole
discretion of the Holder, be conditioned upon, and in such event, the exercise
shall be subject in all respects to a Change of Control, the Issuer ceasing to
be a reporting company under the Securities and Exchange Act of 1934, as
amended, the consummation of a sale of the Issuer, any public offering of the
Issuer's Common Stock registered under the Securities Act or other similar
transaction involving the Issuer (collectively referred to herein as the
"Exercise Conditions"), as specified in the Exercise Notice, and the Issuer
shall provide the Holder with written notice no less than 20 business days prior
to the occurrence of an Exercise Condition. If any exercise of this Warrant is
so conditioned, then, subject to delivery of the items required by Section 2(b),
the Issuer shall
-7-
<PAGE> 8
deliver the certificates and other evidence of ownership of other securities or
other property in such manner as the Holder shall direct as required in
connection with the consummation of the transaction upon which the exercise is
conditioned. At any time that the Issuer shall give notice to the Holder that
such transaction has been abandoned or the Issuer has withdrawn from
participation in such transaction, the Issuer shall return the items delivered
pursuant to Section 2(c) and the Holder's election to exercise this Warrant
shall be deemed rescinded.
(e) The stock certificate or certificates or other evidence of
ownership of Warrant Stock to be delivered pursuant to Section 2(c) hereof shall
be deemed to have been issued, and the Holder or any other Person so designated
to be named therein shall, to the extent permitted by law and the Purchase
Agreement, be deemed to have become a holder of record of the Warrant Stock
represented thereby, including having the right to vote any voting securities
included therein or to consent or to receive notice as a shareholder, as of the
date on which the last of the Exercise Notice, payment of the Exercise Price and
this Warrant is received by the Issuer as aforesaid (subject, in the case of an
exercise to which Section 2(d) applies, to the consummation of the transaction
upon which such exercise is conditioned), notwithstanding that the transfer
books of the Issuer shall then be closed or that such certificates or other
evidence of ownership shall not then actually have been delivered to the Holder.
(f) If this Warrant shall have been exercised only in part, the
Issuer shall, at the time of delivery of the certificate or certificates or
other evidence of ownership of Warrant Stock, execute and deliver to the Holder,
without charge, a new Warrant evidencing the rights of the Holder to purchase
the unpurchased Warrant Stock called for by this Warrant, which new Warrant
shall in all other respects be identical to this Warrant, or, at the request of
the Holder, appropriate notation may be made on this Warrant and the same
returned to the Holder.
(g) The Issuer shall not be required to issue any fractional share
of Common Stock (or fractional interest in any other security) upon exercise of
this Warrant. As to any fraction of a share (or fractional interest in any other
security) that the Holder would otherwise be entitled to receive upon such
exercise, the Issuer shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction of the Current Market Price per share of
Common Stock (and/or other security) on the date of exercise; provided, however,
that in the event that the Issuer undertakes a reduction in the number of shares
of Common Stock or other securities outstanding, it shall be required to issue
fractional shares or fractional interests in such other securities to the Holder
if the Holder exercises all or any part of this Warrant, unless the Holder shall
have consented in writing to such reduction and provided
-8-
<PAGE> 9
the Issuer with a written waiver of its right to receive fractional shares or
interests in accordance with this paragraph. If the Holder shall exercise more
than one Warrant in the same transaction, any payment in respect of fractional
shares (or other fractional interests) shall be based on the final fraction
resulting from aggregating all such exercises.
(h) The Issuer hereby agrees at all times to keep reserved for
issuance and delivery upon exercise of this Warrant such number of its
authorized but unissued shares (or treasury shares) of Common Stock or other
securities of the Issuer from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares and other securities shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable, free
and clear of all liens, security interests, charges and other encumbrances or
restrictions on sale (except to the extent of any applicable provisions set
forth in the Purchase Agreement, Voting Agreement, Registration Rights Agreement
or the Issuer's Fundamental Documents) and free and clear of all preemptive or
similar rights.
(i) If the issuance of any shares of Common Stock or other
securities required to be reserved for purposes of the exercise of this Warrant
requires the registration with, or approval of, any governmental authority or
requires listing on any national securities exchange or national market system
before such shares or other securities may be so issued, the Issuer shall at its
expense use its best efforts to cause such shares to be duly registered,
approved or listed, as the case may be, so that such shares or other securities
may be issued in accordance with the terms hereof; provided, however, that this
provision shall not obligate the Issuer to register such shares or other
securities under the Securities Act or qualify them under state securities or
blue sky laws.
SECTION 3. Transfer, Division and Combination. (a) This Warrant, all
rights hereunder and any Warrant Stock issued or issuable upon exercise hereof
are assignable and transferable, at any time in whole or in part, to any Person
or Persons subject in all cases to the provisions of Article VII of the Purchase
Agreement. Any such transfer shall not require the consent of any security
holder of the Issuer.
(b) Upon a transfer permitted by Section 3(a), this Warrant shall be
transferable upon surrender of this Warrant to the Issuer, together with a
written assignment of this Warrant substantially in the form of Annex B attached
hereto, duly executed by the Holder hereof or such Holder's agent or attorney.
Upon such surrender, the Issuer shall, without charge, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees (and, if the
Holder's entire interest is not being assigned, in the name of the Holder), and
in the denominations
-9-
<PAGE> 10
specified in such instrument of assignment, and this Warrant shall promptly be
canceled.
(c) This Warrant may be exchanged for, or combined with, other
Warrants upon presentation of this Warrant and any other Warrants with which
this Warrant is to be combined to the Issuer, together with a written notice
specifying the denominations in which a new Warrant or Warrants are to be
issued, signed by the Holder. The Issuer shall execute and deliver a new Warrant
or Warrants to the Holder in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(d) The Issuer shall maintain books for the registration and
transfer of the Warrants, and shall allow each Warrant Holder to inspect such
books at such reasonable times as such holder shall request.
SECTION 4. Adjustments.
(a) Dividends and Distributions. If at any time the Issuer shall pay
any dividend or make any other distribution to holders of its Common Stock of
any cash, evidence of indebtedness or other property (including any rights or
warrants to purchase any securities of the Issuer) of any nature whatsoever
(other than as contemplated by subsections (b), (c)(i)(A) and (d)(i)(A) of this
Section 4), the Issuer shall at the same time pay or distribute to the Holder
(whether or not the Holder exercises this Warrant) the cash evidence of
indebtedness or other property the Holder would have been entitled to receive if
such Holder had exercised this Warrant immediately prior to the record date for
such dividend or distribution.
(b) Subdivisions and Combinations. If at any time the Issuer shall
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution of Common
Stock;
(ii) subdivide, split or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then immediately after the occurrence of any such event (A) the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted so as
to equal the number of shares of Common Stock such holder would have held
immediately after the occurrence of such event (in the case of an event referred
to in clause (i), after giving effect to such dividend or distribution)
-10-
<PAGE> 11
if such holder had exercised this Warrant immediately prior to the occurrence of
such event and (B) the Exercise Price shall be adjusted to be equal to (x) the
Exercise Price immediately prior to the occurrence of such event multiplied by
(y) a fraction (1) the numerator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to the adjustment
in clause (A) and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
clause (A).
(c) Issuance of Common Stock. If at any time the Issuer (i) shall
(A) take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock or (B) otherwise sell or issue any shares of any class or series of
Common Stock (other than Excluded Stock) and (ii) the consideration per share of
Common Stock paid or to be paid upon such subscription, purchase, sale or
issuance is less than the Current Market Price per share of Common Stock
immediately before such record date or immediately before the date of such sale
or issuance, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying (x) the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such record date or sale or
issuance date, as the case may be, by (y) a fraction (not to be less than one)
(i) the numerator of which shall be equal to the product of (A) the number of
shares of Common Stock outstanding (determined on a fully-diluted basis) after
giving effect to such subscription, purchase, sale or issuance (and assuming all
such subscription or purchase offers are exercised) and (B) the Current Market
Price per share of Common Stock determined immediately before such record date
or sale or issuance date, as the case may be, and (ii) the denominator of which
shall be equal to the sum of (A) the product of (1) the number of shares of
Common Stock outstanding (determined on a fully-diluted basis) immediately
before such record date or sale or issuance date, as the case may be, and (2)
the Current Market Price per share of Common Stock determined immediately before
such record date or sale or issuance date, as the case may be, and (B) the
aggregate consideration received or to be received by the Issuer for the total
number of shares of Common Stock to be subscribed for or purchased, sold or
issued. Simultaneously with the adjustment in the preceding sentence, the
Exercise Price shall be adjusted to be equal to (x) the Exercise Price
immediately prior to the occurrence of such event multiplied by (y) a fraction
(1) the numerator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to the adjustment in the preceding
sentence and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
the preceding sentence.
-11-
<PAGE> 12
(d) Issuance of Convertible Securities or Options. If at any time
(i) the Issuer shall (A) take a record of the holders of its Common Stock for
the purpose of entitling them to subscribe for or purchase options to purchase
or rights to subscribe for Common Stock, securities directly or indirectly
convertible into or exchangeable for Common Stock ("Convertible Securities") or
options or rights with respect to Convertible Securities (options or rights with
respect to Common Stock or Convertible Securities being referred to as
"Options") or (B) otherwise issue or sell any Options or Convertible Securities
(other than Options exercisable for Excluded Stock) and (ii) the consideration
per share paid or to be paid for the Common Stock deliverable upon exercise of
such Options and/or conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount received or receivable by the
Issuer in consideration of the subscription, purchase, sale or issuance of such
Options or Convertible Securities plus any amount payable to the Issuer upon
such exercise and/or conversion or exchange, by (y) the total maximum number of
shares of Common Stock necessary to effect the exercise and/or conversion or
exchange of all such Options or Convertible Securities) shall be less than the
Current Market Price per share of Common Stock on such record date or sale or
issuance date, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such date by a fraction (not to be
less than one) (i) the numerator of which shall be equal to the product of (A)
the total maximum number of shares of Common Stock outstanding (determined on a
fully diluted basis) after giving effect to the assumed exercise and/or
conversion of all such Options or Convertible Securities and (B) the Current
Market Price per share of Common Stock determined immediately before such record
date or sale or issuance date, as the case may be, and (ii) the denominator of
which shall be equal to the sum of (A) the product of (1) the number of shares
of Common Stock outstanding (determined on a fully-diluted basis) immediately
before such record date or sale or issuance date, as the case may be, and (2)
the Current Market Price per share of the Common Stock determined immediately
before such record date or sale or issuance date, as the case may be, and (B)
the aggregate consideration for which Common Stock is deliverable upon exercise
and/or conversion or exchange for such Options or Convertible Securities.
Simultaneously with the adjustment in the preceding sentence, the Exercise Price
shall be adjusted to be equal to (x) the Exercise Price immediately prior to the
occurrence of such event multiplied by (y) a fraction (1) the numerator of which
is the number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the adjustment in the preceding sentence and (2) the
denominator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately after the adjustment in the preceding
sentence. The adjustment of the exercise price of an Option
-12-
<PAGE> 13
shall not be deemed to be the issuance or sale of an Option at less than the
Current Market Price per share of Common Stock if the exercise price as adjusted
is not less than the Current Market Price per share of Common Stock on the date
of such adjustment.
(e) Superseding Adjustment. If, at any time after any adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant
shall have been made on the basis of the issuance of any Options or Convertible
Securities:
(i) any such Options shall expire prior to exercise or the
right to convert or exchange any such Convertible Securities shall
terminate prior to conversion or exchange; or
(ii) the consideration per share for which shares of Common
Stock are issuable pursuant to the terms of such Options or
Convertible Securities shall be increased or decreased;
then such previous adjustment shall be rescinded and annulled (without affecting
any other adjustments resulting from any other events). Thereupon, a
recomputation shall be made of the adjustment in the number of shares of Common
Stock issuable upon exercise of this Warrant on the basis of
(A) treating the number of shares of Common
Stock, if any, theretofore actually issued or
issuable pursuant to the previous exercise,
conversion or exchange of such Options or
Convertible Securities as having been issued
on the date or dates of such exercise and/or
conversion or exchange and for the
consideration actually received and
receivable therefor, and
(B) treating any such Options or Convertible
Securities that then remain outstanding as
having been granted or issued immediately
after the time of such increase or decrease
for the consideration per share for which
shares of Common Stock are issuable upon
exercise and/or conversion or exchange of
such Options or Convertible Securities,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled. For purposes of the computation of such new adjustment, the Current
Market Price shall be deemed to be the Current Market Price used in computing
the previous adjustment.
-13-
<PAGE> 14
(f) Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock issuable upon exercise of this Warrant:
(i) The sale or other disposition of any issued shares of
Common Stock owned or held by or for the account of the Issuer shall
be deemed to be an issuance thereof for purposes of this Section.
(ii) In computing adjustments under this Section, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(iii) If the Issuer shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase rights and shall,
thereafter and before the payment of such dividend or distribution
or the granting of such subscription or purchase rights, legally
abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall
be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and
annulled.
(iv) Aggregate consideration for purposes of Sections 4(c) and
4(d) shall be determined as follows: In case any Common Stock,
Options, or Convertible Securities shall be issued or sold, or be
exercisable, convertible or exchangeable for cash, the consideration
received therefor shall be deemed to be the amount payable to the
Issuer therefor, after deduction therefrom of any expenses incurred
or any underwriting commissions or concessions or discounts or, in
the case of a private placement thereof, finders' fees or
commissions paid or allowed by the Issuer in connection therewith.
In case any such Common Stock, Options, or Convertible Securities
shall be issued or sold, or be exercisable, convertible or
exchangeable for a consideration other than cash payable to the
Issuer, the consideration received therefor shall be deemed to be
the fair market value of such consideration (as determined in
accordance with the Appraisal Procedure), after deduction therefrom
of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Issuer in connection
therewith. In case any such Common Stock, or Options, Convertible
Securities shall be issued or sold, or be exercisable, convertible
or exchangeable in connection with any merger of another corporation
into the Issuer, the amount of consideration therefor shall be
deemed to
-14-
<PAGE> 15
be the fair market value (as determined in accordance with the
Appraisal Procedure) of such portion of the assets of such merged
corporation as the Board shall reasonably determine (such
determination to be reasonably acceptable to the Majority Holders)
in good faith to be attributable to such options, rights or
securities.
(g) Merger, Consolidation or Disposition of Assets. If the Issuer
shall merge, consolidate or effect a share exchange with another entity, or
shall sell, transfer or otherwise dispose of all or substantially all of its
assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of Common
Stock or other securities of the successor or acquiring entity, or property of
any nature is to be received by or distributed to the holders of Common Stock of
the Issuer, then the Holder shall be entitled to receive in respect of the
Warrant Stock issuable upon exercise of this Warrant, and upon delivery to the
Issuer of this Warrant for cancellation, the amount of cash, shares of Common
Stock, other securities or other property that it would have been entitled to
receive if such Holder had exercised this Warrant in full immediately prior to
the occurrence of such merger, consolidation, share exchange or disposition of
assets. In the case of any such merger, consolidation, share exchange or
disposition of assets, the successor or acquiring entity (and any Affiliate
thereof issuing securities) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Issuer and all of the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board and reasonably acceptable
to the Majority Holders) in order to provide for adjustments of the Warrant
Stock issuable upon exercise of this Warrant that shall be as nearly equivalent
as practicable to the adjustments provided for in this Section 4. The foregoing
provisions shall similarly apply to successive mergers, consolidations, share
exchanges and dispositions of assets.
(h) Capital Reorganization or Capital Reclassification. If the
Issuer shall effect any capital reorganization or any reclassification of its
capital stock (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the Issuer
shall cause effective provision to be made so that this Warrant shall be
exercisable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the Warrant Stock deliverable upon
exercise of this Warrant would have been entitled upon such reorganization or
reclassification and any such provision shall include adjustments in respect of
such stock, securities or other
-15-
<PAGE> 16
property that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4 with respect to this Warrant.
(i) Other Action Affecting Common Stock. If at any time or from time
to time the Issuer shall take any action affecting its Common Stock, other than
any action described in this Section 4, then, unless such action will not have
an adverse effect upon the Holder's rights, the number of shares of Warrant
Stock issuable upon exercise of this Warrant and the Exercise Price shall be
adjusted in such manner and at such time as the Board shall in good faith
determine (such determination to be reasonably acceptable to the Majority
Holders) to be equitable in the circumstances, but no such adjustment shall
decrease the number of shares of Warrant Stock issuable upon exercise of this
Warrant or increase the Exercise Price.
(j) If at any time the Issuer shall issue any shares of its Common
Stock pursuant to the exercise of an option granted under a Stock Option Plan,
then the number of shares of Common Stock issuable upon the exercise of this
Warrant shall be increased by an amount equal to the product of (x) the number
of such shares issued pursuant to the option exercise and (y) 0.1764. The
provisions of this Section 4(j) shall only apply to issuances after the date
hereof of the first 1,300,000 shares of Common Stock pursuant to the Stock
Option Plans, as such number may be adjusted pursuant to any stock splits,
divisions, combinations or similar adjustments.
(k) Notice of Adjustments. Whenever the number of shares of Warrant
Stock issuable upon exercise of this Warrant shall be adjusted pursuant to this
Agreement, the Issuer shall forthwith obtain a certificate signed by a firm of
independent accountants of recognized national standing selected by the Issuer
setting forth, in reasonable detail, the event requiring the adjustment, the
method by which such adjustment was calculated and specifying the number of
shares of Warrant Stock issuable upon exercise of this Warrant after giving
effect to such adjustment (except in the case of adjustments pursuant to Section
4(j) in which event a certificate shall be obtained on December 31 and June 30).
The Issuer shall promptly cause a signed copy of such certificate to be
delivered to the Holder. The Issuer shall keep at its office maintained for
purposes of Section 7(a) hereof copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by the Holder or any prospective purchaser of a Warrant designated by the
registered Holder hereof.
(l) Notice of Certain Corporate Action. If the Issuer shall propose
(i) to pay any dividend to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock; (ii) to offer to the holders of
its Common Stock rights to subscribe for or to purchase any additional
-16-
<PAGE> 17
shares of Common Stock or any Options or Convertible Securities; (iii) to effect
any reorganization or reclassification of its Common Stock; (iv) to otherwise
issue any Common Stock, Options, or Convertible Securities; (v) to effect any
other capital reorganization; (vi) to effect any consolidation, merger or share
exchange or any sale, transfer or other disposition of all or substantially all
of its assets; or (vii) to effect the liquidation, dissolution or winding up of
the Issuer, then, in each such case, the Issuer shall give to the Holder a
notice of such proposed action, which shall specify the date on which a record
is to be taken for the purposes of such dividend, distribution or rights offer,
or the date on which such reclassification, issuance, reorganization,
consolidation, merger, share exchange, sale, transfer, disposition, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of Common Stock, if any such date is to be fixed, and shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Common Stock, and the number of shares
of Warrant Stock that are issuable upon exercise of this Warrant after giving
effect to any adjustment that will be required as a result of such action. Such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Common Stock for purposes of such action, and in the case of any other such
action, at least 10 days prior to the date of the taking of such proposed
action.
(m) No Impairment. The Issuer will not, by amendment of its Articles
of Organization or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Issuer, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder against
impairment.
(n) Miscellaneous. The computations of all amounts under this
Section 4 shall be made assuming all other anti-dilution or similar adjustments
to be made to the terms of all other securities resulting from the transaction
causing an adjustment pursuant to this Section 4 have previously been made so as
to maintain the relative economic interest of this Warrant vis a vis all other
securities issued by the Issuer.
-17-
<PAGE> 18
SECTION 5. Miscellaneous.
(a) Office of Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in the continental United States where the
Warrants may be presented for exercise, transfer, division or combination as
provided in this Warrant. Such office shall be at 210 Boylston Street, Chestnut
Hill, MA 02167, unless and until the Issuer shall designate and maintain some
other office for such purposes and give notice thereof to the Holder.
(b) Notices Generally. Any notices and other communications pursuant
to the provisions hereof shall be sent in accordance with the provisions of
Section 10.6 of the Purchase Agreement.
(c) Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflicts of laws rules. The Issuer agrees that it may be served with process in
the State of New York and any action for breach of this Warrant may be
prosecuted against it in the courts of such State or any Federal court located
in such State.
(d) Limitation of Liability. Except as otherwise provided herein,
this Warrant does not entitle the Holder to any voting rights or other rights of
a shareholder of the Issuer, as a shareholder. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the Exercise Price or as a
shareholder of the Issuer, whether such liability is asserted by the Issuer, by
any creditor of the Issuer or any other Person.
(e) Loss or Destruction of Warrant. Upon receipt by the Issuer of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant and (in the case of
loss, theft or destruction), if requested by the Issuer, of reasonably
satisfactory indemnification (if the Holder is a nationally-chartered financial
institution or an Affiliate thereof, its own agreement being satisfactory), or
(in the case of mutilation) upon surrender and cancellation of this Warrant, the
Issuer shall, without charge, execute and deliver a new Warrant exercisable for
the same amount of Warrant Stock; provided, however, that (in the case of loss,
theft or destruction) no indemnity bond shall be required unless the Issuer has
a class of securities registered pursuant to the Securities Exchange Act of
1934, as amended, and the Issuer's transfer agent requires such indemnity bond
as a condition to the issuance of a new Warrant.
-18-
<PAGE> 19
(f) Amendments and Waivers. Any provision of this Warrant may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Issuer and the Holders and, in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
* * *
-19-
<PAGE> 20
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: July 30, 1997
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
------------------------------
Name: Richard E. Wenz
Title: President
<PAGE> 21
ANNEX A
FORM OF EXERCISE NOTICE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant exercises this
Warrant for the purchase of ________ shares of Common Stock of Safety 1st, Inc.,
a Massachusetts corporation, and herewith makes payment therefor of $__________
(such payment being made [check one] (x) [ ] in cash or by certified or official
bank check or (y) [ ] by acceptance of a reduced number of shares of Common
Stock upon cancellation of this Warrant as provided in Section 2(b) of this
Warrant, all on the terms and conditions specified in this Warrant, and requests
that (i) certificates and/or other instruments covering such shares of Common
Stock be issued in accordance with the instructions given below and (ii) if such
shares of Common Stock shall not include all of the shares of Common Stock to
which the Holder is entitled under this Warrant, that a new Warrant for the
unpurchased balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned. References in this Exercise Notice to "Common
Stock" shall include other securities or other property to the extent included
in Warrant Stock.
[This Exercise Notice is being delivered contingent upon the
consummation of [describe transaction] as contemplated by Section 2(d) of this
Warrant].*
Dated:___________________________
_________________________________________
(Signature of Registered Holder)**
Instructions for issuance and
registration of shares of
Common Stock:
________________________________ Social Security or Other
Name of Registered Holder Identifying Number:______________________
(please print)
- --------
* Include if applicable.
** The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE> 22
Please deliver certificate to
the following address:
_______________________________________
Street
_______________________________________
City, State and Zip Code
<PAGE> 23
ANNEX B
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all the rights
of the undersigned under this Warrant with respect to the number of shares of
Common Stock covered thereby set forth below to:
<TABLE>
<CAPTION>
Number of
Shares of
Name of Assignee Address Common Stock
- ---------------- ------- ------------
<S> <C> <C>
</TABLE>
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
Dated:__________________________
_________________________________________
(Signature of Registered Holder)*
_________________________________________
Name of Registered Holder
(Please Print)
Witness:
________________________________
- --------
* The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE> 1
WARRANT
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES WHICH MAY BE ACQUIRED ON THE EXERCISE HEREOF ARE
SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 30, 1997 AMONG SAFETY 1ST, INC., A MASSACHUSETTS CORPORATION
(THE "ISSUER"), BT CAPITAL PARTNERS, INC. AND BEAR, STEARNS & CO. INC., AS SUCH
AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF SUCH AGREEMENT IS
ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF SUCH AGREEMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH MAY BE
ACQUIRED ON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY,
SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
No. of Shares Warrant No. U-2
of Common Stock: 570,755
WARRANT
to Purchase Common Stock of
SAFETY 1ST, INC.
THIS IS TO CERTIFY THAT Bear, Stearns & Co. Inc., or its registered
assigns, is entitled to purchase in whole or in part from time to time from
Safety 1st, Inc., a Massachusetts corporation (the "Issuer"), at any time on and
after the Effective Date (as hereinafter defined), but not later than 5:00 p.m.,
New York time, on July 30, 2007 (the "Expiration Date"), 570,755 shares of
Common Stock (as hereinafter defined) at a purchase price of $0.01 per share
(the "Exercise Price"), subject to the terms and conditions provided herein and
in the Purchase Agreement (as hereinafter defined). The number of shares of
Common Stock for which this Warrant shall be exercisable and the Exercise Price
are subject to adjustment from time to time as provided herein.
This Warrant is issued pursuant to the Stock and Warrant Purchase
Agreement dated as of July 30, 1997 (as modified and supplemented and in effect
from time to time, the "Purchase Agreement") among the Issuer, BT Capital
Partners, Inc. and Bear, Stearns & Co. Inc. and is subject to the provisions of
the Purchase Agreement and the Registration Rights Agreement (as hereinafter
defined).
<PAGE> 2
SECTION 1. Certain Definitions. (a) Each capitalized term used
herein without definition shall have the meaning assigned thereto (or
incorporated by reference) in the Purchase Agreement and in the Exhibits
thereto.
(b) As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1 or in other provisions of this
Warrant in the singular to have the same meanings when used in the plural and
vice versa):
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, controls, is under common control with, or
is owned or controlled by, such specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, the power
to direct the management or policies of the specified Person through the
ownership of voting securities, by contract, voting agreement or otherwise, and
(ii) the terms "controlling", "control with" and "controlled by", etc. shall
have meanings correlative to the foregoing.
"Appraisal Procedure", if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for purposes
of the definition of "Current Market Price" or the fair market value, as to any
other property (in either case, the "valuation amount"). The valuation amount
shall be determined in good faith jointly by the Board and the Majority Holders;
provided, however, that if such parties are not able to agree on the valuation
amount within a reasonable period of time (not to exceed twenty (20) Business
Days) the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board and
the Majority Holders. If the Board and the Majority Holders are unable to agree
upon an acceptable investment banking firm within ten (10) Business Days after
the date either party proposed that one be selected, the investment banking firm
will be selected by an arbitrator located in New York City, New York, selected
by the American Arbitration Association (or if such organization ceases to
exist, the arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of his
appointment) from a list, jointly prepared by the Board and the Majority
Holders, of not more than six investment banking firms of national standing in
the United States, of which no more than three may be named by the Board and no
more than three may be named by the Majority Holders. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
and the Majority Holders shall submit to the investment banking firm their
respective determinations of the valuation amount, and any supporting arguments
and other data as they may desire, within ten (10) days
-2-
<PAGE> 3
of the appointment of the investment banking firm, and the investment banking
firm shall as soon as practicable thereafter make its own determination of the
valuation amount. The final valuation amount for purposes hereof shall be the
average of the two valuation amounts closest together, as determined by the
investment banking firm, from among the valuation amounts submitted by the
Issuer and the Majority Holders and the valuation amount calculated by the
investment banking firm. Such determination of the final valuation amount by
such investment banking firm shall be final and binding upon the parties. The
fees and expenses of the investment banking firm and arbitrator (if any) used to
determine the valuation amount shall be paid by the Issuer or the applicable
Warrant Holders (on a pro rata basis), whichever party's valuation amount is
excluded from the average referred to above, unless the investment banking
firm's valuation amount is excluded from the average, in which case such fees
and expenses will be divided evenly between the Issuer and such Warrant Holders.
If required by any such investment banking firm or arbitrator, the Issuer shall
execute a retainer and engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Issuer in favor of such
investment banking firm or arbitrator and its officers, directors, partners,
employees, agents and Affiliates.
"Articles of Organization" means the Restated Articles of
Organization of the Issuer as amended and restated and in effect at the time in
question.
"Board" shall mean the Board of Directors of the Issuer.
"By-laws" means the by-laws of the Issuer, as amended and in effect
at time in question.
"Common Stock" shall mean the Issuer's Common Stock, par value $.01
per share.
"Convertible Securities" shall have the meaning given to such term
in Section 4(d).
"Current Market Price" shall mean, as to any security, the average
of the closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York City
time, on such day, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National
-3-
<PAGE> 4
Quotation Bureau, Incorporated, or any similar or successor organization (and in
each such case (i) averaged over a period of 21 days consisting of the day
immediately preceding the day as of which "Current Market Price" is being
determined and the 20 consecutive Business Days prior to such immediately
preceding day and (ii) excluding any trades that are not bona fide, arm's length
transactions). If at any time such security is not listed on any domestic
securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Current Market Price" of such security shall be
the fair market value thereof as determined in accordance with the Appraisal
Procedure, using an appropriate valuation method, assuming an arms-length sale
to an independent party. In determining the fair market value of the Common
Stock, a sale of all of the issued and outstanding Common Stock of the Issuer
will be assumed, without giving regard to the lack of liquidity of such stock
due to any restrictions (contractual or otherwise) applicable thereto or any
discount for minority interests and assuming the conversion or exchange of all
securities then outstanding that are convertible into or exchangeable for Common
Stock and the exercise of all rights and warrants (including the Warrants) then
outstanding and exercisable to purchase shares of such stock or securities
convertible into or exchangeable for shares of such stock. Common Stock issued
in an underwritten public offering shall be deemed to be issued for fair market
value.
"Effective Date" shall mean the date set forth on the signature page
of this Warrant.
"Excluded Stock" shall mean (i) any shares of Common Stock issuable
upon the exercise of any options granted pursuant to the Stock Option Plans, and
(ii) any shares of Common Stock issuable upon exercise of any Warrants.
"Exercise Condition" shall have the meaning assigned to it in
Section 2 hereof.
"Exercise Notice" shall have the meaning assigned to such term in
Section 2 hereof.
"Exercise Price" shall have the meaning assigned to such term in the
first paragraph of this Warrant.
"Expiration Date" shall have the meaning assigned to such term in
the first paragraph of this Warrant.
"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 Issuer are the Articles of
Organization and By-laws.
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<PAGE> 5
"Holder" shall mean the registered holder of this Warrant and the
registered holder of any Warrant Stock issued upon exercise hereof.
"include" and "including" shall be construed as if followed by the
phrase ", without being limited to,".
"Issuer" shall have the meaning assigned to such term in the first
paragraph of this Warrant.
"Majority Holders" shall mean those Warrant Holders holding (or
having the right to receive upon exercise of Warrants) Warrant Stock
representing a majority of the total amount of Warrant Stock held by, or
issuable to, all Warrant Holders.
"NASDAQ System" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Options" shall have the meaning given to such term in Section 4(d).
"Person" shall be construed in its broadest possible sense and shall
include any individual, corporation, general or limited partnership, joint
venture, association, limited liability company, joint stock company, trust,
business trust, bank, trust company, estate (including any beneficiaries
thereof), unincorporated organization, cooperative, association or governmental
branch, authority, agency or political subdivision thereof.
"Purchase Agreement" shall have the meaning assigned to such term in
the second paragraph of this Warrant.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of July 30, 1997 between the Issuer and the Holders, as
modified and supplemented and in effect from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series A Preferred Stock" shall mean the Issuer's Series A
Preferred Stock, par value $1 per share.
"Stock Option Plans" shall have the meaning assigned to such term in
the Purchase Agreement and any other stock option plans adopted by the Issuer
and any other grants of stock options made by the Issuer, in each case granted
to employees, directors and independent contractors of the Issuer or its
subsidiaries.
"Voting Agreement" shall mean the Voting Agreement dated as of July
30, 1997 among the Issuer, the Holders and the
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other signatories thereto, as modified and supplemented and in effect from time
to time.
"Warrant" shall mean this Warrant and all other warrants originally
issued by the Issuer pursuant to the Purchase Agreement and all warrants issued
upon transfer, division, or combination of, or in substitution for, this Warrant
or any such other warrant. All Warrants shall be substantially in the form of
Exhibit D attached to the Purchase Agreement except that the Warrants need not
bear the legends appearing on the first page of this Warrant from and after such
time as the restrictions set forth therein no longer apply.
"Warrant Holder" shall mean any Person who acquires Warrants or
Warrant Stock pursuant to the provisions of the Purchase Agreement or any
Warrant, including any transferees of Warrants or Warrant Stock.
"Warrant Stock" shall mean (a) all shares of Common Stock issued or
issuable from time to time upon exercise of this Warrant, (b) all other
securities or other property issued or issuable upon any such exercise and (c)
any securities distributed with respect to the securities referred to in the
preceding clauses (a) and (b); provided, however, that the term "Warrant Stock"
shall not include shares of Common Stock or other securities following the time
such shares or other securities have been sold in a public offering registered
under the Securities Act or sold under Rule 144 promulgated thereunder. As used
in this Warrant, the phrase "Warrant Stock then held" shall mean Warrant Stock
held at the time of determination by the Holder, and shall include Warrant Stock
issuable upon exercise of any Warrants held at the time of determination by such
Holder.
SECTION 2. Exercise of Warrant. (a) On and after the Effective Date
and until 5:00 p.m., New York City time, on the Expiration Date, the Holder may
exercise this Warrant, on one or more occasions, on any Business Day, in whole
or in part, by delivering to the Issuer, at its office maintained for such
purpose pursuant to Section 5 hereof, (i) a written notice of the Holder's
election to exercise this Warrant, which notice shall be substantially in the
form of Annex A attached hereto and shall be properly completed (the "Exercise
Notice"), (ii) payment of the Exercise Price (payable as set forth in Section
2(b) below) for the Warrant Stock as to which this Warrant is being exercised,
and (iii) this Warrant. Except to the extent necessary to cause the number of
shares of Common Stock deliverable as provided in Section 2(b) to be a whole
number of shares, this Warrant shall be exercisable in part only for a whole
number of shares.
(b) At the option of the Holder, the Exercise Price shall be payable
(i) in cash or by certified or official bank check payable to the order of the
Issuer or (ii) by exchange of this Warrant in accordance with the further
provisions of this
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<PAGE> 7
Section 2(b). In exchange for the portion of this Warrant that is being
exercised at such time, the Holder shall receive the number of shares of Common
Stock determined by multiplying (A) the number of shares of Common Stock for
which this Warrant is being exercised at such time by (B) a fraction, (1) the
numerator of which shall be the difference between (x) Current Market Price per
share of Common Stock at such time and (y) the Exercise Price per share of
Common Stock, and (2) the denominator of which shall be the Current Market Price
per share of Common Stock at such time. The Issuer shall issue a new Warrant for
the portion, if any, of this Warrant not being exercised as provided in Section
2(f).
(c) Subject to the provisions of Section 2(d), upon receipt of an
Exercise Notice, the aggregate Exercise Price payable and this Warrant, the
Issuer shall, as promptly as practicable and in any event within five (5)
Business Days thereafter, issue to the Holder one or more stock certificates
representing the aggregate number of shares of Common Stock to which the Holder
is entitled and transfer to the Holder of this Warrant appropriate evidence of
ownership of other securities or property (including any cash) to which the
Holder is entitled, in such denominations, and registered or otherwise placed
in, or payable to the order of, such name or names, as may be directed in
writing by the Holder, and shall deliver such stock certificates, evidence of
ownership and any other securities or property (including any cash) to the
Person or Persons entitled to receive the same, together with an amount in cash
in lieu of any fraction of a share (or fractional interest in any other
security), as hereinafter provided. The Issuer shall pay all expenses in
connection with, and any and all documentary, stamp or similar issue or transfer
taxes of the United States or any state thereof payable in respect of, the issue
or delivery of the Warrant Stock upon exercise of this Warrant. However, the
Issuer shall not be required to pay any tax or other charge imposed in
connection with any assignment or transfer involved in the issue of any
certificate or other evidence of ownership of Warrant Stock.
(d) The Holder's election to exercise this Warrant may, in the sole
discretion of the Holder, be conditioned upon, and in such event, the exercise
shall be subject in all respects to a Change of Control, the Issuer ceasing to
be a reporting company under the Securities and Exchange Act of 1934, as
amended, the consummation of a sale of the Issuer, any public offering of the
Issuer's Common Stock registered under the Securities Act or other similar
transaction involving the Issuer (collectively referred to herein as the
"Exercise Conditions"), as specified in the Exercise Notice, and the Issuer
shall provide the Holder with written notice no less than 20 business days prior
to the occurrence of an Exercise Condition. If any exercise of this Warrant is
so conditioned, then, subject to delivery of the items required by Section 2(b),
the Issuer shall
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<PAGE> 8
deliver the certificates and other evidence of ownership of other securities or
other property in such manner as the Holder shall direct as required in
connection with the consummation of the transaction upon which the exercise is
conditioned. At any time that the Issuer shall give notice to the Holder that
such transaction has been abandoned or the Issuer has withdrawn from
participation in such transaction, the Issuer shall return the items delivered
pursuant to Section 2(c) and the Holder's election to exercise this Warrant
shall be deemed rescinded.
(e) The stock certificate or certificates or other evidence of
ownership of Warrant Stock to be delivered pursuant to Section 2(c) hereof shall
be deemed to have been issued, and the Holder or any other Person so designated
to be named therein shall, to the extent permitted by law and the Purchase
Agreement, be deemed to have become a holder of record of the Warrant Stock
represented thereby, including having the right to vote any voting securities
included therein or to consent or to receive notice as a shareholder, as of the
date on which the last of the Exercise Notice, payment of the Exercise Price and
this Warrant is received by the Issuer as aforesaid (subject, in the case of an
exercise to which Section 2(d) applies, to the consummation of the transaction
upon which such exercise is conditioned), notwithstanding that the transfer
books of the Issuer shall then be closed or that such certificates or other
evidence of ownership shall not then actually have been delivered to the Holder.
(f) If this Warrant shall have been exercised only in part, the
Issuer shall, at the time of delivery of the certificate or certificates or
other evidence of ownership of Warrant Stock, execute and deliver to the Holder,
without charge, a new Warrant evidencing the rights of the Holder to purchase
the unpurchased Warrant Stock called for by this Warrant, which new Warrant
shall in all other respects be identical to this Warrant, or, at the request of
the Holder, appropriate notation may be made on this Warrant and the same
returned to the Holder.
(g) The Issuer shall not be required to issue any fractional share
of Common Stock (or fractional interest in any other security) upon exercise of
this Warrant. As to any fraction of a share (or fractional interest in any other
security) that the Holder would otherwise be entitled to receive upon such
exercise, the Issuer shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction of the Current Market Price per share of
Common Stock (and/or other security) on the date of exercise; provided, however,
that in the event that the Issuer undertakes a reduction in the number of shares
of Common Stock or other securities outstanding, it shall be required to issue
fractional shares or fractional interests in such other securities to the Holder
if the Holder exercises all or any part of this Warrant, unless the Holder shall
have consented in writing to such reduction and provided
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<PAGE> 9
the Issuer with a written waiver of its right to receive fractional shares or
interests in accordance with this paragraph. If the Holder shall exercise more
than one Warrant in the same transaction, any payment in respect of fractional
shares (or other fractional interests) shall be based on the final fraction
resulting from aggregating all such exercises.
(h) The Issuer hereby agrees at all times to keep reserved for
issuance and delivery upon exercise of this Warrant such number of its
authorized but unissued shares (or treasury shares) of Common Stock or other
securities of the Issuer from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares and other securities shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable, free
and clear of all liens, security interests, charges and other encumbrances or
restrictions on sale (except to the extent of any applicable provisions set
forth in the Purchase Agreement, Voting Agreement, Registration Rights Agreement
or the Issuer's Fundamental Documents) and free and clear of all preemptive or
similar rights.
(i) If the issuance of any shares of Common Stock or other
securities required to be reserved for purposes of the exercise of this Warrant
requires the registration with, or approval of, any governmental authority or
requires listing on any national securities exchange or national market system
before such shares or other securities may be so issued, the Issuer shall at its
expense use its best efforts to cause such shares to be duly registered,
approved or listed, as the case may be, so that such shares or other securities
may be issued in accordance with the terms hereof; provided, however, that this
provision shall not obligate the Issuer to register such shares or other
securities under the Securities Act or qualify them under state securities or
blue sky laws.
SECTION 3. Transfer, Division and Combination. (a) This Warrant, all
rights hereunder and any Warrant Stock issued or issuable upon exercise hereof
are assignable and transferable, at any time in whole or in part, to any Person
or Persons subject in all cases to the provisions of Article VII of the Purchase
Agreement. Any such transfer shall not require the consent of any security
holder of the Issuer.
(b) Upon a transfer permitted by Section 3(a), this Warrant shall be
transferable upon surrender of this Warrant to the Issuer, together with a
written assignment of this Warrant substantially in the form of Annex B attached
hereto, duly executed by the Holder hereof or such Holder's agent or attorney.
Upon such surrender, the Issuer shall, without charge, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees (and, if the
Holder's entire interest is not being assigned, in the name of the Holder), and
in the denominations
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<PAGE> 10
specified in such instrument of assignment, and this Warrant shall promptly be
canceled.
(c) This Warrant may be exchanged for, or combined with, other
Warrants upon presentation of this Warrant and any other Warrants with which
this Warrant is to be combined to the Issuer, together with a written notice
specifying the denominations in which a new Warrant or Warrants are to be
issued, signed by the Holder. The Issuer shall execute and deliver a new Warrant
or Warrants to the Holder in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(d) The Issuer shall maintain books for the registration and
transfer of the Warrants, and shall allow each Warrant Holder to inspect such
books at such reasonable times as such holder shall request.
SECTION 4. Adjustments.
(a) Dividends and Distributions. If at any time the Issuer shall pay
any dividend or make any other distribution to holders of its Common Stock of
any cash, evidence of indebtedness or other property (including any rights or
warrants to purchase any securities of the Issuer) of any nature whatsoever
(other than as contemplated by subsections (b), (c)(i)(A) and (d)(i)(A) of this
Section 4), the Issuer shall at the same time pay or distribute to the Holder
(whether or not the Holder exercises this Warrant) the cash evidence of
indebtedness or other property the Holder would have been entitled to receive if
such Holder had exercised this Warrant immediately prior to the record date for
such dividend or distribution.
