<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-21404
-------
SAFETY 1ST, INC.
(Exact Name of Registrant as specified in its Charter)
Massachusetts 04-2836423
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
210 Boylston Street
Chestnut Hill, Massachusetts 02167
(Address of principal executive (Zip code)
offices)
Registrant's telephone number, including area code:
(617) 964-7744
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
The aggregate number of Registrant's shares outstanding on May 9, 1997 was
7,187,288 shares of Common Stock, $.01 par value.
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Page 2
SAFETY 1ST, INC.
INDEX
Page
PART I - FINANCIAL INFORMATION ----
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS AS OF MARCH 31,
1997 (UNAUDITED) AND DECEMBER 31, 1996 3
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1996 5
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1996 6
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 13
EXHIBIT INDEX 14
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Page 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SAFETY 1ST, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,662,492 $ 509,403
Accounts receivable, less allowance
for doubtful accounts of $3,300,000
and $3,300,000, respectively 23,117,904 20,237,347
Inventory 13,028,392 17,145,683
Prepaid expenses 700,166 938,288
Tax refund receivable -- 5,026,644
Deferred loan acquisition costs, net of accumulated
amortization of $158,457 1,109,201 --
----------- -----------
Total current assets 39,618,155 43,857,365
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $5,524,919
and $4,385,545, respectively 11,614,810 12,163,032
----------- -----------
OTHER ASSETS:
Deposits 2,687,663 3,240,821
Software systems in process 3,111,871 2,155,195
Goodwill, net of amortization of $340,720 and
$267,576, respectively 6,765,410 6,838,554
Deferred income taxes 2,218,000 2,218,000
Patents and trademarks, net of amortization of
$378,074 and $353,746, respectively 638,279 662,607
Other 140,985 141,078
----------- -----------
Total other assets 15,562,208 15,256,255
----------- -----------
$66,795,173 $71,276,652
=========== ===========
</TABLE>
The Condensed Balance Sheet at December 31, 1996 has been derived from the
audited financial statements at that date.
The accompanying notes are an integral part of these Condensed Financial
Statements.
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Page 4
SAFETY 1ST, INC.
CONDENSED BALANCE SHEETS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 38,972,309 $ 36,652,657
Accounts payable and accrued expenses 23,713,714 30,210,729
Notes payable and current portion of capital lease obligation 1,499,000 2,074,403
------------ ------------
Total current liabilities 64,185,023 68,937,789
OTHER LIABILITIES
Capital lease obligation, net of current portion 223,807 260,651
------------ ------------
Total liabilities 64,408,830 69,198,440
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 15,000,000 shares authorized,
7,187,288 and 7,178,156 issued at March 31, 1997 and
December 31, 1996, respectively 71,873 71,781
Additional paid in capital 34,607,235 34,496,395
Accumulated deficit (32,292,765) (32,489,964)
------------ ------------
Total stockholders' equity 2,386,343 2,078,212
------------ ------------
$ 66,795,173 $ 71,276,652
============ ============
</TABLE>
The Condensed Balance Sheet at December 31, 1996 has been derived from the
audited financial statements at that date.
The accompanying notes are an integral part of these Condensed Financial
Statements.
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Page 5
SAFETY 1ST, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
-------------------------
<S> <C> <C>
Net sales $24,269,359 $32,006,438
Cost of sales 14,676,302 19,113,872
----------- -----------
Gross profit 9,593,057 12,892,566
Selling, general and administrative expenses 8,126,848 9,511,894
----------- -----------
Operating income 1,466,209 3,380,672
Interest expense 1,153,283 642,820
----------- -----------
Income before income taxes 312,926 2,737,852
Income taxes expense 115,727 1,033,834
----------- -----------
Net income $ 197,199 $ 1,704,018
=========== ===========
Net income per share $ 0.03 $ 0.24
=========== ===========
Weighted average shares outstanding 7,185,154 7,150,616
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
Condensed Financial Statements.
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SAFETY 1ST, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
--------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 197,199 $ 1,704,018
----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in)
operating activities:
Depreciation 1,169,333 986,712
Amortization 255,930 120,998
Cumulative translation adjustment -- 1,362
----------- -----------
Net cash provided by operating activities
before changes in assets and liabilities: 1,622,462 2,813,090
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (2,880,557) (9,653,278)
Inventory 4,117,291 (1,583,862)
Prepaid expenses 238,119 659,644
Tax refund receivable 5,026,644 1,932,718
Deferred income taxes -- 100,427
Other assets 93 11,507
Decrease in:
Accounts payable and accrued expenses (7,105,534) (290,941)
----------- -----------
Net cash provided by (used in) operating activities 1,018,518 (6,010,695)
----------- -----------
Cash flows used in investing activities:
Acquisitions -- (1,616,416)
Acquisition of property and equipment (67,951) (538,870)
Increase in deposits (641,481) (1,059,113)
Acquisition of patents and trademarks -- (31,549)
Increase in system software in process (956,676) --
----------- -----------
Net cash used in investing activities (1,666,108) (3,245,948)
----------- -----------
Cash flows provided by (used in) financing activities:
Net proceeds on revolving credit facility 2,319,652 10,421,802
Repayment of bank debt assumed and notes payable -- (683,385)
Proceeds from exercised stock options 110,932 --
Loan acquisition fees (17,658) (206,232)
Repayment of notes payable and capital lease obligation (862,247) --
Loan from officer 250,000 --
----------- -----------
Net cash provided by financing activities 1,800,679 9,532,185
----------- -----------
Net increase in cash 1,153,089 275,542
Cash and cash equivalents - beginning
of period 509,403 24,456
----------- -----------
Cash and cash equivalents - end of period $ 1,662,492 $ 299,998
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest $ 938,123 $ 526,000
=========== ===========
Taxes $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these Condensed Financial
Statements.
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SAFETY 1ST, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The Company is a developer, marketer and distributor of child safety and
child care, convenience, activity and home security products.
The accompanying unaudited condensed financial statements of the Company
have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC"), and, in the opinion of management, reflect
all adjustments (consisting of only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and cash
flows for the periods presented.
Certain information and footnote disclosures included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed financial
statements should be read in conjunction with the audited financial
statements and notes thereto included in the financial statements filed as
part of the Company's Annual Report on Form 10-K filed for the year ended
December 31, 1996.
In 1997, common stock equivalents are not reflected in the net income per
share computation presented in the condensed statements of income, as the
dilutive effect is less than 3%.
The results of the operations for the three months ended March 31, 1997 are
not necessarily indicative of the operating results for the full year.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS 128 is
required to be implemented for the year ended December 31, 1997 and
requires the presentation of basic earnings per share and, if applicable,
diluted earnings per share, instead of primary and fully diluted EPS.
Management does not expect that the adoption of SFAS 128 will have a
material impact on the Company's earnings per share.
<PAGE> 8
Page 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Statement of Forward-Looking Information:
The Company may occasionally make forward-looking statements and estimates, such
as forecasts and projections of the Company's future performance or statements
of management's plans and objectives. These forward-looking statements may be
contained in SEC filings, Annual Reports to Shareholders, Press Releases and
oral statements, among others, made by the Company. Actual results could differ
materially from those in such forward-looking statements. Therefore, no
assurances can be given that the results in such forward-looking statements will
be achieved. Important factors that could cause the Company's actual results to
differ from those contained in such forward-looking statements include, among
others, inability to generate successful new product ideas, reduced demand for
the Company's products, inability to successfully implement the new information
system, and inability to manage operations and future growth. These and other
factors are discussed in greater detail in Exhibit 99 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, and incorporated
herein by reference.
Results of Operations:
Three Months Ended March 31, 1997 and 1996
- ------------------------------------------
Net sales for the three months ended March 31, 1997 decreased 24.2% to
approximately $24,269,000 from approximately $32,006,000 in the comparable
period in 1996. The decrease in net sales is due primarily to the shift in
timing of the new product introductions from the first quarter in 1996 to the
second quarter in 1997. New product sales in the first quarter of 1997 were
approximately $600,000 versus approximately $8,600,000 for the same period in
1996. Juvenile sales comprised 95% of total sales, while home security sales
were 5% of the total.
Gross profit for the three months ended March 31, 1997 was approximately
$9,593,000, or 39.5% of net sales, as compared to approximately $12,893,000, or
40.3% of net sales, for the three months ended March 31, 1996.
Selling, general and administrative expenses decreased 14.6% to approximately
$8,127,000 for the three months ended March 31, 1997 from approximately
$9,512,000 for the three months ended March 31, 1996. This decrease is due in
part to the reduction of the variable cost components of selling, general and
administrative costs as sales have decreased. The remainder of the decrease is
due primarily to decreases in professional and consulting fees and temporary
help.
Operating income for the first quarter of 1997 was approximately $1,466,000, or
6.0% of net sales. Operating income for the comparable period last year was
approximately $3,381,000, or 10.6% of net sales.
Interest expense increased to approximately $1,153,000 for the three months
ended March 31, 1997 from approximately $643,000 in the same period in the
prior year due to the inclusion of approximately $158,000 of loan acquisition
fee amortization and additional costs of borrowings under the revolving credit
facility.
Liquidity and Capital Resources
- -------------------------------
During the past two years, the Company has financed its operations primarily
through borrowings under its term loan and revolving credit facility and
internally generated funds. In January 1997, the Company entered into a credit
facility with a new lender consisting of a $25 million term loan and a $20
million revolving credit facility, both of which expire on May 1, 1998. The
Company's current borrowing arrangements are classified as short-term. As a
result of this refinancing, the Company expects its cost of funds to increase
over the term of indebtedness. In addition, the Company's principal shareholder
may be required to pledge additional shares of the Company's stock as additional
collateral with respect to the borrowings. If such collateral is not pledged, it
would constitute an event of default under the terms of the credit facility.
In addition to refinancing the revolving credit facility, management commenced
and initiated a plan to improve both liquidity and operating income. The
objectives of the plan are to simplify business practices, reduce operating
costs, and reduce working capital requirements. Implementation of the plan
started in 1996 and is continuing through 1997. There are no assurances,
however, that the actions taken, or to be
<PAGE> 9
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taken, by the Company will achieve the above intended objectives.
Net cash provided by operations increased to $1,019,000 for the three months
ended March 31, 1997 versus net cash used in operations of $6,011,000 for the
three months ended March 31, 1996. The primary cause of the improvement was the
decrease in the inventory balance and receipt of a tax refund receivable offset
by decreases in accounts payable and accrued expenses.
Cash flows used in investing activities was $1,666,000 due to the purchase of
property and equipment, mainly molds for new products to be introduced in 1997
as well as the purchase and implementation of an integrated computer system
expected to be fully operational during 1997. During the first quarter of 1997,
net cash provided by financing activities was $1,801,000, primarily related to
proceeds from the Company's revolving credit facility offset by repayment of the
note payable issued in connection with the acquisition of Orleans Juvenile
Products, Inc.
The Company believes that its cash on hand, together with its current borrowing
facility, will be sufficient to meet its operating and other cash requirements
over the next twelve months. The Company is also seeking other financing on
terms which may be more favorable to the Company to help meet future needs.
There are no assurances that the Company will be able to obtain such financing.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS 128 is
required to be implemented for the year ended December 31, 1997 and requires the
presentation of basic earnings per share and, if applicable, diluted earnings
per share, instead of primary and fully diluted EPS. Management does not expect
that the adoption of SFAS 128 will have a material impact on the Company's
earnings per share.
<PAGE> 10
Page 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In August 1995, an action was commenced in the United States District
Court for the District of Massachusetts against the Company and three of its
officers by Sandra Esner, on behalf of herself and all other similarly situated,
who purchased stock of the Company between February 8, 1995, and April 5, 1995.
The Complaint alleged that the Company violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by failing
to disclose in a timely manner the adverse effects concerning the Company's
results for the first quarter of fiscal 1995. The Plaintiff sought monetary
damages in an unspecified amount. The parties settled this action and, on
January 29, 1997, the Company obtained a final judgment and order of dismissal
with prejudice of class action from the court. The amount of payment required to
be made by the Company pursuant to the settlement was not material. Although the
Company believes that it had meritorious defenses to the action and continues to
disclaim any wrongdoing, it believes that the settlement was in the best
interests of the Company and its Stockholders.
The Company encounters personal injury litigation related to its products
in the ordinary course of business. The Company maintains product liability
insurance in amounts deemed adequate by management. The Company believes that
there are no claims or litigation pending, the outcome of which could have a
material adverse effect on the financial position of the Company.
Item 2. Changes in Securities.
(c) On January 31, 1997, pursuant to the Company's credit facility with
its lender, the Company issued warrants for up to 350,000 shares of the
Company's common stock, which warrants have been delivered into escrow and are
being held pursuant to the terms of an Escrow Agreement. The warrants were
issued to Goldman Sachs Credit Partners L.P. ("GSCP") and are to be released
from escrow and delivered to the lender as follows: if the credit facility is
still in effect on July 31, 1997, a warrant for 250,000 shares shall be
delivered; if the credit facility is still in effect on October 31, 1997, a
warrant for an additional 50,000 shares shall be delivered; and if the credit
facility is still in effect on January 31, 1998, a warrant for the final 50,000
shares shall be delivered. In the event the Company shall be unable to register
the stock underlying the warrants within sixty days after the release of the
initial 250,000 warrants (on or before September 29, 1997), the Company is
obligated to pay its lender up to $100,000 per month until the earlier of the
date of such registration and the date the underlying stock may be sold under
Rule 144 promulgated under the Securities Act of 1933. The warrants were sold
otherwise than for cash as part of the consideration for the Company's credit
facility and were sold pursuant to an exemption from registration under Section
4(2) of the Securities Act of 1993. Each warrant is exercisable through January
31, 2004, or otherwise as provided in the warrant, at the exercise price of
$8.75 per share.
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Page 11
Pursuant to the terms of its credit facility, the Company is prohibited
from declaring or paying any cash dividends.
Item 6. Exhibits and Reports on Form 8-K.
The following Exhibits are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
10.1 First Amended and Restated Loan Agreement dated as of January 31,
1997, among the Company, as Borrower, the Lenders listed on the
signature pages thereof, as Banks, and GSCP, as Agent (Exhibit 10.1
to the Company's Report on Form 8-K dated February 7, 1997 and
incorporated herein by reference).
10.2 $20,000,000 Revolving Note dated January 31, 1997, executed by the
Company in favor of GSCP, as Agent (Exhibit 10.2 to the Company's
Report on Form 8-K dated February 7, 1997 and incorporated herein by
reference).
10.3 $25,000,000 Term Note dated January 31, 1997, executed by the
Company in favor of GSCP as Agent (Exhibit 10.3 to the Company's
Report on Form 8-K dated February 7, 1997 and incorporated herein by
reference).
10.4 Escrow Agreement dated January 31, 1997, among the Company, GSCP and
O'Melvery & Meyers LLP.
10.5 Warrant dated January 31, 1997, to purchase 250,000 shares of
Registrant's common stock issued to GSCP.
10.6 Warrant dated January 31, 1997, to purchase 50,000 shares of
Registrant's common stock issued to GSCP.
10.7 Warrant dated January 31, 1997, to purchase 50,000 shares of
Registrant's common stock issued to GSCP.
11 Statement re: Computation of Per Share Earnings.
27 Financial Data Schedule
</TABLE>
<PAGE> 12
Page 12
<TABLE>
<S> <C>
99 Important Factors Regarding Forward-Looking Statements (Included as
Exhibit 99 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference).
</TABLE>
Reports on Form 8-K.
The Company filed a report on Form 8-K on February 7, 1997, which disclosed
(i) that the Company entered into a new credit facility with a new lender and
(ii) that the Company obtained a final judgment and order of dismissal with
prejudice of a class action lawsuit.
<PAGE> 13
Page 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant had duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAFETY 1ST, INC.
a Massachusetts corporation
Date: May 15, 1997 By: /s/ Michael Lerner
----------------------------------
Michael Lerner,
Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 1997 By: /s/ Richard Caturano
----------------------------------
Richard Caturano,
Chief Financial Officer
(Principal Financial Officer)
<PAGE> 14
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
10.1 First Amended and Restated Loan Agreement dated as of January 31,
1997, among the Company, as Borrower, the Lenders listed on the
signature pages thereof, as Banks, and GSCP, as Agent (Exhibit 10.1
to the Company's Report on Form 8-K dated February 7, 1997 and
incorporated herein by reference).
10.2 $20,000,000 Revolving Note dated January 31, 1997, executed by the
Company in favor of GSCP, as Agent (Exhibit 10.2 to the Company's
Report on Form 8-K dated February 7, 1997 and incorporated herein by
reference).
10.3 $25,000,000 Term Note dated January 31, 1997, executed by the
Company in favor of GSCP as Agent (Exhibit 10.3 to the Company's
Report on Form 8-K dated February 7, 1997 and incorporated herein by
reference).
10.4 Escrow Agreement dated January 31, 1997, among the Company, GSCP and
O'Melvery & Meyers LLP.
10.5 Warrant dated January 31, 1997, to purchase 250,000 shares of
Registrant's common stock issued to GSCP.
10.6 Warrant dated January 31, 1997, to purchase 50,000 shares of
Registrant's common stock issued to GSCP.
10.7 Warrant dated January 31, 1997, to purchase 50,000 shares of
Registrant's common stock issued to GSCP.
11 Statement re: Computation of Per Share Earnings.
27 Financial Data Schedule
99 Important Factors Regarding Forward-Looking Statements
(included as Exhibit 99 to Registrant's Annual Report on Form 10-
K for the year ended December 31, 1996, and incorporated
herein by reference).
</TABLE>
<PAGE> 1
Exhibit 10.4
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "AGREEMENT") is dated as of January 31, 1997,
by and among SAFETY 1ST, INC., a Massachusetts corporation ("COMPANY"), GOLDMAN
SACHS CREDIT PARTNERS L.P., a Bermuda limited partnership ("GSCP"), and
O'Melveny & Myers LLP, as escrow agent hereunder (in such capacity "ESCROW
AGENT").
W I T N E S S E T H:
WHEREAS, Company, GSCP, as a "Bank", and GSCP, as "Agent", have entered
into that certain First Amended and Restated Loan Agreement dated as of the date
hereof (the "LOAN AGREEMENT"; capitalized terms used herein and not otherwise
defined herein being used herein as therein defined), pursuant to which GSCP and
the other "Banks" which may become parties to the Loan Agreement are to make
certain extensions of credit to Company, and
WHEREAS, as consideration for GSCP's entering into the Loan Agreement,
Company has agreed, among other things, to issue certain warrants to purchase
common stock of Company in the event the Loan Agreement remains outstanding at
certain future specified dates; and
WHEREAS, Company has agreed to deposit such warrants into an escrow
arrangement on the date hereof, to be held in escrow and distributed in
accordance with the terms hereof; and
WHEREAS, Escrow Agent is willing to act as escrow agent in respect of the
Escrowed Warrants (as hereinafter defined) upon the terms and conditions
hereinafter set forth:
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by each of the parties hereto, the
parties hereto, intending to be legally bound, do hereby agree as follows:
1. APPOINTMENT OF ESCROW AGENT. Company and GSCP hereby appoint Escrow
Agent as escrow agent in accordance with the terms and conditions set forth
herein, and Escrow Agent hereby accepts such appointment.
2. DEPOSIT OF ESCROWED WARRANTS. Company, simultaneously with the
execution and delivery of this Agreement, has caused to be deposited with Escrow
Agent (a) that certain Warrant No. R-1, dated as of the date hereof, providing
for the issuance of 250,000 shares of common stock of Company (the "FIRST
WARRANT"), (b) that certain Warrant No. R-2, dated as of the date hereof,
providing for the issuance of 50,000 shares of common stock of Company (the
"SECOND WARRANT"), and (c) that certain Warrant No. R-3, dated as of the date
hereof, providing for the issuance of 50,000
<PAGE> 2
shares of common stock of Company (the "THIRD WARRANT"; together with the First
Warrant and the Second Warrant, the "ESCROWED WARRANTS"). Escrow Agent hereby
acknowledges receipt of the Escrowed Warrants and agrees to hold them upon the
terms and conditions hereinafter set forth.
3. DISTRIBUTION OF ESCROWED WARRANTS. Escrow Agent shall hold the Escrowed
Warrants in its possession until instructed hereunder to deliver the Escrowed
Warrants or any specified portion thereof as follows:
(a) If GSCP delivers a notice to Company and Escrow Agent in the form of
Annex A attached hereto (a "NOTICE OF ISSUANCE") (i) on or after the date which
is six months after the date hereof, requesting Escrow Agent to deliver the
First Warrant to GSCP, (ii) on or after the date which is nine months after the
date hereof, requesting Escrow Agent to deliver the Second Warrant to GSCP, or
(iii) on or after the date which is twelve months after the date hereof,
requesting Escrow Agent to deliver the Third Warrant to GSCP, Escrow Agent shall
deliver to GSCP the Escrowed Warrant specified in the applicable Notice of
Issuance on the third business day after receipt of such Notice of Issuance by
Escrow Agent.
(b) If Company delivers a notice to GSCP and Escrow Agent in the form of
Annex B attached hereto (a "NOTICE OF RELEASE") requesting Escrow Agent to
release all remaining Escrowed Warrants to Company, Escrow Agent shall deliver
to Company all remaining Escrowed Warrants on the third business day after
receipt of such Notice of Issuance by Escrow Agent.
4. EXCULPATION AND INDEMNIFICATION OF ESCROW AGENT.
(a) Escrow Agent may resign and be discharged from its duties hereunder at
any time by giving written notice of such resignation to Company and GSCP
specifying a date when such resignation shall take effect. Upon such notice, a
successor Escrow Agent, which shall be a bank or trust company organized under
the laws of the United States of America or the State of New York having a
combined capital and surplus of not less than $100,000,000 shall be appointed
with the mutual consent of Company and GSCP. Such successor Escrow Agent shall
become Escrow Agent hereunder upon the resignation date specified in such
notice. If Company and GSCP are unable to agree upon a successor Escrow Agent
within thirty (30) days after such notice, Escrow Agent shall be entitled to
apply to a court of competent jurisdiction for the appointment of a successor.
Escrow Agent shall continue to serve until its successor accepts its appointment
as Escrow Agent and receives the Escrowed Warrants. Company and GSCP shall have
the right at any time upon their mutual consent to substitute a new Escrow Agent
by giving notice thereof to the then current Escrow Agent, such substitution to
take effect upon the appointment of a successor Escrow Agent meeting the
requirements set forth above and the acceptance of such appointment by such
successor Escrow Agent and delivery to such successor Escrow Agent of the
Escrowed Warrants.
2
<PAGE> 3
(b) Escrow Agent shall have no duties or responsibilities whatsoever with
respect to the Escrowed Warrants except as are specifically set forth herein and
may conclusively rely, and shall be protected in acting or refraining from
acting, on any written notice, instrument, request, consent, certificate,
document, letter, telegram, order, resolution or signature reasonably believed
by it to be genuine and to have been signed or presented by the proper party or
parties duly authorized to do so. Escrow Agent shall have no responsibility for
the contents of any such writing contemplated herein and may rely without any
liability upon the contents thereof.
(c) Escrow Agent shall not be liable for any action taken or omitted by it
in good faith and reasonably believed by it to be authorized hereby or within
the rights or powers conferred upon it hereunder, nor for any action taken or
omitted by it in good faith and in accordance with the advice of counsel (which
counsel may be of Escrow Agent's own choosing), and shall not be liable for any
mistake of fact or error of judgment or for any acts or omissions of any kind
except for its own fraud, willful misconduct or gross negligence.
(d) Each of Company and GSCP agrees to indemnify Escrow Agent and hold it
harmless against any and all liabilities incurred by it hereunder as a
consequence of such party's action, and the parties agree jointly to indemnify
Escrow Agent and hold it harmless against any and all liabilities incurred by it
hereunder that are not a consequence of any party's action, except in either
case for liabilities incurred by Escrow Agent resulting from its own fraud,
willful misconduct or gross negligence. Company and GSCP agree to reimburse each
other for one-half of any payments made by them pursuant to this Section 4(d)
with respect to liabilities for which the parties are jointly liable pursuant to
this Section 4(d).
5. FURTHER ASSURANCES. From time to time on and after the date hereof, the
other parties hereto shall deliver or cause to be delivered to Escrow Agent such
further documents and instruments and shall do and cause to be done such further
acts as Escrow Agent shall reasonably request (it being understood that Escrow
Agent shall have no obligation to make any such request) to carry out more
effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected in acting
hereunder.
6. TERMINATION AGREEMENT. This Agreement shall terminate on the final
disposition of all Escrowed Warrants in accordance with the provisions of
Section hereof; provided that the rights of Escrow Agent and the obligations of
the other parties hereto under Paragraphs 4 and 5 shall survive the termination
hereof.