(b) Subdivisions and Combinations. If at any time the Issuer shall
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution of Common
Stock;
(ii) subdivide, split or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then immediately after the occurrence of any such event (A) the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted so as
to equal the number of shares of Common Stock such holder would have held
immediately after the occurrence of such event (in the case of an event referred
to in clause (i), after giving effect to such dividend or distribution)
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<PAGE> 11
if such holder had exercised this Warrant immediately prior to the occurrence of
such event and (B) the Exercise Price shall be adjusted to be equal to (x) the
Exercise Price immediately prior to the occurrence of such event multiplied by
(y) a fraction (1) the numerator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to the adjustment
in clause (A) and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
clause (A).
(c) Issuance of Common Stock. If at any time the Issuer (i) shall
(A) take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock or (B) otherwise sell or issue any shares of any class or series of
Common Stock (other than Excluded Stock) and (ii) the consideration per share of
Common Stock paid or to be paid upon such subscription, purchase, sale or
issuance is less than the Current Market Price per share of Common Stock
immediately before such record date or immediately before the date of such sale
or issuance, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying (x) the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such record date or sale or
issuance date, as the case may be, by (y) a fraction (not to be less than one)
(i) the numerator of which shall be equal to the product of (A) the number of
shares of Common Stock outstanding (determined on a fully-diluted basis) after
giving effect to such subscription, purchase, sale or issuance (and assuming all
such subscription or purchase offers are exercised) and (B) the Current Market
Price per share of Common Stock determined immediately before such record date
or sale or issuance date, as the case may be, and (ii) the denominator of which
shall be equal to the sum of (A) the product of (1) the number of shares of
Common Stock outstanding (determined on a fully-diluted basis) immediately
before such record date or sale or issuance date, as the case may be, and (2)
the Current Market Price per share of Common Stock determined immediately before
such record date or sale or issuance date, as the case may be, and (B) the
aggregate consideration received or to be received by the Issuer for the total
number of shares of Common Stock to be subscribed for or purchased, sold or
issued. Simultaneously with the adjustment in the preceding sentence, the
Exercise Price shall be adjusted to be equal to (x) the Exercise Price
immediately prior to the occurrence of such event multiplied by (y) a fraction
(1) the numerator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to the adjustment in the preceding
sentence and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
the preceding sentence.
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<PAGE> 12
(d) Issuance of Convertible Securities or Options. If at any time
(i) the Issuer shall (A) take a record of the holders of its Common Stock for
the purpose of entitling them to subscribe for or purchase options to purchase
or rights to subscribe for Common Stock, securities directly or indirectly
convertible into or exchangeable for Common Stock ("Convertible Securities") or
options or rights with respect to Convertible Securities (options or rights with
respect to Common Stock or Convertible Securities being referred to as
"Options") or (B) otherwise issue or sell any Options or Convertible Securities
(other than Options exercisable for Excluded Stock) and (ii) the consideration
per share paid or to be paid for the Common Stock deliverable upon exercise of
such Options and/or conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount received or receivable by the
Issuer in consideration of the subscription, purchase, sale or issuance of such
Options or Convertible Securities plus any amount payable to the Issuer upon
such exercise and/or conversion or exchange, by (y) the total maximum number of
shares of Common Stock necessary to effect the exercise and/or conversion or
exchange of all such Options or Convertible Securities) shall be less than the
Current Market Price per share of Common Stock on such record date or sale or
issuance date, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such date by a fraction (not to be
less than one) (i) the numerator of which shall be equal to the product of (A)
the total maximum number of shares of Common Stock outstanding (determined on a
fully diluted basis) after giving effect to the assumed exercise and/or
conversion of all such Options or Convertible Securities and (B) the Current
Market Price per share of Common Stock determined immediately before such record
date or sale or issuance date, as the case may be, and (ii) the denominator of
which shall be equal to the sum of (A) the product of (1) the number of shares
of Common Stock outstanding (determined on a fully-diluted basis) immediately
before such record date or sale or issuance date, as the case may be, and (2)
the Current Market Price per share of the Common Stock determined immediately
before such record date or sale or issuance date, as the case may be, and (B)
the aggregate consideration for which Common Stock is deliverable upon exercise
and/or conversion or exchange for such Options or Convertible Securities.
Simultaneously with the adjustment in the preceding sentence, the Exercise Price
shall be adjusted to be equal to (x) the Exercise Price immediately prior to the
occurrence of such event multiplied by (y) a fraction (1) the numerator of which
is the number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the adjustment in the preceding sentence and (2) the
denominator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately after the adjustment in the preceding
sentence. The adjustment of the exercise price of an Option
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shall not be deemed to be the issuance or sale of an Option at less than the
Current Market Price per share of Common Stock if the exercise price as adjusted
is not less than the Current Market Price per share of Common Stock on the date
of such adjustment.
(e) Superseding Adjustment. If, at any time after any adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant
shall have been made on the basis of the issuance of any Options or Convertible
Securities:
(i) any such Options shall expire prior to exercise or the
right to convert or exchange any such Convertible Securities shall
terminate prior to conversion or exchange; or
(ii) the consideration per share for which shares of Common
Stock are issuable pursuant to the terms of such Options or
Convertible Securities shall be increased or decreased;
then such previous adjustment shall be rescinded and annulled (without affecting
any other adjustments resulting from any other events). Thereupon, a
recomputation shall be made of the adjustment in the number of shares of Common
Stock issuable upon exercise of this Warrant on the basis of
(A) treating the number of shares of Common
Stock, if any, theretofore actually issued or
issuable pursuant to the previous exercise,
conversion or exchange of such Options or
Convertible Securities as having been issued
on the date or dates of such exercise and/or
conversion or exchange and for the
consideration actually received and
receivable therefor, and
(B) treating any such Options or Convertible
Securities that then remain outstanding as
having been granted or issued immediately
after the time of such increase or decrease
for the consideration per share for which
shares of Common Stock are issuable upon
exercise and/or conversion or exchange of
such Options or Convertible Securities,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled. For purposes of the computation of such new adjustment, the Current
Market Price shall be deemed to be the Current Market Price used in computing
the previous adjustment.
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<PAGE> 14
(f) Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock issuable upon exercise of this Warrant:
(i) The sale or other disposition of any issued shares of
Common Stock owned or held by or for the account of the Issuer shall
be deemed to be an issuance thereof for purposes of this Section.
(ii) In computing adjustments under this Section, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(iii) If the Issuer shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase rights and shall,
thereafter and before the payment of such dividend or distribution
or the granting of such subscription or purchase rights, legally
abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall
be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and
annulled.
(iv) Aggregate consideration for purposes of Sections 4(c) and
4(d) shall be determined as follows: In case any Common Stock,
Options, or Convertible Securities shall be issued or sold, or be
exercisable, convertible or exchangeable for cash, the consideration
received therefor shall be deemed to be the amount payable to the
Issuer therefor, after deduction therefrom of any expenses incurred
or any underwriting commissions or concessions or discounts or, in
the case of a private placement thereof, finders' fees or
commissions paid or allowed by the Issuer in connection therewith.
In case any such Common Stock, Options, or Convertible Securities
shall be issued or sold, or be exercisable, convertible or
exchangeable for a consideration other than cash payable to the
Issuer, the consideration received therefor shall be deemed to be
the fair market value of such consideration (as determined in
accordance with the Appraisal Procedure), after deduction therefrom
of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Issuer in connection
therewith. In case any such Common Stock, or Options, Convertible
Securities shall be issued or sold, or be exercisable, convertible
or exchangeable in connection with any merger of another corporation
into the Issuer, the amount of consideration therefor shall be
deemed to
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<PAGE> 15
be the fair market value (as determined in accordance with the
Appraisal Procedure) of such portion of the assets of such merged
corporation as the Board shall reasonably determine (such
determination to be reasonably acceptable to the Majority Holders)
in good faith to be attributable to such options, rights or
securities.
(g) Merger, Consolidation or Disposition of Assets. If the Issuer
shall merge, consolidate or effect a share exchange with another entity, or
shall sell, transfer or otherwise dispose of all or substantially all of its
assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of Common
Stock or other securities of the successor or acquiring entity, or property of
any nature is to be received by or distributed to the holders of Common Stock of
the Issuer, then the Holder shall be entitled to receive in respect of the
Warrant Stock issuable upon exercise of this Warrant, and upon delivery to the
Issuer of this Warrant for cancellation, the amount of cash, shares of Common
Stock, other securities or other property that it would have been entitled to
receive if such Holder had exercised this Warrant in full immediately prior to
the occurrence of such merger, consolidation, share exchange or disposition of
assets. In the case of any such merger, consolidation, share exchange or
disposition of assets, the successor or acquiring entity (and any Affiliate
thereof issuing securities) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Issuer and all of the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board and reasonably acceptable
to the Majority Holders) in order to provide for adjustments of the Warrant
Stock issuable upon exercise of this Warrant that shall be as nearly equivalent
as practicable to the adjustments provided for in this Section 4. The foregoing
provisions shall similarly apply to successive mergers, consolidations, share
exchanges and dispositions of assets.
(h) Capital Reorganization or Capital Reclassification. If the
Issuer shall effect any capital reorganization or any reclassification of its
capital stock (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the Issuer
shall cause effective provision to be made so that this Warrant shall be
exercisable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the Warrant Stock deliverable upon
exercise of this Warrant would have been entitled upon such reorganization or
reclassification and any such provision shall include adjustments in respect of
such stock, securities or other
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<PAGE> 16
property that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4 with respect to this Warrant.
(i) Other Action Affecting Common Stock. If at any time or from time
to time the Issuer shall take any action affecting its Common Stock, other than
any action described in this Section 4, then, unless such action will not have
an adverse effect upon the Holder's rights, the number of shares of Warrant
Stock issuable upon exercise of this Warrant and the Exercise Price shall be
adjusted in such manner and at such time as the Board shall in good faith
determine (such determination to be reasonably acceptable to the Majority
Holders) to be equitable in the circumstances, but no such adjustment shall
decrease the number of shares of Warrant Stock issuable upon exercise of this
Warrant or increase the Exercise Price.
(j) If at any time the Issuer shall issue any shares of its Common
Stock pursuant to the exercise of an option granted under a Stock Option Plan,
then the number of shares of Common Stock issuable upon the exercise of this
Warrant shall be increased by an amount equal to the product of (x) the number
of such shares issued pursuant to the option exercise and (y) 0.1764. The
provisions of this Section 4(j) shall only apply to issuances after the date
hereof of the first 1,300,000 shares of Common Stock pursuant to the Stock
Option Plans, as such number may be adjusted pursuant to any stock splits,
divisions, combinations or similar adjustments.
(k) Notice of Adjustments. Whenever the number of shares of Warrant
Stock issuable upon exercise of this Warrant shall be adjusted pursuant to this
Agreement, the Issuer shall forthwith obtain a certificate signed by a firm of
independent accountants of recognized national standing selected by the Issuer
setting forth, in reasonable detail, the event requiring the adjustment, the
method by which such adjustment was calculated and specifying the number of
shares of Warrant Stock issuable upon exercise of this Warrant after giving
effect to such adjustment (except in the case of adjustments pursuant to Section
4(j) in which event a certificate shall be obtained on December 31 and June 30).
The Issuer shall promptly cause a signed copy of such certificate to be
delivered to the Holder. The Issuer shall keep at its office maintained for
purposes of Section 7(a) hereof copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by the Holder or any prospective purchaser of a Warrant designated by the
registered Holder hereof.
(l) Notice of Certain Corporate Action. If the Issuer shall propose
(i) to pay any dividend to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock; (ii) to offer to the holders of
its Common Stock rights to subscribe for or to purchase any additional
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<PAGE> 17
shares of Common Stock or any Options or Convertible Securities; (iii) to effect
any reorganization or reclassification of its Common Stock; (iv) to otherwise
issue any Common Stock, Options, or Convertible Securities; (v) to effect any
other capital reorganization; (vi) to effect any consolidation, merger or share
exchange or any sale, transfer or other disposition of all or substantially all
of its assets; or (vii) to effect the liquidation, dissolution or winding up of
the Issuer, then, in each such case, the Issuer shall give to the Holder a
notice of such proposed action, which shall specify the date on which a record
is to be taken for the purposes of such dividend, distribution or rights offer,
or the date on which such reclassification, issuance, reorganization,
consolidation, merger, share exchange, sale, transfer, disposition, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of Common Stock, if any such date is to be fixed, and shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Common Stock, and the number of shares
of Warrant Stock that are issuable upon exercise of this Warrant after giving
effect to any adjustment that will be required as a result of such action. Such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Common Stock for purposes of such action, and in the case of any other such
action, at least 10 days prior to the date of the taking of such proposed
action.
(m) No Impairment. The Issuer will not, by amendment of its Articles
of Organization or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Issuer, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder against
impairment.
(n) Miscellaneous. The computations of all amounts under this
Section 4 shall be made assuming all other anti-dilution or similar adjustments
to be made to the terms of all other securities resulting from the transaction
causing an adjustment pursuant to this Section 4 have previously been made so as
to maintain the relative economic interest of this Warrant vis a vis all other
securities issued by the Issuer.
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<PAGE> 18
SECTION 5. Miscellaneous.
(a) Office of Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in the continental United States where the
Warrants may be presented for exercise, transfer, division or combination as
provided in this Warrant. Such office shall be at 210 Boylston Street, Chestnut
Hill, MA 02167, unless and until the Issuer shall designate and maintain some
other office for such purposes and give notice thereof to the Holder.
(b) Notices Generally. Any notices and other communications pursuant
to the provisions hereof shall be sent in accordance with the provisions of
Section 10.6 of the Purchase Agreement.
(c) Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflicts of laws rules. The Issuer agrees that it may be served with process in
the State of New York and any action for breach of this Warrant may be
prosecuted against it in the courts of such State or any Federal court located
in such State.
(d) Limitation of Liability. Except as otherwise provided herein,
this Warrant does not entitle the Holder to any voting rights or other rights of
a shareholder of the Issuer, as a shareholder. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the Exercise Price or as a
shareholder of the Issuer, whether such liability is asserted by the Issuer, by
any creditor of the Issuer or any other Person.
(e) Loss or Destruction of Warrant. Upon receipt by the Issuer of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant and (in the case of
loss, theft or destruction), if requested by the Issuer, of reasonably
satisfactory indemnification (if the Holder is a nationally-chartered financial
institution or an Affiliate thereof, its own agreement being satisfactory), or
(in the case of mutilation) upon surrender and cancellation of this Warrant, the
Issuer shall, without charge, execute and deliver a new Warrant exercisable for
the same amount of Warrant Stock; provided, however, that (in the case of loss,
theft or destruction) no indemnity bond shall be required unless the Issuer has
a class of securities registered pursuant to the Securities Exchange Act of
1934, as amended, and the Issuer's transfer agent requires such indemnity bond
as a condition to the issuance of a new Warrant.
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<PAGE> 19
(f) Amendments and Waivers. Any provision of this Warrant may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Issuer and the Holders and, in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
* * *
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<PAGE> 20
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: July 30, 1997
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
------------------------------
Name: Richard E. Wenz
Title: President
<PAGE> 21
ANNEX A
FORM OF EXERCISE NOTICE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant exercises this
Warrant for the purchase of ________ shares of Common Stock of Safety 1st, Inc.,
a Massachusetts corporation, and herewith makes payment therefor of $__________
(such payment being made [check one] (x) [ ] in cash or by certified or official
bank check or (y) [ ] by acceptance of a reduced number of shares of Common
Stock upon cancellation of this Warrant as provided in Section 2(b) of this
Warrant, all on the terms and conditions specified in this Warrant, and requests
that (i) certificates and/or other instruments covering such shares of Common
Stock be issued in accordance with the instructions given below and (ii) if such
shares of Common Stock shall not include all of the shares of Common Stock to
which the Holder is entitled under this Warrant, that a new Warrant for the
unpurchased balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned. References in this Exercise Notice to "Common
Stock" shall include other securities or other property to the extent included
in Warrant Stock.
[This Exercise Notice is being delivered contingent upon the
consummation of [describe transaction] as contemplated by Section 2(d) of this
Warrant].*
Dated:___________________________
_________________________________________
(Signature of Registered Holder)**
Instructions for issuance and
registration of shares of
Common Stock:
_________________________________ Social Security or Other
Name of Registered Holder Identifying Number:______________________
(please print)
- --------
* Include if applicable.
** The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE> 22
Please deliver certificate to
the following address:
________________________________________
Street
________________________________________
City, State and Zip Code
<PAGE> 23
ANNEX B
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all the rights
of the undersigned under this Warrant with respect to the number of shares of
Common Stock covered thereby set forth below to:
<TABLE>
<CAPTION>
Number of
Shares of
Name of Assignee Address Common Stock
- ---------------- ------- ------------
<S> <C> <C>
</TABLE>
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
Dated:___________________________
_________________________________________
(Signature of Registered Holder)*
_________________________________________
Name of Registered Holder
(Please Print)
Witness:
_________________________________
- --------
* The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
dated as of July 30, 1997, among SAFETY 1ST,
INC., a Massachusetts corporation (the
"Company"), the INVESTORS (as defined below)
and MICHAEL LERNER, an individual
("Lerner").
The Investors have the right to purchase by the exercise
warrants owned by the Investors and issued to the Investors by the Company
pursuant to a Stock and Warrant Purchase Agreement of even rate shares of the
Common Stock, $.01 par value (the "Common Stock"), of the Company (or such other
class of common stock of the Company into which the Common Stock may be
converted or reclassified, and all references herein to the Common Stock shall
mean such other class of common stock, if applicable). The Company and the
Investors deem it to be in their respective best interests to set forth the
rights of the Investors in connection with public offerings and sales of the
capital stock of the Company.
ACCORDINGLY, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the Company and the Investors
hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 promulgated under the Exchange Act.
"Bear, Stearns" shall mean Bear, Stearns & Co. Inc. and
includes any successor to, or transferee of, any such Person who or which agrees
in writing to be treated as an Investor hereunder and to be bound by the terms
and comply with all applicable provisions hereof.
"BT Capital" shall mean BT Capital Partners, Inc. and includes
any successor to, or transferee of, any such Person who or which agrees in
writing to be treated as an Investor hereunder and to be bound by the terms and
comply with all applicable provisions hereof.
"Commission" shall mean the Securities and Exchange Commission
or any other Governmental Authority at the time administering the Securities
Act.
"Common Stock" shall have the meaning ascribed to it in the
Preamble.
<PAGE> 2
"Common Stock Equivalent" shall mean one share of Common Stock
or the right to acquire, whether or not such right is immediately exercisable,
one share of Common Stock, whether evidenced by an option, warrant, convertible
security or other instrument or agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934
or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"Governmental Authority" shall mean 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.
"Investors" shall mean, collectively, (i) the Persons listed
on Schedule I attached to this Agreement and (ii) any successor to, or assignee
or transferee of Restricted Securities held by an Investor who or which agrees
in writing to be treated as an Investor hereunder and to be bound by and comply
with all of the applicable terms and provisions hereof.
"Market Price" shall mean, as to any security, the average of
the closing prices of such security's sales on all United States securities
exchanges on which such security may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, on
such day, or, if on any day such security is not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar or successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which such Market
Price is being determined and the 20 consecutive business days prior to such
day; provided, however, that if such security is listed on any domestic
securities exchange the term "business days" as used in this sentence means
business days on which such exchange is open for trading.
"Material Transaction" shall mean any material transaction in
which the Company or any of its subsidiaries proposes to engage or is engaged,
including a purchase or sale of assets or securities, financing, merger,
consolidation, tender offer or any other transaction or event that would require
disclosure pursuant to the Securities Act and/or the Exchange Act, and with
respect to which the Board of Directors of the
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<PAGE> 3
Company reasonably has determined in good faith that compliance with this
Agreement may reasonably be expected to either materially interfere with the
Company's or such subsidiary's ability to consummate such transaction in a
timely fashion or require the Company to disclose material, non-public
information prior to such time as it would otherwise be required to be
disclosed.
"Other Shares" shall mean at any time those shares of Common
Stock which do not constitute Primary Shares or Registrable Shares.
"Person" shall be construed as broadly as possible and shall
include an individual person, a partnership (including a limited liability
partnership), a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a Governmental Authority.
"Primary Shares" shall mean, at any time, the authorized but
unissued shares of Common Stock or Common Stock held by the Company in its
treasury.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any prospectus subject to completion, and any
such prospectus as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable Shares
and, in each case, by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference therein.
"Registrable Shares" shall mean, at any time, and with respect
to any Investor, (i) the Reserved Common Shares, (ii) any other securities of
the Corporation into or for which the Reserved Common Shares may be exchanged,
converted or reclassified or which may be issued as a dividend or distribution
on or with respect thereto, and (iii) any securities received in respect of the
foregoing, in each case in clauses (i) and (ii) which at any time are held by
the Investors. As to any particular Registrable Shares, once issued, such
Registrable Shares shall cease to be Registrable Shares (A) when such
Registrable Shares have been registered under the Securities Act, the
Registration Statement in connection therewith has been declared effective and
they have been disposed of pursuant to and in the manner described in such
effective Registration Statement, (B) when such Registrable Shares are sold or
distributed pursuant to Rule 144, (C) when such Registrable Shares are
transferable pursuant to Rule 144(k) or (D) when such Registrable Shares have
ceased to be outstanding.
"Registration Date" shall mean the date upon which the
registration statement pursuant to which the Company shall have
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<PAGE> 4
initially registered shares of Common Stock under the Securities Act for sale to
the public shall have been declared effective.
"Registration Statement" shall mean any registration statement
of the Company which covers any of the Registrable Shares, and all amendments
and supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Representative" of a Person shall be construed broadly and
shall include such Person's partners, officers, directors, employees, agents,
counsel, accountants and other representatives.
"Reserved Common Shares" shall have the meaning ascribed
thereto in the Stock and Warrant Purchase Agreement.
"Restricted Securities" shall mean, at any time and with
respect to any Investor, the Common Stock Equivalents and any other securities
received with respect to any such Common Stock Equivalents, which are held by
such Investor and which theretofore have not been sold to the public pursuant to
a Registration Statement or pursuant to Rule 144.
"Rule 144" shall mean Rule 144 promulgated under the
Securities Act or any successor rule thereto.
"Securities Act" shall mean the Securities Act of 1933 or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Stock and Warrant Purchase Agreement" means the Stock and
Warrant Purchase Agreement dated as of the date hereof among the Company and the
Investors, as amended or modified from time to time.
"Suspension Period" shall have the meaning ascribed to it in
Section 9.
"Transfer" shall mean any disposition of any Restricted
Securities or of any interest therein which would constitute a sale thereof
within the meaning of the Securities Act, other than any such disposition
pursuant to a Registration Statement and in compliance with all applicable state
securities and "blue sky" laws.
SECTION 2. REQUIRED REGISTRATION.
(a) If at any time the Company shall be requested by an
Investor to effect the registration under the Securities Act
-4-
<PAGE> 5
of Registrable Shares which constitute at least 20% of the then outstanding
Registrable Shares or have an anticipated aggregate offering price of at least
$4,000,000, it shall promptly give written notice to the other Investors of its
requirement to so register such Registrable Shares and, upon the written
request, delivered to the Company within 30 days after delivery of any such
notice by the Company, of the other Investors to include in such registration
Registrable Shares (which request shall specify the number of Registrable Shares
proposed to be included in such registration), the Company shall, subject to
Section 2(c) below, promptly use its best efforts to effect such registration
under the Securities Act of the Registrable Shares which the Company has been so
requested to register.
(b) Anything contained in Sections 2(a) to the contrary
notwithstanding, the Company shall not be obligated to effect pursuant to
Sections 2(a) any registration under the Securities Act except in accordance
with the following provisions:
(i) the Company shall not be obligated to use its
best efforts to file and cause to become effective (A) more than one
Registration Statement initiated by each of BT Capital and Bear Stearns
pursuant to Section 2(a), provided that if the Investors were unable to
sell at least 80% of the Registrable Shares requested to be included in
the registration pursuant to Section 2(a) as a result of an
underwriter's cutback, then additional registrations shall be added to
this Section 2(b)(i) until the foregoing condition is satisfied, or (B)
any Registration Statement during any period in which any other
registration statement (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto) pursuant to
which Primary Shares are to be or were sold has been filed and not
withdrawn or has been declared effective within the prior 90 days;
(ii) the Company may delay the filing or
effectiveness of any Registration Statement for a period of up to 180
days after the date of a request for registration pursuant to Section
2(a) if at the time of such request the Company is engaged in a
Material Transaction; and
(iii) with respect to any registration pursuant to
Section 2(a), the Company may include in such registration any Primary
Shares or Other Shares; provided, however, that if the managing
underwriter advises the Company that the inclusion of all Registrable
Shares, Primary Shares and Other
-5-
<PAGE> 6
Shares proposed to be included in such registration would interfere
with the successful marketing (including pricing) of all such
securities, then the number of Registrable Shares, Primary Shares and
Other Shares proposed to be included in such registration shall be
included in the following order:
(A) first, the Registrable Shares held by
the Investors requesting that their Registrable Shares be
included in such registration pursuant to Section 2(a) or
2(b), pro rata based upon the number of Restricted Securities
owned by each such Investor at the time of such registration;
(B) second, the Primary Shares; and
(C) third, the Other Shares.
(c) A requested registration under this Section 2 may be
rescinded prior to such registration being declared effective by the
Commission by written notice to the Company from each of the Investors;
provided, however, that such rescinded registration shall not count as a
registration initiated pursuant to this Section 2 for purposes of subclause
(A) of clause (i) of subsection (b) above if and only if the Company shall
have been reimbursed (pro rata by the Investors requesting registration or
in such other proportion as they may agree) for all out-of-pocket expenses
incurred by the Company in connection with such rescinded registration.
SECTION 3. PIGGYBACK REGISTRATION.
If the Company at any time proposes for any reason to register
Primary Shares or Other Shares under the Securities Act (other than on Form S-4
or Form S-8 promulgated under the Securities Act or any successor forms
thereto), it shall promptly give written notice to each Investor of its
intention so to register the Primary Shares or Other Shares and, upon the
written request, given within 20 days after delivery of any such notice by the
Company, of any such Investor to include in such registration Registrable Shares
(which request shall specify the number of Registrable Shares proposed to be
included in such registration), the Company shall use its best efforts to cause
all such Registrable Shares to be included in such registration on the same
terms and conditions as the securities otherwise being sold in such
registration; provided, however, that if the managing underwriter advises the
Company that the inclusion of all Registrable Shares or Other Shares proposed to
be included in such registration would interfere with the successful marketing
(including pricing) of Primary Shares proposed to be registered by the Company,
then the number of Primary Shares, Registrable Shares and Other Shares proposed
to be included in such registration shall be included in the following order:
(i) first, the Primary Shares; and
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<PAGE> 7
(ii) second, the Registrable Shares and the Other Shares, pro
rata based upon the number of Common Stock Equivalents owned by each
such Investor and the holders of Other Shares, at the time of such
registration; and provided further, however, that, notwithstanding the
immediately preceding proviso, if any shares of Lerner are included in
any registration of the Company in any circumstance, then the number of
Registrable Shares to be included in such registration shall be equal
to the number of Other Shares which are owned by Lerner and are
included in such registration.
SECTION 4. HOLDBACK AGREEMENT.
(a) If the Company at any time shall register shares of Common Stock
under the Securities Act (including any registration pursuant to Section 2 or 3)
for sale to the public in an underwritten offering, the Investors shall not
sell, make any short sale of, grant any option for the purchase of, or otherwise
dispose of any Restricted Securities (other than those Registrable Shares
included in such registration pursuant to Section 2 or 3) without the prior
written consent of the Company for a period as shall be determined by the
managing underwriters, which period cannot begin more than 30 days prior to the
effectiveness of such Registration Statement and cannot last more than 180 days
after the effective date of such Registration Statement.
(b) If the Company at any time pursuant to Section 2 or 3 of this
Agreement shall register under the Securities Act Registrable Shares held by the
Investors for sale to the public pursuant to an underwritten offering, the
Company shall not, without the prior written consent of each of the Investors,
effect any public sale or distribution of securities similar to those being
registered, or any securities convertible into or exercisable or exchangeable
for such securities, for such period as shall be determined by the managing
underwriters, which period shall not begin more than 10 days prior to the
effectiveness of the Registration Statement pursuant to which such public
offering shall be made and shall not last more than 180 days after the closing
of sale of shares pursuant to such Registration Statement.
SECTION 5. PREPARATION AND FILING. If and whenever the Company is under
an obligation pursuant to the provisions of this Agreement to use its best
efforts to effect the registration of any Registrable Shares, the Company shall,
as expeditiously as practicable:
(i) use its best efforts to cause a Registration Statement
that registers such Registrable Shares to become and remain effective
for a period of 90
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<PAGE> 8
days or until all of such Registrable Shares have been disposed of (if
earlier);
(ii) furnish, at least five business days before filing a
Registration Statement that registers such Registrable Shares, a
Prospectus relating thereto and any amendments or supplements relating
to such Registration Statement or Prospectus, to one counsel selected
by the Investors (the "Investors' Counsel"), copies of all such
documents proposed to be filed (it being understood that such
five-business-day period need not apply to successive drafts of the
same document proposed to be filed so long as such successive drafts
are supplied to such counsel in advance of the proposed filing by a
period of time that is customary and reasonable under the
circumstances);
(iii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective for at least a period of 90 days or until all of
such Registrable Shares have been disposed of (if earlier) and to
comply with the provisions of the Securities Act with respect to the
sale or other disposition of such Registrable Shares;
(iv) notify the Investors' Counsel promptly in writing (A) of
any comments by the Commission with respect to such Registration
Statement or Prospectus, or any request by the Commission for the
amending or supplementing thereof or for additional information with
respect thereto, (B) of the issuance by the Commission of any stop
order suspending the effectiveness of such Registration Statement or
Prospectus or any amendment or supplement thereto or the initiation of
any proceedings for that purpose and (C) of the receipt by the Company
of any notification with respect to the suspension of the qualification
of such Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
(v) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Shares reasonably requests
and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller of Registrable Shares to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by such seller; provided, however, that the Company will
not be required to qualify generally to do business, subject itself to
general taxation or consent to general service of process in any
jurisdiction where it would not otherwise be required so to do but for
this clause (v);
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<PAGE> 9
(vi) furnish to each seller of such Registrable Shares such
number of copies of a summary Prospectus or other Prospectus, including
a preliminary Prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such seller of Registrable
Shares may reasonably request in order to facilitate the public sale or
other disposition of such Registrable Shares;
(vii) use its best efforts to cause such Registrable Shares to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable the seller or sellers thereof to
consummate the disposition of such Registrable Shares;
(viii) notify on a timely basis each seller of such
Registrable Shares at any time when a Prospectus relating to such
Registrable Shares is required to be delivered under the Securities Act
within the appropriate period mentioned in clause (i) of this Section 5
of the happening of any event as a result of which the Prospectus
included in such Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and,
at the request of such seller, prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
offerees of such shares, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(ix) make available for inspection by any seller of such
Registrable Shares, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or
other agent retained by any such seller or underwriter (collectively,
the "Inspectors"), all pertinent financial, business and other records,
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information (together with the Records, the "Information") reasonably
requested by any such Inspector in connection with such Registration
Statement (and any of the Information which the Company determines in
good faith to be confidential, and of which determination the
Inspectors are so notified, shall
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<PAGE> 10
not be disclosed by the Inspectors unless (A) the disclosure of such
Information is necessary to avoid or correct a misstatement or omission
in the Registration Statement, (B) the release of such Information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction (subject to clause (D) below) or (C) such Information has
been made generally available to the public, and (D) the seller of
Registrable Shares agrees that it will, upon learning that disclosure
of such Information is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the
Information deemed confidential);
(x) use its best efforts to obtain from its independent
certified public accountants a "cold comfort" letter in customary form
and covering such matters of the type customarily covered by cold
comfort letters;
(xi) use its best efforts to obtain, from its counsel, an
opinion or opinions in customary form (which shall also be addressed to
the Investors selling Registrable Shares in such registration);
(xii) provide a transfer agent and registrar (which may be the
same entity and which may be the Company) for such Registrable Shares;
(xiii) issue to any underwriter to which any seller of
Registrable Shares may sell shares in such offering certificates
evidencing such Registrable Shares;
(xiv) use its best efforts to list such Registrable Shares on
any national securities exchange on which any shares of the Common
Stock are listed or, if the Common Stock is not listed on a national
securities exchange, use its best efforts to qualify such Registrable
Shares for inclusion on the automated quotation system of the National
Association of Securities Dealers, Inc. (the "NASD"), National Market
System ("NMS"), or such other national securities exchange as the
holders of a majority of such Registrable Shares shall request included
in such registration;
(xv) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, earnings
statements which need not be audited covering a period of 12 months
beginning within three months after the effective date of the
Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
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<PAGE> 11
(xvi) use its best efforts to take all other steps necessary
to effect the registration of such Registrable Shares contemplated
hereby.
SECTION 6. EXPENSES. All expenses incurred by the Company in complying
with Section 5, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), fees and expenses of
complying with securities and blue sky laws, printing expenses, fees and
expenses of the Company's counsel and accountants and fees and expenses of one
special legal counsel to the Investors selected by the Investors, shall be paid
by the Company; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Shares shall not be borne by the
Company but shall be borne by the seller or sellers thereof, in proportion to
the number of Registrable Shares sold by such seller or sellers.
SECTION 7. INDEMNIFICATION.
(a) In connection with any registration of any Registrable Shares under
the Securities Act pursuant to this Agreement, the Company shall indemnify and
hold harmless the seller of such Registrable Shares, each underwriter, broker or
any other Person acting on behalf of such seller, each other Person, if any, who
controls any of the foregoing Persons within the meaning of the Securities Act
and each Representative of any of the foregoing Persons, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
Persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement under which such
Registrable Shares were registered, any preliminary Prospectus or final
Prospectus contained therein, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading or, with respect to any Prospectus, necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, or any violation by the Company of the Securities Act
or state securities or blue sky laws applicable to the Company and relating to
action or inaction required of the Company in connection with such registration
or qualification under such state securities or blue sky laws, and the Company
shall promptly reimburse such seller, such underwriter, such broker, such
controlling Person or such Representatives for any legal or other expenses
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
shall not be liable to any
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<PAGE> 12
such Person to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said Registration Statement, preliminary
Prospectus, amendment, supplement or document incident to registration or
qualification of any Registrable Shares in reliance upon and in conformity with
information furnished to the Company, or a Person duly acting on their behalf,
specifically for use in the preparation thereof; provided further, however, that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any untrue statement, allegedly untrue statement, omission or
alleged omission made in any preliminary Prospectus but eliminated or remedied
in the final Prospectus (filed pursuant to Rule 424 of the Securities Act), such
indemnity agreement shall not inure to the benefit of any indemnified party from
whom the Person asserting any loss, claim, damage, liability or expense
purchased the Registrable Shares which are the subject thereof, if a copy of
such final Prospectus had been timely made available to such indemnified Person
and such final Prospectus was not delivered to such Person with or prior to the
written confirmation of the sale of such Registrable Shares to such Person.
(b) In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each seller of Registrable Shares
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in the paragraph (a) of this Section 7) the Company, each underwriter
or broker involved in such offering, each other seller of Registrable Shares
under such Registration Statement, each Person who controls any of the foregoing
Persons within the meaning of the Securities Act and any Representative of the
foregoing Persons with respect to any statement or omission from such
Registration Statement, any preliminary Prospectus or final Prospectus contained
therein, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company or such underwriter through an instrument duly executed
by such seller or a Person duly acting on their behalf specifically for use in
connection with the preparation of such Registration Statement, preliminary
Prospectus, final Prospectus, amendment or supplement; provided, however, that
the maximum amount of liability in respect of such indemnification shall be
limited, in the case of each seller of Registrable Shares, to an amount equal to
the net proceeds actually received by such seller from the sale of Registrable
Shares effected pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 7, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
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<PAGE> 13
of the commencement of such action (provided that an indemnified party's failure
to give such notice in a timely manner shall only relieve the indemnification
obligations of an indemnifying party to the extent such indemnifying party is
prejudiced by such failure). In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that if any indemnified party shall have
reasonably concluded that there may be one or more legal or equitable defenses
available to such indemnified party which are in addition to or conflict with
those available to the indemnifying party, or that such claim or litigation
involves or could have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section 7, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnifying party shall reimburse such indemnified party and any
Person controlling such indemnified party for that portion of the fees and
expenses of any one lead counsel (plus appropriate special and local counsel)
retained by the indemnified party which are reasonably related to the matters
covered by the indemnity agreement provided in this Section 7.
(b) If the indemnification provided for in this Section 7 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage or liability referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amounts paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other hand in connection with the
statements or omissions which resulted in such loss, claim, damage or liability
as well as any other relevant equitable considerations; provided, however, that
the maximum amount of liability in respect of such contribution shall be
limited, in the case of each seller of Registrable Shares, to an amount equal to
the net proceeds actually received by such seller from the sale of Registrable
Shares effected pursuant to such registration. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent,
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<PAGE> 14
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The indemnification and contribution provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party and will survive the transfer of
securities.
SECTION 8. UNDERWRITING AGREEMENT.
(a) Notwithstanding the provisions of Sections 5 and 7, to the extent
that the Investors selling Registrable Shares in a proposed registration shall
enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such Sections of this
Agreement, the provisions contained in such Sections of this Agreement
addressing such issue or issues shall be of no force or effect with respect to
such registration, but this provision shall not apply to the Company if the
Company is not a party to the underwriting or similar agreement.
(b) If any registration pursuant to Section 2 is requested to be an
underwritten offering, the Company shall negotiate in good faith to enter into a
reasonable and customary underwriting agreement with the underwriters thereof.
The Company shall be entitled to receive indemnities from lead institutions,
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement and to
the extent customary given their role in such distribution.
(c) No Investor may participate in any registration hereunder that is
underwritten unless such Investor agrees to (i) sell such Investor's Registrable
Shares proposed to be included therein on the basis provided in any underwriting
arrangements acceptable to the Company and the Investors and (ii) as
expeditiously as possible, notify the Company of the occurrence of any event
concerning such Investor as a result of which the Prospectus relating to such
registration contains an untrue statement of a material fact or omits 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.
SECTION 9. SUSPENSION. Anything contained in this Agreement to the
contrary notwithstanding, the Company may (not more than once with respect to
each registration), by notice in writing to each holder of Registrable Shares to
which a Prospectus relates, require such holder to suspend, for up to 90 days
(the "Suspension Period"), the use of any Prospectus
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<PAGE> 15
included in a Registration Statement filed under Section 2 or 3 if a Material
Transaction exists that would require an amendment to such Registration
Statement or supplement to such Prospectus (including any such amendment or
supplement made through incorporation by reference to a report filed under
Section 13 of the Exchange Act). The period during which such Prospectus must
remain effective shall be extended by a period equal to the Suspension Period.
The Company may (but shall not be obligated to) withdraw the effectiveness of
any Registration Statement subject to this provision.
SECTION 10. INFORMATION BY HOLDER. Each holder of Registrable Shares to
be included in any registration shall furnish to the Company and the managing
underwriter such written information regarding such holder and the distribution
proposed by such holder as the Company or the managing underwriter may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
SECTION 11. EXCHANGE ACT COMPLIANCE. From and after the Registration
Date or such earlier date as a registration statement filed by the Company
pursuant to the Exchange Act relating to any class of the Company's securities
shall have become effective, the Company shall use its best efforts to comply
with all of the reporting requirements of the Exchange Act (whether or not it
shall be required to do so) and shall use its best efforts to comply with all
other public information reporting requirements of the Commission which are
conditions to the availability of Rule 144 for the sale of the Common Stock. The
Company shall cooperate with each Investor in supplying such information as may
be necessary for such Investor to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of Rule 144.
SECTION 12. NO CONFLICT OF RIGHTS. The Company represents and warrants
to the Investors that the registration rights granted to the Investors hereby do
not conflict with any other registration rights granted by the Company. The
Company shall not, after the date hereof, grant any registration rights which
conflict with or impair, or have any priority over, the registration rights
granted hereby. In any underwritten PUBLIC OFFERING, the managing underwriter
shall be a nationally recognized investment banking firm selected by the
Company, and reasonably acceptable to the Investors if the Investors would have
the right (prior to giving effect to any cutbacks) to include Registrable Shares
in such PUBLIC OFFERING.
SECTION 13. TERMINATION. This Agreement shall terminate and be of no
further force or effect when there shall not be any Registrable Shares, provided
that Sections 6 and 7 shall survive the termination of this Agreement.
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<PAGE> 16
SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the Company and the Investors and, subject to Section 15,
their respective successors and assigns.
SECTION 15. ASSIGNMENT. Each Investor may assign its rights hereunder
to any permitted purchaser from such Investor of Restricted Securities;
provided, however, that such purchaser shall, as a condition to the
effectiveness of such assignment, be required to execute a counterpart to this
Agreement agreeing to be treated as an Investor hereunder, whereupon such
purchaser shall have the benefits of, and shall be subject to the restrictions
contained in, this Agreement as an Investor.
SECTION 16. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior arrangements or understandings with respect hereto.
SECTION 17. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument and shall be deemed to have been duly given
when delivered in Person, by telex, telegram or telecopy, by overnight courier,
or by first class registered or certified mail, postage prepaid, addressed to
such party at the address set forth below or such other address as may hereafter
be designated in writing by the addressee to the sender:
(i) if to the Company, to:
Safety 1st, Inc.
210 Boylston Street
Chestnut Hill, Massachusetts 02167
Telephone: (617) 964-7744
Telecopy: (412)
Attention: Michael Lerner;
with a copy to:
Kassler & Feuer, PC
101 Arch Street
Boston, Massachusetts 02110-1103
Telephone: (617) 439-3800
Telecopy: (617) 439-0060
Attention: Stanley Cygelman, Esq.;
(ii) if to any Investor, to him, her or its
address set forth on Schedule I or, if
none, in the books of the Company;
with a copy to:
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<PAGE> 17
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telephone: (212) 408-2400
Telecopy: (212) 408-2420
Attention: Harvey M. Eisenberg, Esq..
(iii) if to Lerner, to him at
Safety 1st, Inc.
210 Boylston Street
Chestnut Hill, Massachusetts 02167
Telephone: (617) 964-7744
Telecopy: (412)
Attention: Michael Lerner;
with a copy to:
Kassler & Feuer, PC
101 Arch Street
Boston, Massachusetts 02110-1103
Telephone: (617) 439-3800
Telecopy: (617) 439-0060
Attention: Stanley Cygelman, Esq.;
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery, telex, telegram or
telecopy, on the date of such delivery, (b) in the, case of overnight courier,
on the next business day, and (c) in the case of mailing, on the fifth business
day following such mailing.