7. CONSENTS TO SERVICE OF PROCESS. Each of the parties hereto hereby
irrevocably consents to the jurisdiction of the courts of the State of New York
and of any Federal court located in such State in connection with any action,
suit or other proceeding arising out of or relating to this Agreement or any
action taken or omitted hereunder, and waives any claim of forum non conveniens
and any objections as to laying of venue. Each party further waives personal
service of any summons,
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complaint or other process and agrees that the service thereof may be made by
certified or registered mail directed to such person or such person's address
for purposes of notices hereunder.
8. MISCELLANEOUS.
(a) This Agreement embodies the entire agreement and understanding among
the parties relating to the subject matter hereof and may not be changed orally,
but only by an instrument in writing signed by the party against whom
enforcement of such change is sought.
(b) All notices and other communications under this Agreement shall be in
writing and shall be deemed given when delivered personally, on the next
business day after delivery to a recognized overnight courier or when sent by
facsimile to the parties (and shall also be transmitted by facsimile to the
persons receiving copies thereof) at the following addresses (or to such other
address as a party may have specified by notice given to the other party
pursuant to this provision):
If to Company, to
Safety 1st, Inc.
210 Boylston Street
Chestnut Hill, Massachusetts 02167
Attention: Michael Lerner
Telecopy No: (617) 332-0125
with a copy to;
Kassler & Feuer, P.C.
101 Arch Street, 18th Floor
Boston, Massachusetts 02110
Attention: Curt R. Feuer, Esq.
Telecopy No: (617) 439-0060
If to GSCP, to:
Goldman Sachs Credit Partners L.P.
85 Broad Street New York, New York 10004
Attention: Ed Mule and Doug Hitchner
Telecopy No: (212) 902-3000
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<PAGE> 5
If to Escrow Agent, to:
O'Melveny & Myers LLP
153 East 53rd Street
Citicorp Center
New York New York 10022
Attention: Jonathan P. Williams Esq.
Telecopy No: (212) 326-2061
(c) The headings of the Sections of this Agreement have been inserted for
convenience and shall not modify, define, limit or expand the express provisions
of this Agreement.
(d) This Agreement and the rights and obligations hereunder of the parties
hereto (other than Escrow Agent) may not be assigned except with the prior
written consent of the other parties hereto. Subject to the provisions of
Section 4(a) hereof, this Agreement and the rights and obligations hereunder of
Escrow Agent may be assigned by Escrow Agent only to a successor to its entire
business. This Agreement shall be binding upon and inure to the benefit of each
party's respective successors and permitted assigns. Except as expressly
provided below, no other Person shall acquire or have any rights under or by
virtue of this Agreement. This Agreement is intended to be for the sole benefit
of the parties hereto, and (subject to the provisions of this Paragraph 9(d))
their respective successors and assigns, and none of the provisions of this
Agreement are intended to be, nor shall they be construed to be, for the benefit
of any third person.
(e) This Agreement may not be amended, supplemented or otherwise modified
without the prior written consent of Company and GSCP. Any amendment, supplement
or modification which affects Escrow Agent must also be consented to by Escrow
Agent.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without reference to the principles of
conflict of laws.
(g) This Agreement may be executed in two or more counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
[Remainder of page intentionally left blank.]
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SAFETY 1ST, INC.
By:_______________________________________
Name:
Title:
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:_______________________________________
Authorized Signatory Title:
O'MELVENY & MYERS LLP
By:_______________________________________
Name:
Title:
S-1
<PAGE> 7
ANNEX A
_______________, 199__
O'Melveny & Myers LLP
153 East 53rd Street
Citicorp Center
New York, New York 10022
Attention: Jonathan P. Williams Esq.
RE: ESCROW AGREEMENT DATED AS OF JANUARY 31, 1997
The undersigned hereby certifies that:
(i) he or she is a duly authorized representative of Goldman Sachs Credit
Partners L.P. ("GSCP");
(ii) that certain First Amended and Restated Loan Agreement dated as of
January 31, 1997 by and among Safety 1st, Inc. ("COMPANY"), GSCP and the other
financial institutions party thereto as Banks, and GSCP, as Agent, is still in
force and effect and either (a) Company has outstanding Obligations thereunder,
(b) one or more Letters of Credit are outstanding thereunder, or (c) the
Commitments thereunder have not terminated or been cancelled;
(iii) the date of this certificate is on or after the [INSERT AS
APPLICABLE: six-month/nine-month/twelve-month] anniversary of the Effective Date
of such Loan Agreement; and
(iv) GSCP is entitled to the delivery of the [INSERT AS APPLICABLE: First
Warrant/Second Warrant/Third Warrant] to GSCP by Escrow Agent.
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:_______________________________________
Authorized Signatory
<PAGE> 8
ANNEX B
___________, 199__
O'Melveny & Myers LLP
153 East 53rd Street
Citicorp Center
New York, New York 10022
Attention: Jonathan P. Williams, Esq.
RE: ESCROW AGREEMENT DATED AS OF JANUARY 31, 1997
The undersigned hereby certifies that:
(i) he or she is a duly authorized representative of Safety 1st, Inc.
("COMPANY");
(ii) that certain First Amended and Restated Loan Agreement dated as of
January 31, 1997 by and among Company, Goldman Sachs Credit Partners L.P.
("GSCP") and the other financial institutions party thereto as Banks, and GSCP,
as Agent, is no longer in force and effect and (a) Company has no outstanding
Obligations thereunder, (b) no Letters of Credit are outstanding thereunder, and
(c) the Commitments thereunder have terminated or been cancelled; and
(iii) Company is entitled to the delivery of all [remaining] Escrowed
Warrants to Company by Escrow Agent.
SAFETY 1ST, INC.
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES WHICH MAY BE ACQUIRED UPON
THE EXERCISE OF THIS COMMON STOCK PURCHASE WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN OPINION SATISFACTORY TO THE COMPANY OF COUNSEL SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
ACT.
Void after January 31, 2004, or Right to Purchase 250,000 (subject to
otherwise as provided herein adjustment) Shares of Common Stock, $0.01
par value per share, of Safety 1st, Inc.
Warrant R-1
SAFETY 1ST, INC.
COMMON STOCK PURCHASE WARRANT
Safety 1st, Inc., a Massachusetts corporation (the "COMPANY"), for value
received and subject to the terms set forth below, hereby grants to Goldman
Sachs Credit Partners L.P. and its registered successors and assigns (the
"HOLDER") the right to purchase from the Company, at any time or from time to
time after the Adjustment Date and before 3:00 P.M., New York City time, on
January 31, 2004, 250,000 fully paid and non-assessable shares of the Common
Stock, par value $0.01 per share, of the Company, at the Exercise Price (as
defined below). The Exercise Price and the number and character of such shares
of Common Stock purchasable pursuant to the rights granted under this Warrant
are subject to adjustment as provided herein.
This Warrant is subject to the following provisions:
1. DEFINITIONS. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) "ADJUSTMENT DATE" means the date that is six months after the
Issue Date.
<PAGE> 2
(b) "COMMON STOCK" means all stock of any class or classes (however
designated) of the Company, whether authorized upon the Issue Date or
thereafter, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency).
(c) "EXERCISE PRICE" means the Market Price of a share of Common
Stock as of the Issue Date; provided, however, that if the Market Price of a
share of Common Stock as of the Adjustment Date is less than the Market Price of
a share of Common Stock as of the Issue Date, the Exercise Price shall be
automatically adjusted on the Adjustment Date to be the Market Price of a share
of Common Stock as of the Adjustment Date.
(d) "ISSUE DATE" means January 31, 1997.
(e) "MARKET PRICE" means, as to shares of the Common Stock: (i) if
the shares of the Common Stock are listed on any national securities exchange or
quoted on the National Association of Security Dealers, Inc. Automated Quotation
System ("NASDAQ") National Market System ("NMS"), the average of the daily
closing prices for the fifteen (15) consecutive business days commencing twenty
(20) business days before the day in question (the "TRADING PERIOD"); (ii) if
the shares of the Common Stock are not listed on any national securities
exchange or quoted on NMS but otherwise are quoted on NASDAQ, the average of the
high and low bids as reported by NASDAQ for the Trading Period: or (iii) if the
shares of the Common Stock are neither listed on any national securities
exchange nor quoted on NASDAQ, the higher of (x) the Exercise Price then in
effect, or (y) the tangible book value per share of Common Stock as of the end
of the Company's immediately preceding fiscal year; provided however, for
purposes of Sections 2.2(b) and 2.4, the term "TRADING PERIOD" shall be deemed
to mean the business day immediately preceding the applicable date of
determination.
(f) "OTHER SECURITIES" means any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or other) which
the Holder of this Warrant at any time shall be entitled to receive, or shall
have received, upon the exercise of this Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock.
(g) "PERSON" means, without limitation, an individual, a
partnership, a corporation, a trust, a joint venture, an unincorporated
organization, or a government or any department or agency thereof.
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(h) "THIS WARRANT" means, collectively, this Warrant and all other
stock purchase warrants issued in exchange herefor or replacement hereof.
2. EXERCISE OR CONVERSION OF WARRANT.
2.1 EXERCISE PERIOD. The Holder may exercise this Warrant, in whole
or in part (but not as to a fractional share of Common Stock), at any time and
from time to time after the Adjustment Date and prior to 3:00 P.M. New York City
time on January 31, 2004.
2.2 EXERCISE OR CONVERSION PROCEDURE.
(a) This Warrant will be deemed to have been exercised at such
time as the Company has received all of the following items (the "EXERCISE
DATE"):
(i) a completed Subscription Agreement as described in
Section 2.3 hereof, executed by the Holder exercising all or part of the
purchase rights represented by this Warrant (the "PURCHASER");
(ii) this Warrant;
(iii) if this Warrant is not registered in the name of
the Purchaser, an Assignment or Assignments in the form set forth in Exhibit C
hereto, evidencing the assignment of this Warrant to the Purchaser together with
any documentation required pursuant to Section 7(a) hereof; and
(iv) a check payable to the order of the Company in an
amount equal to the product of the Exercise Price multiplied by the number of
shares of Common Stock being purchased upon such exercise;
(b) (i) In lieu of exercise of any portion of this Warrant as
provided in Subparagraph (a) above, this Warrant (or any portion thereof) may,
at the election of the Holder, be converted into the nearest whole number of
shares of Common Stock (or Other Securities) equal to: (1) the product of (a)
the number of shares of Common Stock (or Other Securities) then issuable upon
the exercise of this Warrant (or such portion of this Warrant as is then being
converted) and (b) the excess, if any, of (i) the Market Price with respect to
the date of conversion over (ii) the Exercise Price in effect on the business
day next preceding the date of conversion, divided by(2) the Market Price with
respect to the date of conversion.
(ii) The conversion rights provided under this Section
2.2(b) maybe exercised in whole or in part and at any time and from time to time
while any Warrant remains outstanding. In order to exercise the conversion
privilege, the Holder shall surrender to
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<PAGE> 4
the Company, at its offices, this Warrant accompanied by a duly completed Notice
of Conversion as described in Section 2.3 hereof, executed by the Holder
converting all or a part of the rights represented by this Warrant
("PURCHASER").
(iii) The use of the term "exercise" or "Exercise Date"
in this Warrant shall be deemed to refer to "conversion" or "Conversion Date",
respectively, to the extent rights under this Warrant are converted in lieu of
being exercised.
(c) As soon as practicable after the exercise of this Warrant
in full or in part, and in any event within ten (10) days after the Exercise
Date, the Company at its expense will cause to be issued in the name of and
delivered to the Holder hereof, or as the Holder (upon payment by the Holder of
any applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled upon such exercise, together
with any other stock or other securities and property (including cash, where
applicable) to which the Holder is entitled upon exercise.
(d) Unless this Warrant has expired or all of the purchase
rights represented hereby have been exercised, the Company at its expense will,
within ten (10) days after the Exercise Date, issue and deliver to or upon the
order of the Holder hereof a new Warrant or Warrants of like tenor, in the name
of the Holder calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock remaining issuable under this Warrant.
(e) The Common Stock (or Other Securities) issuable upon the
exercise of this Warrant will be deemed to have been issued to the Purchaser on
the Exercise Date, and the Purchaser will be deemed for all purposes to have
become the record holder of such Common Stock (or Other Securities) on the
Exercise Date.
(e) The issuance of certificates for shares of Common Stock
(or Other Securities) upon exercise of this Warrant will be made without charge
to the Holder for any issuance tax in respect thereof or any other cost incurred
by the Company in connection with such exercise and the related issuance of
Shares of Common Stock (or Other Securities).