SECTION 18. MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and
provisions of this Agreement may not be modified or amended, nor may any
provision applicable to the Investors be waived, except pursuant to a writing
signed by (i) the Company and (ii) each of the Investors; provided, however,
that (A) any such amendment, modification, or waiver that would adversely affect
the rights hereunder of any Investor, in its capacity as an Investor, shall not
be effective as to such Investor without its prior written consent and (B)
Schedule I to this Agreement shall be deemed to be automatically amended from
time to time to reflect the addition to this Agreement of any Person identified
in clause (ii) of the definition of Investor without requiring the consent of
any party, and the Company will, from time to time, distribute to the Investors
revised Schedule I to reflect any such changes.
SECTION 19. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of
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<PAGE> 18
reference only and shall not be deemed to be a part of this Agreement.
SECTION 20. 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, if 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 other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to 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.
SECTION 21. GOVERNING LAW; ETC. 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 apply.
SECTION 22. COUNTERPARTS; VALIDITY. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
taken together shall constitute one and the same agreement, and telecopied
signatures shall be effective. The failure of any Person holding Registrable
Shares to execute this Agreement shall not render this Agreement invalid as
between the Company and any other Person holding Registrable Shares.
SECTION 23. ENTIRE AGREEMENT This Agreement and the other documents,
certificates, instruments, writings and agreements referred to herein or
delivered pursuant hereto contain the entire understanding of the parties with
respect to the subject matter hereof and supersede in their entirety any and all
prior agreements and understandings between any of the parties hereto, all of
which are hereby terminated in their entirety and of no further force or effect.
* * * *
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<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the date first written above.
THE COMPANY:
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
-------------------------------
Name: Richard E. Wenz
Title: President
THE INVESTORS:
BT CAPITAL PARTNERS, INC.
By: /s/ James M. Dworkin
------------------------------
Name: James M. Dworkin
Title: Vice President
BEAR, STEARNS & CO. INC.
By: /s/ Allan B. Ruchman
------------------------------
Name: Allan B. Ruchman
Title: Managing Director
/s/ Michael Lerner
-----------------------------------
Michael Lerner
<PAGE> 20
SCHEDULE I
INVESTORS
BT CAPITAL PARTNERS, INC.
BEAR, STEARNS & CO. INC.
<PAGE> 1
VOTING AGREEMENT, dated as of July
30, 1997 (this "Agreement"), among SAFETY
1ST, INC., a Massachusetts Corporation (the
"Company"), MICHAEL LERNER ("Lerner"),
MICHAEL S. BERNSTEIN ("Bernstein", and
together with Lerner, the "Stockholders"),
BT CAPITAL PARTNERS, INC. ("BT") and BEAR,
STEARNS & CO. INC. ("BS") (each, an
"Investor," and collectively, the
"Investors").
As of the date hereof each Stockholder owns (either
beneficially or of record) the number of shares of Common Stock, par value $.01
per share (the "Safety 1st Stock"), of the Company set forth opposite such
Stockholder's name on Exhibit A hereto (all such shares and any shares hereafter
acquired by the Stockholders prior to the termination of this Agreement
including shares of Safety 1st Stock, and shares of Safety 1st Stock obtained by
a Stockholder upon the exercise, exchange or conversion of any option, warrant
or other security, being referred to herein as the "Shares").
Pursuant to the Stock and Warrant Purchase Agreement dated as
of the date hereof, among the Company and the Investors (the "Purchase
Agreement"), the Company is issuing and the Investors are purchasing Preferred
Stock and Warrants for an aggregate purchase price of $15,000,000. In order to
induce the Investors to enter into the Stock and Warrant Purchase Agreement and
consummate the transactions contemplated thereby, the Company has requested that
each Stockholder agree, and each Stockholder has agreed, to grant the Company
irrevocable proxies to vote his Shares in favor of appointing one Director
designated by each of the Investors to the Board of Directors of the Company
(the "Board") on the terms and conditions set forth in this Agreement.
ACCORDINGLY, in consideration of the promises and of the
mutual agreements and covenants set forth herein and in the Stock and Warrant
Purchase Agreement, the parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby represents
and warrants to the Investors, as follows:
<PAGE> 2
1.1. DUE AUTHORITY.
(a) Such Stockholder has full power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by or on behalf of such
Stockholder and, constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in proceeding in equity or at law).
(b) There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which such Stockholder is trustee whose consent
is required for the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(c) If such Stockholder is married and such Stockholder's Shares
constitute community property, this Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding agreement of, such
Stockholder's spouse, enforceable against such person in accordance with its
terms.
1.2. NO CONFLICT; CONSENTS.
(a) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of the transaction contemplated by this Agreement by
such Stockholder and the compliance by such Stockholder with any provisions
hereof shall not (i) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to such Stockholder or by which such Stockholders
assets are bound or affected, (ii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of such Stockholder's assets pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which such Stockholder is a party or by which
such Stockholder or such Stockholder's assets are bound or affected or (iii)
violate any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to such Stockholder or any of such Stockholder's
properties or assets.
(b) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of this Agreement by such Stockholder shall not,
require any consent, approval,
2
<PAGE> 3
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority except for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended, and except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay the performance by such
Stockholder of his, her or its obligations under this Agreement in any material
respect.
1.3. TITLE TO SHARES.
(a) Such Stockholder is the record or beneficial owner of his Shares
free and clear of any proxy or voting restriction other than pursuant to this
Agreement. The Shares set forth opposite such Stockholder's name on Exhibit A
hereto constitute all of the shares of Safety 1st Stock owned of record or
beneficially by such Stockholder.
(b) Except as noted on Exhibit A, such Stockholder has sole power of
disposition with respect to all the Shares set forth opposite such Stockholder's
name on Exhibit A hereto and the sole voting power with respect to the matters
set forth in Article II hereof and the sole power to demand dissenter's or
appraisal rights, in each case with respect to all of the Shares set forth
opposite such Stockholder's name on Exhibit A hereto, with no restrictions on
such rights, subject to applicable federal securities laws and the terms of this
Agreement.
1.4. NO ENCUMBRANCES.
Except as noted on Exhibit A, such Stockholder's Shares and the
certificates representing such Shares are now and at all times during the Term
will be held by such Stockholder, or by a nominee or custodian for the benefit
of such Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever except for any such encumbrances or proxies
arising hereunder, provided that nothing herein shall prevent the bona fide
pledge of such Stockholder's Shares, so long as the pledgee thereof (except in
the case of the pledges referred to on Exhibit A) agrees to be subject to the
terms hereof or such other agreement with provisions reasonably acceptable to
the Investors that provide for the proxy agreement to remain in full force and
effect.
1.5. ACKNOWLEDGMENT OF RELIANCE.
Such Stockholder understands and acknowledges that the Investors are
entering into the Stock and Warrant Purchase Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
3
<PAGE> 4
ARTICLE II
VOTING OF SHARES
2.1. VOTING OF SHARES; FURTHER ASSURANCES.
(a) Each Stockholder (which term under this Section 2.1 shall be deemed
to include each of the Investors), with respect to those Shares that such
Stockholder owns of record, does hereby, during and for the Term, agree to vote
(except as noted on Exhibit A) each of such Shares at every annual, special or
adjourned meeting of the stockholders of the Company to authorize the Company to
take all actions necessary to cause the Company to be managed at all times by a
Board which shall be comprised (x) so long as BT owns at least 5% of the
10,155,626 Common Equivalents (as hereinafter defined) which are outstanding on
the date hereof (comprised of 7,187,288 shares of issued and outstanding shares
of Common Stock, 1,699,993 shares of Common Stock issuable pursuant to
outstanding options granted pursuant to the Stock Option Plans (as defined in
the Purchase Agreement) and out of plan grants and 1,268,345 shares of Common
Stock issuable pursuant to the Warrants (as defined in the Purchase Agreement)
as the same may be adjusted by stock splits, consolidations, reclassifications,
reorganizations or like adjustments; provided, that for the purpose of
calculating the foregoing percentage of Common Equivalents there shall be
excluded any changes in the number of Common Equivalents outstanding and the
number of Common Equivalents owned by the Investors resulting from any
adjustments made pursuant to Sections 4(c) or (d) of the Warrants), of one
Director designated by BT, and (y) so long as BS owns at least 5% of the
10,155,626 Common Equivalents (as hereinafter defined) which are outstanding on
the date hereof (comprised of 7,187,288 shares of issued and outstanding shares
of Common Stock, 1,699,993 shares of Common Stock issuable pursuant to
outstanding options granted pursuant to the Stock Option Plans (as defined in
the Purchase Agreement) and out of plan grants and 1,268,345 shares of Common
Stock issuable pursuant to the Warrants (as defined in the Purchase Agreement)
as the same may be adjusted by stock splits, consolidations, reclassifications,
reorganizations or like adjustments; provided, that for the purpose of
calculating the foregoing percentage of Common Equivalents there shall be
excluded any changes in the number of Common Equivalents outstanding and the
number of Common Equivalents owned by the Investors resulting from any
adjustments made pursuant to Sections 4(c) or (d) of the Warrants), of one
Director designated by BS. In this Section 2.1 (a) the term "Common Equivalents"
shall mean a share of Common Stock or the right to acquire a share of Common
Stock pursuant to a Warrant or Stock Option Plans and out of plan stock option
grants.
(b) For the purposes of this Agreement, "Term" shall mean the period
from the execution of this Agreement, until the
4
<PAGE> 5
earlier to occur of (x) the date that both BT and BS cease to have the right to
designate a Director under Section 2.1(a), (y) the tenth anniversary of the date
hereof and (z) the occurrence of the situation described in (i) of the
definition of Change of Control (as defined in the Certificate of Designation of
the Company dated July 28, 1997) with respect to 51% or more of the total voting
stock of the Company (and not 30%) or of the occurrence of any of the situations
described in (ii) of the definition of Change of Control (as defined in the
Certificate of Designation of the Company dated July 28, 1997).
(c) Each Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in the
Company the power to carry out the intent and provisions of this Agreement.
2.2. CERTAIN EVENTS.
Each Stockholder agrees that this Agreement and the obligations
hereunder shall attach to such Stockholder's Shares and shall be binding upon
any person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise, including without limitation
such Stockholder's heirs, guardians, administrators or successors or as a result
of any divorce.
2.3 COMPANY OBLIGATION.
The Company undertakes and agrees with each of the Investors and the
Stockholders that it shall during the Term (a) use its best efforts to cause the
Directors designated by BT and BS in accordance with Section 2.1(a) to be
nominated to the Board, and (b) without limiting the generality of Section 2.3
(a), use its best efforts to cause that, as of the Closing (as defined in the
Purchase Agreement) the original designees of BT and BS, being, respectively,
James Dworkin and John Howard, shall be appointed to the Board.
2.4. COOPERATION OF OTHER STOCKHOLDERS.
Each Stockholder agrees to cooperate with the Company in all reasonable
respects in complying with the terms and provisions of the letter agreement
between the Company and Investor, a copy of which is attached hereto as EXHIBIT
B, regarding small business matters (the "Small Business Sideletter"), including
without limitation, voting to approve amending the Company's Articles of
Organization, the Company's by-laws or this Agreement in a manner reasonably
requested by Investor or any Regulated Holder (as defined in the Small Business
Sideletter) entitled to make such request pursuant to the Small Business
Sideletter. Anything contained in this Section 2.4 to the contrary
notwithstanding, no Stockholder shall
5
<PAGE> 6
be required under this Section 2.4 to take any action that would adversely
affect in any material respect such Stockholder's rights under this Agreement or
as a stockholder of the Company.
2.5. COVENANT NOT TO AMEND.
The Company and each Stockholder agree not to amend or waive the voting
or other provisions of the Company's Articles of Organization, the Company's
by-laws or this Agreement if such amendment or waiver would cause any Regulated
Holder to have a Regulatory Problem (as defined in the Small Business
Sideletter), provided that any such Regulated Holder notifies the Company that
it would have a Regulatory Problem promptly after it has notice of such proposed
amendment or waiver.
ARTICLE III
TRANSFERS
On or before the expiration of the Term no Stockholder shall
Transfer (as hereinafter defined) any Shares to a Person (as hereinafter
defined) not already a party to this Agreement as a Stockholder unless and until
such Person executes and delivers to the Company a written agreement, in form
and substance reasonably acceptable to the Investors, pursuant to which such
Person shall (unless he is already a Stockholder) agree to become a party to,
and to be bound by and to comply with the provisions of, this Agreement in the
same capacity and to the same extent as the Stockholder Transferring such
Shares. Any Transfer of Shares that is not made in compliance with the
provisions hereof shall be void ab initio. The foregoing provisions of this
Article III shall not apply to a Transfer of Shares by a Stockholder pursuant to
Public Sale (as hereinafter defined); and with respect to a Transfer pursuant to
a Public Sale, the transferee shall take the Shares free and clear of any
provisions of this Agreement. In this Article III "Person" shall be construed
broadly and shall include an individual, a partnership, a Company, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof; "Public Sale" means any
sale of securities of the Company to the public pursuant to an offering
registered under the Securities Act of 1933, as amended, or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, as such rule may be amended from; "Transfer" shall be
construed broadly and shall include any transfer (whether voluntary, involuntary
or by operation of law) of securities or any interest therein, including without
limitation, by way of issuance, sale, participation, pledge, gift, bequeath,
intestate transfer, distribution, liquidation, merger or consolidation.
6
<PAGE> 7
ARTICLE IV
GENERAL PROVISIONS
4.1. SEVERABILITY.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent pertained by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
4.2. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement of the parties and
supersedes all prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof.
4.3. AMENDMENTS.
This Agreement may not be modified, amended, altered or supplemented,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that Exhibit A hereto may be supplemented by the
Company by adding the name and other relevant information concerning any
stockholder of the Company who agrees to be bound by the terms of this Agreement
without the agreement of any other party hereto, and thereafter such added
stockholder shall be treated as a "Stockholder" for all purposes of this
Agreement.
4.4. ASSIGNMENT.
This Agreement shall not be assigned by operation of law or otherwise;
provided that this Agreement may be assigned to an affiliate of such Stockholder
so long as such affiliate shall continue to be bound by the obligations hereof
as a Stockholder hereunder.
4.5. PARTIES IN INTEREST.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement,
7
<PAGE> 8
express or implied, is intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
4.6. SPECIFIC PERFORMANCE.
The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement was not performed in accordance with the
terms hereof and that the parties shall be entitled to an injunction to prevent
breaches of this Agreement and specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
4.7. FURTHER ASSURANCES.
At the other party's request and without further consideration, each
party hereto shall execute and deliver such additional documents and take all
such further action as may be necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
4.8. 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 Commonwealth of Massachusetts, without
giving effect to any choice or conflict of law provision or rule (whether in the
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Massachusetts. In furtherance of the foregoing, the internal law of the
Commonwealth of Massachusetts 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.
8
<PAGE> 9
4.9. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
* * * * *
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Voting Agreement as
of the date first written above.
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
-------------------------------
Name: Richard E. Wenz
Title: President
BT CAPITAL PARTNERS, INC.
By: /s/ James M. Dworkin
------------------------------
Name: James M. Dworkin
Title: Vice President
BEAR, STEARNS & CO. INC.
By: /s/ Allan B. Ruchman
------------------------------
Name: Allan B. Ruchman
Title: Managing Director
/s/ Michael Lerner
-----------------------------------
MICHAEL LERNER
/s/ Michael S. Bernstein
-----------------------------------
MICHAEL S. BERNSTEIN
<PAGE> 1
July 30, 1997
Safety 1st, Inc.
210 Boylston St.
Chestnut Hill, MA 02167
Ladies and Gentlemen:
Reference is made to that certain Stock and Warrant Purchase
Agreement (the "Purchase Agreement"), dated as of the date hereof, among Safety
lst, Inc. (the "Company"), BT Capital Partners, Inc. ("Investor"), and the other
parties identified therein, pursuant to which Investor is purchasing shares of
the Company's Series A Preferred Stock and Warrants to purchase shares of the
Company's Common Stock (collectively referred to herein as the "Shares").
Investor is a Small Business Investment Company ("SBIC")
licensed by the United States Small Business Administration ("SBA"). In order
for Investor to acquire and hold the Shares, it must obtain from the Company
certain representations and rights as set forth below. As a material inducement
to Investor to enter into the Purchase Agreement and to purchase the Shares, the
Company hereby makes the following representations and warranties and agrees to
comply with the following covenants:
1. SMALL BUSINESS MATTERS.
(a) The Company, together with its "affiliates" (as that term
is defined in Title 13, Code of Federal Regulations, Section 121.103), is a
"small business concern" within the meaning of the Small Business Investment Act
of 1958, as amended ("SBIA"), and the regulations thereunder, including Title
13, Code of Federal Regulations, Section 121.301(c). The information set forth
in the Small Business Administration Forms 480, 652 and Parts A and B of Form
1031 regarding the Company and its affiliates, when delivered to Investor, will
be accurate and complete and will be in form and substance acceptable to
Investor. Copies of such forms shall be completed and executed by the Company
and delivered to Investor at the closing of the sale of the Shares under the
Purchase Agreement (the "Closing").
(b) The proceeds from the sale of the Shares will be used by
the Company to (1) repay in part indebtedness due and payable under the Existing
Credit Agreement (as defined in the Purchase Agreement), (2) pay expenses
related to the
<PAGE> 2
transactions contemplated by the Purchase Agreement and (3) for ongoing working
capital requirements. No portion of such proceeds (i) will be used to provide
capital to a corporation licensed under the Small Business Investment Act of
1958, as amended ("SBIA"), (ii) will be used to acquire farm land, (iii) will be
used to fund production of a single item or defined limited number of items,
generally over a defined production period, and such production will constitute
the majority of the activities of the Company and its Subsidiaries (examples
include motion pictures and electric generating plants), or (iv) will be used
for any purpose contrary to the public interest (including, but not limited to,
activities which are in violation of law) or inconsistent with free competitive
enterprise, in each case, within the meaning of 13 C.F.R. Section 107.720.
(c) Neither the Company's nor any of its Subsidiaries' primary
business activity involves, directly or indirectly, providing funds to others,
the purchase or discounting of debt obligations, factoring or long-term leasing
of equipment with no provision for maintenance or repair, and neither the
Company nor any of its Subsidiaries is classified under Major Group 65 (Real
Estate) of the SIC Manual. The assets of the business of the Company and its
Subsidiaries (the "Business") will not be reduced or consumed, generally without
replacement, as the life of the Business progresses, and the nature of the
Business does not require that a stream of cash payments be made to the
Business's financing sources, on a basis associated with the continuing sale of
assets (examples of such businesses would include real estate development
projects and oil and gas wells). (See 13 CFR Section 107.720)
(d) The proceeds from the sale of the Shares will not be used
substantially for a foreign operation; and at Closing or within one year
thereafter, no more than 49 percent of the employees or tangible assets of the
Company and its Subsidiaries will be located outside the United States (unless
the Company can show, to SBA's satisfaction, that the proceeds from the sale of
the Shares will be used for a specific domestic purpose). This subsection (d)
does not prohibit such proceeds from being used to acquire foreign materials and
equipment or foreign property rights for use or sale in the United States.
(e) To the best knowledge of the Company, each SBIC that owns
any Securities issued by the Company, together with a description of the kinds
and amounts of Securities held, are listed on Schedule I hereto. Without the
Investor's consent, the Company will not issue Securities to any SBIC in the
future if such issuance would cause Investor to be deemed to be a member of an
"Investor Group" in "Control" of the Company (as such terms are defined in 13
CFR Section 107.865).
2. SMALL BUSINESS MATTERS.
2
<PAGE> 3
(a) Regulatory Compliance Cooperation.
(i) In the event that Investor determines that it has a
Regulatory Problem, the Company agrees to take all such actions as are
reasonably requested by Investor in order (A) to effectuate and facilitate any
transfer by Investor of any Securities of the Company then held by Investor to
any Person designated by Investor, (B) to permit Investor (or any of its
Affiliates) to exchange all or any portion of the voting Securities then held by
such Person on a share-for-share basis for shares of a class of non-voting
Securities of the Company, which non-voting Securities shall be identical in all
respects to such voting Securities, except that such new Securities shall be
non-voting and shall be convertible into voting Securities on such terms as are
requested by Investor in light of regulatory considerations then prevailing, and
(C) to continue and preserve the respective allocation of the voting interests
with respect to the Company arising out of Investor's ownership of voting
Securities and/or provided for in the Voting Agreement before the transfers and
amendments referred to above (including entering into such additional agreements
as are requested by Investor to permit any Person(s) designated by Investor to
exercise any voting power which is relinquished by Investor upon any exchange of
voting Securities for nonvoting Securities of the Company); and the Company
shall enter into such additional agreements, adopt such amendments to this
Agreement, the Company's Articles of Organization and the Company's By-laws and
other relevant agreements and taking such additional actions, in each case as
are reasonably requested by Investor in order to effectuate the intent of the
foregoing. If Investor elects to transfer Securities of the Company to a
Regulated Holder in order to avoid a Regulatory Problem, the Company shall enter
into such agreements with such Regulated Holder as it may reasonably request in
order to assist such Regulated Holder in complying with applicable laws, and
regulations to which it is subject. Such agreements may include restrictions on
the redemption, repurchase or retirement of Securities of the Company that would
result or be reasonably expected to result in such Regulated Holder holding more
voting securities or total securities (equity and debt) than it is permitted to
hold under such laws and regulations.
(ii) In the event Investor has the right to acquire any of the
Company's Securities from the Company or any other Person (as the result of a
preemptive offer, pro rata offer or otherwise), at Investor's request the
Company will offer to sell to Investor non-voting Securities (or, if the Company
is not the proposed seller, will arrange for the exchange of any voting
securities for non-voting securities immediately prior to or simultaneous with
such sale) on the same terms as would have existed had Investor acquired the
Securities so offered and immediately requested their exchange for non-voting
Securities pursuant to subsection (i) above.
3
<PAGE> 4
(iii) In the event that any Affiliate of the Company ever
offers to issue any of its Securities to Investor, then the Company will cause
such Affiliate to enter into agreements with Investor substantially similar to
this Section 2(a) and Section 2(b) below.
(iv) In the event that the Company is required to authorize a
class of non-voting Securities in order to comply with the foregoing provisions
if the Investor has a Regulatory Problem, Investor agrees to take all such
actions as are reasonably requested by the Company in order (A) to provide the
Company with a sufficient period of time as is reasonably necessary to create
such class of non-voting Securities and (B) to reimburse the Company all its
reasonable expenses in order to create a class of non-voting Securities.
(b) INFORMATION RIGHTS AND RELATED COVENANTS.
(i) Promptly after the end of each fiscal year (but in any
event prior to February 28 of each year), the Company shall provide to Investor
a written assessment, in form and substance reasonably satisfactory to Investor,
of the economic impact of Investor's financing hereunder, specifying the
full-time equivalent jobs created or retained, the impact of the financing on
the consolidated revenues and profits of the Business and on taxes paid by the
Business and its employees (See 13 CFR Section 107.630(e)).
(ii) Upon the request of Investor or any of their Affiliates,
the Company will (A) provide to such Person such financial statements and other
information as such Person may from time to time reasonably request for the
purpose of assessing the Company's financial condition and (B) furnish to such
Person all information reasonably requested by it in order for it to prepare and
file SBA Form 468 and any other information reasonably requested or required by
any governmental agency asserting jurisdiction over such Person.
(iii) For a period of one year following the date hereof,
neither the Company nor any of its Subsidiaries will change its business
activity if such change would render the Company ineligible to receive financial
assistance from an SBIC under the SBIA and the regulations thereunder (within
the meanings of 13 CFR Sections 107.720 and 107.760(b)).
(iv) The Company will at all times comply with the
non-discrimination requirements of 13 C.F.R., Parts 112, 113 and 117.
3. STOCKHOLDER COOPERATION. The Company shall use its best
efforts to cause the provisions attached hereto as Exhibit A to be included in
the Voting Agreement.
4
<PAGE> 5
4. DEFINITIONS.
"Affiliate" means, with respect to any Person, (i) a director,
officer or stockholder of such Person, (ii) a spouse, parent, sibling or
descendant of such Person (or spouse, parent, sibling or descendant of any
director or executive officer of such Person), and (iii) any other Person that,
directly or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with, such Person.
"Control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Person" shall be construed broadly and shall include an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
"Regulated Holder" means any holder of the Company's
Securities that is (or that is a subsidiary of a bank holding company that is)
subject to the various provisions of Regulation Y of the Board of Governors of
the Federal Reserve Systems, 12 C.F.R., Part 225 (or any successor to Regulation
Y).
"Regulatory Problem" means (i) any set of facts or
circumstances wherein it has been asserted by any governmental regulatory agency
(or Investor believes that there is a significant risk of such assertion) that
such Person (or any bank holding company that controls such Person) is not
entitled to hold, or exercise any material right with respect to, all or any
portion of the Securities of the Company which such Person holds or (ii) when
such Person and its Affiliates would own, control or have power (including
voting rights) over a greater quantity of Securities of the Company than is
permitted under any law or regulation or any requirement of any governmental
authority applicable to such Person or to which such Person is subject.
"Securities" means, with respect to any Person, such Person's
capital stock or any options, warrants or other Securities which are directly or
indirectly convertible into, or exercisable or exchangeable for, such Person's
capital stock (whether or not such derivative Securities are issued by the
Company). Whenever a reference herein to Securities refers to any derivative
Securities, the rights of Investor shall apply to such derivative Securities and
all underlying Securities directly or indirectly issuable upon conversion,
exchange or exercise of such derivative Securities.
5
<PAGE> 6
"Subsidiary" means, with respect to any Person, any other
Person of which the securities having a majority of the ordinary voting power in
electing the board of directors (or other governing body), at the time as of
which any determination is being made, are owned by such first Person either
directly or through one or more of its Subsidiaries.
6
<PAGE> 7
"Voting Agreement" means the Voting Agreement to be entered
into on the date of the Closing among the Company and certain shareholders of
the Company.
* * * * *
7
<PAGE> 8
Please indicate your acceptance of the terms of this letter
agreement by returning a signed copy to the undersigned.
BT CAPITAL PARTNERS, INC.
By: /s/ James M. Dworkin
-----------------------
Name: James M. Dworkin
Title: Vice President
Agreed as of the date
first set forth above:
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
------------------------
Name: Richard E. Wenz
Title: President
8
<PAGE> 9
Schedule I
SBIC Securities
- ---- ----------
BT Capital Partners, Inc. The Shares
9
<PAGE> 10
EXHIBIT A
INSERT INTO VOTING AGREEMENT
SECTION __. REGULATORY MATTERS.
(a) COOPERATION OF OTHER STOCKHOLDERS. Each Stockholder agrees
to cooperate with the Company in all reasonable respects in complying with the
terms and provisions of the letter agreement between the Company and Investor, a
copy of which is attached hereto as EXHIBIT __, regarding small business matters
(the "Small Business Sideletter"), including without limitation, voting to
approve amending the Company's Certificate of Incorporation, the Company's
by-laws or this Agreement in a manner reasonably requested by Investor or any
Regulated Holder (as defined in the Small Business Sideletter) entitled to make
such request pursuant to the Small Business Sideletter. Anything contained in
this Section __ to the contrary notwithstanding, no Stockholder shall be
required under this Section __ to take any action that would adversely affect in
any material respect such Stockholder's rights under this Agreement or as a
stockholder of the Company.
(b) COVENANT NOT TO AMEND. The Company and each Stockholder
agree not to amend or waive the voting or other provisions of the Company's
Articles of Organization, the Company's by-laws or this Agreement if such
amendment or waiver would cause any Regulated Holder to have a Regulatory
Problem (as defined in the Small Business Sideletter), provided that any such
Stockholder notifies the Company that it would have a Regulatory Problem
promptly after it has notice of such amendment or waiver.
10
<PAGE> 1
DRAFT
7/29/97
CREDIT AGREEMENT
Among
SAFETY 1ST, INC.
and
SAFETY 1ST HOME PRODUCTS CANADA INC.,
as Borrowers,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO, TOGETHER WITH
THOSE ASSIGNEES PURSUANT TO SECTION 10.8 HEREOF,
as Lenders,
BT COMMERCIAL CORPORATION,
as Agent,
and
BANKERS TRUST COMPANY,
as Issuing Bank
Dated as of July 30, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. General Definitions.......................................... 1
SECTION 1.2. Accounting Terms and Determinations.......................... 28
SECTION 1.3. Other Terms; Headings........................................ 28
SECTION 1.4. Computation of Time Periods.................................. 28
ARTICLE II
LOANS
SECTION 2.1. Revolving Credit Commitments................................. 29
SECTION 2.2. Borrowing of Revolving Loans................................. 29
SECTION 2.3. Disbursement of Revolving Loans.............................. 30
SECTION 2.4. Notices of Borrowing......................................... 30
SECTION 2.5. Same Day Settlement of Lender Advances....................... 31
SECTION 2.6. Periodic Settlement of Agent Advances........................ 31
SECTION 2.7. Term Loan.................................................... 32
SECTION 2.8. Sharing of Payments.......................................... 33
SECTION 2.9. Defaulting Lenders........................................... 33
SECTION 2.10. Mandatory Payment; Mandatory Reduction of
the Commitments.............................................. 34
SECTION 2.11. Maintenance of Loan Account; Statements of
Account...................................................... 36
SECTION 2.12. Payment Procedures........................................... 36
SECTION 2.13. Collection of Accounts....................................... 36
SECTION 2.14. Application of Payments...................................... 37
ARTICLE III
LETTERS OF CREDIT
SECTION 3.1. Issuance of Letters of Credit................................ 37
SECTION 3.2. Terms of Letters of Credit................................... 38
SECTION 3.3. Lenders' Participation....................................... 38
SECTION 3.4. Notice of Issuance........................................... 39
SECTION 3.5. Payment of Amount Drawn Under Letters of
Credit....................................................... 39
SECTION 3.6. Payment by Lenders........................................... 40
SECTION 3.7. Nature of Issuing Bank's Duties.............................. 40
SECTION 3.8. Obligations Absolute......................................... 41
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<PAGE> 3
ARTICLE IV
INTEREST, FEES AND EXPENSES
SECTION 4.1. Interest on Prime Rate Loans................................. 42
SECTION 4.2. Interest on Eurodollar Rate Loans............................ 42
SECTION 4.3. Interest and Letter of Credit Fees After
Event of Default............................................. 43
SECTION 4.4. Letter of Credit Fees........................................ 43
SECTION 4.5. Unused Line Fee.............................................. 43
SECTION 4.6. Other Fees and Expenses...................................... 44
SECTION 4.7. Calculations................................................. 44
SECTION 4.8. Special Provisions Relating to Eurodollar
Rate Loans................................................... 44
SECTION 4.9. Indemnification in Certain Events............................ 47
SECTION 4.10. Net Payments................................................. 48
SECTION 4.11. Affected Lenders............................................. 52
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. Conditions to Initial Loans and Letters of
Credit....................................................... 53
SECTION 5.2. Conditions Precedent to All Loans and
Letters of Credit............................................ 56
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations and Warranties of the
Borrower..................................................... 56
ARTICLE VII
COVENANTS OF THE BORROWER
SECTION 7.1. Affirmative Covenants........................................ 66
SECTION 7.2. Negative Covenants........................................... 78
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default............................................ 88
SECTION 8.2. Acceleration and Cash Collateralization...................... 90
SECTION 8.3. Rescission of Acceleration................................... 90
SECTION 8.4. Remedies..................................................... 91
SECTION 8.5. Right of Setoff.............................................. 91
SECTION 8.6. License for Use of Software and Other
Intellectual Property........................................ 92
-ii-
<PAGE> 4
SECTION 8.7. No Marshalling; Deficiencies; Remedies
Cumulative.................................................. 92
ARTICLE IX
THE AGENT
SECTION 9.1. Appointment of Agent........................................ 92
SECTION 9.2. Nature of Duties of Agent................................... 93
SECTION 9.3. Lack of Reliance on Agent................................... 93
SECTION 9.4. Certain Rights of the Agent................................. 94
SECTION 9.5. Reliance by Agent........................................... 94
SECTION 9.6. Indemnification of Agent.................................... 94
SECTION 9.7. The Agent in Its Individual Capacity........................ 94
SECTION 9.8. Holders of Notes............................................ 95
SECTION 9.9. Successor Agent............................................. 95
SECTION 9.10. Collateral Matters.......................................... 95
SECTION 9.11. Actions with Respect to Defaults............................ 96
SECTION 9.12. Delivery of Information..................................... 97
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Governing Law............................................... 97
SECTION 10.2. Submission to Jurisdiction.................................. 97
SECTION 10.3. Service of Process.......................................... 98
SECTION 10.4. Jury Trial.................................................. 98
SECTION 10.5. Limitation of Liability..................................... 98
SECTION 10.6. Delays; Partial Exercise of Remedies........................ 98
SECTION 10.7. Notices..................................................... 98
SECTION 10.8. Assignments and Participations.............................. 99
SECTION 10.9. Confidentiality............................................. 102
SECTION 10.10. Indemnification; Reimbursement of Expenses
of Collection............................................... 102
SECTION 10.11. Amendments and Waivers...................................... 103
SECTION 10.12. Nonliability of Agent and Lenders........................... 105
SECTION 10.13. Independent Nature of Lenders' Rights....................... 105
SECTION 10.14. Counterparts................................................ 105
SECTION 10.15. Effectiveness............................................... 105
SECTION 10.16. Severability................................................ 106
SECTION 10.17. Maximum Rate................................................ 106
SECTION 10.18. Entire Agreement; Successors and Assigns.................... 107
SECTION 10.19. Judgment.................................................... 107
SECTION 10.20. Waiver of Immunities........................................ 107
SECTION 10.21. Interest Act (Canada)....................................... 107
SECTION 10.22. Limitation of Obligations of Safety Europe.................. 108
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Schedules
Schedule 1 -- List of Lenders, Lending Offices and
Commitments
Schedule 2 -- Account Debtors with Material
Concentrations
Schedule 3 -- Existing Indebtedness
Schedule 5.1(c) -- List of Closing Documents
Schedule 6.1(a) -- Jurisdictions in which the Borrowers and
the Subsidiaries are Qualified to do
Business
Schedule 6.1(d) -- Conflicts
Schedule 6.1(i) -- Financial Data
Schedule 6.1(k) -- Location of Offices, Records and
Inventory
Schedule 6.1(l)(i) -- List of Subsidiaries
Schedule 6.1(l)(ii) -- 100% owned Subsidiaries
Schedule 6.1(l)(iii) -- Proxies with respect to Stock of
subsidiaries
Schedule 6.1(m)(i) -- Pending Litigation, etc.
Schedule 6.1(m)(ii) -- Products Liability Claims
Schedule 6.1(o) -- Defaults
Schedule 6.1(p) -- Labor Contracts
Schedule 6.1(q) -- Compliance with Law
Schedule 6.1(r) -- Pension Plans
Schedule 6.1(u) -- Environmental Actions
Schedule 6.1(v) -- Real Property
Schedule 6.1(w) -- Material Contracts
Schedule 6.1(x) -- Intellectual Property
Schedule 6.1(y) -- Taxes
Schedule 6.1(z) -- Predecessor Names
Schedule 6.1(ac) -- Affiliate Transactions
Schedule 6.1(ae) -- Location of Molds
Schedule 7.2(a) -- Permitted Liens
Schedule 7.2(f) -- Investments
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Exhibits
Exhibit A--1 -- Revolving Note
Exhibit A--2 -- Term Note
Exhibit B -- Borrowing Base Certificate
Exhibit C -- Notice of Borrowing
Exhibit D -- Notice of Continuation
Exhibit E -- Notice of Conversion
Exhibit F -- Letter of Credit Request
Exhibit G--1 -- Borrower Security Agreement
Exhibit G--2 -- Guarantor Security Agreement
Exhibit H--1 -- Borrower Intellectual Property Security
Agreement
Exhibit H--2 -- Guarantor Intellectual Property Security
Agreement
Exhibit I--1 -- 3232301 Hypothecation Agreement
Exhibit I--2 -- Safety Hypothecation Agreement
Exhibit J -- Guaranty
Exhibit K -- Lockbox Agreement
Exhibit L -- Collateral Access Agreement
Exhibit M -- Compliance Certificate
Exhibit N -- Assignment and Assumption Agreement
Exhibit O -- 3232301 Hypothec
Exhibit P -- Safety Canada Hypothec
Exhibit Q -- Contribution Agreement
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THIS CREDIT AGREEMENT is entered into as of July 30, 1997, among SAFETY
1ST, INC., a Massachusetts corporation ("Safety"), SAFETY 1ST HOME PRODUCTS
CANADA INC., a Canadian federal corporation ("Safety Canada" and, together with
Safety, the "Borrowers"), and each of those financial institutions identified as
Lenders on Schedule 1 hereto (together with each of their successors and
assigns, referred to individually as a "Lender" and collectively as the
"Lenders"), BT COMMERCIAL CORPORATION, acting in the manner and to the extent
described in Article IX (in such capacity, the "Agent") and Bankers Trust
Company, as issuer of letters of credit (in such capacity, the "Issuing Bank").
W I T N E S S E T H :
WHEREAS, the Borrowers wish to obtain a revolving credit facility and a
term loan facility for general working capital purposes, to refinance existing
indebtedness and to pay the costs and expenses incurred in connection with the
closing of the transactions contemplated hereby; and
WHEREAS, the Borrowers wish to obtain a letter of credit facility for
their ongoing letter of credit requirements; and
WHEREAS, upon the terms and subject to the conditions set forth herein,
the Lenders are willing to (i) make loans and advances to the Borrowers and (ii)
purchase participations in letters of credit issued by the Issuing Bank for the
account of the Borrowers, and the Issuing Bank is willing to issue letters of
credit for the account of the Borrowers.
NOW, THEREFORE, the Borrowers, the Lenders, the Issuing Bank and the
Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
<PAGE> 8
SECTION 1.1. GENERAL DEFINITIONS. As used herein, the following terms
shall have the meanings herein specified (to be equally applicable to both the
singular and plural forms of the terms defined):
"Acceptance Date" is defined in Section 10.8(b).
"Accounts" is defined in the Security Agreements.
"Accounts Borrowing Base" means, on any day, an amount up to
75% of the outstanding Eligible Accounts Receivable of the Borrowers on
such day.
"Adjusted Eurodollar Rate" means, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate obtained by
dividing (i) the Eurodollar Rate for such Interest Period by (ii) a
percentage equal to 1 minus the stated maximum rate (stated as a
decimal) of all reserves, if any, required to be maintained against
"Eurocurrency liabilities" as specified in Regulation D of the Board of
Governors Federal Reserve System (or against any other category of
liabilities which includes deposits by reference to which the interest
rate on Eurodollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States
office of any Lender to United States residents).
"Adjusted Net Income" means, in any fiscal period, Net Income
plus or minus (as the case may be) losses or gains from extraordinary
items and from sales of assets, other than sales of Inventory in the
ordinary course of business.
"Affiliate" of a Person means another Person who directly or
indirectly controls, is controlled by, is under common control with or
is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of
the power to vote ten percent (10%) or more of the securities having
ordinary voting power for the election of directors or the direct or
indirect power to direct the management and policies of a business.
"Agent" means BTCC as provided in the preamble to this Credit
Agreement or any successor to BTCC.
"Agent Advance" is defined in Section 2.2.
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"Applicable Lending Office" means, with respect to each
Lender, such Lender's Eurodollar Lending Office in the case of a
Eurodollar Rate Loan, and such Lender's Domestic Lending Office in the
case of a Prime Rate Loan.
"Applicable Margin" means (a) with respect to Revolving Loans,
(i) 1.75% per annum for Prime Rate Loans and (ii) 2.75% per annum for
Eurodollar Rate Loans and (b) with respect to the Term Loan, (i) 2.00%
per annum for Prime Rate Loans and (ii) 3.00% for Eurodollar Rate
Loans.
"Asset Sale" means, for any Person, any sale, transfer or
other disposition or series of sales, transfers or other dispositions
(including, without limitation, by merger or consolidation or by
exchange of assets and whether by casualty, loss, operation of law or
otherwise) made by such Person or any of its Subsidiaries to any Person
other than such Person or one of its wholly-owned Subsidiaries (or, in
the case of a sale, transfer or other disposition by a Subsidiary, to
any Person other than a Borrower or a direct or indirect wholly-owned
Subsidiary of a Borrower) of any assets (excluding Inventory and
Accounts) of such Person or any of its Subsidiaries including, without
limitation, assets consisting of any capital stock or other securities
held by such Person or any of its Subsidiaries (other than capital
stock of such Person), and any capital stock issued by any Subsidiary
of such Person.
"Assignment and Assumption Agreement" is defined in Section
10.8(b).
"Auditors" means a nationally recognized firm of independent
public accountants selected by Safety and satisfactory to the Agent in
its sole discretion. For purposes of this Credit Agreement, Safety's
current firm of independent public accountants, Grant Thornton LLP,
shall be deemed to be satisfactory to the Agent.
"Authorized Officer" means the Chief Executive Officer, Chief
Operating Officer, President, Chief Financial Officer or Treasurer of
Safety.
"Base Amount" is defined in Section 7.2(r).
"Benefit Plan" means a "defined benefit plan" as defined in
Section 3(35) of ERISA for which the Borrowers, any Subsidiary or any
ERISA Affiliate has
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been an "employer" as defined in Section 3(5) of ERISA within the past
six years.
"Blocked Account Agreement" is defined in Section 7.1(q)(iv).
"Borrower Intellectual Property Security Agreement" means the
security agreement relating to the intellectual property of the
Borrowers, substantially in the form of Exhibit H-1, made by the
Borrowers in favor of the Agent for the benefit of the Agent, the
Issuing Bank and the Lenders, as amended, supplemented or otherwise
modified from time to time.
"Borrower Security Agreement" means the security agreement,
substantially in the form of Exhibit G-1, made by the Borrowers in
favor of the Agent for the benefit of the Agent, the Issuing Bank and
the Lenders, as amended, supplemented or otherwise modified from time
to time.
"Borrowing" means a borrowing consisting of a Loan of the same
Type made on the same day by the Lenders.
"Borrowing Base" means, on any day, an amount equal to the sum
of (a) the Accounts Borrowing Base on such day and (b) the Inventory
Borrowing Base on such day.
"Borrowing Base Certificate" is defined in Section 7.1(b)(i).