2.3 SUBSCRIPTION AGREEMENT/CONVERSION NOTICE. The Subscription
Agreement and the Conversion Notice will be substantially in the form set forth
in Exhibit A or Exhibit B, respectively, hereto, except that if the shares of
Common Stock (or Other Securities) issuable upon exercise or conversion of this
Warrant are not to be issued in the name of the Holder hereof, the Subscription
Agreement or Conversion Notice will also state the name of the Person to whom
the certificates for the shares of Common Stock (or Other Securities) are to be
issued, and if the number of shares of Common Stock (or Other Securities) to be
issued does not include all the shares of Common Stock (or Other Securities)
issuable hereunder it will also state the name of
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<PAGE> 5
the Person to whom a new Warrant of the unexercised/unconverted portion of the
rights hereunder is to be delivered.
2.4 FRACTIONAL SHARES. If a fractional share of Common Stock would,
but for the provisions of Section 2.1 hereof, be issuable upon exercise of the
rights represented by this Warrant, the Company will, within ten (10) days after
the Exercise Date, deliver to the Purchaser a check payable to the Purchaser in
lieu of such fractional share, in an amount equal to the Market Price of such
fractional share as of the close of business on the Exercise Date.
3. ADJUSTMENTS; CANCELLATION.
3.1 STOCK SPLITS, ETC. If the Company shall at any time after the
Issue Date subdivide its outstanding Common Stock or Other Securities, by
split-up or otherwise, or combine its outstanding Common Stock or Other
Securities, or issue additional shares of its capital stock in payment of a
stock dividend in respect of its Common Stock or Other Securities, the number of
shares issuable on the exercise of the unexercised portion of this Warrant shall
forthwith be proportionately increased in the case of such a subdivision or
stock dividend, or proportionately decreased in the case of such combination,
and the Exercise Price then applicable to shares covered by the unexercised
portion of this Warrant shall forthwith be proportionately decreased in the case
of such a subdivision or stock dividend, or proportionately increased in the
case of such combination.
3.2 RECLASSIFICATION, REORGANIZATION, ETC. In case of any
reclassification, capital reorganization or change of the outstanding Common
Stock or Other Securities (other than as a result of a subdivision, combination
or stock dividend) or any exchange or conversion of the Common Stock for or into
securities of another entity, or in case of the consolidation or merger of the
Company with or into any other Person or in case of any sale or conveyance of
all or substantially all of the assets of the Company (any of the foregoing
being a "REORGANIZATION TRANSACTION"), then, as a condition of such
Reorganization Transaction, lawful provision shall be made so that the Holder
shall have the right at any time prior to the expiration of this Warrant to
purchase, at a total price not to exceed that payable upon the exercise of the
unexercised portion of this Warrant, the kind and amount of shares of stock and
other securities and property receivable upon such Reorganization Transaction by
a holder of the number of shares of Common Stock or Other Securities of the
Company as to which this Warrant was exercisable immediately prior to such
Reorganization Transaction, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Holder to the end that the
provisions hereof (including, without limitation, provisions for the adjustment
of the Exercise Price and of the number of shares purchasable upon exercise of
this Warrant) shall thereafter be applicable in relation to any shares of stock,
and other securities and property, thereafter deliverable upon exercise hereof.
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<PAGE> 6
3.3 DIVIDENDS. In case the Company shall, at any time or from time
to time after the Issue Date, pay any dividend or make any other distribution
upon its Common Stock (or Other Securities) payable in cash, property or
securities of a corporation other than the Company, then forthwith upon the
payment of such dividend, or the making of such other distribution, as the case
may be, the Exercise Price then in effect shall be reduced by the amount of such
dividend or other distribution in respect of each outstanding share of Common
Stock (or Other Securities). The Board of Directors of the Company shall
determine the fair value of any dividend or other distribution made upon Common
Stock of the Company payable in property or securities of a corporation other
than the Company.
3.4 ADJUSTMENT FOR ISSUE OF STOCK AT LESS THAN EXERCISE PRICE. In
case the Company shall, at any time or from time to time after the Issue Date,
issue or agree to issue, by warrants, convertible securities, stock options or
otherwise, any of its Common Stock or Other Securities, including treasury
shares (other than any shares issued in transactions to which Section 3.1 or 3.2
of this Warrant applies), for a consideration per share less than the Exercise
Price per share in effect immediately prior to the time of such issue or sale,
then forthwith upon such issue or sale, or agreement to issue or sell, said
Exercise Price shall be reduced to a price (calculated to the nearest cent)
determined by dividing (x) an amount equal to (A) the product obtained by
multiplying the number of shares of the Company's Common Stock outstanding (or
then deemed to be outstanding as herein provided) immediately prior to such
issue by the Exercise Price in effect at such time plus (B) the consideration
received by the Company upon such issue by (y) the number of shares of the
Company's Common Stock outstanding (or then deemed to be outstanding as herein
provided) immediately after such issue. Whenever the Exercise Price is adjusted
as provided in this Section 3.4, the aggregate number of shares of Common Stock
(or Other Securities) which the Holder shall thereafter be entitled to purchase
at such adjusted Exercise Price shall be increased to the number of shares
determined by multiplying the number of shares of Common Stock (or Other
Securities) issuable upon exercise of this Warrant immediately prior to such
adjustment by the Exercise Price in effect immediately prior to such adjustment,
and dividing the product so obtained by such adjusted Exercise Price. For the
purposes of this Section 3.4, the number of shares of Common Stock (or Other
Securities) deemed to be outstanding at any given time shall exclude shares in
the treasury of the Company but shall include all shares issuable or to become
issuable under any agreements, warrants (including this Warrant), convertible
securities, stock options, similar rights or otherwise (hereinafter in this
Section 3.4 referred to as "OPTIONS"). Notwithstanding anything contained herein
to the contrary, the provisions of this Section 3.4 shall not apply with respect
to options granted to any management or other key employee of the Company in a
compensatory or incentive transaction or otherwise pursuant to a stock option
plan (or with respect to the issuance of any Common Stock or Other Securities
upon the exercise of such options). The Board of Directors of the Company shall
determine the fair value of the amount of consideration other than money
received by the Company upon the issue by it of any of its securities. Such
Board shall, in case any Common Stock (or Other Securities) or Options for the
purchase thereof are issued with other stock,
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securities or assets of the Company, determine what part of the consideration
received therefor is applicable to the issue of the Common Stock (or Other
Securities) or Options for the purchase thereof. If, as provided herein, the
Exercise Price is adjusted as a consequence of the Company's issuance of
Options, no further adjustment of the Exercise Price shall be made upon the
subsequent issuance of Common Stock (or Other Securities) upon the exercise of
such Options. To the extent that Options expire without having been exercised,
the Exercise Price computed upon their issuance, and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed to take into account
only the shares of Common Stock (or Other Securities) actually issued upon the
exercise of such Options. In any such recomputation, the consideration
applicable to the shares of Common Stock (or Other Securities) issued shall be
the aggregate consideration which was received by the Company upon the issuance
of such Options, whether or not exercised, plus the additional consideration
actually received by the Company upon the exercise thereof. No recomputation
shall have the effect of increasing the Exercise Price by an amount in excess of
the adjustment thereof made in respect of the issuance of the expired Options.
3.5 CERTIFICATE OF ADJUSTMENT. Whenever the Exercise Price or the
number of shares issuable hereunder is adjusted, as herein provided, the Company
shall promptly deliver to the Holder a certificate of the Treasurer of the
Company, which certificate shall state (i) the Exercise Price and the number of
shares of Common Stock (or Other Securities) issuable hereunder after such
adjustment, (ii) the facts requiring such adjustment, and (iii) the method of
calculation for such adjustment and increase or decrease.
3.6 SMALL ADJUSTMENTS. No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or decrease in the
Exercise Price of at least one percent; provided, however, that any adjustments
which by reason of this Section 3.6 are not required to be made immediately
shall be carried forward and taken into account at the time of exercise of this
Warrant or any subsequent adjustment in the Exercise Price which, singly or in
combination with any adjustment carried forward, is required to be made under
Sections 3.1, 3.2, 3.3 or 3.4.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
corporate charter or By-Laws 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 of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) will not permit the par value of any shares of Stock (or Other
Securities) receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
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<PAGE> 8
fully paid and non-assessable shares of Common Stock (or Other Securities) upon
the exercise of this Warrant.
5. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANT. The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable upon the exercise of this Warrant.
6. PURCHASE RIGHTS. If at any time the Company grants, issues or sells any
rights or options to subscribe for or to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (or
Other Securities) (the "PURCHASE RIGHTS"), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock (or Other Securities) acquirable upon exercise
of this Warrant had this Warrant been fully exercised immediately prior to the
date on which a record was taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record was taken, the date as of which the
record holders of Common Stock (or Other Securities) were determined for the
grant, issuance or sale of such Purchase Rights.
7. DISPOSITION OF THIS WARRANT, COMMON STOCK, ETC.
(a) The Holder and any proposed transferee hereof or of the Common
Stock (or Other Securities) with respect to which this Warrant may be
exercisable, by their acceptance hereof, hereby understand and agree that this
Warrant and the Common Stock (or Other Securities) with respect to which this
Warrant may be exercisable have not been registered under the Securities Act of
1933, as amended (the "ACT"), and may not be sold, pledged, hypothecated,
donated, or otherwise transferred (whether or not for consideration) without an
effective registration statement under the Act or an opinion satisfactory to the
Company of counsel satisfactory to the Company and/or submission to the Company
of such other evidence as may be satisfactory to counsel to the Company, in each
such case, to the effect that any such transfer shall not be in violation of the
Act. It shall be a condition to the transfer of this Warrant that any transferee
hereof deliver to the Company its written agreement to accept and be bound by
all of the terms and conditions of this Warrant.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock (or Other Securities) with respect to which this Warrant
may be exercisable will be imprinted with a conspicuous legend in substantially
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD, PLEDGED,
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HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION SATISFACTORY TO THE COMPANY OF COUNSEL
SATISFACTORY TO THE COMPANY AND/OR SUBMISSION TO THE COMPANY OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH CASE,
TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
ACT."
provided, however, that, if the shares of Common Stock (or Other Securities)
with respect to which this Warrant has been exercised are registered in
accordance with the provisions of the Act by the date contemplated by Section 12
hereof, any stock certificates of the Company issued in connection herewith and
bearing the foregoing legend will, upon written request of the Holder, be
replaced with a certificate(s) not bearing the foregoing legend.
8. RIGHTS AND OBLIGATIONS OF HOLDER. The Holder shall not, by virtue
hereof, be entitled to any voting rights or other rights as a stockholder of the
Company. No provision of this Warrant, in the absence of affirmative actions by
the Holder to purchase Common Stock (or Other Securities) of the Company by
exercising this Warrant, and no enumeration in this Warrant of the rights or
privileges of the Holder, will give rise to any liability of the Holder for the
Exercise Price of Common Stock (or Other Securities) acquirable by exercise
hereof or as a stockholder of the Company.
9. TRANSFER OF WARRANTS. Subject to compliance with the restrictions on
transfer applicable to this Warrant referred to in Section 7 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in substantially the form attached hereto as Exhibit C), to
the Company, and the Company at its expense will issue and deliver to or upon
the order of the Holder a new Warrant or Warrants in such denomination or
denominations as may be requested, but otherwise of like tenor, in the name of
the Holder or as the Holder (upon payment of any applicable transfer taxes) may
direct.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
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<PAGE> 10
11. COMPANY RECORDS. Until this Warrant is transferred on the books of the
Company, the Company may treat the registered Holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
12. REGISTRATION RIGHTS. No later than the date that is 60 days after the
Adjustment Date, the Company shall take all actions necessary to provide that
the Common Stock (or Other Securities) to be obtained upon exercise of this
Warrant shall be registered under the Act. In the event the Company fails to
comply with the registration requirements set forth in this Section 12, it shall
pay the Holder $71,500 per month until the earlier of (i) the date such
registration requirements are satisfied and (ii) the date all of the Common
Stock (or Other Securities) to be obtained upon exercise of the Holder's rights
hereunder may be freely sold or otherwise disposed of pursuant to Rule 144 under
the Act.
13. MISCELLANEOUS.
13.1 NOTICES. All notices and other communications from the Company
to the Holder shall be mailed by first class mail, postage prepaid, to such
address as may have been furnished to the Company in writing by the Holder, or,
until an address is so furnished, to and at the address of the last previous
Holder who has so furnished an address to the Company. All communications from
the Holder to the Company shall be mailed by first class mail, postage prepaid,
to the Company at 210 Boylston Street, Chestnut Hill, Massachusetts 02167, or
such other address as may have been furnished to the Holder in writing by the
Company.
13.2 AMENDMENT AND WAIVER. Except as otherwise provided herein, this
Warrant and any term hereof may be amended, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such amendment, waiver, discharge or termination is sought.
[The remainder of this page was intentionally left blank.]
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<PAGE> 11
13.3 GOVERNING LAW; DESCRIPTIVE HEADINGS. This Warrant shall be
construed and enforced in accordance with and governed by the internal laws of
the State of New York (including without limitation Section 5-1401 of the
General Obligations Laws of the State of New York). The headings in this Warrant
are for purposes of reference only, and shall not limit or otherwise affect any
of the terms hereof.
Dated: __________, 1997
SAFETY 1ST, INC.
By:__________________________________
Michael Lerner, President
S-1
<PAGE> 12
EXHIBIT A
SUBSCRIPTION AGREEMENT
[To be signed only upon exercise of Warrant]
To: Safety 1st, Inc. Date:___________________
The undersigned, the Holder of the within Warrant, pursuant to the
provisions set forth in the within Warrant, hereby irrevocably elects to
exercise the purchase rights represented by such Warrant for, and agrees to
subscribe for and purchase thereunder, __________ shares of the Common Stock (or
Other Securities) covered by such Warrant and herewith makes payment of
$__________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to, __________, whose address is
_________________________. If said number of shares is less than all the shares
covered by such Warrant, a new Warrant shall be registered in the name of the
undersigned and delivered to the address stated below.
Signature: __________________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant
or on the form of Assignment attached
as Exhibit C thereto).
Address: __________________________________
___________________________________
Exh. A-1
<PAGE> 13
EXHIBIT B
CONVERSION NOTICE
[To be signed only upon conversion of Warrant]
To: Safety 1st, Inc. Date: ______________________
The undersigned, the Holder of the within Warrant, pursuant to the
provisions set forth in the within Warrant, hereby irrevocably elects to convert
the purchase rights represented by such Warrant for _____ shares of the Common
Stock (or Other Securities) covered by such Warrant, and requests that the
certificates for such shares, calculated in accordance with the provisions of
Section 2.2(b)(i) of the within Warrant, be issued in the name of, and delivered
to, _______, whose address is _________________. If the number of shares with
respect to which conversion election is being made is less than all the shares
covered by such Warrant, a new Warrant shall be registered in the name of the
undersigned and delivered to the address stated below.
Signature: ______________________________
(Signature must confirm in all
respects to name of Holder as
specified on the face of the Warrant
or on the form of Assignment
attached as Exhibit C thereto)
Address: ______________________________
______________________________
Exh. B-1
<PAGE> 14
EXHIBIT C
ASSIGNMENT
[To be signed only upon exercise of Warrant]
For value received, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant with respect to
the number of shares of the Common Stock (or Other Securities) covered thereby
set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature: _____________________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant).
Address: ______________________________________
______________________________________
Exh. C-1
<PAGE> 1
EXHIBIT 10.6
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES WHICH MAY BE ACQUIRED UPON
THE EXERCISE OF THIS COMMON STOCK PURCHASE WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN OPINION SATISFACTORY TO THE COMPANY OF COUNSEL SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
ACT.
<TABLE>
<S> <C>
Void after January 31, 2004, or Right to Purchase 50,000 (subject to
otherwise as provided herein adjustment) Shares of Common Stock, $0.01
par value per share, of Safety 1st, Inc.
</TABLE>
Warrant R-2
SAFETY 1ST, INC.
COMMON STOCK PURCHASE WARRANT
Safety 1st, Inc., a Massachusetts corporation (the "COMPANY"), for value
received and subject to the terms set forth below, hereby grants to Goldman
Sachs Credit Partners L.P. and its registered successors and assigns (the
"HOLDER") the right to purchase from the Company, at any time or from time to
time after the Adjustment Date and before 3:00 P.M., New York City time, on
January 31, 2004, 50,000 fully paid and non-assessable shares of the Common
Stock, par value $0.01 per share, of the Company, at the Exercise Price (as
defined below). The Exercise Price and the number and character of such shares
of Common Stock purchasable pursuant to the rights granted under this Warrant
are subject to adjustment as provided herein.
This Warrant is subject to the following provisions:
1. DEFINITIONS. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) "ADJUSTMENT DATE" means the date that is nine months after the
Issue Date.
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(b) "COMMON STOCK" means all stock of any class or classes (however
designated) of the Company, whether authorized upon the Issue Date or
thereafter, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency).
(c) "EXERCISE PRICE" means the Market Price of a share of Common
Stock as of the Issue Date; provided, however, that if the Market Price of a
share of Common Stock as of the Adjustment Date is less than the Market Price of
a share of Common Stock as of the Issue Date, the Exercise Price shall be
automatically adjusted on the Adjustment Date to be the Market Price of a share
of Common Stock as of the Adjustment Date.
(d) "ISSUE DATE" means January 31, 1997.
(e) "MARKET PRICE" means, as to shares of the Common Stock: (i) if
the shares of the Common Stock are listed on any national securities exchange or
quoted on the National Association of Security Dealers, Inc. Automated Quotation
System ("NASDAQ") National Market System ("NMS"), the average of the daily
closing prices for the fifteen (15) consecutive business days commencing twenty
(20) business days before the day in question (the "TRADING PERIOD"); (ii) if
the shares of the Common Stock are not listed on any national securities
exchange or quoted on NMS but otherwise are quoted on NASDAQ, the average of the
high and low bids as reported by NASDAQ for the Trading Period: or (iii) if the
shares of the Common Stock are neither listed on any national securities
exchange nor quoted on NASDAQ, the higher of (x) the Exercise Price then in
effect, or (y) the tangible book value per share of Common Stock as of the end
of the Company's immediately preceding fiscal year; provided however, for
purposes of Sections 2.2(b) and 2.4, the term "TRADING PERIOD" shall be deemed
to mean the business day immediately preceding the applicable date of
determination..
(f) "OTHER SECURITIES" means any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or other) which
the Holder of this Warrant at any time shall be entitled to receive, or shall
have received, upon the exercise of this Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock.
(g) "PERSON" means, without limitation, an individual, a
partnership, a corporation, a trust, a joint venture, an unincorporated
organization, or a government or any department or agency thereof.
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<PAGE> 3
(h) "THIS WARRANT" means, collectively, this Warrant and all other
stock purchase warrants issued in exchange herefor or replacement hereof.
2. EXERCISE OR CONVERSION OF WARRANT.
2.1 EXERCISE PERIOD. The Holder may exercise this Warrant, in whole
or in part (but not as to a fractional share of Common Stock), at any time and
from time to time after the Adjustment Date and prior to 3:00 P.M. New York City
time on January 31, 2004.
2.2 EXERCISE OR CONVERSION PROCEDURE.
(a) This Warrant will be deemed to have been exercised at such
time as the Company has received all of the following items (the "EXERCISE
DATE"):
(i) a completed Subscription Agreement as described in
Section 2.3 hereof, executed by the Holder exercising all or part of the
purchase rights represented by this Warrant (the "PURCHASER");
(ii) this Warrant;
(iii) if this Warrant is not registered in the name of
the Purchaser, an Assignment or Assignments in the form set forth in Exhibit C
hereto, evidencing the assignment of this Warrant to the Purchaser together with
any documentation required pursuant to Section 7(a) hereof; and
(iv) a check payable to the order of the Company in an
amount equal to the product of the Exercise Price multiplied by the number of
shares of Common Stock being purchased upon such exercise;
(b) (i) In lieu of exercise of any portion of this Warrant
as provided in Subparagraph (a) above, this Warrant (or any portion thereof)
may, at the election of the Holder, be converted into the nearest whole number
of shares of Common Stock (or Other Securities) equal to: (1) the product of (a)
the number of shares of Common Stock (or Other Securities) then issuable upon
the exercise of this Warrant (or such portion of this Warrant as is then being
converted) and (b) the excess, if any, of (i) the Market Price with respect to
the date of conversion over (ii) the Exercise Price in effect on the business
day next preceding the date of conversion, divided by(2) the Market Price with
respect to the date of conversion.
(ii) The conversion rights provided under this Section
2.2(b) maybe exercised in whole or in part and at any time and from time to time
while any Warrant remains outstanding. In order to exercise the conversion
privilege, the Holder shall surrender to
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<PAGE> 4
the Company, at its offices, this Warrant accompanied by a duly completed Notice
of Conversion as described in Section 2.3 hereof, executed by the Holder
converting all or a part of the rights represented by this Warrant
("PURCHASER").
(iii) The use of the term "exercise" or "Exercise Date"
in this Warrant shall be deemed to refer to "conversion" or "Conversion Date",
respectively, to the extent rights under this Warrant are converted in lieu of
being exercised.
(c) As soon as practicable after the exercise of this Warrant
in full or in part, and in any event within ten (10) days after the Exercise
Date, the Company at its expense will cause to be issued in the name of and
delivered to the Holder hereof, or as the Holder (upon payment by the Holder of
any applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled upon such exercise, together
with any other stock or other securities and property (including cash, where
applicable) to which the Holder is entitled upon exercise.
(d) Unless this Warrant has expired or all of the purchase
rights represented hereby have been exercised, the Company at its expense will,
within ten (10) days after the Exercise Date, issue and deliver to or upon the
order of the Holder hereof a new Warrant or Warrants of like tenor, in the name
of the Holder calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock remaining issuable under this Warrant.
(e) The Common Stock (or Other Securities) issuable upon the
exercise of this Warrant will be deemed to have been issued to the Purchaser on
the Exercise Date, and the Purchaser will be deemed for all purposes to have
become the record holder of such Common Stock (or Other Securities) on the
Exercise Date.
(f) The issuance of certificates for shares of Common Stock
(or Other Securities) upon exercise of this Warrant will be made without charge
to the Holder for any issuance tax in respect thereof or any other cost incurred
by the Company in connection with such exercise and the related issuance of
Shares of Common Stock (or Other Securities).
2.3 SUBSCRIPTION AGREEMENT/CONVERSION ON NOTICE. The Subscription
Agreement and the Conversion Notice will be substantially in the form set forth
in Exhibit A or Exhibit B, respectively, hereto, except that if the shares of
Common Stock (or Other Securities) issuable upon exercise or conversion of this
Warrant are not to be issued in the name of the Holder hereof, the Subscription
Agreement or Conversion Notice will also state the name of the Person to whom
the certificates for the shares of Common Stock (or Other Securities) are to be
issued, and if the number of shares of Common Stock (or Other Securities) to be
issued does not include all the shares of Common Stock (or Other Securities)
issuable hereunder it will also state
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<PAGE> 5
the name of the Person to whom a new Warrant of the unexercised/unconverted
portion of the rights hereunder is to be delivered.
2.4 FRACTIONAL SHARES. If a fractional share of Common Stock would,
but for the provisions of Section 2.1 hereof, be issuable upon exercise of the
rights represented by this Warrant, the Company will, within ten (10) days after
the Exercise Date, deliver to the Purchaser a check payable to the Purchaser in
lieu of such fractional share, in an amount equal to the Market Price of such
fractional share as of the close of business on the Exercise Date.
3. ADJUSTMENTS; CANCELLATION.
3.1 STOCK SPLITS, ETC. If the Company shall at any time after the
Issue Date subdivide its outstanding Common Stock or Other Securities, by
split-up or otherwise, or combine its outstanding Common Stock or Other
Securities, or issue additional shares of its capital stock in payment of a
stock dividend in respect of its Common Stock or Other Securities, the number of
shares issuable on the exercise of the unexercised portion of this Warrant shall
forthwith be proportionately increased in the case of such a subdivision or
stock dividend, or proportionately decreased in the case of such combination,
and the Exercise Price then applicable to shares covered by the unexercised
portion of this Warrant shall forthwith be proportionately decreased in the case
of such a subdivision or stock dividend, or proportionately increased in the
case of such combination.