"BTCC" means BT Commercial Corporation, in its individual
capacity.
"Business Day" means any day other than a Saturday, Sunday or
a day on which commercial banks in New York, New York are required or
permitted by law to close. When used in connection with Eurodollar Rate
Loans, this definition will also exclude any day on which commercial
banks are not open for dealing in Dollar deposits in the London
(England, U.K.) interbank market.
"Capital Expenditures" means, for any period, the sum of all
expenditures capitalized for financial statement purposes in accordance
with GAAP (whether payable in cash or other property or accrued as
liability), including any mold deposits and the capitalized portion of
capital leases and that portion of Investments allocable to property,
plant or equipment. Capital Expenditures shall exclude proceeds
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of a Casualty Loss applied to the repair or replacement of the property
affected by the Casualty Loss.
"Cash Equivalents" means (i) securities issued, guaranteed or
insured by the United States or any of its agencies with maturities of
not more than one year from the date acquired; (ii) certificates of
deposit with maturities of not more than one year from the date
acquired, issued by a U.S. federal or state chartered commercial bank
of recognized standing, which has capital and unimpaired surplus in
excess of $200,000,000 and which bank or its holding company has a
short-term commercial paper rating of at least A-1 or the equivalent by
Standard & Poor's Corporation or at least P-1 or the equivalent by
Moody's Investors Service, Inc.; (iii) repurchase agreements and
reverse repurchase agreements with terms of not more than seven days
from the date acquired, for securities of the type described in (i)
above and entered into only with commercial banks having the
qualifications described in (ii) above; (iv) commercial paper, other
than commercial paper issued by a Borrower or any of its Affiliates,
issued by any Person incorporated under the laws of the United States
or any state thereof and rated at least A-1 or the equivalent thereof
by Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc., in each case with
maturities of not more than one year from the date acquired; (v)
investments in money market funds registered under the Investment
Company Act of 1940, which have net assets of at least $200,000,000 and
at least eighty-five percent (85%) of whose assets consist of
securities and other obligations of the type described in clauses (i)
through (iv) above and (vi) other instruments, commercial paper or
investments acceptable to the Agent in its sole discretion.
"Casualty Loss" is defined in Section 7.1(g).
"Change of Control" means one or more of the following events:
(a) less than a majority of the members of Safety's board
of directors shall be persons who either (i) were serving as directors
on the Closing Date or were nominated by the Investors (as defined in
the Stock Purchase Agreement) or (ii) were nominated as directors and
approved by the vote of at least two-thirds of the directors who are
directors referred to in clause (i) above or this clause (ii); or
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(b) the stockholders of Safety shall approve any plan or
proposal for the liquidation or dissolution of Safety; or
(c) a Person or group of Persons (other than Lerner and
the Lerner Trust) acting in concert (other than the direct or indirect
beneficial owners of the capital stock of Safety as of the Closing
Date) shall, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, have become the
direct or indirect beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended from time to
time) of securities of the Borrower representing more than thirty
percent (30%) of the combined voting power of the outstanding voting
securities for the election of directors or shall have the right to
elect a majority of the Board of directors of Safety; or
(d) Lerner shall cease to be the direct or indirect
beneficial owner (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended from time to time) of at least
twenty-five percent (25%) of the combined voting power of the
outstanding voting securities for the election of directors of Safety;
or
(e) If Lerner or two of Safety's other Executive Officers
shall within a period of six months cease for any reason to hold the
office and have the management and policy making responsibilities which
he or they hold on the date hereof, unless such officer is replaced
within forty-five days of such cessation with a person or persons
reasonably acceptable to the Agent.
"Closing Date" means the date of execution and delivery of
this Credit Agreement.
"Code" is defined in Section 1.3.
"Collateral" means the Accounts, Inventory, the Collateral (as
such term is defined in the Borrower Intellectual Property Security
Agreement and the Guarantor Intellectual Property Security Agreement)
and other property identified as security for any of the Obligations or
any of the obligations under the Guaranty pursuant to the Collateral
Documents.
"Collateral Access Agreements" means any landlord waiver,
mortgagee waiver, bailee letter or any similar acknowledgment agreement
of any warehousemen or
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processor in possession of Inventory, in each case substantially in the
form of Exhibit L.
"Collateral Documents" means all contracts, instruments and
other documents now or hereafter executed and delivered in connection
with this Credit Agreement (including, without limitation, any
agreements executed and delivered after the Closing Date pursuant to
Section 7.1(q)), pursuant to which liens and security interests are
granted to the Agent in the Collateral for the benefit of the Lenders,
including without limitation, the Security Agreements, the Hypothecs
and the Hypothecation Agreements and any amendments, supplements or
modifications thereto.
"Collection Account" is defined in Section 2.13.
"Collections" means all cash, funds, checks, notes,
instruments and any other form of remittance tendered by account
debtors in payment of Accounts.
"Commitment" of any Lender means its commitment to make
Revolving Loans and to participate in Letters of Credit, up to the
amount set forth opposite its name on Schedule 1, as such amount may be
reduced from time to time in accordance with the terms of this Credit
Agreement.
"Compliance Certificate" is defined in Section 7.1(a)(i).
"Components Inventory" means Inventory consisting of completed
television monitors for the 48010 (TV Monitor System) that need cameras
to create finished product.
"Concentration Account" is defined in Section 2.13.
"Concentration Percentage" means (a) with respect to any
account debtor of a Borrower set forth on Schedule 2, the percentage
set forth on Schedule 2 opposite the name of such account debtor, and
(b) with respect to any other account debtor of a Borrower, ten percent
(10%), unless otherwise agreed to in writing by the Agent.
"Consolidated Fixed Charge Coverage Ratio" means with respect
to Safety and its Subsidiaries for any period, the ratio of (X) EBITDA
for such period, to (Y) (i) scheduled principal amounts of all
Indebtedness paid or payable by such Person in such period, whether
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or not such payments are actually made, other than payments on the Line
of Credit which do not permanently reduce the Commitments, plus (ii)
all interest and fees for the use of money or the availability of
money, including commitment, facility and like fees and charges upon
Indebtedness (including Indebtedness to the Lender) payable by such
Persons during such period whether or not such interest or fees are
actually paid, plus (iii) all loans and Investments made by such
Persons in or to any other Person made during such period, plus (iv)
all Capital Expenditures paid or payable by such Persons during such
period, plus (v) all cash dividends paid or declared by Safety during
such period, regardless of whether or when such dividends are actually
paid, plus (vi) cash income taxes of Safety and its Subsidiaries for
such period.
"Consolidated Tangible Net Worth" means the consolidated
assets of Safety and its Subsidiaries minus (i) their consolidated
liabilities, and (ii) their intangible assets (including, without
limitation, patents, trade or service marks, franchises, trade names
and goodwill), all as reflected on the Financial Statements.
"Contingent Obligation" means any direct, indirect, contingent
or non-contingent guaranty or obligation for the Indebtedness of
another, except endorsements in the ordinary course of business.
"Contribution Agreement" means the Contribution Agreement,
substantially in the form of Exhibit Q, made by the Credit Parties
(other than Safety) in favor of the Agent for the benefit of the
Lenders, as amended, supplemented or otherwise modified from time to
time.
"Covered Taxes" is defined in Section 4.10(a).
"Credit Agreement" means this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Credit Documents" means this Credit Agreement, the Notes, the
Guaranty, the Security Agreements, the Hypothecs, the Hypothecation
Agreements, the Lockbox Agreements, the Fee Letter, the Letter of
Credit Related Documents, the Contribution Agreement and each other
document, agreement and instrument from time to time executed by any
Credit Party and delivered to the Agent or a Lender in connection
herewith (including, without limitation, those delivered after the
Closing Date pursuant to Section 7.1(q)), as each may be
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amended, supplemented or otherwise modified from time to time.
"Credit Parties" means the Borrowers and the Guarantors.
"Default" means an event, condition or default which with the
giving of notice, the passage of time or both would be an Event of
Default.
"Defaulting Lender" is defined in Section 2.9(a).
"Disbursement Accounts" means the operating account of each
Borrower maintained with the Disbursement Account Bank.
"Disbursement Account Bank" means BT Delaware.
"Documentary Letter of Credit Obligations" means the sum of
the aggregate undrawn amount of all documentary Letters of Credit
outstanding plus the aggregate amount of all drawings under documentary
Letters of Credit for which a Borrower has not reimbursed the Issuing
Bank.
"Dollars" and the sign "$" mean freely transferable lawful
money of the United States.
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule 1, as such Schedule may be amended from
time to time.
"EBITDA" means, in any fiscal period, Adjusted Net Income
plus, to the extent deducted in determining Adjusted Net Income, the
amount of all interest expense, income tax expense, the write-off of
deferred financing fees in connection with the transactions
contemplated herein, depreciation and amortization, including
amortization of any goodwill, deferred financing fees in connection
with the transactions contemplated herein, or other intangibles, of
Safety and its Subsidiaries, on a consolidated basis, for such period
all determined in accordance with GAAP.
"Eligible Accounts Receivable" means Accounts of the Borrowers
deemed by the Agent in its Permitted Discretion to be eligible for
inclusion in the calculation of the Borrowing Base. In determining the
amount to be so included, the face amount of such Accounts shall be
reduced by the aggregate amount of
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all reserves, limits and deductions provided for in this definition and
elsewhere in this Credit Agreement. For purposes of calculating the
Accounts of Safety Canada under this Credit Agreement, if any Account
is denominated in a currency other than Dollars, then the face amount
of such Account shall be converted into Dollars at the Rate of Exchange
on the date that the Accounts are calculated. No Accounts of Safety
Canada shall be included as Eligible Accounts Receivable until the
Blocked Account Agreement is executed and delivered. Unless otherwise
approved in writing by the Agent, no Account shall be deemed to be an
Eligible Account Receivable if:
(a) it arises out of a sale made by a Borrower to an
Affiliate; or
(b) its payment terms are longer than 60 days from date of
invoice; provided, that an aggregate amount of Accounts not to exceed
$2,500,000 may have payment terms of up to 90 days from the date of
invoice; or
(c) it remains unpaid after the earlier of (i) 60 days from
the due date and (ii) 120 days from the date of invoice; or
(d) it is from the same account debtor (or any Affiliate
thereof) and fifty percent (50%) or more of all Accounts from such
account debtor (or any Affiliate thereof) are ineligible under clause
(c) above; or
(e) the Account, when aggregated with all other Accounts of
such account debtor, exceeds such account debtor's Concentration
Percentage in face value of all Accounts of the Borrowers then
outstanding, to the extent of such excess; provided, however, that
Accounts supported or secured by an irrevocable letter of credit in
form and substance satisfactory to the Agent, issued by a financial
institution satisfactory to the Agent, and duly pledged to the Agent
(together with sufficient documentation to permit direct draws by the
Agent) shall be excluded for purposes of such calculation; or
(f) the account debtor for the Account is a creditor of a
Borrower, has or has asserted a right of setoff, has disputed its
liability or made any claim with respect to the Account or any other
Account which has not been resolved, to the extent of the amount owed
by such Borrower to the account debtor, the amount of such actual or
asserted right of setoff, or the amount of such dispute or claim, as
the case may be; or
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(g) the account debtor is (or its assets are) the subject of
an Insolvency Event or, in the reasonable judgment of the Agent, likely
to become subject to an Insolvency Event; or
(h) the sale is to an account debtor outside of the United
States or Canada, unless the Account is supported by an irrevocable
letter of credit in form and substance satisfactory to the Agent and
assigned to and directly drawable by the Agent; or
(i) the sale to the account debtor is on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis
or made pursuant to any other written agreement providing for
repurchase or return; or
(j) the Agent determines in its Permitted Discretion that
collection of such Account is uncertain or the Account may not be paid;
or
(k) the goods giving rise to such Account have not been
shipped and delivered to and accepted by the account debtor, the
services giving rise to such Account have not been performed and
accepted by the account debtor or the Account otherwise does not
represent a final sale; or
(l) the Account does not comply with all Requirements of Law,
including, without limitation, the Federal Consumer Credit Protection
Act, the Federal Truth in Lending Act and Regulation Z of the Board of
Governors of the Federal Reserve System; or
(m) the Agent does not have a valid and perfected first
priority Lien on such Account or the Account does not otherwise conform
to the representations and warranties contained in this Credit
Agreement or the other Credit Documents; or
(n) the account debtor is the government of the United States
of America, the government of Canada or any department, body, agency,
authority or instrumentality thereof, unless the applicable Borrower
duly and validly assigns its right to payment of such Account to the
Agent pursuant to the Assignment of Claims Act of 1940, as amended (31
U.S.C. Sections 3727 et seq.), or the Financial Administration
Act (Canada) in form and substance satisfactory to the Agent, and
otherwise complies with such legislation; or
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(o) the Account is subject to any adverse security deposit,
progress payment or other similar advance made by or for the benefit of
the applicable account debtor; or
(p) the account debtor with respect to the Account is located
in New Jersey, Minnesota or any other state or jurisdiction imposing
conditions on the right of a creditor to collect accounts receivable,
unless the applicable Borrower has either qualified as a foreign
corporation authorized to transact business in such state or
jurisdiction or has filed a Notice of Business Activities Report or
other appropriate report with the taxing or other designated
authorities of such state or jurisdiction for the then current year.
"Eligible Components Inventory" means the aggregate amount of
Inventory consisting of Components Inventory deemed by the Agent in the
exercise of its Permitted Discretion to be eligible for inclusion in
the calculation of the Borrowing Base. In determining the amount to be
so included, Inventory shall be valued at the lower of cost or market
on a basis consistent with the Borrowers' current and historical
accounting practice, and such amount shall be reduced by the amount of
all reserves and deductions maintained by the applicable Borrower.
Unless otherwise approved in writing by the Agent, an item of
Components Inventory shall not be included in Eligible Components
Inventory if it does not satisfy the criteria set forth in (a)-(e) of
the definition of Eligible Inventory or without duplication of other
amounts excluded from Eligible Inventory, is obsolete or slow moving,
represents demonstration or sample inventory or does not otherwise
conform to the representations and warranties contained in the Credit
Documents.
"Eligible Inventory" means the aggregate amount of Inventory
consisting of finished goods (not including Components Inventory)
deemed by the Agent in the exercise of its Permitted Discretion to be
eligible for inclusion in the calculation of the Borrowing Base. In
determining the amount to be so included, Inventory shall be valued at
the lower of cost or market on a basis consistent with the Borrowers'
current and historical accounting practice, and such amount shall be
reduced by the amount of all reserves and deductions maintained by the
applicable Borrower. Unless otherwise approved in writing by the Agent,
an item of Inventory shall not be included in Eligible Inventory if:
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(a) it is not owned solely by a Borrower or a Borrower does
not have good, valid and marketable title thereto; or
(b) it is not located in the United States or the Province of
Quebec, Canada; or
(c) it is not located on property owned or leased by a
Borrower or in a contract warehouse, subject to a Collateral Access
Agreement executed by the mortgagee, lessor or the contract
warehousemen, as the case may be, and segregated or otherwise
separately identifiable from goods of others, if any, stored on the
premises; or
(d) it is not subject to a valid and perfected first priority
Lien in favor of the Agent except, with respect to Inventory stored at
sites described in clause (c) above, for Liens for unpaid rent or
normal and customary warehousing charges; or
(e) it consists of defective goods returned or rejected by a
Borrower's customers or goods in transit to third parties (other than
to warehouse sites covered by a Collateral Access Agreement); or
(f) without duplication of other amounts excluded from
Eligible Inventory, it is not first-quality finished goods, is obsolete
or slow moving, represents demonstration or sample inventory, or does
not otherwise conform to the representations and warranties contained
in the Credit Documents.
"Environmental Laws" means all federal, state, provincial and
local statutes, laws (including common or case law), rulings,
regulations or governmental, administrative or judicial policies,
directories, orders or interpretations applicable to the business or
property of Safety or any of its Subsidiaries relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of
Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of any Hazardous Materials.
"Equipment" is defined in the Security Agreements.
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"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 et seq., amendments thereto,
successor statutes, and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means any entity required to be aggregated
with Safety or any of its Subsidiaries under Sections 414(b), (c), (m)
or (o) of the Internal Revenue Code.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule 1, as such Schedule may be amended from
time to time (or, if no such office is specified, its Domestic Lending
Office), or such other office or Affiliate of such Lender as such
Lender may from time to time specify in writing to the Borrowers and
the Agent.
"Eurodollar Rate" means, with respect to the Interest Period
for each Eurodollar Rate Loan comprising part of the same Borrowing, an
interest rate per annum equal to the rate (rounded upward to the
nearest whole multiple of one-sixteenth (1/16) of one percent (1%) per
annum, if such rate is not such a multiple) of the offered quotation,
if any, to first class banks in the Eurodollar market by Bankers Trust
Company for Dollar deposits of amounts in immediately available funds
comparable to the principal amount of the Eurodollar Rate Loan for
which the Eurodollar Rate is being determined with maturities
comparable to the Interest Period for which such Eurodollar Rate will
apply as of approximately 10:00 a.m. (New York City time) two (2)
Business Days prior to the commencement of such Interest Period.
"Eurodollar Rate Loan" means a Loan that bears interest as
provided in Section 4.2.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means with respect to any period of Safety,
EBITDA for such period minus the sum without duplication of (i) cash
interest expense of Safety and its Subsidiaries for such period, (ii)
cash income taxes of Safety and its Subsidiaries for such period, (iii)
all Capital Expenditures of Safety and its Subsidiaries made during
such period, (iv) all cash dividends declared by Safety during such
period, regardless of when such dividends are actually paid, (v) all
scheduled principal payments on Indebtedness of
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Safety or its Subsidiaries other than payments on the Line of Credit
which do not permanently reduce the Commitments and other than payments
on account of the Existing Indebtedness paid on the Closing Date and
(vi) all Investments made by Safety and its Subsidiaries during such
period.
"Executive Officers" means Lerner, Richard Wenz, Michael
Bernstein and Richard Caturano.
"Existing Indebtedness" means the Indebtedness of Safety and
its Subsidiaries existing on the date of the initial Loan hereunder as
set forth on Schedule 3.
"Existing Loan Facility" means the First Amended and Restated
Loan Agreement, dated as of January 31, 1997, among Safety, the lenders
parties thereto and Goldman Sachs Credit Partners L.P., as agent, and
all other agreements, documents and instruments executed and delivered
by Safety or any of its Subsidiaries in connection therewith, each as
amended, supplemented or otherwise modified from time to time.
"Expenses" means all costs and expenses of the Agent incurred
in connection with the Credit Documents and the transactions
contemplated therein, including, without limitation, (i) the costs of
conducting record searches, examining collateral, opening bank accounts
and lockboxes, depositing checks, receiving and transferring funds
(including charges for checks for which there are insufficient funds),
and other costs of administration and enforcement of the rights of the
Lenders under the Credit Documents, (ii) the reasonable fees and
expenses of legal counsel and paralegals (including the allocated cost
of internal counsel and paralegals), accountants, appraisers and other
consultants, experts or advisors retained by the Agent, (iii)
reasonable fees and expenses incurred in connection with the
assignments of or sales of participations in the Loans, (iv) fees and
taxes in connection with the filing of financing statements, (v) the
costs of preparing and recording Collateral Documents, releases of
Collateral, and waivers, amendments, and terminations of any of the
Credit Documents and (vi) all other fees and expenses set forth in the
Fee Letter.
"Expiration Date" means the earlier of the date occurring five
years from the Closing Date and the date of termination of the
Commitments pursuant to the terms hereof.
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"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the
weighted average of the rates on overnight Federal Funds transactions
with members of the Federal Reserve System arranged by Federal Funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by it.
"Fee Letter" means the letter agreement dated as of the date
hereof between BT Commercial Corporation and the Borrowers.
"Fees" means, collectively, the Unused Line Fee, Letter of
Credit Fees, the Issuing Bank Fees and the fees provided for in the Fee
Letter.
"Financial Covenants" means the covenants set forth in
Sections 7.2(r) through (v).
"Financial Statements" means the consolidated and
consolidating balance sheets, statements of operations, statements of
cash flows and statements of changes in shareholder's equity of Safety
and its Subsidiaries for the period specified, prepared in accordance
with GAAP and consistent with prior practices.
"Foreign Lender" means any Lender organized under the laws of
a jurisdiction outside of the United States.
"Foreign Subsidiary" means any Person (i) that is a
"controlled foreign corporation," as defined in Section 957(a) of the
Internal Revenue Code and (ii) of which Safety or any of its
Subsidiaries is a "United States shareholder," as defined in Section
951(b) of the Internal Revenue Code.
"Funding Bank" is defined in Section 4.9.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governing Documents" means, as to any Person, the certificate
or articles of incorporation and by-laws or
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other organizational or governing documents of such Person.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantors" means Safety 1st International, Inc., Safety 1st
(Europe) Limited, 3232301 and any other Person who from time to time
guarantees any or all of the Obligations.
"Guarantor Intellectual Property Security Agreement" means the
security agreement relating to the intellectual property of the
Guarantor, substantially in the form of Exhibit H-2, made by the
Guarantors in favor of the Agent for the benefit of the Agent, the
Issuing Bank and the Lenders, as amended, supplemented or otherwise
modified from time to time.
"Guarantor Security Agreement" means the security agreement,
substantially in the form of Exhibit G-2, made by the Guarantors in
favor of the Agent for the benefit of the Agent, the Issuing Bank and
the Lenders, as amended, supplemented or otherwise modified from time
to time.
"Guaranty" means the Guaranty, substantially in the form of
Exhibit J, made by the Guarantors in favor of the Agent for the benefit
of the Lenders, as amended, supplemented or otherwise modified from
time to time.
"Hazardous Materials" means any and all pollutants and
contaminants and any and all toxic, caustic, radioactive or hazardous
materials, substances or wastes that are regulated under any
Environmental Laws, including without limitation, petroleum, its
derivatives and by-products and any other hydrocarbons.
"Highest Lawful Rate" means, at any given time during which
any Obligations shall be outstanding hereunder, the maximum
non-usurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Obligations, under the laws of the State of New York (or the law of any
other jurisdiction whose laws may be mandatorily applicable
notwithstanding other provisions of this Credit Agreement and the other
Credit Documents), or under applicable federal laws
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which may presently or hereafter be in effect and which allow a higher
maximum nonusurious interest rate than under New York (or such other
jurisdiction's) law, in any case after taking into account, to the
extent permitted by applicable law, any and all relevant payments or
charges under this Credit Agreement and any other Credit Documents
executed in connection herewith, and any available exemptions,
exceptions and exclusions.
"Hypothec" means the collective reference to the Safety Canada
Hypothec and the 3232301 Hypothec.
"Hypothecation Agreements" means the collective reference to
the Safety Hypothecation Agreement and the 3232301 Hypothecation
Agreement.
"Indebtedness" of any Person means (a) indebtedness for
borrowed money or for the deferred purchase price of property or
services (other than trade liabilities incurred in the ordinary course
of business and payable in accordance with customary trade practices of
the Credit Party), whether on open account or evidenced by a note,
bond, debenture or similar instrument, (b) obligations under capital
leases computed in accordance with GAAP, (c) reimbursement obligations
for letters of credit, banker's acceptances or other credit
accommodations, (d) liabilities, as determined by the Agent in its
reasonable judgment, under any Interest Rate Agreement, (e) Contingent
Obligations and (f) obligations secured by any Lien on that Person's
property, even if that Person has not assumed such obligations.
"Indemnified Party" is defined in Section 10.10(a).
"Insolvency Event" means, with respect to any Person, the
occurrence of any of the following: (a) such Person shall be
adjudicated insolvent or bankrupt, or shall generally fail to pay or
admit in writing its inability to pay its debts as they become due, (b)
such Person shall seek dissolution or reorganization or the appointment
of a receiver, trustee, custodian or liquidator for it or a substantial
portion of its property, assets or business or to effect a plan or
other arrangement with its creditors, (c) such Person shall make a
general assignment for the benefit of its creditors, or consent to or
acquiesce in the appointment of a receiver, trustee, custodian or
liquidator for a substantial portion of its property, assets or
business, (d) such
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<PAGE> 25
Person shall file a voluntary petition under any bankruptcy, insolvency
or similar law, (e) such Person, or a substantial portion of its
property, assets or business shall become the subject of an involuntary
proceeding or petition for its dissolution, reorganization, or the
appointment of a receiver, trustee, custodian or liquidator or shall
become subject to any writ, judgment, warrant of attachment, execution
or similar process or (f) such Person shall take any action to
authorize any of the foregoing.
"Interest Period" means for any Eurodollar Rate Loan the
period commencing on the date of such Borrowing and ending on the last
day of the period selected by a Borrower pursuant to the provisions
below. The duration of each such Interest Period shall be one, two,
three or six months, in each case as a Borrower may, in an appropriate
Notice of Borrowing, Notice of Continuation or Notice of Conversion,
select; provided, however, that a Borrower may not select any Interest
Period that ends after the Expiration Date. Whenever the last day of
any Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to
occur on the next succeeding Business Day, provided that if such
extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day.
"Interest Rate Agreement" means any interest rate protection
or hedge agreement, including, without limitation, any interest rate
future, option, swap and cap agreement, in form and substance
acceptable to the Agent.
"Internal Revenue Code" means the Internal Revenue Code of
1986, any amendments thereto, and any successor statute thereto and
regulations and guidance promulgated thereunder.
"Internal Revenue Service" or "IRS" means the United States
Internal Revenue Service and any successor agency.
"Inventory" is defined in the Security Agreements.
"Inventory Borrowing Base" means, on any day, the lesser of
(a) $10,000,000 and (b) an amount up to 60% of the value of the
Eligible Inventory of the Borrowers on such day and, through December
31, 1997, an amount
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up to 40% of the value of the Eligible Components Inventory of the
Borrowers on such day.
"Investment" means all expenditures made and all liabilities
incurred (including Contingent Obligations) for or in connection with
the acquisition of stock or Indebtedness of a Person, loans, advances,
capital contributions or transfers of property to a Person, or
acquisition of all or substantially all the assets of a Person. In
determining the aggregate amount of Investments outstanding at any
particular time, (i) a guaranty shall be valued at not less than the
principal amount outstanding unless such guaranty is a limited
guaranty, in which case it shall be valued at not less than the maximum
principal amount guaranteed; (ii) returns of capital (but only by
repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution) shall be deducted; (iii) earnings, whether as
dividends, interest or otherwise, shall not be deducted; and (iv)
decreases in market value shall not be deducted unless such decreases
are computed in accordance with GAAP.
"Issuing Bank Fees" is defined in Section 4.4(b).
"Lender" is defined in the preamble to this Credit Agreement.
"Lender Advance" is defined in Section 2.2.
"Lerner" means Michael Lerner, an individual residing at 220
Boylston Street, Boston, Massachusetts 02116.
"Lerner Trust" means Lerner Collateral Trust, a Delaware
business trust of which Lerner is the sole beneficiary.
"Letter of Credit Agreement" is defined in Section 3.4.
"Letter of Credit Fees" is defined in Section 4.4(a).
"Letter of Credit Obligations" means the sum of the
Documentary Letter of Credit Obligations and the Standby Letter of
Credit Obligations.
"Letter of Credit Related Documents" is defined in Section
3.8.
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"Letter of Credit Request" is defined in Section 3.4.
"Letters of Credit" means all standby and documentary letters
of credit issued for the account of a Borrower pursuant to Article III
of this Credit Agreement and all amendments, renewals, extensions or
replacements thereof.
"Lien(s)" means any lien, claim, charge, pledge, security
interest, assignment, legal cause of preference, hypothecation, deed of
trust, mortgage, lease, conditional sale, retention of title, or other
preferential arrangement having substantially the same economic effect
as any of the foregoing, whether voluntary or imposed by law.
"Line of Credit" means the aggregate revolving line of credit
extended by the Lenders to the Borrowers for Revolving Loans and
Letters of Credit pursuant to and in accordance with the terms of this
Credit Agreement, in the amount of $27,500,000 as such revolving line
of credit may be reduced from time to time in accordance with Section
2.10.
"Loan Account" is defined in Section 2.11.
"Loans" means the Revolving Loans and the Term Loan made from
time to time hereunder.
"Lockbox Agreements" is defined in Section 2.13.
"Lockbox Banks" is defined in Section 2.13.
"Lockboxes" is defined in Section 2.13.
"Majority Lenders" means those Lenders owed or holding in the
aggregate more than 50% of the total Commitments or if the Commitments
are terminated, more than 50% of the Loans and Letter of Credit
Obligations then outstanding; provided, that if there are at least two
Lenders and BTCC holds more than 50% of the total Commitments, Majority
Lenders means BTCC and one other Lender.
"Material Adverse Effect" means (i) a material adverse effect
on the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of either Borrower
individually or Safety and its Subsidiaries, taken as a whole, (ii) the
material impairment of the ability of either Borrower individually or
Safety and its
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Subsidiaries, taken as a whole, to perform its obligations under the
Credit Documents to which it is a party or of the Agent or the Lenders
to enforce the Obligations or realize upon the Collateral, or (iii) a
material adverse effect on the value of the Collateral or the amount
which the Agent or the Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral, in either of the events described in
this clause (iii) having a value in excess of $250,000.
"Material Contract" means any contract or other arrangement to
which Safety or any of its Subsidiaries is a party (other than the
Credit Documents) for which breach, nonperformance, cancellation or
failure to renew could have a Material Adverse Effect.
"Mold" means a mold used in connection with the manufacture of
the Borrowers' inventory which accounts for at least five percent (5%)
of the Borrowers' gross sales.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which Safety, any of its Subsidiaries
or any ERISA Affiliate has contributed within the past six years or
with respect to which Safety or any of its Subsidiaries may incur any
liability.
"Net Cash Proceeds" means, with respect to any Asset Sale, any
issuance of any equity securities by a Credit Party or any incurrence
of Indebtedness by a Credit Party (other than Indebtedness permitted
under Section 7.2(b)), the aggregate amount of cash received from time
to time by or on behalf of such Credit Party in connection with such
transaction after deducting therefrom only (a) reasonable and customary
brokerage commissions, underwriting fees and discounts, legal fees,
finder's fees and other similar fees and commissions, (b) the amount of
income taxes reasonably estimated to be actually payable in connection
with or as a result of such transaction within one year of such
transaction, and (c) in the case of any Asset Sale, the amount of any
Indebtedness secured by a Lien on such asset that, by the terms of such
transaction, is required to be repaid upon such disposition.
"Net Income" means, for any period, the net income of Safety
and its Subsidiaries on a consolidated basis, as reflected on the
Financial Statements for such period.
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"Notes" means the Revolving Notes and the Term Notes.
"Notice of Borrowing" is defined in Section 2.2(a).
"Notice of Continuation" is defined in Section 4.8(a).
"Notice of Conversion" is defined in Section 4.8(b).
"Obligations" means the unpaid principal and interest
hereunder (including interest accruing on or after the occurrence of an
Insolvency Event, whether or not an allowed claim), reimbursement
obligations under Letters of Credit, Fees, Expenses and all other
obligations and liabilities of the Borrowers to the Agent, the Issuing
Bank or to the Lenders under this Credit Agreement, the Notes, or any
other Credit Document.
"Other Taxes" is defined in Section 4.10(b).
"PBGC" means the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"Pending Borrowings" means prospective Borrowings for which a
Notice of Borrowing has been delivered but for which Revolving Loans
have not been advanced.
"Permitted Discretion" means the Agent's good faith judgment
based upon any factor which the Agent believes in good faith: (i) will
or could reasonably be expected to adversely affect the value of any
Collateral, the enforceability or priority of the Agent's Liens thereon
or the amount which the Agent and the Lenders would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to the Agent
by any Person on behalf of a Borrower is incomplete, inaccurate or
misleading in any material respect; (iii) materially increases the
likelihood of a bankruptcy, reorganization or other insolvency
proceeding involving Safety or any of its Subsidiaries or any of the
Collateral, or (iv) creates or reasonably could be expected to create a
Default or Event of Default. In exercising such judgment, the Agent may
consider such factors already included in or tested by the definition
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of Eligible Accounts Receivable or Eligible Inventory, as well as any
of the following: (A) the financial and business climate of the
Borrowers' industry and general macroeconomic conditions, (B) changes
in collection history and dilution with respect to the Accounts, (C)
changes in demand for, and pricing of, Inventory, (D) changes in any
concentration of risk with respect to Accounts or Inventory, and (E)
any other factors that change the credit risk of lending to the
Borrowers on the security of the Accounts or Inventory. The burden of
establishing lack of good faith shall be on the Borrowers.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced and be continuing: (a) Liens for taxes,
assessments and governmental charges not yet due and payable or which
are being diligently contested in good faith by Safety or one of its
Subsidiaries by appropriate proceedings, provided that in any such case
an adequate reserve is being maintained by Safety or one of its
Subsidiaries for the payment of the same; (b) so long as the Agent has
been notified of the same, Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and other
similar Liens arising in the ordinary course of business securing
obligations that are not overdue and, in any case, where the property
subject thereto is not material to the operations of the Person whose
assets are subject to such Lien or which are being diligently contested
in good faith and by appropriate proceedings and as to which
appropriate reserves are being maintained; (c) pledges or deposits to
secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; and (d)
easements, rights of way and other encumbrances incurred in the
ordinary course of business which, in the aggregate, are not
substantial in amount and which do not materially detract from the
value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Person whose property is
subject to such easement, right of way or encumbrance.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, limited or unlimited liability company,
institution, entity, party or government (including any division,
agency or department thereof), and, as applicable, the successors,
heirs and assigns of each.
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"Plan" means any employee benefit plan, program or arrangement
maintained or contributed to by Safety or any of its Subsidiaries, or
with respect to which any of them may incur liability.
"Prime Lending Rate" means the rate which Bankers Trust
Company announces as its prime lending rate from time to time. The
Prime Lending Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer.
Bankers Trust Company and each of the Lenders may make commercial loans
or other loans at rates of interest at, above or below the Prime
Lending Rate.
"Prime Rate Loan" means a Loan that bears interest as provided
in Section 4.1.
"Prohibited Transaction" is defined in Section 6.1(r)(v).
"Proportionate Share" of a Lender means a fraction, expressed
as a decimal, obtained by dividing its Commitment by the total
Commitments of all the Lenders or, if the Commitments are terminated,
by dividing its then outstanding Revolving Loans and/or Letter of
Credit participations by the aggregate Revolving Loans and/or Letter of
Credit Obligations then outstanding.
"Purchase Money Liens" is defined in Section 7.2(b)(v).
"Rate of Exchange" means the rate at which the Agent is able
on the relevant date to purchase Dollars with other currency and shall
include any premiums and costs of exchange payable in connection with
the purchase of or conversion into Dollars.
"Reduced Rate" is defined in Section 4.10(e), relating to
backup withholding tax.
"Register" is defined in Section 10.8(c).
"Reportable Event" means any of the events described in
Section 4043 of ERISA and the regulations thereunder, other than a
reportable event for which the 30-day notice requirement to the PBGC
has been waived.
"Requirement of Law" means (a) the Governing Documents of a
Person, (b) any law, treaty, rule or regulation or determination of an
arbitrator, court or other Governmental Authority, or (c) any
governmental
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franchise, license, lease, permit, certificate, authorization,
qualification, easement, right of way, right or approval binding on a
Person or any of its property.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
persons after termination of employment, other than as required by
Section 601 of ERISA.
"Revolving Loans" is defined in Section 2.1(a).
"Revolving Note" means a promissory note of the Borrowers
payable to the order of any Lender, substantially in the form of
Exhibit A-1, as the same may be amended, supplemented or otherwise
modified from time to time.
"Safety Canada Hypothec" means the Movable Hypothec,
substantially in the form of Exhibit P, made by Safety Canada in favor
of the Agent for the benefit of the Lenders, as amended, supplemented
or otherwise modified from time to time.
"Safety Canada Trade Payable" means amounts owed from Safety
Canada to Safety on account of goods sold and delivered or services
rendered.
"Safety Europe" means Safety 1st (Europe) Limited, a limited
liability company organized under the laws of the United Kingdom.
"Safety Hypothecation Agreement" means the Hypothecation
Agreement, substantially in the form of Exhibit I-2, made by Safety in
favor of the Agent for the ratable benefit of the Lenders, as amended,
supplemented or otherwise modified from time to time.
"Security Agreements" means the Borrower Security Agreement,
the Borrower Intellectual Property Security Agreement, the Guarantor
Security Agreement and the Guarantor Intellectual Property Security
Agreement.
"Settlement Date" is defined in Section 2.6(a).
"Standby Letter of Credit Obligations" means the sum of the
aggregate undrawn amount of all standby Letters of Credit outstanding
plus the aggregate amount of all drawings under standby Letters of
Credit for which a Borrower has not reimbursed the Issuing Bank.
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"Stock Purchase Agreement" means the Stock and Warrant
Purchase Agreement dated as of even date herewith among Safety and the
Investors named therein, as amended, supplemented or otherwise modified
from time to time.
"Subsidiary" means as to any Person, a corporation or other
entity in which that Person directly or indirectly owns or controls the
shares of stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or appoint other
managers of such corporation or other entity. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Credit Agreement shall refer to a Subsidiary or Subsidiaries of
Safety.
"Syndication Date" means the earlier of (i) the date that is
ninety (90) days after the Closing Date and (ii) the date on which the
Agent notifies Safety of the completion of the primary syndication of
the Loans under this Credit Agreement, as determined by the Agent in
its sole discretion, which notice shall be promptly given.
"Taxes" is defined in Section 4.10(a).
"Tax Transferee" is defined in Section 4.10(a).
"Termination Event" means (i) a Reportable Event with respect
to any Benefit Plan or Multiemployer Plan; (ii) the withdrawal of
Safety, any of its Subsidiaries or any ERISA Affiliate from a Benefit
Plan during a plan year in which it was a "substantial employer" (as
defined in Section 4001(a)(2) of ERISA); (iii) the providing of notice
of intent to terminate a Benefit Plan in a distress termination (as
described in Section 4041(c) of ERISA); (iv) the institution by the
PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan;
(v) any event or condition (a) which is reasonably likely to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or
Multiemployer Plan, or (b) that is reasonably likely to result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA;
or (vi) the partial or complete withdrawal within the meaning of
Sections 4203 and 4205 of ERISA, of Safety, any of its Subsidiaries or
any ERISA Affiliate from a Multiemployer Plan.
"Term Loan" is defined in Section 2.7.
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"Term Note" means a promissory note of the Borrowers payable
to the order of any Lender, substantially in the form of Exhibit A-2,
as the same may be amended, supplemented or otherwise modified from
time to time.
"3232301" means 3232301 Canada Inc., a Canadian federal
corporation, and its successors and permitted assigns.
"3232301 Hypothec" means the Movable Hypothec, substantially
in the form of Exhibit O, made by 3232301 in favor of the Agent for the
ratable benefit of the Lenders, as amended, supplemented or otherwise
modified from time to time.
"3232301 Hypothecation Agreement" means the Hypothecation
Agreement, substantially in the form of I-2, made by 3232301 in favor
of the Agent for the ratable benefit of the Lenders, as amended,
supplemented or otherwise modified from time to time.
"Type" means, with respect to any Loan, whether such Loan is a
Eurodollar Rate Loan or a Prime Rate Loan.
"Unused Availability" means, at any time of determination, the
excess of (x) the lesser of the Borrowing Base or the Line of Credit
over (y) the sum of the unpaid principal amount of the Revolving Loans
outstanding and the Letter of Credit Obligations.
"Unused Line Fee" is defined in Section 4.5.
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
defined or specified herein, all accounting terms used in this Credit Agreement
shall be construed in accordance with GAAP, applied on a basis consistent in all
material respects with the Financial Statements delivered to the Agent on or
before the Closing Date. All accounting determinations for purposes of
determining compliance with Section 7.2(r) through (v) shall be made in
accordance with GAAP as in effect on the Closing Date and applied on a basis
consistent in all material respects with the audited Financial Statements
delivered to the Agent on or before the Closing Date. The Financial Statements
required to be delivered hereunder from and after the Closing Date, and all
financial records, shall be maintained in accordance with GAAP. If GAAP shall
change from the basis used in preparing the audited Financial Statements
delivered to the Agent on or before the Closing Date, the certificates required
to be delivered pursuant to Section 7.1
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demonstrating compliance with the covenants contained herein shall include
calculations setting forth the adjustments necessary to demonstrate how each
Borrower is in compliance with the financial covenants based upon GAAP as in
effect on the Closing Date. References to a fiscal period ending on a particular
date shall mean the fiscal period ending on or about such date.
SECTION 1.3. OTHER TERMS; HEADINGS. Terms used herein that are defined
in the Uniform Commercial Code, from time to time, in effect in the State of New
York (the "Code") shall have the meanings given in the Code. Each of the words
"hereof," "herein," and "hereunder" refer to this Credit Agreement as a whole.
An Event of Default shall "continue" or be "continuing" until such Event of
Default has been cured (to the extent capable of being cured) or waived in
accordance with Section 10.11 hereof. References to Articles, Sections, Annexes,
Schedules, and Exhibits are internal references to this Credit Agreement, and to
its attachments, unless otherwise specified. The headings and the Table of
Contents are for convenience only and shall not affect the meaning or
construction of any provision of this Credit Agreement.
SECTION 1.4. COMPUTATION OF TIME PERIODS. In this Credit Agreement, in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding."
ARTICLE II
LOANS
SECTION 2.1. REVOLVING CREDIT COMMITMENTS.
(a) Subject to the terms and conditions set forth in this
Credit Agreement, on and after the Closing Date and to the Expiration Date, each
Lender severally agrees to make loans and advances to Safety ("Revolving Loans")
in an outstanding amount not to exceed at any time its Proportionate Share of
the lesser of (x) the total Commitments and (y) the Borrowing Base, minus, in
each case, the then outstanding Letter of Credit Obligations, the Pending
Borrowings and the Borrower's exposure (as determined by the Agent) under any
Interest Rate Agreements entered into in accordance with Section 7.2(b)(vii).
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(b) The Agent, at any time in the exercise of its Permitted
Discretion, may (i) establish and increase or decrease reserves against Eligible
Accounts Receivable and Eligible Inventory, (ii) reduce the advance rates
provided for in the definition of Accounts Borrowing Base and Inventory
Borrowing Base, or restore such advance rates to any level equal to or below the
advance rates in effect as of the date of this Credit Agreement, (iii) increase
advance rates provided for in the definition of Accounts Borrowing Base up to a
maximum of 85% of Eligible Accounts Receivable based on evidence of lower
dilution levels of the Accounts of the Borrowers, and (iv) impose additional
restrictions (or eliminate the same) to the standards of eligibility set forth
in the definitions of Eligible Accounts Receivable and Eligible Inventory. The
Agent may, but shall not be obligated to, rely on each Borrowing Base
Certificate and any other schedules or reports in determining the eligibility of
Accounts and Inventory.
SECTION 2.2. BORROWING OF REVOLVING LOANS. It is contemplated that
Revolving Loans will be made available to Safety directly by the Lenders
("Lender Advances") and, in the circumstances described in Section 2.2(b), from
the Agent acting on behalf of the Lenders ("Agent Advances"). The Revolving
Loans made by each Lender shall be evidenced by Revolving Notes payable to the
order of each Lender, with appropriate insertions as to the date and principal
amount.
(a) Lender Advances of Revolving Loans. Subject to the
determination by the Agent and the Lenders that the conditions for borrowing
contained in Section 5.2 are satisfied, upon notice from Safety to the Agent,
substantially in the form of Exhibit C ("Notice of Borrowing") received by the
Agent before 12:00 noon (New York City time) on a Business Day, Lender Advances
of Revolving Loans shall be made to the extent of each Lender's Proportionate
Share of the requested borrowing. The Notice of Borrowing shall specify whether
the requested Borrowing is of Prime Rate Loans or Eurodollar Rate Loans.
(b) Agent Advances of Revolving Loans. The Agent is authorized
by the Lenders, but is not obligated, to make Agent Advances (i) upon a Notice
of Borrowing received by the Agent before 2:00 p.m. (New York City time) on a
Business Day, or (ii) upon advice received by the Agent on a Business Day from
the Disbursement Account Bank of the face amount of checks drawn on the
Disbursement Account, which have been or will be presented for payment on that
day, minus the amount of funds then available in the Disbursement Account. All
Agent Advances shall be Prime Rate Loans. Agent Advances will not at any time
exceed the amount available for borrowing under Section 2.1(a). Agent Advances
will be subject to periodic settlement with the Lenders under Section 2.6. Agent
Advances may be made only in the following circumstances:
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(i) For administrative convenience, the Agent may, but is not
obligated to, make Agent Advances in reliance upon Safety's actual or
deemed representations under Section 5.2 that the conditions for
borrowing are satisfied.
(ii) If the conditions for borrowing under Section 5.2 cannot
be fulfilled, Safety shall in its Notice of Borrowing or otherwise give
immediate notice thereof to the Agent, with a copy to each of the
Lenders, and the Agent may, but is not obligated to, continue to make
Agent Advances for twenty (20) Business Days from the date the Agent
first receives such notice, or until sooner instructed by the Majority
Lenders to cease.
SECTION 2.3. DISBURSEMENT OF REVOLVING LOANS. The proceeds of Revolving
Loans shall be transmitted by the Agent (x) upon advice received by the Agent
from the Disbursement Account Bank, as described in Section 2.2(b), directly to
the Disbursement Account, (y) in the circumstances described in Section 3.5,
directly to the Issuing Bank and (z) in all other circumstances, as requested by
Safety in its Notice of Borrowing.
SECTION 2.4. NOTICES OF BORROWING. Notices of Borrowing may be given
under this Section by telephone or facsimile transmission, and, if by telephone,
promptly confirmed in writing, substantially in the form of Exhibit C. Safety
shall specify in each Notice of Borrowing whether the conditions for the
requested borrowing are satisfied. Safety may request one or more borrowings of
Prime Rate Loans by Notice of Borrowing given not later than 12:00 noon (New
York City time) on the same Business Day as the proposed Borrowing. Notice of
Borrowing for Eurodollar Rate Loans shall be given not later than 2:00 p.m. (New
York City time) on the third Business Day prior to the proposed Borrowing. Each
Notice of Borrowing shall, unless otherwise specifically provided herein,
consist entirely of Revolving Loans of the same Type and, if such Borrowing is
to consist of Eurodollar Rate Loans, shall be in an aggregate amount for all
Lenders of not less than $1,000,000 or an integral multiple of $100,000 in
excess thereof. The right of Safety to choose Eurodollar Rate Loans is subject
to the provisions of Section 4.8. Once given, a Notice of Borrowing is
irrevocable by and binding on Safety. Safety shall provide to the Agent a list,
with specimen signatures, of officers authorized to request Revolving Loans and
Letters of Credit. The Agent is entitled to rely upon such list until it is
replaced by Safety.
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SECTION 2.5. SAME DAY SETTLEMENT OF LENDER ADVANCES. The Agent shall
give each Lender prompt notice by telephone or facsimile transmission of a
Notice of Borrowing that requests Lender Advances of Revolving Loans. No later
than 2:00 p.m. (New York City time) on the date of receipt of the Notice of
Borrowing, each Lender shall make available to the Agent at the Agent's address
such Lender's Proportionate Share of such borrowing in immediately available
funds. Unless the Agent receives contrary written notice prior to the date of
any such borrowing of Revolving Loans, it is entitled to assume that each Lender
will make available its Proportionate Share of the borrowing and in reliance
upon that assumption, but without any obligation to do so, may advance such
Proportionate Share on behalf of such Lender.
SECTION 2.6. PERIODIC SETTLEMENT OF AGENT ADVANCES.
(a) The Settlement Date. The amount of each Lender's
Proportionate Share of Revolving Loans shall be computed weekly (or more
frequently in the Agent's discretion) and shall be adjusted upward or downward
based on all Revolving Loans (including Agent Advances) and repayments received
by the Agent as of 5:00 p.m. (New York City time) on the last Business Day of
the period specified by the Agent (such date, the "Settlement Date").
(b) Summary Statements; Settlements of Principal. The Agent
shall deliver to each of the Lenders promptly after the Settlement Date a
summary statement of the amount of outstanding Revolving Loans (including Agent
Advances) for the period and the amount of repayments received for the period.
As reflected on the summary statement: (i) the Agent shall transfer to each
Lender its Proportionate Share of repayments; and (ii) each Lender shall
transfer to the Agent, or the Agent shall transfer to each Lender, such amounts
as are necessary to insure that, after giving effect to all such transfers, the
amount of Revolving Loans made by each Lender shall be equal to such Lender's
Proportionate Share of the aggregate amount of Revolving Loans outstanding as of
such Settlement Date. If the summary statement requires transfers to be made to
the Agent by the Lenders and is received prior to 12:00 Noon (New York City
time) on a Business Day, such transfers shall be made in immediately available
funds no later than 2:00 p.m. (New York City time) that day; and, if received
after 12:00 Noon (New York City time), then no later than 2:00 p.m. (New York
City time) on the next Business Day. The obligation of each Lender to transfer
such funds is irrevocable, unconditional and without recourse to or warranty by
the Agent.
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(c) Distribution of Interest and Unused Line Fees. Interest on
the Revolving Loans (including Agent Advances), together with the amount of the
Unused Line Fee, shall be allocated by the Agent to each Lender in accordance
with the Proportionate Share of Revolving Loans actually advanced by and repaid
to each Lender, and shall accrue from and including the date such Revolving
Loans are so advanced and to but excluding the date such Revolving Loans are
either repaid by a Borrower or actually settled under this Section. After the
end of each month, the Agent shall, upon receipt from a Borrower, distribute to
each Lender its Proportionate Share of the interest and Unused Line Fee accrued
during such month. The Agent shall, upon receipt from a Borrower, distribute
interest on Eurodollar Rate Loans promptly after it is received from a Borrower.
SECTION 2.7. TERM LOAN.
(a) Upon the request of Safety to the Agent, each Lender
severally agrees, subject to the terms and conditions set forth in this
Agreement, to make a term loan (the "Term Loan") to Safety on the Closing Date
in an aggregate principal amount equal to such Lender's Proportionate Share of
$12,500,000.
(b) The Term Loan made by each Lender shall be evidenced by
Term Notes payable to the order of each Lender, with appropriate insertions as
to the date and principal amount. The principal amount of each Term Loan shall
be payable in twenty (20) consecutive equal quarterly installments, the first
nineteen (19) installments of which shall be payable on the first Business Day
of each calendar quarter, commencing with October 1, 1997, and the last
installment of which shall be payable on the Expiration Date, whereupon the
entire outstanding principal balance thereof and all accrued and unpaid interest
thereon shall be payable in full. Amounts paid on account of the Term Loan may
not be reborrowed.
SECTION 2.8. SHARING OF PAYMENTS. If any Lender shall obtain any
payment pursuant to the terms of this Credit Agreement (whether voluntary,
involuntary, through the exercise of any right of setoff or otherwise) on
account of the Loans made by it or its participation in Letters of Credit in
excess of its Proportionate Share of payments on account of the Loans or Letters
of Credit obtained by all the Lenders, such Lender shall forthwith purchase from
the other Lenders such participations in the Loans made by them or in their
participation in Letters of Credit as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and each such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's
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ratable share (according to the proportion of (i) the amount of such Lender's
required repayment to (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing Lender
in respect to the total amount so recovered, and provided, further that this
Section shall not apply with respect to any fees which are intended to be for
the benefit of less than all of the Lenders. Each Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section 2.8 may, to the fullest extent permitted by law, exercise all of its
rights of payment (including the right of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of such
Borrower in the amount of such participation. Notwithstanding anything contained
herein to the contrary, the sharing provisions of this Section 2.8 shall not
apply to any payments received by any Lender from or on behalf of a Borrower or
the Agent that is not made pursuant to the express terms and provisions of this
Credit Agreement.
SECTION 2.9. DEFAULTING LENDERS.
(a) A Lender who fails to pay the Agent its Proportionate
Share of any Loans (including Agent Advances) made available to a Borrower by
the Agent on such Lender's behalf, or who fails to pay any other amount owing by
it to the Agent, is a defaulting lender ("Defaulting Lender"). The Agent may
recover all such amounts owing by a Defaulting Lender on demand. If the
Defaulting Lender does not pay such amounts on the Agent's demand, the Agent
shall promptly notify the Borrowers and the Borrowers shall jointly and
severally pay such amounts within five (5) Business Days. In addition, the
Defaulting Lender or the Borrowers shall jointly and severally pay the Agent
interest on such amount for each day from the date it was made available by the
Agent to Safety to the date it is recovered by the Agent at a rate per annum
equal to (x) the overnight Federal Funds Rate, if paid by the Defaulting Lender,
or (y) the then applicable rate of interest calculated under Section 4.1, if
paid by the Borrower; plus, in each case, the Expenses and losses, if any,
incurred as a result of the Defaulting Lender's failure to perform its
obligations.
(b) The failure of any Lender to fund its Proportionate Share
of any Loan (including Agent Advances) shall not relieve any other Lender of its
obligation to fund its Proportionate Share of such Loan. Conversely, no Lender
shall be responsible for the failure of another Lender to fund such other
Lender's Proportionate Share of a Loan.
(c) The Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by the Borrower to the Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder.
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Amounts payable to a Defaulting Lender shall instead be paid to or retained by
the Agent. The Agent may hold and, in its discretion, re-lend to Safety the
amount of all such payments received or retained by it for the account of such
Defaulting Lender. For purposes of voting or consenting to matters with respect
to the Credit Documents and determining Proportionate Shares, such Defaulting
Lender shall be deemed not to be a "Lender" and such Lender's Commitment shall
be deemed to be zero (-0-). This Section shall remain effective with respect to
such Lender until (x) the Obligations under this Credit Agreement shall have
been declared or shall have become immediately due and payable or (y) the
Majority Lenders, the Agent and the Borrowers shall have waived such Lender's
default in writing. The operation of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or relieve or excuse
the performance by a Borrower of its duties and obligations hereunder.
SECTION 2.10. MANDATORY PAYMENT; MANDATORY REDUCTION OF THE
COMMITMENTS.
(a) The aggregate balance of Revolving Loans and all Letter of
Credit Obligations outstanding at any time in excess of the lesser of (i) the
Borrowing Base then in effect and (ii) the Line of Credit shall be immediately
due and payable without the necessity of any demand.
(b) On the Expiration Date, the Commitment of each Lender
shall automatically reduce to zero and may not be reinstated. The obligation of
each Lender to make its Proportionate Share of the Term Loan shall expire on the
Closing Date, after giving effect to the Term Loan borrowed on such date.
(c) The Borrower may reduce or terminate the Commitments on a
pro rata basis at any time and from time to time in whole or in part; provided,
however, that each such reduction must be in an aggregate amount for all Lenders
of not less than $1,000,000 (and in increments of $1,000,000 thereafter). If the
Borrower seeks to reduce the Commitments to an aggregate amount of less than
$5,000,000, then the Commitments shall be reduced to zero. Once reduced, no
portion of the Commitments may be reinstated.
(d) If any Credit Party shall receive any proceeds from the
consummation of any Asset Sales or the issuance of any equity securities (other
than proceeds of the preferred stock and warrants acquired by the Investors
under (and as defined in) the Stock Purchase Agreement) 100% of the Net Cash
Proceeds received therefrom shall be immediately paid to the Agent to be applied
toward the prepayment of the Term Loan and, after the Term Loan is repaid in
full, in payment of the Revolving Loans as set forth in Section 2.10(f).
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(e) If, for the six month period ended December 31, 1997 or
any fiscal year ending thereafter, there shall be Excess Cash Flow for such
period or fiscal year, 75% of such Excess Cash Flow shall be applied toward
prepayment of the Term Loan as set forth in subsection 2.10(f). Each such
prepayment or reduction shall be made on or before the date on which the
financial statements referred to in Section 7.1(a)(i) in respect of such fiscal
year are delivered, but in no event later than the date by which such statements
are required to be delivered pursuant to such Section.
(f) Prepayments made pursuant to Section 2.10(e) shall be
applied by the Credit Parties to the prepayment of the Term Loan. Prepayments
made pursuant to Section 2.10(d) shall be applied by the Credit Parties first,
to the prepayment of the Term Loan and, second, to repay the Revolving Loans,
which amounts may be reborrowed, subject to the terms and conditions contained
herein. Any reduction of the Line of Credit or the Commitment, shall reduce the
Commitment of each Lender proportionately by its Proportionate Share of the
amount of such reduction. Prepayments of the Term Loan pursuant to this Section
2.10 shall be ratable and applied to the remaining installments of the Term Loan
in the inverse order of their scheduled maturities. Amounts prepaid on account
of the Term Loan may not be reborrowed.
(g) Notwithstanding anything to the contrary contained in
Section 2.10(d), if at any time any Credit Party shall receive any Net Cash
Proceeds in excess of $250,000 from any casualty or loss of any assets, such
proceeds shall be promptly deposited with the Agent who shall hold such proceeds
in a cash collateral account satisfactory to the Agent. From time to time upon
request, the Agent will release such proceeds to such Credit Party, as
necessary, to pay for replacement or rebuilding of the assets subject to such
casualty or loss. If such assets are not replaced or rebuilt within 120 days
following the date of the Credit Party's receipt of the proceeds of the loss or
casualty or if Safety fails to notify the Agent in writing on or before 45 days
after the Credit Party's receipt of the proceeds of such casualty or loss that
the Credit Party shall commence the replacement or rebuilding of such asset,
then, in either case, the Agent may apply any amounts in the cash collateral
account toward the prepayment of the Term Loan or reduction of the Line of
Credit in accordance with Section 2.10(f).
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SECTION 2.11. MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF
ACCOUNT. The Agent shall maintain an account on its books in the name of Safety
(the "Loan Account") in which Safety will be charged with all loans and advances
made by the Lenders to Safety or for Safety's account, including the Loans, the
Letter of Credit Obligations, the Fees, the Expenses and any other Obligations.
The Loan Account will be credited with all amounts received by the Agent from
the Borrowers or for the Borrowers' account, including, as set forth in Section
2.13, all amounts received in the Concentration Account from any Lockbox Bank.
The Agent shall send the Borrowers a monthly statement reflecting the activity
in the Loan Account. Absent manifest error, each monthly statement shall be an
account stated and shall be final, conclusive and binding on the Borrowers.
SECTION 2.12. PAYMENT PROCEDURES. The Borrowers hereby
authorize the Agent to charge the Loan Account with the amount of all interest,
Fees and Expenses and other payments to be made hereunder and under the other
Credit Documents. The Borrowers' obligations to the Agent and the Lenders with
respect to such payments shall be discharged by the Agent charging the Loan
Account as provided herein.
SECTION 2.13. COLLECTION OF ACCOUNTS. Subject to Section
7.1(q)(iv), Safety and Safety Canada shall at all times maintain lockboxes (the
"Lockboxes") and shall instruct all account debtors on their respective Accounts
to remit all Collections to their respective Lockboxes. Each Borrower, the Agent
and financial institutions selected by such Borrower and acceptable to the Agent
(the "Lockbox Banks") shall enter into separate agreements, substantially in the
form of Exhibit K (the "Lockbox Agreements"), which among other things shall
provide for the opening of an account for the deposit of Collections (a
"Collection Account") at a Lockbox Bank. All Collections and other amounts
received by a Borrower from any account debtor, in addition to all other cash
received from any other source, shall upon receipt be deposited into a
Collection Account. Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all available amounts held in each Collection Account
shall be wired each Business Day into an account (the "Concentration Account")
maintained by the Agent at Bankers Trust Company.
SECTION 2.14. APPLICATION OF PAYMENTS. All amounts received in
the Concentration Account from the Lockbox Banks shall be credited to the Loan
Account. All amounts received by the Agent from the Lockbox Banks, from
liquidation of Collateral or otherwise, shall be applied in the following order:
first, to the payment of any Fees, Expenses or other Obligations due and payable
to the Agent under any of the Credit Documents, including Agent Advances and any
other amounts advanced by the Agent on
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behalf of the Lenders; second, to the payment of any Fees, Expenses or other
Obligations due and payable to the Issuing Bank under any of the Credit
Documents; third, to the ratable payment of any Fees, Expenses or other
Obligations due and payable to the Lenders under any of the Credit Documents
other than those Obligations specifically referred to in this Section; fourth,
to the ratable payment of interest due on the Loans; fifth, to the ratable
payment of principal due on the Term Loan (to be applied to the installments
thereof in the inverse order of maturity); sixth, to the ratable payment of
principal due on the Revolving Loans; seventh, to cash collateralize Letters of
Credit in accordance with the provisions of Section 8.2(c); and eighth, to the
ratable payment of any then due and owing obligations arising under any Interest
Rate Agreement entered into by the Borrower in accordance with Section
7.2(b)(vii).
ARTICLE III
LETTERS OF CREDIT
SECTION 3.1. ISSUANCE OF LETTERS OF CREDIT. Subject to the
terms and conditions of this Credit Agreement and in reliance upon the
representations and warranties of the Borrowers set forth herein, the Issuing
Bank shall issue Letters of Credit hereunder at the request of Safety and for
its account, as more specifically described below. The Issuing Bank shall not be
obligated to issue any Letter of Credit for the account of Safety on or after
the Expiration Date or if at the time of such requested issuance:
(a) The face amount of such requested Letter of
Credit when added to the Letter of Credit Obligations then outstanding, would
cause the Letter of Credit Obligations to exceed (i) $2,000,000 or (ii) when
added to the aggregate amount of Revolving Loans and all Letter of Credit
Obligations then outstanding would cause the sum of the Revolving Loans and
Letter of Credit Obligations to exceed the lesser of (x) the Line of Credit and
(y) the Borrowing Base then in effect;
(b) Any order, judgment or decree of any
Governmental Authority or arbitrator shall purport by its terms to enjoin or
restrain the Issuing Bank from issuing such Letter of Credit or any Requirement
of Law applicable to the Issuing Bank or any request or directive (whether or
not having the force of law) from any Governmental Authority with jurisdiction
over the Issuing Bank shall prohibit, or request the Issuing Bank refrain from,
the issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction or
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reserve or capital requirement (for which the Issuing Bank is not otherwise
compensated) not in effect as of the Closing Date, or any unreimbursed loss,
cost or expense which was not applicable, in effect or known to the Issuing Bank
as of the Closing Date and which the Issuing Bank deems in good faith to be
material to it; or
(c) A default of any Lender's obligations to fund
under Section 3.6 exists, or such Lender is a Defaulting Lender, unless the
Agent and the Issuing Bank have entered into satisfactory arrangements with the
Borrowers to eliminate the Issuing Bank's risk with respect to such Lender,
including cash collateralization of such Lender's Proportionate Share of the
Letter of Credit Obligations.
SECTION 3.2. TERMS OF LETTERS OF CREDIT. The Letters of Credit
shall be in a form customarily used by the Issuing Bank or in such other form as
has been approved by the Issuing Bank. At the time of issuance, the amount and
the terms and conditions of each Letter of Credit, and of any drafts or
acceptances thereunder, shall be subject to approval by the Agent and Safety. In
no event may the term of any standby Letter of Credit issued hereunder exceed
360 days (except that such Letters of Credit may provide for annual renewal) and
all Letters of Credit issued hereunder shall expire no later than the date that
is five (5) Business Days prior to the Expiration Date. Any Letter of Credit
containing an automatic renewal provision shall also contain a provision
pursuant to which, notwithstanding any other provisions thereof, it shall not be
renewable on or after the Expiration Date and it shall expire no later than the
date that is five (5) Business Days prior to the Expiration Date.
Notwithstanding the foregoing, a Letter of Credit may have an expiry date
subsequent to the Expiration Date if such Letter of Credit contains such terms
and conditions as are satisfactory to the Agent and the Lenders.
SECTION 3.3. LENDERS' PARTICIPATION. Immediately upon issuance
or amendment by the Issuing Bank of any Letter of Credit in accordance with the
procedures set forth in Section 3.1 and 3.2, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from the Issuing Bank,
without recourse or warranty, an undivided interest and participation to the
extent of such Lender's Proportionate Share (based upon its Commitment) of the
liability with respect to such Letter of Credit (including, without limitation,
all obligations of the Borrowers with respect thereto, other than amounts owing
to the Issuing Bank consisting of Issuing Bank Fees) and any security therefor
or guaranty pertaining thereto.
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SECTION 3.4. NOTICE OF ISSUANCE. (i) Whenever Safety desires
the issuance of a Letter of Credit, Safety shall deliver to the Agent a written
notice no later than 12:00 noon New York City time at least five (5) Business
Days (or such shorter period as may be agreed to by the Issuing Bank) in advance
of the proposed date of issuance of a letter of credit request in substantially
the form attached as Exhibit F (a "Letter of Credit Request") accompanied by
such application and agreement for letter of credit (a "Letter of Credit
Agreement") as the Issuing Bank may specify to Safety in connection with such
requested Letter of Credit. The transmittal by Safety of each Letter of Credit
Request shall be deemed to be a representation and warranty by Safety that the
Letter of Credit may be issued in accordance with and will not violate any of
the requirements of Section 3.1 and 3.2. Prior to the date of issuance of each
Letter of Credit, Safety shall provide to the Agent a precise description of the
documents and the text of any certificate to be presented by the beneficiary of
such Letter of Credit which if presented by such beneficiary on or prior to the
expiration date of the Letter of Credit would require the Issuing Bank to make
payment under the Letter of Credit. The Issuing Bank, in its reasonable
judgment, may require changes in any such documents and certificates. No Letter
of Credit shall require payment against a conforming draft to be made thereunder
prior to the second Business Day (under the laws of the jurisdiction of the
Issuing Bank) after the date on which such draft is presented. A Letter of
Credit Request may be given in writing or electronically and, if requested by
the Agent, with prompt confirmation in writing. Any electronic Letter of Credit
Request shall be deemed to have been prepared by, or under the supervision of
the chief financial officer of Safety. The Agent shall promptly provide the
aforementioned Letter of Credit Request, document description and proposed text
of certification to the Issuing Bank.
SECTION 3.5. PAYMENT OF AMOUNT DRAWN UNDER LETTERS OF CREDIT.
In the event of any request for drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Bank shall notify the Agent, which shall notify
the Borrowers of such request, not later than 11:00 a.m. (New York City time) on
the Business Day immediately prior to the date on which the Issuing Bank intends
to honor such drawing. The Borrowers shall give notice to be received by the
Agent and the Issuing Bank not later than 1:00 p.m. (New York City time) on such
Business Day if they intend to reimburse the Issuing Bank for the amount of such
drawing with funds other than the proceeds of Loans. Such notice from the
Borrowers shall be irrevocable and, if given, the Borrowers shall jointly and
severally reimburse the Issuing Bank not later than the close of business (New
York City time) on the day on which such drawing is honored in an amount in same
day funds equal to the amount of such drawing. If the Agent shall
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not have timely received such notice (i) the Borrowers shall be deemed to have
timely given a Notice of Borrowing to the Agent to make Revolving Loans on the
date on which such drawing is honored in an amount equal to the amount of such
drawing and (ii) subject to satisfaction or waiver of the applicable conditions
specified in Article V and the other terms and conditions of Borrowings
contained herein, the Lenders shall, on the date of such drawing, make Revolving
Loans in the amount of such drawing, the proceeds of which shall be applied
directly by the Agent to reimburse the Issuing Bank for the amount of such
drawing or payment. If for any reason, proceeds of Revolving Loans are not
received by the Issuing Bank on such date in an amount equal to the amount of
such drawing, the Borrowers shall jointly and severally be obligated to and
shall reimburse the Issuing Bank, on the Business Day (under the laws of the
jurisdiction of the Issuing Bank) immediately following the date of such
drawing, in an amount in same day funds equal to the excess of the amount of
such drawing over the amount of such Loans, if any, which are so received, plus
accrued interest on such amount at the rate set forth in Section 4.1 for
Revolving Loans.
SECTION 3.6. PAYMENT BY LENDERS. In the event that the
Borrowers do not reimburse the Issuing Bank for the amount of any drawing
pursuant to Section 3.5, the Agent shall promptly notify each Lender of the
unreimbursed amount of such drawing and of such Lender's respective
participation therein. Each Lender shall make available to the Issuing Bank an
amount equal to its respective participation in same day funds, at the office of
the Issuing Bank specified in such notice, not later than 1:00 p.m. (New York
City time) on the first Business Day (under the laws of the jurisdiction of the
Issuing Bank) after the date notified by the Agent. In the event that any Lender
fails to make available to the Issuing Bank the amount of such Lender's
participation in such Letter of Credit as provided in this Section 3.6, the
Issuing Bank shall be entitled to recover such amount on demand from such Lender
together with interest at the Federal Funds Rate for three (3) Business Days and
thereafter at the Prime Rate. The Agent or the Issuing Bank shall distribute to
each other Lender which has paid all amounts payable by it under this Section
3.6 with respect to any Letter of Credit issued by the Issuing Bank such other
Lender's Proportionate Share of all payments subsequently received by the Agent
or the Issuing Bank from the Borrowers in reimbursement of drawings honored by
the Issuing Bank under such Letter of Credit when such payments are received.
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SECTION 3.7. NATURE OF ISSUING BANK'S DUTIES. In determining
whether to pay under any Letter of Credit, the Issuing Bank shall be responsible
only to determine that the documents and certificates required to be delivered
under that Letter of Credit have been delivered and that they comply on their
face with the requirements of that Letter of Credit. Subject to the last
sentence of this Section 3.7, as between the Borrowers, the Issuing Bank and
each other Lender, the Borrowers assume all risks of the acts and omissions of
the Issuing Bank, or misuse of the Letters of Credit issued by the Issuing Bank
by the respective beneficiaries of such Letters of Credit. In furtherance and
not in limitation of the foregoing, neither the Issuing Bank nor any of the
Lenders shall be responsible (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effects of any document submitted by any party in
connection with the application for and issuance of or any drawing honored under
such Letters of Credit even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged, (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit, or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason, (iii) for failure of the beneficiary
of any such Letter of Credit to comply fully with conditions required in order
to draw upon such Letter of Credit, (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex, telecopy or otherwise, whether or not they be in cipher, (v) for errors
in interpretation of technical terms, (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit, or of the proceeds thereof, (vii) for the
misapplication by the beneficiary of any such Letter of Credit, of the proceeds
of any drawing honored under such Letter of Credit, and (viii) for any
consequences arising from causes beyond the control of the Issuing Bank or the
other Lenders. None of the above shall affect, impair, or prevent the vesting of
any of the Issuing Bank's rights or powers hereunder. The Issuing Bank shall
have no liability to the Borrowers or any Lender for any action taken or omitted
to be taken by the Issuing Bank under or in connection with any Letter of
Credit, unless such action or omission constitutes gross negligence or willful
misconduct, as determined by a court of competent jurisdiction. Any action taken
or omitted to be taken by the Issuing Bank under or in connection with any
Letter of Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not create any liability of the Issuing Bank to the
Borrowers or any Lender.
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SECTION 3.8. OBLIGATIONS ABSOLUTE. The obligations of the
Borrowers to reimburse the Issuing Bank for drawings honored under the Letters
of Credit and the obligations of the Lenders under Section 3.6 shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Credit Agreement under all circumstances including, without
limitation, the following circumstances: (i) any lack of validity or
enforceability of this Credit Agreement, any Letter of Credit, any Letter of
Credit Agreement or any other agreement or instrument relating thereto (the
"Letter of Credit Related Documents"); (ii) the existence of any claim, setoff,
defense or other right which a Borrower or any Affiliate of a Borrower may have
at any time against a beneficiary or any transferee of any Letter of Credit (or
any Persons or entities for whom any such beneficiary or transferee may be
acting), the Issuing Bank, any Lender or any other Person, whether in connection
with this Credit Agreement, the other Credit Documents, the transactions
contemplated herein or therein or any unrelated transaction; (iii) any draft,
demand, certificate or any other documents presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; (iv) the surrender
or impairment of any security for the performance or observance of any of the
terms of any of the Credit Documents; (v) payment by the Issuing Bank under any
Letter of Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of Credit; or (vi)
failure of any drawing under a Letter of Credit or any non-application or
misapplication by that a Default or Event of Default shall have occurred and be
continuing. Nothing in this Section 3.8 shall release the Issuing Bank of its
duties set forth in Section 3.7.
ARTICLE IV
INTEREST, FEES AND EXPENSES
SECTION 4.1. INTEREST ON PRIME RATE LOANS. The Borrowers shall
jointly and severally pay to the Agent for the benefit of the Lenders interest
on Prime Rate Loans on the first Business Day of each month, calculated monthly
in arrears at an interest rate per annum equal to the Prime Lending Rate plus
the Applicable Margin on the average net balances owing to the Agent and the
Lenders at the close of business each day during such month. The rate under this
Section 4.1 shall change each day as the Prime Lending Rate changes.
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SECTION 4.2. INTEREST ON EURODOLLAR RATE LOANS. The Borrowers
shall jointly and severally pay to the Agent for the benefit of the Lenders
interest on Eurodollar Rate Loans on the last day of each Interest Period with
respect to such Eurodollar Rate Loan and, in the case of an Interest Period
longer than three months, on the date occurring every three months from the
first day of such Interest Period, at the date of conversion of such Eurodollar
Rate Loan (or a portion thereof) to a Prime Rate Loan, and at maturity of such
Eurodollar Rate Loan, in each case at a per annum interest rate equal during the
Interest Period for such Eurodollar Loan to the Adjusted Eurodollar Rate for the
Interest Period in effect for such Eurodollar Rate Loan plus the Applicable
Margin. After maturity of such Eurodollar Rate Loan (whether by acceleration or
otherwise), interest shall be payable upon demand. The Agent, upon determining
the Adjusted Eurodollar Rate for any Interest Period, shall promptly notify the
Borrowers and the Lenders by telephone (confirmed promptly in writing) or in
writing thereof. Each determination by the Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error.
SECTION 4.3. INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF
DEFAULT. From the date of occurrence of any Event of Default until the earlier
of the date upon which (i) all Obligations shall have been paid and satisfied in
full or (ii) such Event of Default shall have been cured (to the extent capable
of being cured) or waived, interest on the Loans, and Letter of Credit Fees on
Letter of Credit Obligations, shall each be payable on demand at a rate per
annum equal to, with respect to the Loans, the rate in effect under Section 4.1,
plus two percent (2%), and with respect to the Letter of Credit Obligations, the
rate in effect under Section 4.4(a), plus two percent (2%).
SECTION 4.4. LETTER OF CREDIT FEES.
(a) The Borrowers shall jointly and severally pay to
the Agent for distribution to the Lenders on the first Business Day of each
month a fee (the "Letter of Credit Fee"), in an amount equal to the sum of 2.50%
per annum of the daily average amount of Standby Letter of Credit Obligations
outstanding during the immediately preceding month and 1.375% per annum of the
daily average amount of Documentary Letter of Credit Obligations outstanding
during the immediately preceding month. In addition, the Borrower shall pay the
Agent, for its own benefit, the letter of credit facing fees outlined in the Fee
Letter.
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(b) The Borrowers shall jointly and severally
also pay the customary charges, fees and expenses of the Issuing Bank for the
issuance, administration and negotiation of each Letter of Credit (the "Issuing
Bank Fees"). Each determination by the Agent of Letter of Credit Fees and other
fees, charges and expenses under this Section shall be conclusive and binding
for all purposes, absent manifest error.
SECTION 4.5. UNUSED LINE FEE. The Borrowers shall jointly and
severally pay to the Agent for distribution to the Lenders on the first Business
Day of each month and on the Expiration Date a fee equal to 0.50% per annum
calculated monthly in arrears on the average unused portion of the total
Commitments at the close of business each day during such month or occurring
prior to the Expiration Date (the "Unused Line Fee").
SECTION 4.6. OTHER FEES AND EXPENSES. The Borrowers agree to
jointly and severally pay fees to BTCC in the amounts and at the times set forth
in the Fee Letter and shall be obligated to reimburse the Agent's Expenses
promptly upon demand.
SECTION 4.7. CALCULATIONS. All calculations of (i) interest
hereunder and (ii) Fees, including, without limitation, Unused Line Fees and
Letter of Credit Fees, shall be made by the Agent, on the basis of a year of 360
days for the actual number of days elapsed (including the first day but
excluding the last day) occurring in the period for which such interest or Fees
are payable. Each determination by the Agent of an interest rate, Fee or other
payment hereunder shall be conclusive and binding for all purposes, absent
manifest error.
SECTION 4.8. SPECIAL PROVISIONS RELATING TO EURODOLLAR RATE
LOANS.
(a) Continuation. With respect to any Borrowing
consisting of Eurodollar Rate Loans, Safety may (so long as no Default or Event
of Default has occurred and is continuing), subject to the provisions of Section
4.8(c), elect to maintain such Borrowing or any portion thereof as consisting of
Eurodollar Rate Loans by selecting a new Interest Period for such Borrowing,
which new Interest Period shall commence on the last day of the immediately
preceding Interest Period. Each selection of a new Interest Period shall be made
by notice given not later than 2:00 p.m. (New York City time) on the third
Business Day prior to the date of any such continuation relating to Eurodollar
Rate Loans, by Safety to the Agent. Such notice by Safety of a continuation (a
"Notice of Continuation") shall be by telephone or facsimile transmission, and
if by telephone, promptly confirmed in writing substantially in the form of
Exhibit D, in each case specifying (i) the date of such continuation, (ii) the
Type of Loans subject to such continuation, (iii) the aggregate
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amount of Loans subject to such continuation and (iv) the duration of the
selected Interest Period. Safety may elect to maintain more than one Borrowing
consisting of Eurodollar Rate Loans by combining such Borrowings into one
Borrowing and selecting a new Interest Period pursuant to this Section 4.8(a).
If Safety shall fail to select a new Interest Period for any Borrowing
consisting of Eurodollar Rate Loans in accordance with this Section 4.8(a), such
Revolving Loans will automatically, on the last day of the then existing
Interest Period therefore, convert into Prime Rate Loans. The Agent shall give
each Lender prompt notice by telephone or facsimile transmission of each Notice
of Continuation.
(b) Conversion. Safety may on any Business Day (so
long as no Default or Event of Default has occurred and is continuing), upon
notice (each such notice, a "Notice of Conversion") given to the Agent, and
subject to the provisions of Section 4.8(c), convert the entire amount of or a
portion of all Loans of one Type comprising the same Borrowing into Loans of
another Type; provided, however, that any conversion of any Eurodollar Rate
Loans into Loans of another Type shall be made on, and only on, the last day of
an Interest Period for such Eurodollar Rate Loans and, upon conversion of any
Prime Rate Loans into Loans of another Type, Safety shall pay accrued interest
to the date of conversion on the principal amount converted. Each such Notice of
Conversion shall be given not later than 10:00 a.m. (New York City time) on the
Business Day prior to the date of any proposed conversion into Prime Rate Loans
and on the third Business Day prior to the date of any proposed conversion into
Eurodollar Rate Loans. Subject to the restrictions specified above, each Notice
of Conversion shall be by telephone or facsimile transmission, and if by
telephone, promptly confirmed in writing substantially in the form of Exhibit E,
in each case specifying (i) the requested date of such conversion, (ii) the Type
of Loans to be converted, (iii) the portion of such Type of Loan to be
converted, (iv) the Type of Loan such Loans are to be converted into and (v) if
such conversion is into Eurodollar Rate Loans, the duration of the Interest
Period of such Loan. Each conversion shall be in an aggregate amount for the
Loans of all Lenders of not less than $1,000,000 or an integral multiple of
$100,000 in excess thereof. Safety may elect to convert the entire amount of or
a portion of all Loans of one Type comprising more than one Borrowing into Loans
of another Type by combining such Borrowings into one Borrowing; provided,
however, that if the Borrowings so combined consist of Eurodollar Rate Loans,
such Loans shall have Interest Periods ending on the same date.
(c) Certain Limitations on Eurodollar Rate Loans. The
right of Safety to maintain, select, continue or convert Eurodollar Rate Loans
shall be limited as follows:
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(i) If the Agent is advised by Bankers Trust
Company that it is not offering U.S. dollar deposits (in the
applicable amounts) in the London interbank market, or the
Agent determines that adequate and fair means do not otherwise
exist for ascertaining the Eurodollar Rate for Eurodollar Rate
Loans comprising any requested Borrowing, continuation or
conversion, the right of Safety to select or maintain
Eurodollar Rate Loans for such Borrowing or any subsequent
Borrowing shall be suspended until the Agent shall notify
Safety and the Lenders that the circumstances causing such
suspension no longer exists, and each Loan comprising such
Borrowing shall be made as a Prime Rate Loan.
(ii) If the Majority Lenders shall, at least
one Business Day before the date of any requested Borrowing,
continuation or conversion, notify the Agent that the
Eurodollar Rate for Loans comprising such Borrowing will not
adequately reflect the cost to such Lenders of making or
funding their respective Loans for such Borrowing, the right
of Safety to select Eurodollar Rate Loans for such Borrowing
shall be suspended until the Agent shall notify Safety and the
Lenders that the circumstances causing such suspension no
longer exist, and each Loan comprising such Borrowing shall be
made as a Prime Rate Loan.
(iii) If at any time any Lender determines (which
determination shall, absent manifest error, be conclusive and
binding on all parties) that the making, continuation or
conversion of any Loan as a Eurodollar Rate Loan has become
unlawful or impermissible by reason of compliance by that
Lender with any law, governmental rule, regulation or order of
any Governmental Authority (whether or not having the force of
law or resulting in costs or penalties), then, and in any such
event, such Lender may give notice of that determination in
writing, to Safety and the Agent and the Agent shall promptly
transmit the notice to each other Lender. Until such Lender
gives notice otherwise, the right of Safety to select
Eurodollar Rate Loans from that Lender shall be suspended and
each Eurodollar Rate Loan outstanding from that Lender shall
automatically and immediately convert to a Prime Rate Loan.
(iv) The right of Safety to select Eurodollar
Rate Loans for any Borrowing is suspended until the first
Business Day following the Syndication Date.
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(v) There shall not be outstanding at any one
time more than an aggregate of three (3) Borrowings of Loans
which consist of Eurodollar Rate Loans.
(vi) No Agent Advance shall be made as a
Eurodollar Rate Loan.
(d) Compensation.
(i) Each Notice of Continuation and Notice of
Conversion shall be irrevocable by and binding on Safety. In
the case of any Borrowing, continuation or conversion that the
related Notice of Borrowing, Notice of Continuation or Notice
of Conversion specifies is to be comprised of Eurodollar Rate
Loans, the Borrowers shall jointly and severally indemnify
each Lender against any loss, cost or expense incurred by such
Lender as a result of any failure to fulfill, on or before the
date for such Borrowing, continuation or conversion specified
in such Notice of Borrowing, Notice of Continuation or Notice
of Conversion, the applicable conditions set forth in Article
V, including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of
the liquidation or re-employment of deposits or other funds
acquired by such Lender to fund the Loan to be made by such
Lender as part of such Borrowing, continuation or conversion.
(ii) If any payment of principal of, or
conversion or continuation of, any Eurodollar Rate Loan is
made other than on the last day of the Interest Period for
such Loan as a result of a payment, prepayment, conversion or
continuation of such Loan or acceleration of the maturity of
the Notes pursuant to Article VIII or for any other reason,
the Borrowers shall jointly and severally, upon demand by any
Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such
payment, including, without limitation, any loss (excluding
loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other
funds acquired by any Lender to fund or maintain such Loan.
(iii) Calculation of all amounts payable to a
Lender under this Section 4.8(d) shall be made as though such
Lender elected to fund all Eurodollar Rate Loans by purchasing
U.S. dollar deposits in its
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Eurodollar Lending Office's interbank eurodollar market.
SECTION 4.9. INDEMNIFICATION IN CERTAIN EVENTS. If after the
Closing Date, either (i) any change in or in the interpretation of any law or
regulation becomes effective, including, without limitation, with respect to
reserve requirements, applicable to the Agent, to any of the Lenders, or to
Bankers Trust Company, or any other banking or financial institution from whom
any of the Lenders borrows funds or obtains credit (a "Funding Bank"), or (ii)
the Agent, a Funding Bank or any of the Lenders complies with any future
guideline or request from any central bank or other Governmental Authority or
(iii) the Agent, a Funding Bank or any of the Lenders determines that the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof has or would have the effect
described below, or the Agent, a Funding Bank or any of the Lenders complies
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, and
in the case of any event set forth in this clause (iii), such adoption, change
or compliance has or would have the direct or indirect effect of reducing the
rate of return on any of the Lenders' capital as a consequence of its
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Agent's or such Funding Bank's or Lender's policies as the case may be with
respect to capital adequacy) by an amount deemed by such Lender to be material,
and any of the foregoing events described in clauses (i), (ii) or (iii)
increases the cost to the Agent, the Issuing Bank or any of the Lenders of (A)
funding or maintaining the total Commitments or (B) issuing, making or
maintaining any Letter of Credit or of purchasing or maintaining any
participation therein, or reduces the amount receivable in respect thereof by
the Agent, the Issuing Bank or any Lender, then the Borrowers shall jointly and
severally upon demand by the Agent, pay to the Agent, for the account of each
applicable Lender or, as applicable, the Issuing Bank or a Funding Bank,
additional amounts sufficient to indemnify the Lenders against such increase in
cost or reduction in amount receivable. A certificate as to the amount of such
increased cost and setting forth in reasonable detail the calculation thereof
shall be submitted to the Borrowers by the Agent, or the applicable Lender,
Issuing Bank or Funding Bank, and shall be conclusive absent manifest error.