3.2 RECLASSIFICATION, REORGANIZATION, ETC. In case of any
reclassification, capital reorganization or change of the outstanding Common
Stock or Other Securities (other than as a result of a subdivision, combination
or stock dividend) or any exchange or conversion of the Common Stock for or into
securities of another entity, or in case of the consolidation or merger of the
Company with or into any other Person or in case of any sale or conveyance of
all or substantially all of the assets of the Company (any of the foregoing
being a "REORGANIZATION TRANSACTION"), then, as a condition of such
Reorganization Transaction, lawful provision shall be made so that the Holder
shall have the right at any time prior to the expiration of this Warrant to
purchase, at a total price not to exceed that payable upon the exercise of the
unexercised portion of this Warrant, the kind and amount of shares of stock and
other securities and property receivable upon such Reorganization Transaction by
a holder of the number of shares of Common Stock or Other Securities of the
Company as to which this Warrant was exercisable immediately prior to such
Reorganization Transaction, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Holder to the end that the
provisions hereof (including, without limitation, provisions for the adjustment
of the Exercise Price and of the number of shares purchasable upon exercise of
this Warrant) shall thereafter be applicable in relation to any shares of stock,
and other securities and property, thereafter deliverable upon exercise hereof.
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<PAGE> 6
3.3 DIVIDENDS. In case the Company shall, at any time or from time
to time after the Issue Date, pay any dividend or make any other distribution
upon its Common Stock (or Other Securities) payable in cash, property or
securities of a corporation other than the Company, then forthwith upon the
payment of such dividend, or the making of such other distribution, as the case
may be, the Exercise Price then in effect shall be reduced by the amount of such
dividend or other distribution in respect of each outstanding share of Common
Stock (or Other Securities). The Board of Directors of the Company shall
determine the fair value of any dividend or other distribution made upon Common
Stock of the Company payable in property or securities of a corporation other
than the Company.
3.4 ADJUSTMENT FOR ISSUE OF STOCK AT LESS THAN EXERCISE PRICE. In
case the Company shall, at any time or from time to time after the Issue Date,
issue or agree to issue, by warrants, convertible securities, stock options or
otherwise, any of its Common Stock or Other Securities, including treasury
shares (other than any shares issued in transactions to which Section 3.1 or 3.2
of this Warrant applies), for a consideration per share less than the Exercise
Price per share in effect immediately prior to the time of such issue or sale,
then forthwith upon such issue or sale, or agreement to issue or sell, said
Exercise Price shall be reduced to a price (calculated to the nearest cent)
determined by dividing (x) an amount equal to (A) the product obtained by
multiplying the number of shares of the Company's Common Stock outstanding (or
then deemed to be outstanding as herein provided) immediately prior to such
issue by the Exercise Price in effect at such time plus (B) the consideration
received by the Company upon such issue by (y) the number of shares of the
Company's Common Stock outstanding (or then deemed to be outstanding as herein
provided) immediately after such issue. Whenever the Exercise Price is adjusted
as provided in this Section 3.4, the aggregate number of shares of Common Stock
(or Other Securities) which the Holder shall thereafter be entitled to purchase
at such adjusted Exercise Price shall be increased to the number of shares
determined by multiplying the number of shares of Common Stock (or Other
Securities) issuable upon exercise of this Warrant immediately prior to such
adjustment by the Exercise Price in effect immediately prior to such adjustment,
and dividing the product so obtained by such adjusted Exercise Price. For the
purposes of this Section 3.4, the number of shares of Common Stock (or Other
Securities) deemed to be outstanding at any given time shall exclude shares in
the treasury of the Company but shall include all shares issuable or to become
issuable under any agreements, warrants (including this Warrant), convertible
securities, stock options, similar rights or otherwise (hereinafter in this
Section 3.4 referred to as "OPTIONS"). Notwithstanding anything contained herein
to the contrary, the provisions of this Section 3.4 shall not apply with respect
to options granted to any management or other key employee of the Company in a
compensatory or incentive transaction or otherwise pursuant to a stock option
plan (or with respect to the issuance of any Common Stock or Other Securities
upon the exercise of such options). The Board of Directors of the Company shall
determine the fair value of the amount of consideration other than money
received by the Company upon the issue by it of any of its securities. Such
Board shall, in case any Common Stock (or Other Securities) or Options for the
purchase thereof are issued with other stock,
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<PAGE> 7
securities or assets of the Company, determine what part of the consideration
received therefor is applicable to the issue of the Common Stock (or Other
Securities) or Options for the purchase thereof. If, as provided herein, the
Exercise Price is adjusted as a consequence of the Company's issuance of
Options, no further adjustment of the Exercise Price shall be made upon the
subsequent issuance of Common Stock (or Other Securities) upon the exercise of
such Options. To the extent that Options expire without having been exercised,
the Exercise Price computed upon their issuance, and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed to take into account
only the shares of Common Stock (or Other Securities) actually issued upon the
exercise of such Options. In any such recomputation, the consideration
applicable to the shares of Common Stock (or Other Securities) issued shall be
the aggregate consideration which was received by the Company upon the issuance
of such Options, whether or not exercised, plus the additional consideration
actually received by the Company upon the exercise thereof. No recomputation
shall have the effect of increasing the Exercise Price by an amount in excess of
the adjustment thereof made in respect of the issuance of the expired Options.
3.5 CERTIFICATE OF ADJUSTMENT. Whenever the Exercise Price or the
number of shares issuable hereunder is adjusted, as herein provided, the Company
shall promptly deliver to the Holder a certificate of the Treasurer of the
Company, which certificate shall state (i) the Exercise Price and the number of
shares of Common Stock (or Other Securities) issuable hereunder after such
adjustment, (ii) the facts requiring such adjustment, and (iii) the method of
calculation for such adjustment and increase or decrease.
3.6 SMALL ADJUSTMENTS. No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or decrease in the
Exercise Price of at least one percent; provided, however, that any adjustments
which by reason of this Section 3.6 are not required to be made immediately
shall be carried forward and taken into account at the time of exercise of this
Warrant or any subsequent adjustment in the Exercise Price which, singly or in
combination with any adjustment carried forward, is required to be made under
Sections 3.1, 3.2, 3.3 or 3.4.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
corporate charter or By-Laws 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 of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) will not permit the par value of any shares of Stock (or Other
Securities) receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
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<PAGE> 8
fully paid and non-assessable shares of Common Stock (or Other Securities) upon
the exercise of this Warrant.
5. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANT. The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable upon the exercise of this Warrant.
6. PURCHASE RIGHTS. If at any time the Company grants, issues or sells
any rights or options to subscribe for or to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (or Other Securities) (the "PURCHASE RIGHTS"), then the Holder will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder had
held the number of shares of Common Stock (or Other Securities) acquirable upon
exercise of this Warrant had this Warrant been fully exercised immediately prior
to the date on which a record was taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record was taken, the date as of which the
record holders of Common Stock (or Other Securities) were determined for the
grant, issuance or sale of such Purchase Rights.
7. DISPOSITION OF THIS WARRANT, COMMON STOCK, ETC.
(a) The Holder and any proposed transferee hereof or of the Common
Stock (or Other Securities) with respect to which this Warrant may be
exercisable, by their acceptance hereof, hereby understand and agree that this
Warrant and the Common Stock (or Other Securities) with respect to which this
Warrant may be exercisable have not been registered under the Securities Act of
1933, as amended (the "ACT"), and may not be sold, pledged, hypothecated,
donated, or otherwise transferred (whether or not for consideration) without an
effective registration statement under the Act or an opinion satisfactory to the
Company of counsel satisfactory to the Company and/or submission to the Company
of such other evidence as may be satisfactory to counsel to the Company, in each
such case, to the effect that any such transfer shall not be in violation of the
Act. It shall be a condition to the transfer of this Warrant that any transferee
hereof deliver to the Company its written agreement to accept and be bound by
all of the terms and conditions of this Warrant.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock (or Other Securities) with respect to which this Warrant
may be exercisable will be imprinted with a conspicuous legend in substantially
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD, PLEDGED,
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HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION SATISFACTORY TO THE COMPANY OF COUNSEL
SATISFACTORY TO THE COMPANY AND/OR SUBMISSION TO THE COMPANY OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH CASE,
TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
ACT."
provided, however, that, if the shares of Common Stock (or Other Securities)
with respect to which this Warrant has been exercised are registered in
accordance with the provisions of the Act by the date contemplated by Section 12
hereof, any stock certificates of the Company issued in connection herewith and
bearing the foregoing legend will, upon written request of the Holder, be
replaced with a certificate(s) not bearing the foregoing legend.
8. RIGHTS AND OBLIGATIONS OF HOLDER. The Holder shall not, by virtue
hereof, be entitled to any voting rights or other rights as a stockholder of the
Company. No provision of this Warrant, in the absence of affirmative actions by
the Holder to purchase Common Stock (or Other Securities) of the Company by
exercising this Warrant, and no enumeration in this Warrant of the rights or
privileges of the Holder, will give rise to any liability of the Holder for the
Exercise Price of Common Stock (or Other Securities) acquirable by exercise
hereof or as a stockholder of the Company.
9. TRANSFER OF WARRANTS. Subject to compliance with the restrictions on
transfer applicable to this Warrant referred to in Section 7 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in substantially the form attached hereto as Exhibit C), to
the Company, and the Company at its expense will issue and deliver to or upon
the order of the Holder a new Warrant or Warrants in such denomination or
denominations as may be requested, but otherwise of like tenor, in the name of
the Holder or as the Holder (upon payment of any applicable transfer taxes) may
direct.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
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<PAGE> 10
11. COMPANY RECORDS. Until this Warrant is transferred on the books of the
Company, the Company may treat the registered Holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
12. REGISTRATION RIGHTS. No later than the date that is eight months after
the Issue Date, the Company shall take all actions necessary to provide that the
Common Stock (or Other Securities) to be obtained upon exercise of this Warrant
shall be registered under the Act. In the event the Company fails to comply with
the registration requirements set forth in this Section 12, it shall pay the
Holder $14,250 per month until the earlier of (i) the date such registration
requirements are satisfied and (ii) the date all of the Common Stock (or Other
Securities) to be obtained upon exercise of the Holder's rights hereunder may be
freely sold or otherwise disposed of pursuant to Rule 144 under the Act.
13. MISCELLANEOUS.
13.1 NOTICES. All notices and other communications from the Company
to the Holder shall be mailed by first class mail, postage prepaid, to such
address as may have been furnished to the Company in writing by the Holder, or,
until an address is so furnished, to and at the address of the last previous
Holder who has so furnished an address to the Company. All communications from
the Holder to the Company shall be mailed by first class mail, postage prepaid,
to the Company at 210 Boylston Street, Chestnut Hill, Massachusetts 02167, or
such other address as may have been furnished to the Holder in writing by the
Company.
13.2 AMENDMENT AND WAIVER. Except as otherwise provided herein, this
Warrant and any term hereof may be amended, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such amendment, waiver, discharge or termination is sought.
[The remainder of this page was intentionally left blank.]
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<PAGE> 11
13.3 GOVERNING LAW; DESCRIPTIVE HEADINGS. This Warrant shall be
construed and enforced in accordance with and governed by the internal laws of
the State of New York (including without limitation Section 5-1401 of the
General Obligations Law of the State of New York). The headings in this Warrant
are for purposes of reference only, and shall not limit or otherwise affect any
of the terms hereof.
Dated: __________, 1997
SAFETY 1ST, INC.
By:_________________________________
Michael Lerner, President
S-1
<PAGE> 12
EXHIBIT A
SUBSCRIPTION AGREEMENT
[To be signed only upon exercise of Warrant]
To: Safety 1st, Inc. Date:_______________
The undersigned, the Holder of the within Warrant, pursuant to the
provisions set forth in the within Warrant, hereby irrevocably elects to
exercise the purchase rights represented by such Warrant for, and agrees to
subscribe for and purchase thereunder, __________ shares of the Common Stock (or
Other Securities) covered by such Warrant and herewith makes payment of
$__________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to, __________, whose address is
_________________________. If said number of shares is less than all the shares
covered by such Warrant, a new Warrant shall be registered in the name of the
undersigned and delivered to the address stated below.
Signature: ____________________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant
or on the form of Assignment attached
as Exhibit C thereto).
Address: ____________________________________
Exh. A-1
<PAGE> 13
EXHIBIT B
CONVERSION NOTICE
[To be signed only upon conversion of Warrant]
To: Safety 1st, Inc. Date: ______________________
The undersigned, the Holder of the within Warrant, pursuant to the
provisions set forth in the within Warrant, hereby irrevocably elects to convert
the purchase rights represented by such Warrant for _____ shares of the Common
Stock (or Other Securities) covered by such Warrant, and requests that the
certificates for such shares, calculated in accordance with the provisions of
Section 2.2(b)(i) of the within Warrant, be issued in the name of, and delivered
to, _______, whose address is _________________. If the number of shares with
respect to which conversion election is being made is less than all the shares
covered by such Warrant, a new Warrant shall be registered in the name of the
undersigned and delivered to the address stated below.