Prior to making any such demand, each of the Lenders, the Agent, Funding Bank or
other such party shall use reasonable efforts to designate a different Lending
Office if such a designation could reduce or eliminate any such payment.
<PAGE> 56
SECTION 4.10. NET PAYMENTS.
(a) Any and all payments by the Borrowers hereunder,
under the Loans or under the Letters of Credit to or for the benefit of any
Lender, the Issuing Bank or the Agent shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings and penalties, interests and all other
liabilities with respect thereto ("Taxes"), including any Taxes imposed under
Section 7701(l) of the Internal Revenue Code, excluding, (i) in the case of each
such Lender, the Issuing Bank or the Agent, taxes imposed on its net income
(including, without limitation, any taxes imposed on branch profits) and
franchise taxes imposed on it by the jurisdiction under the laws of which such
Lender, the Issuing Bank or the Agent (as the case may be) is organized or any
political subdivision thereof, (ii) in the case of each Lender, taxes imposed on
its net income (including, without limitation, any taxes imposed on branch
profits), and franchise taxes imposed on it, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof, (iii)
in the case of each such Lender, the Issuing Bank and the Agent, any Taxes that
are in effect and that would apply to a payment to such Lender, the Issuing Bank
or Agent, as applicable, as of the Closing Date (other than any Taxes imposed
under Section 7701(l) of the Internal Revenue Code), and (iv) if any Person
acquires any interest in this Credit Agreement, any Loan or Letter of Credit
pursuant to the provisions hereof, or a Foreign Lender or the Agent changes the
office in which the Borrowing is made, accounted for or booked (any such person,
or such Foreign Lender or the Agent in that event, being referred to as a "Tax
Transferee"), any Taxes (other than Taxes imposed under Section 7701(l) of the
Internal Revenue Code) to the extent that they are in effect and would apply to
a payment to such Tax Transferee as of the date of the acquisition of such
interest or change in office, as the case may be (all such nonexcluded Taxes
being hereinafter referred to as "Covered Taxes"). If the Borrowers shall be
required by law to deduct any Covered Taxes from or in respect of any sum
payable hereunder, under any Loan or under any Letter of Credit to or for the
benefit of any Lender, the Issuing Bank or the Agent or any Tax Transferee, (A)
the sum payable shall be increased as may be necessary so that after making all
required deductions of Covered Taxes (including deductions of Covered Taxes
applicable to additional sums payable under this Section 4.10) such Lender, the
Issuing Bank, the Agent or such Tax Transferee, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been made,
(B) the Borrowers shall make such deductions and (C) the Borrowers shall jointly
and severally pay the full amount so deducted to the relevant taxation authority
or other authority in accordance with applicable law.
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(b) In addition, the Borrowers agree to jointly and
severally pay any present or future stamp, documentary, excise, privilege,
intangible or similar levies that arise at any time or from time to time (i)
from any payment made under any and all Credit Documents, (ii) from the transfer
of the rights of the Lender under any Credit Documents to any transferee, or
(iii) from the execution or delivery by the Borrowers of, or from the filing or
recording or maintenance of, or otherwise with respect to the exercise by the
Agent or the Lenders of their rights under, any and all Credit Documents
(hereinafter referred to as "Other Taxes").
(c) The Borrowers jointly and severally indemnify
each Lender, the Issuing Bank, the Agent, and any Tax Transferee for the full
amount of (i) Covered Taxes imposed on or with respect to amounts payable
hereunder, (ii) Other Taxes, and (iii) any Taxes (other than Covered Taxes
imposed by any jurisdiction on amounts payable under this Section 4.10) paid by
such Lender, the Issuing Bank or the Agent or such Tax Transferee, as the case
may be, and any liability (including penalties, interest and expenses) arising
solely therefrom or with respect thereto. Payment of this indemnification shall
be made within 30 days from the date such Lender, the Issuing Bank or the Agent
or Tax Transferee certifies and sets forth in reasonable detail the calculation
thereof as to the amount and type of such Taxes. Any such certificate submitted
by the Lender, the Issuing Bank or Agent or Tax Transferee in good faith to the
Borrowers shall, absent manifest error, be final, conclusive and binding on all
parties.
(d) Within 30 days after having received a receipt of
Covered Taxes or Other Taxes, the Borrowers will furnish to the Agent the
original or a certified copy of a receipt evidencing payment thereof.
(e) On or before the Closing Date, each Foreign
Lender shall deliver to the Agent and the Borrowers (i) two valid, duly
completed copies of IRS Form 1001 or 4224 or successor applicable form, as the
case may be, and any other required form, certifying in each case that such
Foreign Lender is entitled to receive payments under this Credit Agreement or
the Loans payable to it without deduction or withholding of any United States
federal income taxes or with such withholding imposed at a reduced rate (the
"Reduced Rate"), and (ii) a valid, duly completed IRS Form W-8 or W-9 or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax. Each such Foreign Lender shall also
deliver to the Agent and the Borrowers two further copies of said Form 1001 or
4224 and W-8 or W-9, or successor applicable forms, or other manner of required
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or otherwise is required to be resubmitted as a
condition to
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obtaining an exemption from a required withholding of United States federal
income tax or entitlement to having such withholding imposed at the Reduced Rate
or after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrowers and the Agent, and such extensions
or renewals thereof as may reasonably be requested by the Borrowers and the
Agent, certifying (i) in the case of a Form 1001 or 4224 that such Foreign
Lender is entitled to receive payments under this Credit Agreement or the Notes
payable to it without deduction or withholding of any United States federal
income taxes, unless in any such case any change in a tax treaty to which the
United States is a party, or any change in law or regulation of the United
States or official interpretation thereof has occurred after the Closing Date
and prior to the date on which any such delivery would otherwise be required
that renders all such forms inapplicable or that would prevent such Foreign
Lender from duly completing and delivering any such form with respect to it, and
such Foreign Lender advises the Borrowers and the Agent that it is not capable
of receiving payments without any deduction or withholding at the Reduced Rate,
or (ii) in the case of a Form W-8 or W-9, establishing an exemption from United
States backup withholding tax.
(f) If a Tax Transferee that is organized under the
laws of a jurisdiction outside of the United States acquires an interest in this
Credit Agreement or any Loan or a Foreign Lender changes the office through
which Loans are made, accounted for or booked, the transferor, or the applicable
Foreign Lender, in the case of a change of office, shall cause such Tax
Transferee to agree that, on or prior to the effective date of such acquisition
or change, as the case may be, it will deliver to the Borrowers and the Agent
(i) two valid, duly completed copies of IRS Form 1001 or 4224 or successor
applicable form, as the case may be, and any other required form, certifying in
each case that such Tax Transferee is entitled to receive payments under this
Credit Agreement and the Notes payable to it without deduction or withholding of
United States federal income tax or with such withholding imposed at a Reduced
Rate; and (ii) a valid, duly completed IRS Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding tax. Each Tax Transferee that delivers to the
Borrowers and the Agent a Form 1001 or 4224, and Form W-8 or W-9 and any other
required form, pursuant to the next preceding sentence, further undertakes to
deliver two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms, or other manner of required certification, as the
case may be, on or before the date that any such form expires or becomes
obsolete or otherwise is required to be resubmitted as a condition to obtaining
an exemption from a required withholding of United States federal income tax or
entitlement to having such withholding imposed at the Reduced Rate or after the
occurrence of any event requiring a change in
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the most recent form previously delivered by it to the Borrowers and the Agent,
and such extensions or renewals thereof as may reasonably be requested by the
Borrowers and the Agent, certifying (i) in the case of a Form 1001 or 4224 that
such Tax Transferee is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes or with such
withholding imposed at the Reduced Rate, unless any change in treaty, law or
regulation or official interpretation thereof has occurred after the effective
date of such acquisition or change and prior to the date on which any such
delivery would otherwise be required that renders all such forms inapplicable or
that would prevent such Tax Transferee from duly completing and delivering any
such form with respect to it, and such Tax Transferee advises the Borrowers and
the Agent that it is not capable of receiving payments (a) without any deduction
or withholding of United States federal income tax or (b) with such withholding
at the Reduced Rate, as the case may be, or (ii) in the case of a Form W-8 or
W-9, establishing an exemption from United States backup withholding tax.
(g) If any Taxes for which the Borrowers would be
required to make payment under this Section 4.10 are imposed, the Lender, the
Issuing Bank or the Agent, as the case may be, shall use its reasonable best
efforts to avoid or reduce such Taxes by taking any appropriate action
(including, without limitation, assigning its rights hereunder to a related
entity or a different office) which would not in the sole opinion of such
Lender, the Issuing Bank or Agent be otherwise disadvantageous to such Lender,
the Issuing Bank or Agent, as the case may be.
(h) Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and obligations of the
Borrowers contained in this Section 4.10 shall survive the payment in full of
the Obligations.
SECTION 4.11. AFFECTED LENDERS. If a Borrower is obligated to
pay to any Lender any amount under Sections 4.9 or 4.10 materially in excess of
any such amounts payable to the other Lenders, the Borrowers may, if no Default
or Event of Default then exists, replace such Lender with another lender
acceptable to the Agent, and such Lender hereby agrees to be so replaced subject
to the following:
(a) The obligations of the Borrowers hereunder to the
Lender to be replaced (including such increased or additional costs incurred
from the date of notice to the Borrowers of such increase or additional costs
through the date such Lender is replaced hereunder) shall be paid in full to
such Lender concurrently with such replacement;
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(b) The replacement Lender shall be a bank or other
financial institution that is not subject to the increased costs arising under
Section 4.10 which have effectuated the Borrowers' election to replace any
Lender hereunder, and each such replacement Lender shall execute and deliver to
the Agent such documentation satisfactory to the Agent pursuant to which such
replacement Lender is to become a party hereto, conforming to the provisions of
Section 10.8, with a Commitment equal to that of the Lender being replaced and
shall make a Loan or Loans in the aggregate principal amount equal to the
aggregate outstanding principal amount of the Loan or Loans of the Lender being
replaced;
(c) Upon such execution of such documents referred to
in clause (b) and repayment of the amounts referred to in clause (a), the
replacement lender shall be a "Lender" with a Commitment as specified
hereinabove and the Lender being replaced shall cease to be a "Lender"
hereunder, except with respect to indemnification provisions under this Credit
Agreement, which shall survive as to such replaced Lender;
(d) The Agent shall reasonably cooperate in
effectuating the replacement of any Lender under this Section 4.11, but at no
time shall the Agent be obligated to initiate any such replacement; and
(e) Any Lender replaced under this Section 4.11 shall
be replaced at the Borrowers' sole cost and expense and at no cost or expense to
the Agent or any of the Lenders.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. CONDITIONS TO INITIAL LOANS AND LETTERS OF
CREDIT. The obligation of each Lender to fund its Proportionate Share of the
initial Loan and the obligation of the Issuing Bank to issue the initial Letter
of Credit is subject to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the best
knowledge of the Borrowers, threatened litigation, proceeding, inquiry or other
action seeking an injunction or other restraining order, damages or other relief
with respect to the transactions contemplated by this Credit Agreement, the
other Credit Documents or the transactions contemplated hereby and thereby or
the Borrowers' other business activities, except where such litigation,
proceeding, inquiry or other action could not reasonably be expected to have a
Material Adverse Effect.
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(b) The Borrowers shall have paid all accrued fees
and expenses of the Agent (which have been invoiced) in connection with the
negotiation, preparation, execution and delivery of the Credit Documents
(including, without limitation, the reasonable accrued fees and expenses of
counsel to the Agent).
(c) The Agent and the Lenders shall have received
each of the agreements, opinions, reports, approvals, consents, certificates and
other documents set forth on the Closing Document List attached hereto as
Schedule 5.1(c), in each case, in form and substance satisfactory to the
Lenders.
(d) All documentation relating to the transactions
contemplated hereby (including, without limitation, the Credit Documents) shall
be in form and substance satisfactory to the Agent and the Lenders.
(e) All Existing Indebtedness shall be on terms and
conditions (including, without limitation, amount, pricing, amortization,
intercreditor arrangements and extent of subordination) satisfactory to the
Agent.
(f) Safety and its Subsidiaries shall have been
released from all obligations under the Existing Loan Facility and all related
documents and agreements pursuant to a release in form and substance
satisfactory to the Agent and all liens and security interests related thereto
shall be released or terminated.
(g) Except as set forth on Schedule 5.1(g), and
except for (i) the filing of U.C.C. financing statements under the Code, the
filing of the Borrower Intellectual Property Security Agreement and the
Guarantor Intellectual Property Security Agreement in the United States Patent
and Trademark Office and the Canadian Intellectual Property Office and the
filing of the Hypothecs and the Hypothecation Agreements under the laws of
Quebec, (ii) consents or authorizations which have been obtained or filings
which have been made, and which in either case are in full force and effect,
(iii) the filings of the releases of any Liens on the Collateral pledged in
connection with the Existing Loan Facility or (iv) consents or authorizations
the failure to obtain or filings the failure to make could not reasonably be
expected to have a Material Adverse Effect, no consent or authorization of,
filing with or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the Borrowings hereunder, the grant
of the Liens pursuant to the Credit Documents or the continuing operations of
Safety and its Subsidiaries following such consummation or with the execution,
delivery, performance, validity or enforceability of this Credit Agreement, the
Notes, the Letters of Credit or the other Credit Documents.
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(h) (i) No change, occurrence, event or development
or event involving a prospective change that is reasonably likely to have a
Material Adverse Effect shall have occurred and be continuing since December 31,
1996 or (ii) there shall not have occurred a substantial impairment of the
financial markets generally that is reasonably likely to materially and
adversely affect the transactions contemplated hereby, in each case as
determined by the Agent and each Lender in its sole discretion.
(i) Subject to the provisions of Section 7.1(q)(iv),
there shall be established cash management systems for Safety and its
Subsidiaries on terms and conditions satisfactory to the Agent including,
without limitation, establishment of the Borrowers' principal bank accounts with
the Agent, establishment of the Disbursement Accounts, and establishment of the
Lockboxes with the Lockbox Banks.
(j) Counsel to the Agent shall have performed a legal
review satisfactory to the Agent of all of each Credit Party's material
contracts and tax, litigation, environmental and other potential contingent
liabilities, and of the corporate and capital structure of Safety and its
Subsidiaries.
(k) Each Credit Party shall be in compliance with all
material indentures or agreements to which it is a party.
(l) The Agent shall have received a solvency
certificate, in form and substance satisfactory to the Agent, duly executed by
an authorized officer of each Credit Party.
(m) The Liens and all other security interests in
favor of the Agent, for the benefit of the Lenders, shall have been duly
perfected and shall constitute first and prior Liens.
(n) The Agent shall have received evidence
satisfactory to it that there will be Unused Availability in an amount
satisfactory to it after giving effect to the Revolving Loans to be borrowed and
the Letters of Credit to be issued on the Closing Date.
(o) The Agent shall have received evidence
satisfactory to it that Safety shall have received gross cash proceeds from an
equity sale of at least $15,000,000 on terms and conditions and from an investor
satisfactory to the Agent.
(p) The Agent shall have performed a due diligence
review with respect to the Credit Parties (including, without limitation, a
review of the management information systems and a collateral examination of the
working capital
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assets of the Credit Parties), and the Agent shall be satisfied with the results
thereof.
(q) The Agent shall have received projections of the
financial condition and results of operations of Safety and its Subsidiaries for
the five-year period ending December 31, 2002, certified by an Authorized
Officer, prepared on a monthly basis for the first year, a quarterly basis for
the second year and annually thereafter, and such projections shall be
satisfactory to the Agent.
(r) The Agent shall have received all of the products
liability insurance policies of Safety and its Subsidiaries and all riders and
endorsements thereto, and the Agent shall be satisfied with the scope and amount
of coverage, the deductibles, the effectiveness and all other terms and
conditions of such policies.
(s) The Agent shall have received such other
approvals, opinions or documents as any Lender or the Issuing Bank through the
Agent may reasonably request.
SECTION 5.2. CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF
CREDIT. The obligation of each Lender to fund its Proportionate Share of any
requested Loan or of the Agent to cause the Issuing Bank to issue any requested
Letter of Credit is subject to the conditions precedent set forth below. Each
Notice of Borrowing and each Letter of Credit Request, and each issuance by the
Borrowers of a check drawn against, or request for transfer from, the
Disbursement Accounts shall constitute a representation and warranty that such
conditions are satisfied.
(a) All representations and warranties contained in
this Credit Agreement and the other Credit Documents shall be true and correct
in all material respects on and as of the date of such Notice of Borrowing or
Letter of Credit Request or issuance of a check drawn against or request for
transfer from the Disbursement Account, as if then made, other than
representations and warranties that relate solely to an earlier date;
(b) No Default or Event of Default shall have
occurred, or would result from the making of the requested Loan or the issuance
of the requested Letter of Credit, which has not been cured (to the extent
capable of being cured) or waived; and
(c) No event has occurred since December 31, 1996
which has had or could reasonably be expected to have a Material Adverse Effect.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
The Borrowers represent and warrant as follows:
(a) Organization and Qualification. Safety and each
Subsidiary (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
capacity, power and authority to own its properties and assets and to transact
the businesses in which it presently is, or proposes to be, engaged and (iii) is
duly qualified and is authorized to do business and is in good standing in each
jurisdiction where it presently is engaged in business. Schedule 6.1(a) lists
all jurisdictions in which Safety and each Subsidiary are qualified to do
business as foreign corporations as of the Closing Date.
(b) Authority. Each Credit Party has the requisite
corporate capacity, power and authority to execute, deliver and perform each of
the Credit Documents to which it is a party. All corporate action necessary for
the execution, delivery and performance by any Credit Party of any of the Credit
Documents has been taken.
(c) Enforceability. This Credit Agreement is and,
when executed and delivered, each other Credit Document will be the legal, valid
and binding obligation of any Credit Party which is a party thereto, enforceable
in accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency or similar laws affecting creditors' rights
generally, and (ii) general principles of equity.
(d) No Conflict. Except as described in Schedule
6.1(d), the execution, delivery and performance of each Credit Document by or on
behalf of any Credit Party does not contravene (i) the Governing Documents of
any Credit Party, or (ii) any Requirement of Law or (iii) any franchise,
license, permit, indenture, contract, lease, agreement, instrument or other
commitment to which it is a party or by which it or any of its properties are
bound, and will not, except as contemplated herein, result in the imposition of
any Liens upon any of its properties.
(e) Consents and Filings. No consent, authorization,
approval or filing is required in connection with the execution, delivery and
performance by any Credit Party of this Credit Agreement or any Credit Document,
or the continuing
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operations of Safety and any Subsidiary, except: (i) those that have been
obtained or made; (ii) filings necessary to create, perfect or retain the
perfection of Liens against the Collateral; (iii) in the case of the continuing
operations of Safety and each Subsidiary, those the failure to obtain would not
have a Material Adverse Effect.
(f) Government Regulation. Neither Safety nor any
Subsidiary is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940, or any other Requirement of Law that limits its ability to
incur indebtedness or its ability to consummate the transactions contemplated in
this Credit Agreement and the other Credit Documents.
(g) Solvency. The fair saleable value of the assets
of Safety and its Subsidiaries on a consolidated basis and each Borrower on an
individual basis exceeds all its probable liabilities, including those to be
incurred pursuant to this Credit Agreement and the other Credit Documents. None
of either of the Borrowers individually or Safety and its Subsidiaries, taken as
a whole (i) has unreasonably small capital in relation to the business in which
it is or proposes to be engaged and (ii) has incurred, or believes that it will
incur, after giving effect to the transactions contemplated by this Credit
Agreement and the other Credit Documents, debts beyond its ability to pay as
such debts become due.
(h) Rights in Collateral; Priority of Liens. All
property consisting of Collateral is owned or leased by a Credit Party, free and
clear of any and all Liens in favor of third parties, other than Permitted
Liens. No Credit Party owns any real or immovable property. Upon the proper
filing of the UCC financing statements and Forms for registration in the
Province of Quebec, the security interests granted pursuant to the Credit
Documents constitute valid and enforceable first, prior and perfected Liens on
the Collateral to the extent such Liens can be perfected by the filing of such
financing statements and forms.
(i) Financial Data. Safety has provided to the Agent
and each of the Lenders complete and accurate copies of annual audited Financial
Statements for the fiscal year ended December 31, 1996, reported on by Grant
Thornton LLP, unaudited Financial Statements for the fiscal period ended March
31, 1997 and Monthly Financial Statements for April, May and June 1997. Such
Financial Statements have been prepared in accordance with GAAP consistently
applied throughout the periods involved and fairly present the respective
financial positions, results of operations and cash flows of Safety and its
Subsidiaries for each of the periods covered. Neither Safety nor any of its
Subsidiaries has any Contingent Obligation, or liability for
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taxes or long-term leases, which is not reflected in such Financial Statements
or the footnotes thereto. During the period from December 31, 1996 to and
including the date hereof there has been no sale, transfer or other disposition
by Safety or any of its Subsidiaries of any material part of its business or
property and no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to the
consolidated financial condition of Safety and its Subsidiaries at December 31,
1996. Since December 31, 1996, except as set forth on Schedule 6.1(i), (a) there
has been no change, occurrence, development or event which has had or could
reasonably be expected to have a Material Adverse Effect and (b) no dividends or
other distributions have been declared, paid or made upon the capital stock of
any Credit Party, except for dividends paid to Safety by its Subsidiaries, nor
has any of the capital stock of Safety or any of its Subsidiaries been redeemed,
retired, purchased or otherwise acquired for value by Safety or any of its
Subsidiaries.
(j) Projections. The projected balance sheet, statement of
operations, statement of cash flows and other financial statements of Safety
individually and Safety and its Subsidiaries on a consolidated basis delivered
to the Lenders pursuant to Section 5.1(q) were prepared in good faith on the
basis of assumptions which were fair in light of the conditions existing at the
time of delivery of such projections, and represented, at the time of delivery,
Safety's best estimate of its and its Subsidiaries' future financial
performance.
(k) Locations of Offices, Records and Inventory. The address of
the principal place of business and chief executive office of each Credit Party
is set forth on Schedule 6.1(k). The books and records of each Credit Party, and
all of its chattel paper and records of Accounts, are (or will be) maintained
exclusively at the locations for such Credit Party set forth on such Schedule.
There is no jurisdiction in which any Credit Party has any Collateral (except
for vehicles and Inventory in transit for processing) other than those
jurisdictions with respect to such Credit Party identified on Schedule 6.1(k). A
complete list of the legal name and address of each warehouse at which any
Credit Party's Inventory or Equipment is located is set forth on Schedule
6.1(k). Schedule 6.1(k) indicates whether each premises listed thereon is leased
or owned by such Credit Party. None of the receipts received and to be received
by any Credit Party from any warehouseman state that any Credit Party's
Inventory or Equipment covered thereby is to be delivered to bearer or to the
order of a named person or to a named person and such named person's assigns
(other than a Credit Party). All Accounts of Safety Canada are and will continue
to be payable to Safety Canada in the Province of Quebec.
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(l) Subsidiaries; Ownership of Stock. The only direct or indirect
Subsidiaries of Safety are those listed on Schedule 6.1(l)(i). Safety is the
record and beneficial owner of all of the shares of capital stock of each of the
Subsidiaries listed on Schedule 6.1(l)(ii). 3232301 is the record and beneficial
owner of all of the shares of capital stock of Safety Canada. Except as set
forth on Schedule 6.1(l)(iii), there are no proxies, irrevocable or otherwise,
with respect to such shares, and no equity securities of any of the Subsidiaries
are or may become required to be issued by reason of any options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any capital stock of any such Subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any such Subsidiary is or
may become bound to issue additional shares of its capital stock or securities
convertible into or exchangeable for such shares. All of such shares so owned by
Safety and by 3232301 are owned by Safety and by 3232301 free and clear of any
Liens.
(m) No Judgments or Litigation. (i) Except as set forth on
Schedule 6.1(m)(i), no judgments, orders, writs or decrees are outstanding
against Safety or any of its Subsidiaries nor is there now pending or, to the
best of the Borrowers' knowledge after diligent inquiry, threatened any
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against Safety or any of its Subsidiaries that (A) could
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect or (B) purports to affect the legality, validity or
enforceability of this Credit Agreement, any Note or any other Credit Document
or the consummation of the transactions contemplated hereby or thereby.
(ii) Except as set forth on Schedule 6.1(m)(ii), no judgments,
orders, writs or decrees with respect to any products liability claims are
outstanding against Safety or any of its Subsidiaries nor is there now pending
or, to the best of the Borrowers' knowledge after diligent inquiry, threatened
any litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against Safety or any of its Subsidiaries with respect to any
products liability claim where the amount sought to be recovered is in excess of
$250,000. In addition to an accurate description of each products liability
claim involving Safety and its Subsidiaries, Schedule 6.1(m)(ii) sets forth an
accurate description of the status of each such claim, the estimated liability
therefor, the reserves taken therefor and the insurance coverage applicable with
respect thereto (including the total amount of insurance coverage available to
pay each such claim).
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(n) Licenses and Permits. Safety and each Subsidiary has obtained
and holds in full force and effect, all franchises, licenses, leases, permits,
certificates, authorizations, qualifications, easements, rights of way and other
rights and approvals which are necessary or advisable for the operation of its
business as presently conducted and as proposed to be conducted.
(o) No Defaults. Except as set forth on Schedule 6.1(o), neither
Safety nor any of its Subsidiaries is in default under any term of any
indenture, contract, lease, agreement, instrument or other commitment to which
any of them is a party or by which any of them is bound which could,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect. Except as set forth on Schedule 6.1(o), the Borrowers know of no
dispute regarding any such indenture, contract, lease, agreement, instrument or
other commitment which would, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect.
(p) Labor Matters. Schedule 6.1(p) accurately sets forth all labor
contracts to which Safety or any of its Subsidiaries is a party as of the
Closing Date, and their dates of expiration. There are no existing or threatened
strikes, lockouts or other disputes relating to any collective bargaining or
similar agreement to which Safety or any of its Subsidiaries is a party which
would, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
(q) Compliance with Law. Except as set forth on Schedule 6.1(q),
neither Safety nor any of its Subsidiaries has violated or failed to comply with
any Requirement of Law, including without limitation ERISA and Environmental
Laws which violation or failure to comply could, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect.
(r) ERISA.
(i) None of Safety, any of its Subsidiaries or any ERISA
Affiliate maintains or contributes to any Plan, other than those listed
on Schedule 6.1(r).
(ii) Safety, each of its Subsidiaries and each ERISA Affiliate
have fulfilled all contribution obligations for each Plan (including
obligations related to the minimum funding standards of ERISA and the
Internal Revenue Code).
(iii) No Termination Event has occurred nor has any other event
occurred that is likely to result in a Termination Event. None of
Safety or its Subsidiaries,
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any ERISA Affiliate, or any fiduciary of any Plan is subject to any
direct or indirect liability with respect to any Plan under any
Requirement of Law or agreement.
(iv) None of Safety or its Subsidiaries or any ERISA Affiliate
is required to or reasonably expects to be required to provide security
to any Plan under Section 401(a)(29) of the Internal Revenue Code.
(v) Safety, each of its Subsidiaries and each ERISA Affiliate
are in compliance in all material respects with any applicable
provisions of ERISA with respect to all Plans. There has been no
prohibited transaction as defined in Section 406 of ERISA or Section
4975 of the Internal Revenue Code (a "Prohibited Transaction") with
respect to any Plan or, to the best knowledge of the Borrowers, with
respect to any Multiemployer Plan, which could result in any material
liability to Safety, its Subsidiaries or any other ERISA Affiliates.
Safety, its Subsidiaries and each ERISA Affiliate have made when due
any and all payments required to be made under any agreement relating
to a Multiemployer Plan or any Requirement of Law pertaining thereto.
With respect to each Plan and Multiemployer Plan, Safety, its
Subsidiaries and each ERISA Affiliate have not incurred any liability
to the PBGC and have not had asserted against them any penalty for
failure to fulfill the minimum funding requirements of ERISA.
(vi) To the Borrowers' best knowledge, Safety and its
Subsidiaries are able to pay benefits under each Multiemployer Plan
when due.
(vii) Neither Safety, its Subsidiaries nor any ERISA Affiliate
has instituted or intends to institute proceedings to terminate any
Plan.
(viii) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in, and as of the date of, the
most recent actuarial report for such Plan, does not exceed the
aggregate fair market value of the assets of such Plan.
(ix) Neither Safety, its Subsidiaries nor any ERISA Affiliate
has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan.
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(x) To the extent that any Plan is insured, Safety, its
Subsidiaries and all ERISA Affiliates have paid when due all premiums
required to be paid for all periods through and including the Closing
Date. To the extent that any Plan is funded other than with insurance,
Safety, its Subsidiaries and all ERISA Affiliates have made when due
all contributions required to be paid for all periods through and
including the Closing Date.
(s) Business and Properties. Neither the business nor the
properties of Safety or any Subsidiary is affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that could reasonably be expected to have
a Material Adverse Effect.
(t) Investment Company. No Credit Party is an "investment
company," or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. Neither the making of any Loans, nor the
issuance of any Letters of Credit, nor the application of the proceeds or
repayment thereof by a Borrower, nor the consummation of the other transactions
contemplated by this Credit Agreement or the other Credit Documents, will
violate any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(u) Compliance with Environmental Laws. Except as set forth on
Schedule 6.1(u), (i) neither Safety nor any of its Subsidiaries is the subject
of a judicial or administrative proceeding or investigation relating to the
violation of any Environmental Laws, or asserting potential liability arising
from the release or disposal by any Person of any Hazardous Materials which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect, (ii) neither Safety nor any of its Subsidiaries has filed or
received any notice under any Environmental Laws concerning the treatment,
storage, disposal, spill or release or threatened release of any Hazardous
Materials at, on, beneath or adjacent to property owned or leased by Safety or
any of its Subsidiaries, or the release or threatened release at any other
location of any Hazardous Material generated, used, stored, treated, transported
or released by or on behalf of Safety or any of its Subsidiaries which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect; and (iii) neither Safety nor any of its Subsidiaries has
knowledge of any contingent liability for any release of any Hazardous
Materials, in each case which individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect.
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(v) Real Property. Except as set forth on Schedule 6.1(v), no
Credit Party either owns or leases any real or immovable property.
(w) Material Contracts. Set forth on Schedule 6.1(w) is a complete
and accurate list of all Material Contracts, showing as of the date hereof the
parties, subject matter and term thereof. Each such contract has been duly
authorized, executed and delivered by each Credit Party that is a party thereto,
and, to Safety's best knowledge, each other party thereto. Except as described
on Schedule 6.1(w), none of the Material Contracts contains any restrictions on
Safety or any of its Subsidiaries or any of their respective properties which
could have a Material Adverse Effect, and each Material Contract is in full
force and effect and is binding upon and enforceable against all parties thereto
in accordance with its terms, and there exists no default under such contract by
any party thereto.
(x) Intellectual Property. Set forth on Schedule 6.1(x) hereto is
a complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights, and all applications therefor and material licenses
thereof, of each Credit Party, showing as of the date hereof the jurisdiction in
which registered, the registration number, the date of registration and the
expiration date. Each Credit Party owns or licenses all material patents,
trademarks, service-marks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of foregoing, which
are necessary or advisable for the operation of its business as presently
conducted or proposed to be conducted. To the best of Safety's knowledge, no
Credit Party has infringed any patent, trademark, service-mark, tradename,
copyright, license or other right owned by any other Person by the sale or
employment of any product, process, method, substance, part or other material
presently contemplated to be sold or employed, where such sale or employment
could reasonably be expected to have a Material Adverse Effect and, except as
set forth on Schedule 6.1(x), no claim or litigation is pending, or to the best
of Safety's knowledge, threatened against or affecting any Credit Party that
contests its right to sell or use any such product, process, method, substance,
part or other material that could reasonably be expected to have a Material
Adverse Effect.
(y) Taxes and Tax Returns.
(i) Except as set forth on schedule 6.1(y), Safety and each of
its Subsidiaries has properly completed and timely filed, without
request for extension, all income tax returns it is required to file.
The information filed is complete and accurate in all material
respects. All deductions taken in such
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income tax returns are appropriate and in accordance with applicable
laws and regulations, except deductions that may have been disallowed
but are being challenged in good faith and for which adequate reserves
have been made in accordance with GAAP.
(ii) All taxes, assessments, fees and other governmental charges
for periods beginning prior to the date hereof have been timely paid
(or, if not yet due, adequate reserves therefor have been established)
and neither Safety nor any of its Subsidiaries has any material
liability for taxes in excess of the amounts so paid or reserves so
established.
(iii) No deficiencies for taxes have been claimed, proposed or
assessed by any taxing or other Governmental Authority against Safety
or any of its Subsidiaries and no tax liens have been filed. There are
no pending or threatened audits, investigations or claims for or
relating to any liability for taxes and there are no matters under
discussion with any Governmental Authority which could result in a
material additional liability for taxes. Either the federal income tax
returns of Safety have been audited by the Internal Revenue Service and
such audits have been closed, or the period during which any
assessments may be made by the Internal Revenue Service has expired
without waiver or extension for all years up to and including the
fiscal year of the Borrower ended December 31, 1993. No extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to Safety or any of its
Subsidiaries.
(iv) Neither Safety nor any of its Subsidiaries is a party to or
has any obligation under any written tax sharing agreement or agreement
regarding payments in lieu of taxes.
(z) Corporate and Trade Name. During the past five years, except
as set forth on Schedule 6.1(z), no Credit Party has been known by or used any
other corporate or fictitious name.
(aa) Title to Property. Each of Safety and its Subsidiaries has
(i) good and marketable fee simple title to or valid leasehold interests in all
of its real property and (ii) good and marketable title to all of its other
property (including, without limitation, all real and other property in each
case as reflected in the Financial Statements delivered to the Agent hereunder),
other than, with respect to properties described in clause (ii) above,
properties disposed of in the
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ordinary course of business or in any manner otherwise permitted under this
Credit Agreement since the date of the most recent audited consolidated balance
sheet of Safety and its Subsidiaries, and in each case subject to no Liens other
than those Liens that are permitted by Section 7.2(a).
(bb) Accuracy and Completeness of Information. All factual
information heretofore, contemporaneously or hereafter furnished by or on behalf
of Safety or any of its Subsidiaries in writing to the Agent or any Lender for
purposes of or in connection with this Credit Agreement or any Credit Documents,
or any transaction contemplated hereby or thereby is or will be true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any material fact
necessary to make such information not misleading at such time. There are no
facts now known to any officer of the Borrowers which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect and
which have not been set forth herein (including the Schedules hereto), in the
Financial Statements, or any certificate, opinion or other written statement
made or furnished by the Borrowers to the Agent.
(cc) Affiliate Transactions. Except as set forth on Schedule
6.1(ac), neither Safety nor any of its Subsidiaries is a party to or bound by
any agreement or arrangement (whether oral or written) to which any Affiliate of
Safety or any Subsidiary is a party except (i) in the ordinary course of and
pursuant to the reasonable requirements of Safety's or such Subsidiary's
business and (ii) upon fair and reasonable terms no less favorable to Safety and
such Subsidiary than it could obtain in a comparable arm's-length transaction
with an unaffiliated Person.
(dd) No Other Indebtedness. After giving effect to the closing of
this Credit Agreement and the transactions contemplated hereby, neither Safety
nor any of its Subsidiaries has any Indebtedness other than Indebtedness that is
permitted under Section 7.2(b).
(ee) Locations of Molds. Set forth on Schedule 6.1(ae) is a
listing of all of the Molds owned by any Credit Party and the location thereof
as of April 30, 1997.
(ff) Safety Canada Trade Payable. The Safety Canada Trade Payable
constitutes a legal, valid and binding obligation of Safety Canada to Safety and
is indebtedness which is non-interest bearing.
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(gg) Survival of Representations. All representations made by any
Credit Party in this Credit Agreement and in any other Credit Document executed
and delivered in connection herewith shall survive the execution and delivery
hereof and thereof and the closing of the transactions contemplated hereby.
ARTICLE VII
COVENANTS OF THE BORROWER
SECTION 7.1. AFFIRMATIVE COVENANTS. Until termination of this
Credit Agreement and all outstanding Letters of Credit and payment and
satisfaction of all Obligations due hereunder:
(a) Financial Reporting. Safety shall timely deliver to each
Lender the following information:
(i) Annual Financial Statements. As soon as available, but not
later than ninety (90) days after each fiscal year end, beginning with
the fiscal year ending December 31, 1997: (A) Safety's annual audited
Financial Statements; (B) a comparison in reasonable detail to the
prior year audited Financial Statements; (C) the Auditors' unqualified
opinion, "Management Letter" and a statement indicating that the
Auditors have not obtained knowledge of the existence of any Default or
Event of Default during their audit; (D) a narrative discussion of
Safety's consolidated financial condition and results of operations and
the consolidated liquidity and capital resources for such fiscal year,
prepared by an Authorized Officer; (E) a compliance certificate,
substantially in the form of Exhibit M (a "Compliance Certificate"),
with an attached schedule of calculations demonstrating compliance with
the Financial Covenants; and (F) a certificate demonstrating the
calculation of Excess Cash Flow. To the extent that Safety's annual
report on Form 10-K contains any of the foregoing items, the Lenders
will accept Safety's Form 10-K in lieu of such items.
(ii) Projections. Prior to December 31 of each year, beginning
with the fiscal year ended December 31, 1997, projections of Safety's
financial condition and results of operations for the next five years
prepared in good faith and based upon reasonable assumptions,
containing projected consolidating balance sheets, statements of
operations, statements of cash flows and
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statements of changes in shareholders equity on a monthly basis for the
first year, quarterly for the second year and annually thereafter. The
projections provided pursuant to this Section 7.1(a)(ii) are for
information purposes only and will not be construed by the Agent or the
Lenders as a guaranty of results or performance in the future.
(iii) Quarterly Financial Statements. As soon as available, but
not later than forty-five (45) days after the end of each of the first
three (3) fiscal quarters, beginning with the fiscal quarter ending
June 30, 1997: (A) Safety's unaudited Financial Statements as of the
fiscal quarter then ended, and for the fiscal year to date; (B) a
comparison in reasonable detail to the Financial Statements for the
corresponding periods of the prior fiscal year; (C) the certification
of an Authorized Officer that such Financial Statements have been
prepared in accordance with GAAP (subject to year-end audit adjustments
and footnotes); (D) a narrative discussion of Safety's consolidated
financial condition and results of operations and the consolidated
liquidity and capital resources for such fiscal quarter and fiscal year
to date, prepared by an Authorized Officer; and (E) a Compliance
Certificate signed by an Authorized Officer with an attached schedule
of calculations demonstrating compliance with the Financial Covenants.
To the extent that Safety's quarterly report on Form 10-Q contains any
of the foregoing terms, the Lenders will accept Safety's Form 10-Q in
lieu of such items.
(iv) Monthly Financial Statements. As soon as available, but not
later than thirty (30) days after the end of each month other than
December, commencing with the month of July, 1997, and forty-five (45)
days after the end of each fiscal year of Safety: (A) a balance sheet
for Safety as at the end of such month and for the fiscal year to date
and statements of operations and cash flows for such month and for the
fiscal year to date; (B) a comparison to the balance sheet, statement
of operations and statement of cash flows for the same periods in the
prior year; (C) a certification by an Authorized Officer that such
balance sheet, statement of operations and statement of cash flows have
been prepared in accordance with GAAP (subject to year-end audit
adjustments and footnotes); and (D) a Compliance Certificate signed by
an Authorized Officer with an attached schedule of calculations
demonstrating compliance with the Financial Covenants.
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(v) Monthly Comparison to Prior Projections. As soon as
available, but not later than thirty (30) days after the end of each
month other than December, commencing with the month of July, 1997, and
forty-five (45) days after the end of each fiscal year of Safety, a
comparison of actual results of operations, cash flow and capital
expenditures for Safety and its Subsidiaries for such month and for the
period from the beginning of the current fiscal year through the end of
such month with amounts previously projected for those periods and with
actual results for corresponding periods in the previous fiscal year.
(vi) Public Filings. As soon as filed, copies of all 10-Ks,
10-Qs, 8-Ks, proxy statements, annual reports, quarterly reports,
registration statements and any other public filings or other
communications made by Safety to its stockholders or the Securities
Exchange Commission from time to time pursuant to the Exchange Act or
the Securities Act of 1933, as amended.
(b) Collateral Reporting. Safety shall timely deliver to the Agent
the following certificates and reports:
(i) Weekly and Monthly Borrowing Base Certificates. Weekly,
before 12:00 noon on the second Business Day of each week (except the
last week of each month); monthly, within two (2) Business Days after
the last Business day of each month, and at any other time requested by
the Agent during the continuance of a Default or Event of Default, a
borrowing base certificate, substantially in the form of Exhibit B (the
"Borrowing Base Certificate"), which shall: (A) detail the Borrowers'
Eligible Accounts Receivable and the Borrowers' Eligible Inventory as
of each Saturday of the immediately preceding week and as of the last
day of each month, as applicable (or as of such other date as the Agent
may request); (B) prepared by or under the supervision of an Authorized
Officer and certified by such officer subject only to adjustment upon
completion of the normal year-end audit of physical inventory; and (C)
attached to such additional schedules and other information as the
Agent may reasonably request (including, without limitation, a monthly
aging of Accounts).
(ii) Appraisals. When requested by the Agent, a report of
Inventory, based upon a physical count, which shall describe the
Borrowers' Inventory by category and by item (in reasonable detail) and
report the then appraised value (at lower of cost or market) of such
Inventory.
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(iii) Further Assurances. When requested by the Agent, any further
information regarding the Collateral, business affairs and financial
condition of Safety or any of its Subsidiaries.
(c) Notification Requirements. Safety shall timely give the Agent
and each of the Lenders the following notices:
(i) Notice of Defaults. Promptly, and in any event within two
(2) Business Days after becoming aware of the occurrence of a Default
or Event of Default, a certificate signed by an Authorized Officer
specifying the nature thereof and Safety's proposed response thereto,
each in reasonable detail.
(ii) Proceedings or Adverse Changes. Promptly, and in any event
within five (5) Business Days after Safety becomes aware of (A) any
proceeding being instituted or threatened to be instituted by or
against Safety or any of its Subsidiaries in any federal, state,
provincial, local or foreign court or before any commission or other
regulatory body (federal, state, provincial, local or foreign)
involving a sum in excess of $250,000, (B) any order, judgment or
decree in excess of $250,000 being entered against Safety or any of its
Subsidiaries or any of their respective properties or assets, (C) any
proceeding with respect to a products liability claim being instituted
or threatened to be instituted against Safety of any of its
Subsidiaries in any federal, state, provincial, local or foreign court
or before any commission or other regulatory body (federal, state,
provincial, local or foreign) or (D) any actual or prospective change,
development or event which has had or could reasonably be expected to
have a Material Adverse Effect, a written statement describing such
proceeding, order, judgment, decree, change, development or event and
any action being taken with respect thereto by Safety or any such
Subsidiary.
(iii) ERISA Notices.
(A) Promptly, and in any event within five (5) Business
Days after Safety, any of its Subsidiaries or any ERISA Affiliate
knows or has reason to know that a Termination Event has occurred,
a written statement of an Authorized Officer describing such
Termination Event and any action that is being taking with respect
thereto by Safety, any such Subsidiary or ERISA Affiliate,
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and any action taken or threatened by the Internal Revenue
Service, Department of Labor or PBGC. Safety, such Subsidiary and
the ERISA Affiliate shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor;
(B) promptly, and in any event within three (3) Business
Days after the filing thereof with the Internal Revenue Service, a
copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by Safety, any of its
Subsidiaries or any ERISA Affiliate with respect to such request;
(C) promptly, and in any event within three (3) Business
Days after receipt by Safety, any of its Subsidiaries or any ERISA
Affiliate, of notice of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a
Benefit Plan, copies of each such notice;
(D) promptly, and in any event within three (3) Business
Days after receipt by Safety, any of its Subsidiaries or any ERISA
Affiliate, notice (including the nature of the event and, when
known, any action taken or threatened by the Internal Revenue
Service or the PBGC with respect thereto) of:
(1) any Prohibited Transaction which could subject
Safety or any ERISA Affiliate to a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan, or any trust
created thereunder,
(2) any cessation of operations (by Safety or any ERISA
Affiliate) at a facility in the circumstances described in Section
4063(e) of ERISA,
(3) a failure by Safety or any ERISA Affiliate to make
a payment to a Plan required to avoid imposition of a lien under
Section 302(f) of ERISA,
(4) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of
ERISA, or
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(5) any change in the actuarial assumptions or funding
methods used for any Plan, where the effect of such change is to
materially increase or materially reduce the unfunded benefit
liability or obligation to make periodic contributions;
(E) promptly upon the request of the Agent or any Lender,
each annual report (IRS Form 5500 series) and all accompanying
schedules, the most recent actuarial reports, the most recent
financial information concerning the financial status of each Plan
administered or maintained by Safety or any ERISA Affiliate, and
schedules showing the amounts contributed to each such Plan by or
on behalf of Safety or any ERISA Affiliate in which any of their
personnel participate or from which such personnel may derive a
benefit, and each Schedule B (Actuarial Information) to the annual
report filed by Safety or any ERISA Affiliate with the Internal
Revenue Service with respect to each such Plan; and
(F) Promptly upon the filing thereof, copies of any Form
5310, or any successor or equivalent form to Form 5310, filed with
the PBGC in connection with the termination of any Plan.
(iv) Material Contracts. Promptly, and in any event within five
(5) Business Days after any Material Contract of Safety or any of its
Subsidiaries is terminated or amended or any new Material Contract is
entered into, a written statement describing such event, with copies of
amendments or new contracts, and an explanation of any actions being
taken with respect thereto.
(v) Collateral Matters. At least twenty (20) Business Days
prior written notice to the Agent of any change in the location of any
Collateral or in the location of the chief executive office or place of
business of any Credit Party from the locations specified in Schedule
6.1(k). At least ten (10) Business Days prior to any such change,
Safety shall cause to be executed and delivered to the Agent any
financing statements, Collateral Access Agreements or other documents
reasonably required by the Agent, all in form and substance reasonably
satisfactory to the Agent.
(vi) Location of Molds, etc. Safety shall give the Agent notice
of the change in the location of any
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of the Molds or the assertion by a third party of a claim to any of the
Molds.
(d) Corporate Existence. Safety shall, and shall cause each of its
Subsidiaries to, (i) maintain its corporate existence (except for mergers
permitted by Section 7.2(d), provided the Agent receives five (5) Business Days
prior written notice thereof), (ii) maintain in full force and effect all
material licenses, bonds, franchises, leases, trademarks and qualifications to
do business, and all material patents, contracts and other rights necessary or
advisable to the profitable conduct of their businesses, except where such
leases, contracts or patents expire in accordance with their respective terms
and (iii) continue in, and limit their operations to, the same general lines of
business as presently conducted by them.
(e) Books and Records; Inspections. Safety agrees to maintain, and
to cause each of its Subsidiaries to maintain, books and records pertaining to
the Collateral in such detail, form and scope as is consistent with good
business practice. Safety agrees that the Agent or its agents may at any time
and from time to time contact customers indebted on the Accounts of Safety or
any of its Subsidiaries to verify information concerning such Accounts and the
amounts owing thereon. Safety agrees that the Agent or its agents may enter upon
the premises of Safety or any of its Subsidiaries at any time and from time to
time, during normal business hours and upon reasonable notice under the
circumstances, and at any time at all on and after the occurrence of a Default
or Event of Default which continues beyond the expiration of any grace or cure
period applicable thereto, and which has not otherwise been waived by the Agent,
for the purposes of (i) inspecting and verifying the Collateral, (ii) inspecting
and/or copying (at the Borrowers' expense) any and all records pertaining
thereto, and (iii) discussing the affairs, finances and business of Safety with
any officers, employees and directors of Safety or with the Auditors.
(f) Insurance. Safety agrees to maintain, and to cause each of its
Subsidiaries to maintain, products liability insurance, public liability
insurance, business interruption insurance, third party property damage
insurance and replacement value insurance on its assets (including the
Collateral) under such policies of insurance, with such insurance companies, in
such amounts and covering such risks as are at all times satisfactory to the
Agent in its commercially reasonable judgment. All policies covering the
Collateral and are to name the Agent as an additional insured and the loss payee
in case of loss, and are to contain such other provisions as the Agent may
reasonably require to fully protect the Agent's interest in the Collateral and
to any payments to be made under such policies.
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(g) Casualty Loss. Safety shall provide written notice to the
Agent and the Lenders of the occurrence of any of the following events within
five (5) Business Days after the occurrence of such event: any asset or property
owned or used by any Credit Party is (i) damaged or destroyed, or suffers any
material loss, or (ii) condemned, confiscated or otherwise taken, in whole or in
part, or the use thereof is otherwise diminished so as to render impracticable
or unreasonable the use of such asset or property for the purposes to which such
asset or property were used immediately prior to such condemnation, confiscation
or taking, by exercise of the powers of condemnation or eminent domain or
otherwise, and in either case the amount of the damage, destruction, loss or
diminution in value is in excess of $1,000,000 (collectively, a "Casualty
Loss"). Safety shall, and shall cause its Subsidiaries to, diligently file and
prosecute its claim or claims for any award or payment in connection with a
Casualty Loss.
(h) Taxes. Safety agrees to pay, when due, and to cause each of
its Subsidiaries to pay when due, all taxes lawfully levied or assessed against
Safety, any of its Subsidiaries or any of the Collateral before any penalty or
interest accrues thereon; provided, however, that, unless such taxes have become
a federal tax or ERISA Lien on any of the assets of Safety or any of its
Subsidiaries, no such tax need be paid if the same is being contested, in good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or other appropriate provision shall have been made
therefor as required in order to be in conformity with GAAP.
(i) Compliance With Laws. Safety agrees to comply, and to cause
each of its Subsidiaries to comply, with all Requirements of Law applicable to
the Collateral or any part thereof, or to the operation of its business or its
assets generally, unless Safety or such Subsidiary contests any such
Requirements of Law in a reasonable manner and in good faith and except where
the failure to so comply could not be reasonably expected to have a Material
Adverse Effect.
(j) Use of Proceeds. The Loans made and Letters of Credit issued
hereunder shall be used by Safety solely (i) to refinance the Existing
Indebtedness owed by Safety under the Existing Loan Facility, (ii) for the
Borrowers' general corporate purposes and (iii) to pay the costs and expenses
incurred in connection with the transactions contemplated hereby. The Borrowers
shall not use any portion of the proceeds of any Revolving Loans for the purpose
of purchasing or carrying any "margin stock" (as defined in Regulation G of the
Board of Governors of the Federal Reserve System) in any manner which violates
the provisions of Regulation G or X of said Board of Governors or for any other
purpose in violation of any applicable
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statute or regulation, or of the terms and conditions of this Credit Agreement.
(k) Fiscal Year. Safety agrees to maintain, and to cause each of
its Subsidiaries to maintain, its fiscal year as a year ending on the Saturday
closest to December 31.
(l) Maintenance of Property. Except as permitted by Section
7.2(e), Safety agrees to keep, and to cause each of its Subsidiaries to keep,
all property useful and necessary to their respective businesses in good working
order and condition (ordinary wear and tear excepted) in accordance with their
past operating practices and not to commit or suffer any material waste with
respect to any of their properties.
(m) ERISA Documents. Safety will cause to be delivered to the
Agent, upon the Agent's request, each of the following: (i) a copy of each Plan
(or, where any such plan is not in writing, complete description thereof) (and
if applicable, related trust agreements or other funding instruments) and all
amendments thereto, all written interpretations thereof and written descriptions
thereof that have been distributed to employees or former employees of Safety or
its Subsidiaries; (ii) the most recent determination letter issued by the
Internal Revenue Service with respect to each Benefit Plan; (iii) for the three
most recent plan years, Annual Reports on Form 5500 Series required to be filed
with any governmental agency for each Benefit Plan; (iv) all actuarial reports
prepared for the last three plan years for each Benefit Plan; (v) a listing of
all Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by Safety or any ERISA Affiliate to each such
plan and copies of the collective bargaining agreements requiring such
contributions; (vi) any information that has been provided to Safety or any
ERISA Affiliate regarding withdrawal liability under any Multiemployer Plan; and
(vii) information relating to the aggregate amount of the most recent annual
payments made to former employees of Safety or any ERISA Affiliate under any
Retiree Health Plan.
(n) Environmental and Other Matters.
(i) Safety and its Subsidiaries will conduct their businesses so
as to comply in all material respects with all applicable Environmental
Laws, in all jurisdictions in which any of them is doing business,
including, without limitation, compliance in all material respects with
the terms and conditions of all permits and governmental
authorizations, except to the extent that Safety or any of the
Subsidiaries are contesting, in good faith by appropriate legal
proceedings, any such Environmental Law or interpretation thereof or
application thereof;
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provided, further, that Safety and each of the Subsidiaries shall
comply in all material respects with the applicable order of any court
or other governmental agency relating to such Environmental Laws unless
Safety or the Subsidiaries shall currently be prosecuting an appeal or
proceedings for review and shall have secured a stay of enforcement or
execution or other arrangement postponing enforcement or execution
pending such appeal or proceedings for review. If Safety or any of the
Subsidiaries shall (A) receive written notice that any material
violation of any federal, state or local Environmental Law may have
been committed or is about to be committed by Safety or any of the
Subsidiaries, (B) receive written notice that any administrative or
judicial complaint or order has been filed or is about to be filed
against Safety or any of the Subsidiaries alleging material violations
of any federal, state, provincial or local Environmental Law, or
requiring Safety or any of the Subsidiaries to take any action in
connection with the release of toxic or hazardous substances into the
environment or (C) receive any written notice from a federal, state,
provincial or local governmental agency or private party alleging that
Safety or any of the Subsidiaries may be liable or responsible for
material costs associated with a response to or cleanup of a release of
a toxic or hazardous substance into the environment or any damages
caused thereby, Safety shall provide the Agent and the Lenders with a
copy of such notice within ten (10) Business Days after the receipt
thereof by Safety or any of the Subsidiaries. Within ten (10) Business
Days after Safety has knowledge of the enactment or promulgation of any
federal, state or local Environmental Law, which could reasonably be
expected to have a Material Adverse Effect, Safety shall provide the
Agent and the Lenders with notice thereof. The Borrowers shall promptly
take all reasonable actions necessary to prevent the imposition of any
Liens on any of its properties arising out of or related to any
environmental matters. At the request of the Agent, the Borrowers shall
provide the Agent with any additional information relating to
environmental matters and any potential related liability resulting
therefrom as the Agent may reasonably request.
(ii) For purposes of this Section 7.1(n), "material" means any
noncompliance or basis of liability that could reasonably be expected
to subject the Borrower or any of its Subsidiaries to liability in
excess of $250,000.
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(o) Security Interests. Safety will defend, and will cause its
Subsidiaries to defend, the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein, other than claims
relating to Liens permitted by the Credit Documents. Safety agrees to comply,
and will cause its Subsidiaries to comply, with the requirements of all
provincial, state and federal laws in order to grant to the Lenders valid and
perfected first security interests in the Collateral. The Agent is hereby
authorized by each Borrower to file any financing statements or other forms
covering the Collateral whether or not such Borrower's signatures appear
thereon. Safety agrees, and shall cause its Subsidiaries, to do whatever the
Agent may reasonably request, from time to time, by way of: filing notices of
liens, financing statements, and amendments, renewals and continuations thereof;
cooperating with the Agent's representatives; keeping stock records; paying
claims which could, if unpaid, become a Lien on the Collateral; and performing
such further acts as the Agent may reasonably require in order to effect the
purposes of this Credit Agreement and the other Credit Documents. Any and all
fees, costs and expenses incurred in connection with the actions contemplated by
this Section 7.1(o) shall be borne and paid by the Borrowers. If same are not
promptly paid by the Borrowers, the Agent may pay same on the Borrowers' behalf,
and the amount thereof shall be an Obligation secured hereby and due to the
Agent on demand.
(p) Trademarks. Safety shall do and cause to be done all things
necessary to preserve and keep in full force and effect all of its and its
Subsidiaries' material registrations of trademarks, service marks and other
marks, trade names or other trade rights.
(q) Further Assurances. (i) Safety shall take, and shall cause
each of its Subsidiaries to take, all such further actions and execute all such
further documents and instruments as the Agent may at any time reasonably
determine in its sole discretion to be necessary or desirable to further carry
out and consummate the transactions contemplated by the Credit Documents, to
cause the execution, delivery and performance of the Credit Documents to be duly
authorized and to perfect or protect the Liens (and the priority status thereof)
of the Agent for the benefit of the Lenders on the Collateral.
(ii) In the event that any Person becomes a Subsidiary after
the date hereof, (it being understood that this Section 7.1(q)(ii) is not and
shall not be deemed to be a consent to the creation or acquisition of any such
Subsidiary), Safety will promptly notify the Agent and cause such Subsidiary to
execute and deliver to the Agent a counterpart of the Guaranty, Contribution
Agreement, the Guarantor Security Agreement and the Guarantor Intellectual
Property Security Agreement, and to take all such further actions and execute
all such further documents
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and instruments as may be required to grant and perfect in favor of the Agent,
for the benefit of the Lenders, a first-priority security interest in all the
assets of such Subsidiary. Safety shall deliver to the Agent, together with such
documents, all legal opinions and other Credit Documents that the Agent may
reasonably request. In the event that Safety or any of its Subsidiaries creates
a new Subsidiary, all of the capital stock or partnership interests of such new
Subsidiary shall promptly be duly and validly pledged to the Agent for the
benefit of the Lenders pursuant to the Credit Documents, subject to no other
Liens.
(iii) With respect to the assets of any Credit Party that are
not subject to a perfected Lien in favor of the Agent, Safety shall, and shall
cause each of its Subsidiaries to, promptly following the request of the Agent,
(A) execute and deliver to the Agent such amendments to the relevant Collateral
Documents or such other documents as the Agent shall deem necessary or advisable
to grant to the Agent, for the benefit of the Lenders, a Lien on such assets,
(B) take all actions necessary or advisable to cause such Lien to be duly
perfected in accordance with all applicable Requirements of Law, and (C) deliver
to the Agent legal opinions relating to the matters described in clauses (A) and
(B) above, which in each case shall be in form and substance reasonably
satisfactory to the Agent.
(iv) (A) Within three (3) days after the Closing Date and
without limiting the generality of Section 7.1 (q)(iii), Safety Canada shall
cause to be delivered to the Agent a blocked account agreement, in form and
substance acceptable to the Agent, executed by a financial institution
acceptable to the Agent, pursuant to which Safety Canada agrees to maintain a
Collection Account with such financial institution and such financial
institution agrees, among other things, to follow the Agent's instructions with
respect to all collections deposited in the Collection Account (the "Blocked
Account Agreement"); (B) within 45 days after the Closing Date, without limiting
the generality of Section 7.1(q)(iii), (i) Safety shall cause to be delivered to
the Agent a new Lockbox Agreement, duly executed by Safety and a Lockbox Bank,
and (ii) Safety Canada shall cause to be delivered to the Agent a Lockbox
Agreement, duly executed by Safety Canada and a Lockbox Bank which shall
supersede and replace the Blocked Account Agreement.
(v) Within 45 days after the Closing Date and without limiting
the generality of Section 7.1(q)(iii), Safety shall cause Safety 1st (Europe)
Limited to (A) execute and deliver to the Agent such documents as the Agent
shall deem necessary or advisable to grant to the Agent, for the benefit of the
Lenders, a Lien on all of the assets of Safety 1st (Europe) Limited, (B) take
all actions necessary or advisable to cause such Lien to be duly perfected in
accordance with all applicable
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Requirements of Law, and (C) deliver to the Agent legal opinions relating to the
matters described in clauses (A) and (B) above, which in each case shall be in
form and substance reasonably satisfactory to the Agent.
(vi) Within 45 days after the Closing Date and without
limiting the generality of Section 7.1(q)(iii), Safety shall obtain BAAN U.S.A.
Inc.'s consent to a collateral assignment to the Agent of the Software License
and Support Agreement executed by Safety on March 27, 1996.
(vii) Within ten (10) days after the Closing Date, Safety
shall deliver to the Agent certificates evidencing key man life insurance
policies on the life of Michael Lerner in a minimum amount of $5,000,000 and on
the life of Richard Wenz in a minimum amount of $1,000,000, naming the Agent as
an additional insured.
(r) Safety Canada Trade Payable. The Safety Canada Trade Payable
shall, at all times, be non-interest bearing. Safety Canada shall pay the Safety
Canada Trade Payable from Collections which it deposits in a Collection Account
pursuant to Section 2.13 (the "Canada Collections Account") by transfer to the
Agent of amounts in the Canada Collections Account maintained by Safety Canada
in accordance with Section 2.13. Safety acknowledges that the Safety Canada
Trade Payable, outstanding from time to time, will be reduced to the extent of
any transfer from the Canada Collections Account to the Agent. The Borrowers
agree to notify the Agent immediately if the difference between the Safety
Canada Trade Payable and all Accounts of Safety Canada is equal to or less than
$500,000. The Borrowers shall execute such further documents and do such further
acts as the Agent may reasonably determine are necessary to effectuate the
provisions of this Section 7.1(r).
SECTION 7.2. NEGATIVE COVENANTS. Until termination of this Credit
Agreement and all outstanding Letters of Credit and payment and satisfaction of
all Obligations due hereunder:
(a) Liens, Etc. Safety will not, nor will it permit any of its
Subsidiaries to, directly or indirectly at any time create, incur, assume or
suffer to exist any Lien on or with respect to any of its properties of any
character (including, without limitation, Accounts) whether now owned or
hereafter acquired, except:
(i) Liens created by the Collateral Documents;
(ii) Permitted Liens;
(iii) the Liens existing on the date hereof and described on
Schedule 7.2(a);
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(iv) Purchase Money Liens;
(v) cash deposits for bids and other performance obligations
under contracts entered into in the ordinary course of business;
(vi) Liens on a Credit Party's goods, or documents evidencing
title to such goods, which are established in the ordinary course of
such Credit Party's business for the purpose of such Credit Party's
receiving interim trade financing; provided, however, that no such Lien
shall extend to or cover any property other than such goods or
documents so financed;
(vii) the replacement, extension or renewal of any Lien permitted
by clauses (iii), (iv) or (v) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or contingent
obligor) of the Indebtedness secured thereby; and
(viii) leases or subleases of real estate or immovable property
(other than the real estate or immovable property upon which Agent is
granted a mortgage) granted by a Credit Party to other Persons in the
ordinary course of business and not materially interfering with the
conduct of the business of such Credit Party and cash security deposits
made pursuant to real estate or immovable property leases in customary
amounts.
(b) Indebtedness. Safety will not, nor will it permit any of its
Subsidiaries to, directly or indirectly, at any time create, incur, assume or
suffer to exist, any Indebtedness other than:
(i) Indebtedness under the Credit Documents;
(ii) Indebtedness secured by Liens permitted by Section
7.2(a)(iii);
(iii) the Existing Indebtedness;
(iv) indorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(v) Indebtedness secured by purchase money liens on equipment
acquired after the date of this Credit Agreement not to exceed $500,000
in the
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aggregate outstanding at any one time ("Purchase Money Liens") so long
as such Indebtedness shall be from parties and on terms and conditions
satisfactory to the Agent. Each Purchase Money Lien shall attach only
to the property to be acquired and the debt incurred shall not exceed
one hundred percent (100%) of the purchase price of the item or items
of equipment purchased; and
(vi) Indebtedness constituting Contingent Obligations otherwise
permitted by Section 7.2(v); and
(vii) Indebtedness of Safety under Interest Rate Agreements
provided that the outstanding exposure in connection therewith shall be
subject to the Agent's approval; and
(viii) Indebtedness in an aggregate outstanding principal amount
not to exceed $250,000 owing by Safety Canada to Safety and
Indebtedness in an aggregate outstanding principal amount not to exceed
$250,000 owing by Safety Europe to Safety; provided that (A) such
Indebtedness is used only for general working capital purposes, (B)
such Indebtedness is evidenced by one or more demand promissory notes
in form and substance satisfactory to the Agent, (C) such promissory
notes are pledged to the Agent for the ratable benefit of the Lenders
pursuant to documentation in form and substance satisfactory to the
Agent, (D) such notes are delivered to the Agent with note powers
executed in blank and (E) if an Event of Default has occurred and is
continuing, no such Indebtedness may be incurred by Safety 1st (Europe)
Limited.
(c) Contingent Obligations. Safety shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly incur, assume, or suffer to
exist any Contingent Obligation, excluding (i) indemnities given in connection
with the sale of Inventory or other asset dispositions permitted hereunder and
(ii) Contingent Obligations for Indebtedness permitted to be incurred under
Section 7.2(b).
(d) Corporate Changes, Etc. Safety will not, nor will it permit
any of its Subsidiaries to, directly or indirectly, at any time merge or
consolidate or otherwise alter or modify Safety's or any such Subsidiary's
Governing Documents, corporate names, mailing addresses, principal places of
business, structure, status or existence, or liquidate or dissolve itself (or
suffer any liquidation or dissolution), except for the merger of any Subsidiary
with and into Safety (provided Safety shall be the surviving corporation) and
the merger of 3232301 with and into Safety Canada and except that any Credit
Party may modify
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its Governing Documents in a manner which could not have an adverse effect on
the Agent or the Lenders.
(e) Sales, Etc. of Assets. Safety will not, nor will it permit any
of its Subsidiaries to, directly or indirectly, at any time sell, lease,
transfer or otherwise dispose of any assets (including contract rights), or
grant any option or other right to purchase, lease or otherwise acquire any
assets (including contract rights), except (i) sales of Inventory and obsolete
equipment in the ordinary course of its business, (ii) the sale or disposition
of scrap, waste and obsolete assets in the ordinary course of business, (iii)
the sale of any other assets that do not constitute Collateral, provided that
(A) such sales are for fair value, (B) at least eighty percent (80%) of the
aggregate consideration is paid in full in cash at the time of sale and is
applied in the manner set forth in Section 2.10(d) and (C) the aggregate amount
of all such sales does not exceed $500,000 in the aggregate for any fiscal year
and (iv) so long as no Event of Default shall occur and be continuing, the grant
of any option or other right to purchase any asset in a transaction which would
be permitted under the provisions of the immediately preceding clause (iii).
(f) Investments in Other Persons. Safety will not, nor will it
permit any of its Subsidiaries to, directly or indirectly, at any time make or
hold any Investment in any Person (whether in cash, securities or other property
of any kind) other than:
(i) Investments in Cash Equivalents;
(ii) Advances or loans made in the ordinary course of business
not to exceed $100,000 outstanding at any one time to any one Person
and $250,000 in the aggregate outstanding at any one time;
(iii) loans, investments and advances between Safety and its
Subsidiaries in existence as of the date hereof and described on
Schedule 7.2(f);
(iv) the endorsement of instruments for collection or deposit in
the ordinary course of business;
(v) stock or obligations issued to a Credit Party by any Person
(or the representative of such Person) in respect of Indebtedness of
such Person owing to such Credit Party in connection with the
insolvency, bankruptcy, receivership or reorganization of such Person
or a composition or readjustment of the debts of such Person; provided,
that, the original of any such stock or instrument evidencing such
obligations shall
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be promptly delivered to the Agent, upon the Agent's request, together
with such stock power, assignment or endorsement by such Credit Party
as the Agent may request;
(vi) Investments in existence on the date hereof and described
on Schedule 7.2(f);
(vii) Investments constituting Indebtedness permitted by Section
7.2(b)(vii); and
(viii) such other Investments as the Agent and the Majority
Lenders may approve in writing in their sole discretion.
(g) Affiliate Transactions. Safety will not, nor will it permit
any of its Subsidiaries to, at any time enter into, directly or indirectly, any
transaction with, including, without limitation, the purchase, sale or exchange
of property or the rendering of any service to, any Subsidiary or Affiliate of
Safety, except in the ordinary course of and pursuant to the reasonable
requirements of Safety's or such Subsidiary's or Affiliate's business, as the
case may be, and upon fair and reasonable terms no less favorable to Safety or
such Subsidiary than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person; provided, that, except as set forth on Schedule
6.1(ac), the aggregate amount of all transactions with Affiliates may not exceed
$250,000 in any twelve month period. Safety may pay fees to any Affiliate for
legal, accounting, financial, consulting or investment banking services
(including, without limitation, any underwriting discounts and commissions and
placement agent fees, but excluding management fees) performed in the ordinary
course of such Affiliate's business, provided, that the amount of any such fees
for any such service provided shall not exceed the usual and customary fees of
such Affiliate for similar services rendered to third parties.
(h) Dividends, Exchange, Etc. (i) Safety will not, nor will it
permit any of its Subsidiaries to, directly or indirectly, declare or pay any
dividends (other than solely in shares of stock or the accumulation (but not
payment) of dividends in accordance with Section 3 of the Certificate of
Designation of Safety dated as of July 28, 1997) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any shares
of any class of its capital stock or any warrants, options or rights to purchase
any such capital stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of Safety or any of its Subsidiaries, except that
(A) Subsidiaries of Safety may pay dividends to Safety and (B) after the Term
Loan
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has been paid in full so long as no Default or Event of Default has occurred and
is continuing or would result therefrom Safety may pay regularly scheduled cash
dividends to the holders of Safety's Series A Preferred Stock so long as there
is at least $3,000,000 of Unused Availability on each of the thirty (30) days
immediately prior to the date of such payment and after giving effect to the
payment of such dividends.
(i) Change in Nature of Business. Safety will not, nor will it
permit any of its Subsidiaries to, at any time make any material change in the
lines of its business as carried on at the date hereof. Safety will not permit
Safety 1st International, Inc. to own any material assets, incur any liens or
Indebtedness or conduct any material business.
(j) Charter Amendments, Etc. Safety will not, nor will it permit
any of its Subsidiaries to, at any time amend its certificate of incorporation
except for the filing of any certificate of designation with respect to the
preferred stock of Safety.
(k) Accounting Changes. Safety will not, nor will it permit any of
its Subsidiaries to, at any time make or permit any change in accounting
policies (as defined in GAAP) or reporting practices, except as required by
GAAP.
(l) Prepayments and Material Amendments of Material Contracts.
Safety will not, nor will it permit any of its Subsidiaries to, at any time (i)
prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner, or make any payment in violation of any
subordination terms of, any Indebtedness, other than the prepayment of the Loans
in accordance with the terms of this Credit Agreement and payments of the
Indebtedness permitted by Section 7.2(b)(viii), or (ii) amend, modify, cancel or
terminate or permit the amendment, modification, cancellation or termination of,
any of the Material Contracts, except in the event that such amendments or
modifications could not have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Borrower shall not, and shall not permit any of
its Subsidiaries to, amend, modify or change, or consent or agree to any
amendment, modification or change, to any of the terms of any Indebtedness.
(m) Negative Pledge. Safety will not, nor will it permit any of
its Subsidiaries to, at any time enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon any of
its property or assets other than (i) in favor of the Agent and the Lenders, or
(ii) in connection with Liens described in Section 7.2(a)(iv), but solely with
respect to the property so acquired.
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(n) Limitation on Sales and Leasebacks. Safety will not, nor will
it permit any of its Subsidiaries to, at any time enter into any arrangement
with any Person providing for the leasing by Safety or such Subsidiary of real
or immovable or personal or movable property which has been or is to be sold or
transferred by Safety or such Subsidiary to such Person or to any other Person
to whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of Safety or such Subsidiary.
(o) Partnerships; Subsidiaries; Joint Ventures. Safety will not,
nor will it permit any of its Subsidiaries to, at any time create any direct or
indirect subsidiary, enter into any joint venture or similar arrangement or
become a partner in any general or limited partnership.
(p) Additional Bank Accounts. Safety will not at any time open,
maintain or otherwise have or permit Safety Canada to enter into or otherwise
have any checking, savings or other accounts at any bank or other financial
institution, or any other account where money is or may be deposited or
maintained with any Person, other than the Lockbox Accounts, the Disbursement
Accounts or as otherwise agreed to in writing by the Agent.
(q) Excess Cash. Safety will not, and will not permit any of its
Subsidiaries to, directly or indirectly, maintain in the aggregate in all
deposit accounts of Safety and its Subsidiaries (other than the Disbursement
Account and payroll accounts) total cash balances and Investments permitted by
Sections 7.2(f)(i) and (viii) in excess of $100,000 at any time during which any
Revolving Loans are outstanding.
(r) Capital Expenditures. Safety and its Subsidiaries will not at
any time make or commit to make any payments for Capital Expenditures, except
that Safety and its Subsidiaries in the aggregate may make or commit to make
Capital Expenditures not exceeding the amount (the "Base Amount") per fiscal
year (or portion thereof) set forth below:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
from the Closing Date through
December 31, 1997 $2,700,000
fiscal year ending December 31, 1998 6,000,000
fiscal year ending December 31, 1999 6,750,000
fiscal year ending December 31, 2000 7,500,000
fiscal year ending December 31, 2001 8,250,000
</TABLE>
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<TABLE>
<S> <C>
six months ending June 30, 2002 4,000,000
</TABLE>
provided, however, that for any fiscal year commencing with the fiscal
year ending December 31, 1998, the Base Amount set forth above may be
increased for any such fiscal year by carrying over to any such fiscal
year any portion of the Base Amount (not to exceed 50% of such Base
Amount) not spent in the immediately preceding fiscal year (but not in
any year prior thereto); provided, further, however, that any Capital
Expenditures made must be directly related to the business conducted by
Safety and its Subsidiaries on the Closing Date.
(s) Minimum Consolidated Tangible Net Worth. As of the Closing
Date and the end of any fiscal quarter thereafter, Safety will not permit
Consolidated Tangible Net Worth to be less than the sum of (a) $9,000,000, (b)
75% of the increases to (but not decreases to) Net Income of Safety for each of
the fiscal quarters ending subsequent to the Closing Date, (c) 100% of the net
proceeds of any capital or equity infusion received by Safety through an
offering of the capital stock of Safety and (d) 100% of the fair market value of
any capital stock issued by Safety in connection with an Investment by Safety.
(t) Minimum Consolidated Current Ratio. Safety will not at any
time permit, during each period set forth below, the ratio of its consolidated
current assets to its consolidated current liabilities to be less than the ratio
set forth below opposite such period, provided, however, that for purposes of
the calculation of such ratio, the determination of consolidated current
liabilities shall include the full outstanding balance of the Revolving Loans:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
from the Closing Date to
September 30, 1997 .90:1
October 1, 1997 to December 31, 1997 .90:1
January 1, 1998 to March 31, 1998 1.00:1
April 1, 1998 to June 30, 1998 1.00:1
July 1, 1998 to September 30, 1998 1.25:1
October 1, 1998 to December 31, 1998 1.25:1
January 1, 1999 to March 31, 1999 1.25:1
April 1, 1999 to June 30, 1999 1.25:1
for each fiscal quarter from and 1.50:1
after July 1, 1999
</TABLE>
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(u) Minimum Consolidated EBITDA. Safety will not, for the
following periods, permit the EBITDA of Safety and its Subsidiaries, determined
for each period set forth below, to be less than the amount set forth below
opposite such period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
fiscal quarter ended September 30,
1997 $ 3,500,000
two fiscal quarters ended
December 31, 1997 6,000,000
three fiscal quarters ended March 31,
1998 10,000,000
four fiscal quarters ended June 30,
1998 13,000,000
four fiscal quarters ended
September 30, 1998 16,000,000
four fiscal quarters ended
December 31, 1998 19,000,000
four fiscal quarters ended each March
31, June 30, September 30 and
December 31 thereafter 20,000,000
========================================================
</TABLE>
(v) Minimum Consolidated Fixed Charge Coverage Ratio. Safety will
not permit Consolidated Fixed Charge Coverage Ratio, for any period, to be less
than 1.50:1.
(w) No Prohibited Transactions Under ERISA. Safety will not, and
shall not permit any of its Subsidiaries to, directly or indirectly:
(i) Engage in any prohibited transaction which could reasonably
be expected to result in a civil penalty or excise tax described in
Sections 406 of ERISA or 4975 of the Internal Revenue Code for which a
statutory or class exemption is not available or a private exemption
has not been previously obtained from the Department of Labor;
(ii) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and
412 of the Internal Revenue Code), whether or not waived;
(iii) fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any
Benefit Plan;
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(iv) terminate any Benefit Plan where such event would result in
any liability of Safety, any Subsidiary or any ERISA Affiliate under
Title IV of ERISA;
(v) fail to make any required contribution or payment to any
Multiemployer Plan;
(vi) fail to pay any required installment or any other payment
required under Section 412 of the Internal Revenue Code on or before
the due date for such installment or other payment;
(vii) amend a Plan resulting in an increase in current liability
for the plan year such that Safety, any Subsidiary or any ERISA
Affiliate is required to provide security to such Plan under Section
401(a)(29) of the Internal Revenue Code; or
(viii) withdraw from any Multiemployer Plan where such withdrawal
is reasonably likely to result in any liability of any such entity
under Title IV of ERISA.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default":
(a) the Borrowers shall fail to pay (i) any interest, Fees,
Expenses or other Obligations (other than principal) when due or within three
(3) Business Days of when due, whether at stated maturity, by acceleration, or
otherwise or (ii) any principal when due, whether at stated maturity, by
acceleration or otherwise; or
(b) any representation or warranty made by any Credit Party under
or in connection with any Credit Document or the Stock Purchase Agreement shall
prove to have been incorrect in any material respect when made or deemed made;
or
(c) the Borrowers or any other Credit Party shall fail to perform
or observe any term, covenant or agreement contained in Sections 7.1(a), (b),
(c), (d)(i), (f) and (j) and 7.2 of this Credit Agreement or Section 4 of the
Borrower Security Agreement, Section 4 of the Guarantor Security Agreement,
Section 2 of the Borrower Intellectual
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Property Security Agreement, Section 2 of the Guarantor Intellectual Property
Security Agreement, Section 5 of the 3232301 Hypothecation Agreement or Section
5 of the Safety Hypothecation Agreement; or
(d) any Credit Party shall fail to perform or observe any term,
covenant or agreement contained in any Credit Document (other than as set forth
in Sections 8.1(a) and (c)) on its part to be performed or observed or Safety or
any Subsidiary shall fail to comply with any provisions contained in any
Material Contract to which it is a party if such failure shall remain unremedied
or not waived for ten (10) Business Days after its occurrence; or
(e) Safety or any Subsidiary (i) shall fail to pay any
Indebtedness or any interest or premium thereon, when due (whether at scheduled
maturity or by required prepayment, acceleration, demand or otherwise), or (ii)
shall otherwise be in breach or default in any of its obligations under any
agreement with respect to any such Indebtedness, if the effect of such failure
to pay, breach or default is to cause such Indebtedness to become due or
redeemed or permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to declare such Indebtedness due or
require such Indebtedness to be redeemed prior to its stated maturity; or
(f) any Credit Party shall dissolve, wind up or otherwise cease
its business (except pursuant to a merger permitted by Section 7.2(d)); or
(g) Safety or any Subsidiary shall become the subject of (i) an
Insolvency Event as set forth in clause (e) of the definition of Insolvency
Event that is not resolved or dismissed within sixty (60) days or (ii) any
Insolvency Event except as set forth in clause (e) of the definition of
Insolvency Event; or
(h) any judgment or order for the payment of money in excess of
$500,000 shall be rendered against any Credit Party and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of twenty (20) consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(i) any non-monetary judgment or order shall be rendered by a
court of competent jurisdiction against Safety or any of its Subsidiaries that
could reasonably be expected to have a Material Adverse Effect, and there shall
be any period of thirty (30) consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; or
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(j) any material covenant, agreement or obligation of any Credit
Party contained in or evidenced by any of the Credit Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; any Credit Party shall deny or disaffirm its obligations under any of the
Credit Documents or any Liens granted in connection therewith; or any Liens
granted in any of the Collateral shall be determined to be void, voidable or
invalid, are subordinated or are not given the priority contemplated by this
Credit Agreement; or
(k) a Collateral Document shall for any reason (other than
pursuant to the terms thereof) cease to create a valid and, except as otherwise
permitted under Section 7.2(a), perfected first priority Lien on the Collateral
purported to be covered thereby; or
(l) a Change in Control shall have occurred.
SECTION 8.2. ACCELERATION AND CASH COLLATERALIZATION. Upon the
occurrence and during the continuance of an Event of Default, the Agent may take
any or all of the following actions, without prejudice to the rights of the
Agent or any Lender to enforce its claims against the Borrowers:
(a) Acceleration. Upon the written request of the Majority
Lenders, and by delivery of written notice to the Borrowers from the Agent, all
Obligations may be declared to be immediately due and payable (except with
respect to any Event of Default with respect to a Credit Party set forth in
Section 8.1(g) hereof, in which case all Obligations shall automatically become
immediately due and payable without the necessity of any request of the Majority
Lenders or notice or other demand to the Borrowers) without presentment, demand,
protest or any other action or obligation of the Agent or any Lender.
(b) Termination of Commitments. Upon the written request of the
Majority Lenders, and by delivery of written notice to the Borrowers from the
Agent, the Commitments may be immediately terminated and, at all times
thereafter, all Loans made by any Lender pursuant to this Credit Agreement shall
be at such Lender's sole discretion, unless such Event of Default is waived in
accordance with Section 10.11.
(c) Cash Collateralization. On demand of the Agent or the Majority
Lenders, the Borrowers jointly and severally shall immediately deposit with the
Agent for each Letter of Credit then outstanding, cash or Cash Equivalents in an
amount equal to 105% of the greatest amount drawable thereunder and execute and
deliver documentation with respect to such cash
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collateralization in form and substance satisfactory to the Agent.
SECTION 8.3. RESCISSION OF ACCELERATION. After acceleration of the
maturity of the Loans, if the Borrowers pay all accrued interest and all
principal due (other than by reason of the acceleration) and all Defaults and
Events of Default are otherwise remedied or waived in accordance with Section
10.11, the Majority Lenders may elect in their sole discretion, to rescind the
acceleration and return any cash collateral. (This Section is intended only to
bind all of the Lenders to a decision of the Majority Lenders and not to confer
any right on the Borrowers, even if the described conditions for the Majority
Lenders' election may be met.)
SECTION 8.4. REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, the Agent and the Lenders shall have all rights and
remedies with respect to the Obligations under the Credit Documents and the
Collateral available to it as creditors under applicable law and the Credit
Documents and the Agent may do any or all of the following:
(a) remove for copying all documents, instruments, files and
records (including the copying of any computer records) relating to the Accounts
or use (at the expense of the Borrowers) such supplies or space of any Credit
Party at such Credit Party's place of business necessary to properly administer
and collect the Accounts thereon;
(b) accelerate or extend the time of payment, compromise, issue
credits, or bring suit on the Accounts (in the name of the Borrowers or the
Lenders) and otherwise administer and collect the Accounts;
(c) sell, assign and deliver the Accounts and any returned,
reclaimed or repossessed merchandise, with or without advertisement, at public
or private sale, for cash, on credit or otherwise, subject to applicable law;
and
(d) foreclose the security interests created pursuant to the
Credit Documents by any available procedure, or take possession of any or all of
the Collateral without judicial process and enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same.
Any Lender may bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by the Borrowers. If notice of
intended disposition of any Collateral is required by law, it is agreed that ten
(10) Business Days notice shall constitute reasonable notification. Safety will
assemble, and cause its Subsidiaries to assemble, the Collateral
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and make it available to the Agent at such locations as the Agent may specify,
whether at the premises of such Credit Party or elsewhere, and will make
available to the Agent the premises and facilities of such Credit Party for the
purpose of the Agent's taking possession of, removing or putting the Collateral
in saleable form.