Signature: ______________________________
(Signature must confirm in all
respects to name of Holder as
specified on the face of the Warrant
or on the form of Assignment
attached as Exhibit C thereto)
Address: ______________________________
______________________________
Exh. B-1
<PAGE> 14
EXHIBIT C
ASSIGNMENT
[To be signed only upon exercise of Warrant]
For value received, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant with respect to
the number of shares of the Common Stock (or Other Securities) covered thereby
set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature: ____________________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant).
Address: ____________________________________
____________________________________
Exh. C-1
<PAGE> 1
EXHIBIT 10.7
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES WHICH MAY BE ACQUIRED UPON
THE EXERCISE OF THIS COMMON STOCK PURCHASE WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN OPINION SATISFACTORY TO THE COMPANY OF COUNSEL SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
ACT.
<TABLE>
<S> <C>
Void after January 31, 2004, or Right to Purchase 50,000 (subject to
otherwise as provided herein adjustment) Shares of Common Stock, $0.01
par value per share, of Safety 1st, Inc.
Warrant R-3
</TABLE>
SAFETY 1ST, INC.
COMMON STOCK PURCHASE WARRANT
Safety 1st, Inc., a Massachusetts corporation (the "COMPANY"), for value
received and subject to the terms set forth below, hereby grants to Goldman
Sachs Credit Partners L.P. and its registered successors and assigns (the
"HOLDER") the right to purchase from the Company, at any time or from time to
time after the Adjustment Date and before 3:00 P.M., New York City time, on
January 31, 2004, 50,000 fully paid and non-assessable shares of the Common
Stock, par value $0.01 per share, of the Company, at the Exercise Price (as
defined below). The Exercise Price and the number and character of such shares
of Common Stock purchasable pursuant to the rights granted under this Warrant
are subject to adjustment as provided herein.
This Warrant is subject to the following provisions:
1. DEFINITIONS. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
<PAGE> 2
(a) "ADJUSTMENT DATE" means the date that is twelve months after the
Issue Date.
(b) "COMMON STOCK" means all stock of any class or classes (however
designated) of the Company, whether authorized upon the Issue Date or
thereafter, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency).
(c) "EXERCISE PRICE" means the Market Price of a share of Common
Stock as of the Issue Date; provided, however, that if the Market Price of a
share of Common Stock as of the Adjustment Date is less than the Market Price of
a share of Common Stock as of the Issue Date, the Exercise Price shall be
automatically adjusted on the Adjustment Date to be the Market Price of a share
of Common Stock as of the Adjustment Date.
(d) "ISSUE DATE" means January 31, 1997.
(e) "MARKET PRICE" means, as to shares of the Common Stock: (i) if
the shares of the Common Stock are listed on any national securities exchange or
quoted on the National Association of Security Dealers, Inc. Automated Quotation
System ("NASDAQ") National Market System ("NMS"), the average of the daily
closing prices for the fifteen (15) consecutive business days commencing twenty
(20) business days before the day in question (the "TRADING PERIOD"); (ii) if
the shares of the Common Stock are not listed on any national securities
exchange or quoted on NMS but otherwise are quoted on NASDAQ, the average of the
high and low bids as reported by NASDAQ for the Trading Period: or (iii) if the
shares of the Common Stock are neither listed on any national securities
exchange nor quoted on NASDAQ, the higher of (x) the Exercise Price then in
effect, or (y) the tangible book value per share of Common Stock as of the end
of the Company's immediately preceding fiscal year; provided however, for
purposes of Sections 2.2(b) and 2.4, the term "TRADING PERIOD" shall be deemed
to mean the business day immediately preceding the applicable date of
determination.
(f) "OTHER SECURITIES" means any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or other) which
the Holder of this Warrant at any time shall be entitled to receive, or shall
have received, upon the exercise of this Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock.
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<PAGE> 3
(g) "PERSON" means, without limitation, an individual, a
partnership, a corporation, a trust, a joint venture, an unincorporated
organization, or a government or any department or agency thereof.
(h) "THIS WARRANT" means, collectively, this Warrant and all other
stock purchase warrants issued in exchange herefor or replacement hereof.
2. EXERCISE OR CONVERSION OF WARRANT.
2.1 EXERCISE PERIOD. The Holder may exercise this Warrant, in whole
or in part (but not as to a fractional share of Common Stock), at any time and
from time to time after the Adjustment Date and prior to 3:00 P.M. New York City
time on January 31, 2004.
2.2 EXERCISE OR CONVERSION PROCEDURE.
(a) This Warrant will be deemed to have been exercised at such
time as the Company has received all of the following items (the "EXERCISE
DATE"):
(i) a completed Subscription Agreement as described in
Section 2.3 hereof, executed by the Holder exercising all or part of the
purchase rights represented by this Warrant (the "PURCHASER");
(ii) this Warrant;
(iii) if this Warrant is not registered in the name of
the Purchaser, an Assignment or Assignments in the form set forth in Exhibit C
hereto, evidencing the assignment of this Warrant to the Purchaser together with
any documentation required pursuant to Section 7(a) hereof; and
(iv) a check payable to the order of the Company in an
amount equal to the product of the Exercise Price multiplied by the number of
shares of Common Stock being purchased upon such exercise;
(b) (i) In lieu of exercise of any portion of this Warrant as
provided in Subparagraph (a) above, this Warrant (or any portion thereof) may,
at the election of the Holder, be converted into the nearest whole number of
shares of Common Stock (or Other Securities) equal to: (1) the product of (a)
the number of shares of Common Stock (or Other Securities) then issuable upon
the exercise of this Warrant (or such portion of this Warrant as is then being
converted) and (b) the excess, if any, of (i) the Market Price with respect to
the date of conversion over (ii) the Exercise Price in effect on the business
day next preceding the date of conversion, divided by(2) the Market Price with
respect to the date of conversion.
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<PAGE> 4
(ii) The conversion rights provided under this Section
2.2(b) maybe exercised in whole or in part and at any time and from time to time
while any Warrant remains outstanding. In order to exercise the conversion
privilege, the Holder shall surrender to the Company, at its offices, this
Warrant accompanied by a duly completed Notice of Conversion as described in
Section 2.3 hereof, executed by the Holder converting all or a part of the
rights represented by this Warrant ("PURCHASER").
(iii) The use of the term "exercise" or "Exercise Date"
in this Warrant shall be deemed to refer to "conversion" or "Conversion Date",
respectively, to the extent rights under this Warrant are converted in lieu of
being exercised.
(c) As soon as practicable after the exercise of this Warrant
in full or in part, and in any event within ten (10) days after the Exercise
Date, the Company at its expense will cause to be issued in the name of and
delivered to the Holder hereof, or as the Holder (upon payment by the Holder of
any applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled upon such exercise, together
with any other stock or other securities and property (including cash, where
applicable) to which the Holder is entitled upon exercise.
(d) Unless this Warrant has expired or all of the purchase
rights represented hereby have been exercised, the Company at its expense will,
within ten (10) days after the Exercise Date, issue and deliver to or upon the
order of the Holder hereof a new Warrant or Warrants of like tenor, in the name
of the Holder calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock remaining issuable under this Warrant.
(e) The Common Stock (or Other Securities) issuable upon the
exercise of this Warrant will be deemed to have been issued to the Purchaser on
the Exercise Date, and the Purchaser will be deemed for all purposes to have
become the record holder of such Common Stock (or Other Securities) on the
Exercise Date.
(f) The issuance of certificates for shares of Common Stock
(or Other Securities) upon exercise of this Warrant will be made without charge
to the Holder for any issuance tax in respect thereof or any other cost incurred
by the Company in connection with such exercise and the related issuance of
Shares of Common Stock (or Other Securities).
2.3 SUBSCRIPTION AGREEMENT/CONVERSION NOTICE. The Subscription
Agreement and the Conversion Notice will be substantially in the form set forth
in Exhibit A or Exhibit B, respectively, hereto, except that if the shares of
Common Stock (or Other Securities) issuable upon exercise or conversion of this
Warrant are not to be issued in the name of the Holder hereof, the Subscription
Agreement or Conversion Notice will also state the name of the Person to whom
4
<PAGE> 5
the certificates for the shares of Common Stock (or Other Securities) are to be
issued, and if the number of shares of Common Stock (or Other Securities) to be
issued does not include all the shares of Common Stock (or Other Securities)
issuable hereunder it will also state the name of the Person to whom a new
Warrant of the unexercised/unconverted portion of the rights hereunder is to be
delivered.
2.4 FRACTIONAL SHARES. If a fractional share of Common Stock would,
but for the provisions of Section 2.1 hereof, be issuable upon exercise of the
rights represented by this Warrant, the Company will, within ten (10) days after
the Exercise Date, deliver to the Purchaser a check payable to the Purchaser in
lieu of such fractional share, in an amount equal to the Market Price of such
fractional share as of the close of business on the Exercise Date.
3. ADJUSTMENTS; CANCELLATION.
3.1 STOCK SPLITS, ETC. If the Company shall at any time after the
Issue Date subdivide its outstanding Common Stock or Other Securities, by
split-up or otherwise, or combine its outstanding Common Stock or Other
Securities, or issue additional shares of its capital stock in payment of a
stock dividend in respect of its Common Stock or Other Securities, the number of
shares issuable on the exercise of the unexercised portion of this Warrant shall
forthwith be proportionately increased in the case of such a subdivision or
stock dividend, or proportionately decreased in the case of such combination,
and the Exercise Price then applicable to shares covered by the unexercised
portion of this Warrant shall forthwith be proportionately decreased in the case
of such a subdivision or stock dividend, or proportionately increased in the
case of such combination.
3.2 RECLASSIFICATION, REORGANIZATION, ETC. In case of any
reclassification, capital reorganization or change of the outstanding Common
Stock or Other Securities (other than as a result of a subdivision, combination
or stock dividend) or any exchange or conversion of the Common Stock for or into
securities of another entity, or in case of the consolidation or merger of the
Company with or into any other Person or in case of any sale or conveyance of
all or substantially all of the assets of the Company (any of the foregoing
being a "REORGANIZATION TRANSACTION"), then, as a condition of such
Reorganization Transaction, lawful provision shall be made so that the Holder
shall have the right at any time prior to the expiration of this Warrant to
purchase, at a total price not to exceed that payable upon the exercise of the
unexercised portion of this Warrant, the kind and amount of shares of stock and
other securities and property receivable upon such Reorganization Transaction by
a holder of the number of shares of Common Stock or Other Securities of the
Company as to which this Warrant was exercisable immediately prior to such
Reorganization Transaction, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Holder to the end that the
provisions hereof (including, without limitation, provisions for the adjustment
of the Exercise Price and of the number of shares purchasable upon exercise of
this Warrant) shall thereafter be applicable in
5
<PAGE> 6
relation to any shares of stock, and other securities and property, thereafter
deliverable upon exercise hereof.
3.3 DIVIDENDS. In case the Company shall, at any time or from time
to time after the Issue Date, pay any dividend or make any other distribution
upon its Common Stock (or Other Securities) payable in cash, property or
securities of a corporation other than the Company, then forthwith upon the
payment of such dividend, or the making of such other distribution, as the case
may be, the Exercise Price then in effect shall be reduced by the amount of such
dividend or other distribution in respect of each outstanding share of Common
Stock (or Other Securities). The Board of Directors of the Company shall
determine the fair value of any dividend or other distribution made upon Common
Stock of the Company payable in property or securities of a corporation other
than the Company.