SECTION 8.5. RIGHT OF SETOFF. In addition to and not in limitation of
all rights of offset that any Lender or the Issuing Bank may have under
applicable law, upon the occurrence of any Event of Default, and whether or not
any Lender or the Issuing Bank has made any demand or the Obligations of any
Credit Party have matured, each Lender and the Issuing Bank shall have the right
to appropriate and apply to the payment of the Obligations of a Credit Party all
deposits and other obligations then or thereafter owing by such Lender or the
Issuing Bank to such Credit Party. Each Lender or the Issuing Bank exercising
such rights shall notify the Agent thereof (and the Agent shall promptly notify
the Borrowers thereof) and any amount received as a result of the exercise of
such rights shall be shared in accordance with Section 2.8.
SECTION 8.6. LICENSE FOR USE OF SOFTWARE AND OTHER INTELLECTUAL
PROPERTY. The Agent is hereby granted a license to use all computer software
programs, data bases, processes, patents, trademarks and materials used by
Safety and its Subsidiaries in connection with their businesses or in connection
with the Collateral. The Agent agrees not to use any such license prior to the
occurrence of an Event of Default without giving the Borrowers prior notice.
SECTION 8.7. NO MARSHALLING; DEFICIENCIES; REMEDIES CUMULATIVE. The net
cash proceeds resulting from the Agent's exercise of any of the foregoing rights
to liquidate all or substantially all of the Collateral (after deducting all of
the Agent's Expenses related thereto) shall be applied by the Agent to the
payment of the Obligations to the Agent and the Lenders, whether due or to
become due, in such order as the Agent may elect. The Borrowers shall remain
liable to the Agent and the Lenders for any deficiencies, and the Agent and the
Lenders in turn agree to remit to the Borrowers or the Guarantors or their
respective successors or assigns, any surplus resulting therefrom. The foregoing
remedies are not intended to be exhaustive and the full or partial exercise of
any of them shall not preclude the full or partial exercise of any other
available remedy under this Credit Agreement, under any other Credit Document,
at equity or at law.
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ARTICLE IX
THE AGENT
SECTION 9.1. APPOINTMENT OF AGENT.
(a) Each Lender hereby designates BTCC as its Agent and
irrevocably authorizes the Agent to take action on such Lender's behalf under
the Credit Documents and to exercise the powers and to perform the duties
described therein and to exercise such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties by or through its agents or
employees.
(b) Other than the Borrowers' rights under Section 9.9, the
provisions of this Article IX are solely for the benefit of the Agent and the
Lenders, and none of the Credit Parties shall have any rights as a third party
beneficiary of any of the provisions hereof. The Agent shall act solely as agent
of the Lenders and assumes no obligation toward or relationship of agency or
trust with or for any Credit Party.
SECTION 9.2. NATURE OF DUTIES OF AGENT. The Agent shall have no duties
or responsibilities except those expressly set forth in the Credit Documents.
Neither the Agent nor any of its officers, directors, employees or agents shall
be liable for any action taken or omitted by it as such hereunder or in
connection herewith, unless caused by its or their gross negligence or willful
misconduct. The duties of the Agent shall be mechanical and administrative in
nature. The Agent shall not have a fiduciary relationship in respect of any
Lender or any participant of any Lender.
SECTION 9.3. LACK OF RELIANCE ON AGENT.
(a) Independently and without reliance upon the Agent, each
Lender, to the extent it deems appropriate, has made and shall continue to make
(i) its own independent investigation of the financial or other condition and
affairs of each Credit Party in connection with the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the creditworthiness
of each Credit Party, and, except as expressly provided in this Credit
Agreement, the Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter.
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(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Credit Agreement or the Notes or
the financial or other condition of any Credit Party. The Agent shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Credit Agreement or the
Notes, or the financial condition of any Credit Party, or the existence or
possible existence of any Default or Event of Default, unless specifically
requested to do so in writing by any Lender.
SECTION 9.4. CERTAIN RIGHTS OF THE AGENT. The Agent may request
instructions from the Majority Lenders at any time. If the Agent requests
instructions from the Majority Lenders with respect to any action or inaction,
the Agent shall be entitled to await instructions from the Majority Lenders
before such action or inaction. No Lender shall have any right of action based
upon the Agent's action or inaction in response to instructions from the
Majority Lenders.
SECTION 9.5. RELIANCE BY AGENT. The Agent may rely upon written or
telephonic communication it believes to be genuine and to have been signed, sent
or made by the proper person. The Agent may obtain the advice of legal counsel
(including counsel for the Borrowers with respect to matters concerning the
Borrowers), independent public accountants and other experts selected by it and
shall have no liability for any action or inaction taken or omitted to be taken
by it in good faith based upon such advice.
SECTION 9.6. INDEMNIFICATION OF AGENT. To the extent the Agent is not
reimbursed and indemnified by the Borrowers, each Lender will reimburse and
indemnify the Agent, to the extent of its Proportionate Share for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever (including all Expenses) which may be imposed on,
incurred by or asserted against the Agent in performing its duties hereunder or
otherwise relating to the Credit Documents unless resulting from the Agent's
gross negligence or willful misconduct. The agreements contained in this Section
shall survive any termination of this Credit Agreement and the other Credit
Documents and the payment in full of the Obligations.
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SECTION 9.7. THE AGENT IN ITS INDIVIDUAL CAPACITY. In its individual
capacity, the Agent shall have the same rights and powers hereunder as any other
Lender or holder of a Note or participation interests and may exercise the same
as though it was not performing the duties specified herein. The terms
"Lenders," "Majority Lenders," "holders of Notes," or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent and its Affiliates may accept deposits from, lend
money to, acquire equity interests in, and generally engage in any kind of
banking, trust, financial advisory or other business with the Borrowers or any
Affiliate of the Borrowers as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Borrowers for
services in connection with this Credit Agreement and otherwise without having
to account for the same to the Lenders.
SECTION 9.8. HOLDERS OF NOTES. The Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment or transfer thereof shall have been filed with
the Agent. Any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
SECTION 9.9. SUCCESSOR AGENT.
(a) The Agent may, upon ten (10) Business Days' notice to the
Lenders and the Borrowers, resign by giving written notice thereof to the
Lenders and the Borrowers. The Agent's resignation shall be effective upon the
appointment of a successor Agent. Such resignation of the Agent shall be deemed
to be a resignation of Bankers Trust Company as Issuing Bank.
(b) Upon receipt of the Agent's resignation, the Majority Lenders
may appoint a successor Agent which shall also be a Lender. Unless an Event of
Default shall have occurred and be continuing at the time of such appointment,
the successor Agent shall be subject to approval by the Borrowers, which
approval shall not be unreasonably withheld and shall be delivered to the
Majority Lenders within five (5) Business Days after the Borrowers' receipt of
notice of a proposed successor Agent. If a successor Agent has not accepted its
appointment within fifteen (15) Business Days, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent.
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(c) Upon its acceptance of the agency hereunder, such successor
Agent shall succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Credit Agreement. The retiring Agent
shall continue to have the benefit of this Article IX for any action or inaction
while it was Agent.
SECTION 9.10. COLLATERAL MATTERS.
(a) Each Lender authorizes and directs the Agent to enter into the
Collateral Documents for the benefit of the Lenders. Except as otherwise set
forth herein, any action or exercise of powers by the Majority Lenders under the
Credit Documents, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all of the Lenders. Prior to an
Event of Default, without notice to or consent from any Lender, the Agent may
take any action necessary or advisable to perfect and maintain the perfection of
the Liens upon the Collateral.
(b) The Agent is authorized to release any Lien granted to or held
by the Agent upon any Collateral (i) upon termination of the Commitments and
payment and satisfaction of all of the Obligations, (ii) required to be
delivered from permitted sales of Collateral hereunder, if any, upon receipt of
the proceeds or (iii) if the release can be and is approved by the Majority
Lenders. The Agent may request and the Lenders will provide confirmation of the
Agent's authority to release particular types or items of Collateral.
(c) Upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Credit Agreement, or consented to in
writing by the Majority Lenders or all of the Lenders, as applicable, and upon
at least five (5) Business Days' prior written request by the Borrowers, the
Agent shall (and is hereby irrevocably authorized by the Lenders to) execute
such documents as may be necessary to evidence the release of the Liens granted
to the Agent for the benefit of the Lenders herein or pursuant hereto upon the
Collateral that was sold or transferred; provided that (i) the Agent shall not
be required to execute any such document on terms which, in the Agent's opinion,
would expose the Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of the Borrowers or any Subsidiary
of Safety in respect of) all interests retained by Safety or any Subsidiary,
including (without limitation) the proceeds of the sale, all of which shall
continue to constitute part of the Collateral. In the event of any sale or
transfer of Collateral, or any foreclosure with respect to any of the
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Collateral, the Agent shall be authorized to deduct all of the Expenses
reasonably incurred by the Agent from the proceeds of any such sale, transfer or
foreclosure.
(d) The Agent shall have no obligation to assure that the
Collateral exists or is owned by Safety or any of its Subsidiaries, that such
Collateral is cared for, protected or insured, or that the Liens in the
Collateral have been created, perfected, or have any particular priority. With
respect to the Collateral, the Agent may act in any manner it may deem
appropriate, in its sole discretion, given the Agent's own interest in the
Collateral as one of the Lenders and it shall have no duty or liability
whatsoever to the Lenders, except for its gross negligence or willful
misconduct.
SECTION 9.11. ACTIONS WITH RESPECT TO DEFAULTS. In addition to the
Agent's right to take actions on its own accord as permitted under this Credit
Agreement, the Agent shall take such action with respect to a Default or Event
of Default as shall be directed by the Majority Lenders. Until the Agent shall
have received such directions, the Agent may act or not act as it deems
advisable and in the best interests of the Lenders.
SECTION 9.12. DELIVERY OF INFORMATION. The Agent shall not be required
to deliver to any Lender originals or copies of any documents, instruments,
notices, communications or other information received by the Agent from any
Credit Party, the Subsidiaries of Safety, the Majority Lenders, any Lender or
any other Person under or in connection with this Credit Agreement or any other
Credit Document except (i) as specifically provided in this Credit Agreement or
any other Credit Document and (ii) as specifically requested from time to time
in writing by any Lender with respect to a specific document, instrument, notice
or other written communication received by and in the possession of the Agent at
the time of receipt of such request and then only in accordance with such
specific request.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND ANY
DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OF THE
CREDIT DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL
BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS
OTHER THAN SECTION 5-1401 OF THE
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NEW YORK GENERAL OBLIGATIONS LAW) AND DECISIONS OF THE STATE OF NEW YORK.
SECTION 10.2. SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG THE
BORROWERS AND THE LENDERS (OR THE AGENT ACTING ON THEIR BEHALF), WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE
AND FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, AND THE COURTS TO WHICH AN
APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE AGENT, ON BEHALF OF
THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE BORROWERS OR THEIR PROPERTY IN ANY LOCATION REASONABLY
SELECTED BY THE AGENT IN GOOD FAITH TO ENABLE THE AGENT TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT.
THE BORROWERS AGREE THAT THEY WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS,
SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE AGENT. THE BORROWERS
WAIVE ANY OBJECTION THAT THEY MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
AGENT HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
SECTION 10.3. SERVICE OF PROCESS. EACH OF THE BORROWERS HEREBY
IRREVOCABLY DESIGNATES KASSLER & FEUER, P.C., 101 ARCH STREET, BOSTON,
MASSACHUSETTS 02110 AS THE DESIGNEE, APPOINTEE AND AGENT OF SUCH BORROWER TO
RECEIVE, FOR AND ON BEHALF OF SUCH BORROWER, SERVICE OF PROCESS IN SUCH
RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF
SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY
MAIL TO SUCH BORROWER, BUT FAILURE OF SUCH BORROWER TO RECEIVE SUCH COPY SHALL
NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.
SECTION 10.4. JURY TRIAL. THE BORROWERS, THE AGENT, THE ISSUING BANK
AND THE LENDERS EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY
DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
SECTION 10.5. LIMITATION OF LIABILITY. NEITHER THE AGENT NOR ANY LENDER
SHALL HAVE ANY LIABILITY TO THE BORROWERS (WHETHER SOUNDING IN TORT, CONTRACT,
OR OTHERWISE) FOR LOSSES SUFFERED BY ANY BORROWER IN CONNECTION WITH, ARISING
OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED
BY THIS CREDIT AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR
COURT ORDER BINDING ON THE AGENT OR ANY SUCH LENDER, THAT THE LOSSES WERE THE
RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
THE BORROWERS HEREBY WAIVE ALL FUTURE CLAIMS AGAINST
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THE AGENT FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
SECTION 10.6. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Agent, the Issuing Bank or the Lenders to exercise any right or
remedy hereunder shall impair any such right or operate as a waiver thereof. No
single or partial exercise by the Agent, the Issuing Bank or the Lenders of any
right or remedy shall preclude any other or further exercise thereof, or
preclude any other right or remedy.
SECTION 10.7. NOTICES. Except as otherwise provided herein, all notices
and correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to the Agent, or any of the Lenders, then to BT
Commercial Corporation, at 14 Wall Street, New York, New York 10005, Attention:
Credit Department, Fritz Thomas, if to the Issuing Bank, then to Bankers Trust
Company, 14 Wall Street, New York, New York 10005, Attention: Fritz Thomas, with
a copy to Luskin, Stern & Eisler LLP, 330 Madison Avenue, New York, New York
10017, Attention: Richard Stern, Esq., and if to the Borrowers, then to the
Borrowers c/o Safety at 210 Boylston Street, Chestnut Hill, Massachusetts 02167,
Attention: Richard Wenz, President, with a copy to Kassler & Feuer, 101 Arch
Street, Boston, Massachusetts 02110, Attention: Curt R. Feuer, Esq., or by
facsimile transmission, promptly confirmed in writing sent by first class mail,
if to the Agent, or any of the Lenders, at (212) 618-2630, if to the Borrowers,
at (617) 928-3205, if to Luskin, Stern & Eisler LLP, at (212) 293-2705 and if to
Kassler & Feuer, P.C., at (617) 439-3800. All such notices and correspondence
shall be deemed given (i) if sent by certified or registered mail, three (3)
Business Days after being postmarked, (ii) if sent by overnight delivery
service, when received at the above stated addresses or when delivery is refused
and (iii) if sent by telex or facsimile transmission, when receipt of such
transmission is acknowledged.
SECTION 10.8. ASSIGNMENTS AND PARTICIPATIONS.
(a) Borrower Assignment. The Borrowers shall not assign this
Credit Agreement or any rights or obligations hereunder, without the prior
written consent of the Agent and the Lenders.
(b) Lender Assignments. Each Lender may assign to one or more
banks or other financial institutions all or a portion of its rights and
obligations under this Credit Agreement, the Notes and the other Credit
Documents, with the consent of the Agent, and with the consent of the Borrowers
(not to be unreasonably withheld), and upon execution and delivery to
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the Agent, for its acceptance and recording in the Register, of an agreement in
substantially the form of Exhibit N (an "Assignment and Assumption Agreement"),
together with surrender of any Note or Notes subject to such assignment and a
processing and recordation fee of $5,000.00. No such assignment shall be for
less than $5,000,000 of the Commitments unless it is to another Lender. Any
assignment by a Lender hereunder must include a ratable portion of such Lender's
Revolving Loans (and Commitment, if any) and the Term Loan. Upon such execution
and delivery of the Assignment and Assumption Agreement to the Agent, from and
after the date specified as the effective date in the Assignment and Assumption
Agreement (the "Acceptance Date"), (x) the assignee thereunder shall be a party
hereto, and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Assumption Agreement, such
assignee shall have the rights and obligations of a Lender hereunder and (y) the
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Assumption Agreement,
relinquish its rights (other than any rights it may have pursuant to Section
10.10 which will survive) and be released from its obligations under this Credit
Agreement (and, in the case of an Assignment and Assumption Agreement covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Credit Agreement, such Lender shall cease to be a party hereto).
(This Section does not apply to branches and Affiliates of a Lender, it being
understood that a Lender may make, carry or transfer Loans at or for the account
of any of its branch offices or Affiliates without consent of the Borrowers, the
Agent or any Lender.)
By executing and delivering an Assignment and Assumption Agreement, the
assignee thereunder confirms and agrees as follows: (i) other than as provided
in such Assignment and Assumption Agreement, the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the Notes or any
other instrument or document furnished pursuant hereto, (ii) such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or any other Credit Parties
or the performance or observance by the Borrowers or any other Credit Parties of
any of its obligations under this Credit Agreement or any other instrument or
document furnished pursuant hereto, (iii) such assignee confirms that it has
received a copy of this Credit Agreement, together with copies of the Financial
Statements referred to in Section 6.1(i) and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption Agreement, (iv) such
assignee
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will, independently and without reliance upon the Agent, such assigning Lender
or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Credit Agreement, (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Credit Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto and
(vi) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Credit Agreement are required
to be performed by it as a Lender.
(c) Agent's Register. The Agent shall maintain a register of the
names and addresses of the Lenders, their Commitments, and the principal amount
of their Revolving Loans and Term Loan (the "Register"). The Agent shall also
maintain a copy of each Assignment and Assumption Agreement delivered to and
accepted by it and modify the Register to give effect to each Assignment and
Assumption Agreement. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrowers, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Credit Agreement. The Register and
copies of each Assignment and Assumption Agreement shall be available for
inspection by the Borrowers or any Lender at any reasonable time and from time
to time upon reasonable prior notice. Upon its receipt of each Assignment and
Assumption Agreement and surrender of the affected Revolving Note and Term Note
subject to such assignment, the Agent will give prompt notice thereof to the
Borrowers. Within five (5) Business Days after its receipt of such notice, both
Borrowers shall execute and deliver to the Agent (i) a new Revolving Note or
Revolving Notes to the order of the assignee in the amount of the Commitment or
Commitments assumed by it and to the assignor in the amount of the Commitment or
Commitments retained by it, if any and (ii) a new Term Note or Term Notes to the
order of the assignee in the amount of the Term Loan assumed by it and to the
assignor in the amount of the Term Loan retained by it, if any, in exchange for
which the Agent shall deliver to the Borrowers the existing Notes subject to
such assignment. Such new Notes shall re-evidence the indebtedness outstanding
under the surrendered Notes and shall be in an aggregate principal amount equal
to the aggregate principal amount of such surrendered Notes and shall be dated
as of the Closing Date. The Agent shall be entitled to rely upon the Register
exclusively for purposes of identifying the Lenders hereunder.
(d) Lender Participations. Each Lender may sell participations
(without the consent of the Agent, the Borrowers or any other Lender) to one or
more parties in or to all or a portion of its rights and obligations under this
Credit
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Agreement, the Notes and the other Credit Documents. Notwithstanding a Lender's
sale of a participation interest, such Lender's obligations hereunder shall
remain unchanged. The Borrowers, the Agent, and the other Lenders shall continue
to deal solely and directly with such Lender. No participant shall have rights
to approve any amendment or waiver of this Credit Agreement except to the extent
such amendment or waiver would (i) increase the Commitment of the Lender from
whom the participant purchased its participation interest; (ii) reduce the
principal of, or rate or amount of interest on the Loans subject to such
participation; (iii) postpone any date fixed for any payment of principal of, or
interest on, the Loans subject to the participation interest; or (iv) release
all or a substantial portion of the Collateral, other than in each case when
otherwise permitted hereunder.
Each Lender agrees that, without the prior written consent of Safety
and the Agent, it will not make any assignment hereunder in any manner or under
any circumstances that would require registration or qualification of, or
filings in respect of, any Loan, Note or other Obligation under the securities
laws of the United States or of any jurisdiction.
(e) Confidentiality. In connection with their efforts to assign
its rights or obligations or sell participations pursuant to Sections 10.8(b)
and (d) hereof, the Agent or the Lenders may disclose any information they have,
now or in the future, with respect to the business of the Borrowers to
prospective assignees or purchasers, provided that each such prospective
assignee of purchaser is notified of the confidential nature of the information
and agrees to be bound by the terms of Section 10.9.
SECTION 10.9. CONFIDENTIALITY. Except as provided in Section 10.8(e),
each Lender agrees that it will not disclose, without the prior written consent
of the Borrowers, any information with respect to Safety or any of its
Subsidiaries, which is furnished pursuant to this Credit Agreement and which is
designated by the Borrowers to the Lenders in writing as confidential (the
information delivered pursuant to Sections 7.1(a)(ii), (iv) and (v), 7.1(b), (c)
and (e) and 8.4(a) being hereby so designated), provided, that any Lender may
disclose any such information (a) to its Affiliates, employees, auditors, or
counsel, or to another Lender if the disclosing Lender or such disclosing
Lender's holding or parent company in its reasonable discretion determines that
any such party should have access to such information provided that each such
person will be advised of the confidential nature of such information, (b) as
has become generally available to the public, (c) as may be required or
appropriate in any report, statement or testimony submitted to any Governmental
Authority having or claiming to have jurisdiction over such Lender, (d) as may
be required or
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appropriate in response to any summons or subpoena or in connection with any
litigation and (e) in order to comply with any Requirement of Law; provided,
that, in the case of clauses (c) through (e) above, if practicable Safety is
given five (5) Business Days' notice prior to such disclosure.
SECTION 10.10. INDEMNIFICATION; REIMBURSEMENT OF EXPENSES OF
COLLECTION.
(a) The Borrowers, jointly and severally, hereby indemnify and
agree to defend and hold harmless the Agent, the Issuing Bank and each of the
Lenders and their respective directors, officers, agents, employees and counsel
(each, an "Indemnified Party") from and against any and all losses, claims,
damages, liabilities, deficiencies, judgments or expenses incurred by any of
them (except to the extent that it is finally judicially determined to have
resulted from their own gross negligence or willful misconduct) arising out of
or by reason of (i) any litigations, investigations, claims or proceedings which
arise out of or are in any way related to (A) this Credit Agreement, any other
Credit Document or the transactions contemplated hereby or thereby, (B) the
issuance of the Letters of Credit, (C) the failure of the Issuing Bank to honor
a drawing under any Letter of Credit, as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority, (D) any actual or proposed use by the
Borrowers of the proceeds of the Loans or (E) the Agent's or the Lenders'
entering into this Credit Agreement, the other Credit Documents or any other
agreements and documents relating hereto, including, without limitation, amounts
paid in settlement, court costs and the reasonable fees and disbursements of
counsel incurred in connection with any such litigation, investigation, claim or
proceeding or any advice rendered in connection with any of the foregoing and
(ii) any remedial or other action taken by any of the Credit Parties or any of
the Lenders in connection with compliance by Safety or any of its Subsidiaries,
or any of their respective properties, with any federal, state, provincial or
local Environmental Laws. In addition, the Borrowers shall, upon demand, pay to
the Agent all costs and expenses incurred by the Agent (including the reasonable
fees and disbursements of counsel and other professionals) in connection with
the preparation, execution, delivery, administration, modification and amendment
of the Credit Documents, and pay to the Agent and any Lender all costs and
expenses (including the reasonable fees and disbursements of counsel and other
professionals) paid or incurred by the Agent or such Lender in (A) enforcing or
defending its rights under or in respect of this Credit Agreement, the other
Credit Documents or any other document or instrument now or hereafter executed
and delivered in connection herewith, (B) in collecting the Obligations, (C) in
foreclosing or otherwise collecting upon the Collateral or any part thereof and
(D) obtaining any legal,
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<PAGE> 111
accounting or other advice in connection with any of the foregoing. If and to
the extent that the Obligations of the Borrowers hereunder are unenforceable for
any reason, the Borrowers, jointly and severally, hereby agree to make the
maximum contribution to the payment and satisfaction of such Obligations which
is permissible under applicable law.
(b) The Borrowers' Obligations under Sections 4.9, 4.10, 9.6 and
this Section 10.10 shall survive any termination of this Credit Agreement and
the other Credit Documents and the payment in full of the Obligations, and are
in addition to, and not in substitution of, any other of their Obligations set
forth in this Credit Agreement.
SECTION 10.11. AMENDMENTS AND WAIVERS.
(a) No amendment or waiver of any provision of this Credit
Agreement or any other Credit Document shall be effective unless in writing and
signed by the Majority Lenders (or by the Agent on their behalf) and the
Borrowers, except that:
(i) the consent of all the Lenders is required to (A) reduce the
principal of, or interest on, the Notes, any Letter of Credit
reimbursement obligations or any Fees hereunder (other than Fees that
are exclusively for the account of the Agent or the Issuing Bank), (B)
postpone the final scheduled date of maturity of the Notes or any date
fixed for any payment in respect of interest on the Notes, any Letter
of Credit reimbursement obligations or any Fees hereunder, (C) change
any minimum requirement necessary for the Lenders or Majority Lenders
to take any action hereunder or the percentage of Commitments necessary
to take any such action, (D) amend or waive this Section 10.11(a), or
change the definition of Majority Lenders, (E) release any Liens in
favor of the Lenders on all or substantially all of the Collateral,
except as otherwise expressly provided in this Credit Agreement, and
other than in connection with the financing, refinancing, sale or other
disposition of any asset of the Credit Parties permitted under this
Credit Agreement, (F) increase the advance rate from that set forth in
the definitions of Accounts Borrowing Base or Inventory Borrowing Base
or (G) consent to the assignment or transfer by a Borrower of any of
its rights and obligations under this Credit Agreement;
(ii) no such amendment or waiver shall increase the Commitment of
any Lender over the amount thereof then in effect without the consent
of such Lender (it being understood that amendments or waivers of
conditions precedent, covenants, Defaults or Events of
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<PAGE> 112
Default shall not constitute an increase in the Commitment of any
Lender, and that an increase in the available portion of any Commitment
of any Lender shall not constitute an increase in the Commitment of
such Lender);
(iii) the consent of the Agent or the Issuing Bank, as the case
may be, shall be required for any amendment, waiver or consent
affecting the rights or duties of the Agent or the Issuing Bank under
any Credit Document, in addition to the consent of the Lenders
otherwise required by this Section 10.11; and
(iv) the consent of the Borrowers shall not be required for any
amendment, modification or waiver of the provisions of Article IX
(other than Section 9.9).
(b) The Borrowers and the Lenders hereby authorize the Agent to
modify this Credit Agreement by unilaterally amending or supplementing Annex I
to reflect assignments of the Commitments.
(c) Notwithstanding the foregoing, the Borrowers may amend
Schedule 6.1(a) without the consent of the Majority Lenders; provided that,
except as contemplated by Section 8.1, no amendment to any such Schedule shall
be permitted to cure any Default or Event of Default which would otherwise have
existed in the absence of such amendment; and provided further that, with
respect to any amendment Schedule 6.1(a) the Borrowers shall comply with Section
7.1(c)(v).
(d) If, in connection with any proposed amendment or waiver of any
of the provisions of this Credit Agreement as contemplated by Section
10.11(a)(i), the consent of the Majority Lenders is obtained but the consent of
one or more of such other Lenders whose consent is required is not obtained,
then the Borrowers shall have the right to replace each such nonconsenting
Lender or Lenders (so long as all non-consenting Lenders are so replaced) with
one or more replacement Lenders pursuant to Section 4.11 so long as at the time
of such replacement, each such replacement Lender consents to the proposed
amendment or waiver; provided that the Borrowers shall not have the right to
replace a Lender solely as a result of the exercise of such Lender's rights (and
the withholding of any required consent by such Lender) pursuant to Section
10.11(a)(ii).
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<PAGE> 113
SECTION 10.12. NONLIABILITY OF AGENT AND LENDERS. The relationship
between the Borrowers and the Lenders and the Agent shall be solely that of
borrower and lender. Neither the Agent nor any Lender shall have any fiduciary
responsibilities to the Borrowers. Neither the Agent nor any Lender undertakes
any responsibility to the Borrowers to review or inform the Borrowers of any
matter in connection with any phase of the Borrowers' business or operations.
SECTION 10.13. INDEPENDENT NATURE OF LENDERS' RIGHTS. The amounts
payable at any time hereunder to each Lender under such Lender's Note or Notes
shall be a separate and independent debt.
SECTION 10.14. COUNTERPARTS. This Credit Agreement and any waiver or
amendment hereto may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
SECTION 10.15. EFFECTIVENESS. This Credit Agreement shall become
effective on the date on which all of the parties hereto shall have signed a
copy hereof (whether the same or different copies) and shall have delivered the
same to the Agent, or, in the case of the Lenders, shall have given to the Agent
written, telecopied or telex notice (actually received) at such office that the
same has been signed and mailed to it.
SECTION 10.16. SEVERABILITY. In case any provision in or obligation
under this Credit Agreement or the Notes or the other Credit Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 10.17. MAXIMUM RATE. Notwithstanding anything to the contrary
contained elsewhere in this Credit Agreement or in any other Credit Document,
the Borrowers, the Agent and the Lenders hereby agree that all agreements among
them under this Credit Agreement and the other Credit Documents, whether now
existing or hereafter arising and whether written or oral, are expressly limited
so that in no contingency or event whatsoever shall the amount paid, or agreed
to be paid, to the Agent or any Lender for the use, forbearance, or detention of
the money loaned to the Borrowers and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Credit Agreement or any of the other
Credit Documents at the time
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<PAGE> 114
performance of such provision shall be due shall exceed the Highest Lawful Rate,
then, automatically, the obligation to be fulfilled shall be modified or reduced
to the extent necessary to limit such interest to the Highest Lawful Rate, and
if from any such circumstance any Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to the Borrowers.
All sums paid or agreed to be paid to the Agent or any Lender for the use,
forbearance, or detention of the Obligations and other indebtedness of the
Borrowers to the Agent or any Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness, until payment in full thereof, so that the actual
rate of interest on account of all such indebtedness does not exceed the Highest
Lawful Rate throughout the entire term of such indebtedness. The terms and
provisions of this Section shall control every other provision of this Credit
Agreement and all agreements among the Borrowers, the Agent and the Lenders.
SECTION 10.18. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Credit
Agreement and the other Credit Documents constitute the entire agreement among
the Borrowers, the Agent and the Lenders, supersedes any prior agreements among
them, and shall bind and benefit the Borrowers and the Lenders and their
respective successors and permitted assigns.
SECTION 10.19. JUDGMENT. The obligation of Safety Canada in respect of
any sum due from it to the Agent or any Lender under any Credit Document shall,
notwithstanding any judgment in a currency other than Dollars, be discharged
only to the extent that on the Business Day following receipt by the Agent or
such Lender of any sum adjudged to be so due in such other currency, the Agent
or such Lender may in accordance with normal banking procedures purchase Dollars
with such other currency; if the Dollars so purchased are less than the sum
originally due to the Agent or such Lender in Dollars, the Borrowers agree, as a
separate obligation and notwithstanding any such judgment, to, jointly and
severally, indemnify the Agent or such Lender against such loss, and if the
Dollars so purchased exceed the sum originally due to the Agent or such Lender
in Dollars, the Agent or such Lender agrees to remit to Safety Canada such
excess.
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<PAGE> 115
SECTION 10.20. WAIVER OF IMMUNITIES. To the extent that Safety Canada
has or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with respect
to itself or its property, to the fullest extent permitted by law, Safety Canada
hereby irrevocably waives such immunity in respect of its obligations under this
Credit Agreement and any other Credit Document to which it is a party and,
without limiting the generality of the foregoing, agrees that the waivers set
forth in this Section shall have the fullest scope permitted under the Foreign
Sovereign Immunities Act of 1976 of the United States and are intended to be
irrevocable for purposes of such Act.
SECTION 10.21. INTEREST ACT (CANADA). Safety Canada hereby acknowledges
that the rate or rates of interest applicable to the Obligations are computed on
the basis of a year of 360 days and paid for the actual number of days elapsed.
For purposes of the Interest Act (Canada), at any time and from time to time,
the yearly rate of interest provided in this Credit Agreement, which is paid or
payable pursuant hereto is equivalent and may be determined by multiplying the
applicable rate of interest by the number of days in such calendar year and
dividing such product by 360.
SECTION 10.22. LIMITATION OF OBLIGATIONS OF SAFETY EUROPE.
Notwithstanding anything to the contrary contained in any Credit Document
(including without limitation the Guaranty of Safety Europe), the liability of
Safety Europe for the Obligations shall be limited as provided in the debenture
of Safety Europe.
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<PAGE> 116
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed by their proper and duly authorized officers as of the
date set forth above.
BORROWERS
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
------------------------------
Richard E. Wenz
President
SAFETY 1ST HOME PRODUCTS
CANADA INC.
By: /s/ Richard E. Wenz
------------------------------
Richard E. Wenz
Vice President
AGENT
BT COMMERCIAL CORPORATION, as Agent
By: /s/ Joseph F. Romano
------------------------------
Joseph F. Romano
Vice President
LENDER
BT COMMERCIAL CORPORATION
By: /s/ Joseph F. Romano
------------------------------
Joseph F. Romano
Vice President
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<PAGE> 117
ISSUING BANK
BANKERS TRUST COMPANY,
as Issuing Bank
By: /s/ Joseph F. Romano
----------------------------
Joseph F. Romano
Vice President
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<PAGE> 1
REVOLVING NOTE
$27,500,000 July 30, 1997
FOR VALUE RECEIVED, the undersigned, SAFETY 1ST, INC., a
Massachusetts corporation, and SAFETY 1ST HOME PRODUCTS CANADA INC., a Canadian
federal corporation, (collectively, the "Borrowers"), jointly and severally
promise to pay to the order of BT Commercial Corporation (the "Lender") at care
of BT Commercial Corporation, as Agent, 14 Wall Street, New York, New York
10005, in lawful money of the United States of America and in immediately
available funds, the principal amount of TWENTY SEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($27,500,000), or such lesser amount as may then constitute the
unpaid aggregate principal amount of the Lender's Proportionate Share of the
Revolving Loans outstanding on the Expiration Date.
The Borrowers jointly and severally agree to pay interest at
said office, in like money, on the unpaid principal amount owing hereunder from
time to time from the date hereof until paid in full (both before and after
judgment) on the dates and at the rates specified in Article IV of the Credit
Agreement (as defined below).
If any payment on this note becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This note is one of the Revolving Notes referred to in the
Credit Agreement, dated as of July 30, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrowers, the Lender, the other financial institutions parties thereto, BT
Commercial Corporation, as Agent (in such capacity, the "Agent") and Bankers
Trust Company, as Issuing Bank, (in such capacity, the "Issuing Bank"), and is
subject to, and entitled to, all provisions and benefits thereof and is subject
to voluntary and mandatory prepayment in whole or in part as provided therein.
Capitalized terms used herein shall have the meanings given to such terms in the
Credit Agreement unless otherwise defined herein. The Credit Agreement, among
other things, provides for the making of Revolving Loans by the Lender to the
Borrowers from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned.
<PAGE> 2
Upon the occurrence and during the continuance of an Event of
Default, the Agent may, among other things, by delivery of written notice to the
Borrowers from the Agent, take any or all of the following actions, without
prejudice to the rights of the Agent, the Lender or any holder of this note to
enforce its claims against the Borrowers: (a) declare all Obligations due
hereunder to be immediately due and payable (except with respect to any Event of
Default set forth in Section 8.1(g) of the Credit Agreement, in which case all
Obligations due hereunder shall automatically become immediately due and payable
without the necessity of any notice or other demand) without presentment,
demand, protest or any other action or obligation of the Lender; and (b)
immediately terminate the Commitments; and at all times thereafter, all loans
and advances made by the Lender pursuant to the Credit Agreement shall be at the
Lender's sole discretion.
This note is secured by the collateral described in the
Security Agreements and other Collateral Documents.
The Borrowers hereby waive presentment, demand, protest and
notice of any kind in connection with this note. No failure to exercise, and no
delay in exercising any rights hereunder on the part of the holder hereof shall
operate as a waiver of such rights.
This note shall not be revoked or impaired as to either
Borrower by the revocation or release of any obligations of the other Borrower.
Each Borrower hereby agrees that, until the Obligations are
paid in full and the Credit Agreement and all outstanding Letters of Credit are
terminated, it shall not assert any claim or other right that it may now have or
hereafter acquire against the other Borrower that arises from the existence,
payment, performance or enforcement of such Borrower's obligations under this
note or the Credit Agreement, the other Credit Documents or the Obligations or
guarantees thereof, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent or any Lender against the other
Borrower, or any collateral securing any Obligation, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from the other
Borrower, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim, remedy or right.
If any amount shall be paid to either Borrower in violation of the preceding
sentence at any time prior to the indefeasible cash payment in full of the
Obligations and the termination of the Credit Agreement and all outstanding
Letters of Credit, such Borrower shall immediately give the Agent notice of its
receipt of such amount and such amount shall be held in trust for the benefit of
the Agent and the Lenders owed the Obligations which gave rise to such
Borrower's right of recovery,
<PAGE> 3
segregated from other funds of such Borrower, and shall forthwith be paid to the
Agent to be credited and applied to the Obligations then due and payable,
whether matured or unmatured, in such order as the Agent may determine. Each
Borrower acknowledges that it will receive direct and indirect benefits from the
Credit Agreement and the transactions consummated in connection therewith and
that the waiver set forth in this paragraph is knowingly made in contemplation
of such benefits. Until all of the Obligations shall have been paid in full in
cash and the termination of the Credit Agreement and all outstanding Letters of
Credit, neither Borrower will enforce any other claim or exercise any other
rights which it may have against the other Borrower.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
AND DECISIONS OF THE STATE OF NEW YORK.
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
--------------------------------
Richard E. Wenz
President
Attest: /s/ Charles DeBevoise
-------------------------
Charles DeBevoise
SAFETY 1ST HOME PRODUCTS CANADA
INC.
By: /s/ Richard E. Wenz
--------------------------------
Richard E. Wenz
Vice President
Attest: /s/ Charles DeBevoise
-------------------------
Charles DeBevoise
<PAGE> 1
TERM NOTE
$12,500,000 July 30, 1997
FOR VALUE RECEIVED, the undersigned, SAFETY 1ST, INC., a
Massachusetts corporation, and SAFETY 1ST HOME PRODUCTS CANADA INC., a Canadian
federal corporation (collectively, the "Borrowers"), promise to pay to the order
of BT Commercial Corporation (the "Lender"), at care of BT Commercial
Corporation, as Agent, 14 Wall Street, New York, New York 10005 in lawful money
of the United States of America and in immediately available funds, the
principal amount of TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS ($12,500,000).
The principal amount of this Note shall be repaid in 20 consecutive quarterly
installments of $625,000 each, which shall be payable on the first Business Day
of each calendar quarter, commencing with October 1, 1997, provided that the
entire unpaid principal amount of the Note, together with all accrued and unpaid
interest thereon, shall become due and payable on the Expiration Date.
The Borrowers jointly and severally agree to pay interest at
said office, in like money, on the unpaid principal amount owing hereunder from
time to time from the date hereof until paid in full (both before and after
judgment) on the dates and at the rate specified in Article IV of the Credit
Agreement (as defined below).
If any payment on this note becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This note is one of the Term Notes referred to in the Credit
Agreement, dated as of July 30, 1997 (the "Credit Agreement"), among the
Borrowers, the Lender, certain other financial institutions parties thereto,
Bankers Trust Company, as issuing bank (in such capacity, the "Issuing Bank")
and BT Commercial Corporation, as Agent (in such capacity, the "Agent") and is
subject to, and entitled to, all provisions and benefits thereof and is subject
to voluntary and mandatory prepayment in whole or in part as provided therein.
Capitalized terms used herein shall have the meanings given to such terms in the
Credit Agreement unless otherwise defined herein. The Credit Agreement, among
other things, provides for the making of a Term Loan by the Lender to the
Borrowers in the amount equal to the U.S. dollar amount first above mentioned.
Upon the occurrence and during the continuance of an Event of
Default, the Agent may, among other things, by delivery
<PAGE> 2
of written notice to the Borrowers from the Agent, without prejudice to the
rights of the Agent, the Lender or any holder of this note to enforce its claims
against the Borrowers, declare all Obligations due hereunder to be immediately
due and payable (except with respect to any Event of Default set forth in
Section 8.1(g) of the Credit Agreement, in which case all Obligations due
hereunder shall automatically become immediately due and payable without the
necessity of any notice or other demand) without presentment, demand, protest or
any other action or obligation of the Lender.
This note is secured by the collateral described in the
Security Agreements and other Collateral Documents.
The Borrowers hereby waive presentment, demand, protest and
notice of any kind in connection with this note. No failure to exercise, and no
delay in exercising, any rights hereunder on the part of the holder hereof shall
operate as a waiver of such rights.
This note shall not be revoked or impaired as to either
Borrower by the revocation or release of any obligations of the other Borrower.
Each Borrower hereby agrees that, until the Obligations are
paid in full and the Credit Agreement and all outstanding Letters of Credit are
terminated, it shall not assert any claim or other right that it may now have or
hereafter acquire against the other Borrower that arises from the existence,
payment, performance or enforcement of such Borrower's obligations under this
note or the Credit Agreement, the other Credit Documents or the Obligations or
guarantees thereof, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent or any Lender against the other
Borrower, or any collateral securing any Obligation, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from the other
Borrower, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim, remedy or right.
If any amount shall be paid to either Borrower in violation of the preceding
sentence at any time prior to the indefeasible cash payment in full of the
Obligations and the Credit Agreement and all outstanding Letters of Credit are
terminated, such Borrower shall immediately give the Agent notice of its receipt
of such amount and such amount shall be held in trust for the benefit of the
Agent and the Lenders owed the Obligations which gave rise to such Borrower's
right of recovery, segregated from other funds of such Borrower, and shall
forthwith be paid to the Agent to be credited and applied to the Obligations
then due and payable, whether matured or unmatured, in such order as the Agent
may determine. Each Borrower acknowledges that it will receive direct and
indirect benefits from the Credit Agreement and the transactions consummated in
<PAGE> 3
connection therewith and that the waiver set forth in this paragraph is
knowingly made in contemplation of such benefits. Until all of the Obligations
shall have been paid in full in cash and the Credit Agreement and all
outstanding Letters of Credit are terminated, neither Borrower will enforce any
other claim or exercise any other rights which it may have against the other
Borrower.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
AND DECISIONS OF THE STATE OF NEW YORK.
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
--------------------------------
Richard E. Wenz
President
Witness: /s/ Charles DeBevoise
-------------------------
Charles DeBevoise
SAFETY 1ST HOME PRODUCTS CANADA
INC.
By: /s/ Richard E. Wenz
--------------------------------
Richard E. Wenz
Vice President
Witness: /s/ Charles DeBevoise
-------------------------
Charles DeBevoise