3.4 ADJUSTMENT FOR ISSUE OF STOCK AT LESS THAN EXERCISE PRICE. In
case the Company shall, at any time or from time to time after the Issue Date,
issue or agree to issue, by warrants, convertible securities, stock options or
otherwise, any of its Common Stock or Other Securities, including treasury
shares (other than any shares issued in transactions to which Section 3.1 or 3.2
of this Warrant applies), for a consideration per share less than the Exercise
Price per share in effect immediately prior to the time of such issue or sale,
then forthwith upon such issue or sale, or agreement to issue or sell, said
Exercise Price shall be reduced to a price (calculated to the nearest cent)
determined by dividing (x) an amount equal to (A) the product obtained by
multiplying the number of shares of the Company's Common Stock outstanding (or
then deemed to be outstanding as herein provided) immediately prior to such
issue by the Exercise Price in effect at such time plus (B) the consideration
received by the Company upon such issue by (y) the number of shares of the
Company's Common Stock outstanding (or then deemed to be outstanding as herein
provided) immediately after such issue. Whenever the Exercise Price is adjusted
as provided in this Section 3.4, the aggregate number of shares of Common Stock
(or Other Securities) which the Holder shall thereafter be entitled to purchase
at such adjusted Exercise Price shall be increased to the number of shares
determined by multiplying the number of shares of Common Stock (or Other
Securities) issuable upon exercise of this Warrant immediately prior to such
adjustment by the Exercise Price in effect immediately prior to such adjustment,
and dividing the product so obtained by such adjusted Exercise Price. For the
purposes of this Section 3.4, the number of shares of Common Stock (or Other
Securities) deemed to be outstanding at any given time shall exclude shares in
the treasury of the Company but shall include all shares issuable or to become
issuable under any agreements, warrants (including this Warrant), convertible
securities, stock options, similar rights or otherwise (hereinafter in this
Section 3.4 referred to as "OPTIONS"). Notwithstanding anything contained herein
to the contrary, the provisions of this Section 3.4 shall not apply with respect
to options granted to any management or other key employee of the Company in a
compensatory or incentive transaction or otherwise pursuant to a stock option
plan (or with respect to the issuance of any Common Stock or Other Securities
upon the exercise of such options). The Board of Directors of the Company shall
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<PAGE> 7
determine the fair value of the amount of consideration other than money
received by the Company upon the issue by it of any of its securities. Such
Board shall, in case any Common Stock (or Other Securities) or Options for the
purchase thereof are issued with other stock, securities or assets of the
Company, determine what part of the consideration received therefor is
applicable to the issue of the Common Stock (or Other Securities) or Options for
the purchase thereof. If, as provided herein, the Exercise Price is adjusted as
a consequence of the Company's issuance of Options, no further adjustment of the
Exercise Price shall be made upon the subsequent issuance of Common Stock (or
Other Securities) upon the exercise of such Options. To the extent that Options
expire without having been exercised, the Exercise Price computed upon their
issuance, and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed to take into account only the shares of Common Stock
(or Other Securities) actually issued upon the exercise of such Options. In any
such recomputation, the consideration applicable to the shares of Common Stock
(or Other Securities) issued shall be the aggregate consideration which was
received by the Company upon the issuance of such Options, whether or not
exercised, plus the additional consideration actually received by the Company
upon the exercise thereof. No recomputation shall have the effect of increasing
the Exercise Price by an amount in excess of the adjustment thereof made in
respect of the issuance of the expired Options.
3.5 CERTIFICATE OF ADJUSTMENT. Whenever the Exercise Price or the
number of shares issuable hereunder is adjusted, as herein provided, the Company
shall promptly deliver to the Holder a certificate of the Treasurer of the
Company, which certificate shall state (i) the Exercise Price and the number of
shares of Common Stock (or Other Securities) issuable hereunder after such
adjustment, (ii) the facts requiring such adjustment, and (iii) the method of
calculation for such adjustment and increase or decrease.
3.6 SMALL ADJUSTMENTS. No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or decrease in the
Exercise Price of at least one percent; provided, however, that any adjustments
which by reason of this Section 3.6 are not required to be made immediately
shall be carried forward and taken into account at the time of exercise of this
Warrant or any subsequent adjustment in the Exercise Price which, singly or in
combination with any adjustment carried forward, is required to be made under
Sections 3.1, 3.2, 3.3 or 3.4.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
corporate charter or By-Laws 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 of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) will not permit the par value of any shares of Stock (or Other
Securities) receivable upon the exercise of this
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<PAGE> 8
Warrant to exceed the amount payable therefor upon such exercise, and (b) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares of
Common Stock (or Other Securities) upon the exercise of this Warrant.
5. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANT. The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable upon the exercise of this Warrant.
6. PURCHASE RIGHTS. If at any time the Company grants, issues or sells
any rights or options to subscribe for or to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (or Other Securities) (the "PURCHASE RIGHTS"), then the Holder will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder had
held the number of shares of Common Stock (or Other Securities) acquirable upon
exercise of this Warrant had this Warrant been fully exercised immediately prior
to the date on which a record was taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record was taken, the date as of which the
record holders of Common Stock (or Other Securities) were determined for the
grant, issuance or sale of such Purchase Rights.
7. DISPOSITION OF THIS WARRANT, COMMON STOCK, ETC.
(a) The Holder and any proposed transferee hereof or of the Common
Stock (or Other Securities) with respect to which this Warrant may be
exercisable, by their acceptance hereof, hereby understand and agree that this
Warrant and the Common Stock (or Other Securities) with respect to which this
Warrant may be exercisable have not been registered under the Securities Act of
1933, as amended (the "ACT"), and may not be sold, pledged, hypothecated,
donated, or otherwise transferred (whether or not for consideration) without an
effective registration statement under the Act or an opinion satisfactory to the
Company of counsel satisfactory to the Company and/or submission to the Company
of such other evidence as may be satisfactory to counsel to the Company, in each
such case, to the effect that any such transfer shall not be in violation of the
Act. It shall be a condition to the transfer of this Warrant that any transferee
hereof deliver to the Company its written agreement to accept and be bound by
all of the terms and conditions of this Warrant.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock (or Other Securities) with respect to which this Warrant
may be exercisable will be imprinted with a conspicuous legend in substantially
the following form:
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<PAGE> 9
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR
NOT FOR CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN OPINION SATISFACTORY TO THE COMPANY OF
COUNSEL SATISFACTORY TO THE COMPANY AND/OR SUBMISSION TO THE COMPANY OF
SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN
EACH CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION
OF THE ACT."
provided, however, that, if the shares of Common Stock (or Other Securities)
with respect to which this Warrant has been exercised are registered in
accordance with the provisions of the Act by the date contemplated by Section 12
hereof, any stock certificates of the Company issued in connection herewith and
bearing the foregoing legend will, upon written request of the Holder, be
replaced with a certificate(s) not bearing the foregoing legend.
8. RIGHTS AND OBLIGATIONS OF HOLDER. The Holder shall not, by virtue
hereof, be entitled to any voting rights or other rights as a stockholder of the
Company. No provision of this Warrant, in the absence of affirmative actions by
the Holder to purchase Common Stock (or Other Securities) of the Company by
exercising this Warrant, and no enumeration in this Warrant of the rights or
privileges of the Holder, will give rise to any liability of the Holder for the
Exercise Price of Common Stock (or Other Securities) acquirable by exercise
hereof or as a stockholder of the Company.
9. TRANSFER OF WARRANTS. Subject to compliance with the restrictions on
transfer applicable to this Warrant referred to in Section 7 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in substantially the form attached hereto as Exhibit C), to
the Company, and the Company at its expense will issue and deliver to or upon
the order of the Holder a new Warrant or Warrants in such denomination or
denominations as may be requested, but otherwise of like tenor, in the name of
the Holder or as the Holder (upon payment of any applicable transfer taxes) may
direct.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
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<PAGE> 10
11. COMPANY RECORDS. Until this Warrant is transferred on the books of the
Company, the Company may treat the registered Holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
12. REGISTRATION RIGHTS. No later than the date that is eight months after
the Issue Date, the Company shall take all actions necessary to provide that the
Common Stock (or Other Securities) to be obtained upon exercise of this Warrant
shall be registered under the Act. In the event the Company fails to comply with
the registration requirements set forth in this Section 12, it shall pay the
Holder $14,250 per month until such registration requirements are satisfied.
13. MISCELLANEOUS.
13.1 NOTICES. All notices and other communications from the Company
to the Holder shall be mailed by first class mail, postage prepaid, to such
address as may have been furnished to the Company in writing by the Holder, or,
until an address is so furnished, to and at the address of the last previous
Holder who has so furnished an address to the Company. All communications from
the Holder to the Company shall be mailed by first class mail, postage prepaid,
to the Company at 210 Boylston Street, Chestnut Hill, Massachusetts 02167, or
such other address as may have been furnished to the Holder in writing by the
Company.
13.2 AMENDMENT AND WAIVER. Except as otherwise provided herein, this
Warrant and any term hereof may be amended, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such amendment, waiver, discharge or termination is sought.
[The remainder of this page was intentionally left blank.]
10
<PAGE> 11
13.3 GOVERNING LAW; DESCRIPTIVE HEADINGS. This Warrant shall be
construed and enforced in accordance with and governed by the internal laws of
the State of New York (including without limitation Section 5-1401 of the
General Obligations of the State of New York). The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof.
Dated: __________, 1997
SAFETY 1ST, INC.
By: ____________________________
Michael Lerner, President
S-1
<PAGE> 12
EXHIBIT A
SUBSCRIPTION AGREEMENT
[To be signed only upon exercise of Warrant]
To: Safety 1st, Inc. Date: _______________________
The undersigned, the Holder of the within Warrant, pursuant to the
provisions set forth in the within Warrant, hereby irrevocably elects to
exercise the purchase rights represented by such Warrant for, and agrees to
subscribe for and purchase thereunder, __________ shares of the Common Stock (or
Other Securities) covered by such Warrant and herewith makes payment of
$__________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to, __________, whose address is
_________________________. If said number of shares is less than all the shares
covered by such Warrant, a new Warrant shall be registered in the name of the
undersigned and delivered to the address stated below.
Signature: ______________________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant
or on the form of Assignment attached
as Exhibit C thereto).
Address: ______________________________________
Exh. A-1
<PAGE> 13
EXHIBIT B
CONVERSION NOTICE
[To be signed only upon conversion of Warrant]
To: Safety 1st, Inc. Date: ______________________
The undersigned, the Holder of the within Warrant, pursuant to the
provisions set forth in the within Warrant, hereby irrevocably elects to convert
the purchase rights represented by such Warrant for _____ shares of the Common
Stock (or Other Securities) covered by such Warrant, and requests that the
certificates for such shares, calculated in accordance with the provisions of
Section 2.2(b)(i) of the within Warrant, be issued in the name of, and delivered
to, _______, whose address is _________________. If the number of shares with
respect to which conversion election is being made is less than all the shares
covered by such Warrant, a new Warrant shall be registered in the name of the
undersigned and delivered to the address stated below.
Signature: ____________________________________
(Signature must confirm in all
respects to name of Holder as
specified on the face of the Warrant
or on the form of Assignment
attached as Exhibit C thereto)
Address: ____________________________________
Exh. B-1
<PAGE> 14
EXHIBIT C
ASSIGNMENT
[To be signed only upon exercise of Warrant]
For value received, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant with respect to
the number of shares of the Common Stock (or Other Securities) covered thereby
set forth below, unto:
Name of Assignee Address No. of Shares
Dated: ______________ Signature: ____________________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrant).
Address: ____________________________________
<PAGE> 1
EXHIBIT 11
SAFETY 1ST, INC.
COMPUTATION OF NET INCOME
PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
COMPUTATION OF NET INCOME PER SHARE
<S> <C> <C>
Net income available for common
shares and common stock equivalent
shares deemed to have a dilutive effect $ 197,199 $1,704,018
Net income per share .03 .24
SHARES USED IN COMPUTATION
Weighted average common shares
outstanding 7,185,154 7,150,616
Common stock equivalents - stock options 202,406 21,713
---------- ----------
Total 7,387,560 7,172,329
---------- ----------
</TABLE>
Note: This calculation is submitted in accordance with Regulation S-K
item 601(b)(11) although not required by footnote 2 to paragraph 14
of APB Opinion No. 15 because it results in dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SAFETY 1ST
FORM 10Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10Q.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,662,492
<SECURITIES> 0
<RECEIVABLES> 26,417,904
<ALLOWANCES> 3,300,000
<INVENTORY> 13,028,392
<CURRENT-ASSETS> 39,618,155
<PP&E> 17,139,729
<DEPRECIATION> 5,524,919
<TOTAL-ASSETS> 66,795,173
<CURRENT-LIABILITIES> 64,185,023
<BONDS> 0
0
0
<COMMON> 71,873
<OTHER-SE> 34,607,235
<TOTAL-LIABILITY-AND-EQUITY> 2,386,343
<SALES> 24,269,359
<TOTAL-REVENUES> 24,269,359
<CGS> 14,676,302
<TOTAL-COSTS> 14,676,302
<OTHER-EXPENSES> 8,126,848
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,153,283
<INCOME-PRETAX> 312,926
<INCOME-TAX> 115,727
<INCOME-CONTINUING> 197,199
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197,199
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
