<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Amendment No.__
Safety 1st, Inc.
- ------------------------------------------------------------------------------
(Name of issuer)
Common Stock, par value $.01 per share
(Title of class of securities)
- ------------------------------------------------------------------------------
786475-10-3 (CUSIP number)
Charles A. Nalbone
Bear, Stearns & Co. Inc.
115 South Jefferson Road
Whippany, New Jersey 07981
(201) 739-2202
(Name, address and telephone number of person
authorized to receive notices and communications)
Copy to:
Harvey M. Eisenberg, Esq.
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 408-2400
July 30, 1997
- ------------------------------------------------------------------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
(Continued on following pages)
<PAGE>
CUSIP No. 786475-10-3 13D Page 2 of __ Pages
<TABLE>
<S> <C>
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Bear, Stearns & Co. Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF 634,173
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH
REPORTING
PERSON WITH 9 SOLE DISPOSITIVE POWER
634,173
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
634,173
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.5%
14 TYPE OF REPORTING PERSON*
CO
</TABLE>
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Statement relates to the Common Stock, par value $.01 per share
("Common Stock"), of Safety 1st, Inc. (the "Issuer"), whose principal executive
offices are at 210 Boylston Street, Chestnut Hill, Massachusetts, 02167.
ITEM 2. IDENTITY AND BACKGROUND.
Item 2(a) through (C), Item 2(f).
This statement is being filed by Bear, Stearns & Co. Inc., a Delaware
corporation ("Bear, Stearns"), with respect to shares of Common Stock
beneficially owned by it as principal. Bear, Stearns is referred to from time to
time as the "Purchaser".
The principal business of Bear, Stearns is acting as a securities
broker/dealer.
The address of the principal business and principal office of Bear, Stearns
is 245 Park Avenue, New York, New York 10167.
The name, citizenship, business or residence address, principal occupation
or employment, and name, principal business and address of any corporation or
organization in which such employment is conducted of each director and
executive officer of the Purchaser is set forth in Annex A attached hereto and
incorporated into this item 2 by reference.
Items 2(d) and (3).
Except as disclosed in Annex B hereto, neither the Purchaser, nor, to its
best knowledge or belief, any of the persons identified in Annex A, have during
the past five years been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
DESCRIPTION OF TRANSACTION
On July 30, 1997, Bear, Stearns, the Issuer and BT Capital Partners, Inc.
("BT Capital Partners") entered into a Stock and Warrant Purchase Agreement (the
"Agreement"). Pursuant to the Agreement, Bear, Stearns purchased (i) 7,500
shares of the Issuer's non-voting Series A Preferred Stock, par value $1.00 per
share, (ii) Warrants to purchase 570,755 shares of the Issuer's Common Stock and
(iii) Warrants to purchase 63,418 shares of the Issuer's Common Stock subject to
the Issuer's right to repurchase such Warrants under certain conditions. Bear,
Stearns' original cost basis for the purchases of the Series A Preferred Stock
and the Warrants was $7,500,000. Any funds used in this acquisition came from
working capital.
DISCLAIMER OF GROUP STATUS
Pursuant to the Agreement, Bear, Stearns and BT Capital Partners were
issued warrants to purchase shares of the Issuer's Common Stock. In addition,
in connection with the Agreement and the closing of the transactions
contemplated thereby, Bear, Stearns entered into (i) a Voting Agreement (a copy
of which is attached hereto as Exhibit 3) (the "Voting Agreement") among the
Issuer, BT Capital Partners, Bear, Stearns and certain shareholders of the
Issuer and (ii) a Registration Rights Agreement (the "Registration Rights
Agreement") among the Issuer, BT Capital Partners, Bear, Stearns and Michael
Lerner. The Voting Agreement provides that each party to the agreement,
including BT Capital Partners, will (subject to the satisfaction of a minimum
percentage holding of Common Stock by Bear, Stearns) vote all their respective
holdings of Common Stock to elect one person designated by Bear, Stearns to the
Issuer's Board of Directors. Pursuant to the Registration Rights Agreement, the
Issuer agrees with Bear, Stearns and BT Capital Partners to provide certain
rights of registration under the Securities Act of 1933 as amended (the "1933
Act"), with respect to their stockholdings of Common Stock. Prior to execution
of the Agreement and the Voting Agreement, Bear, Stearns had no contractual or
other relationship with BT Capital Partners with respect to beneficial
ownership of the Issuer's Common Stock. The Series A Preferred Stock has no
voting rights. As a party to the Voting Agreement, Bear, Stearns might be
considered to be a member of a group together with BT
<PAGE>
Capital Partners because Bear, Stearns and BT Capital Partners have agreed,
(subject to the satisfaction of a minimum percentage holding of Common Stock)
to vote their respective shares of Common Stock in favor of the appointment
of persons designated by Bear, Stearns and BT Capital Partners, respectively,
to the Board of Directors. However, Bear, Stearns disclaims membership in any
such group and disclaims beneficial ownership of the shares of Common Stock
owned by the other parties to the Voting Agreement. The Voting Agreement is
filed as an exhibit hereto and is hereby incorporated by reference in its
entirety.
ITEM 4. PURPOSE OF TRANSACTION.
The Purchaser has acquired the shares of Common Stock reported herein for
investment purposes. The Purchaser intends to review from time to time the
Issuer's business affairs and financial position. Based on such evaluation and
review, as well as general economic and industry conditions existing at the
time, the Purchaser may consider from time to time various alternative courses
of action. Such actions may include the acquisition of additional Common Stock
through open market purchases, privately negotiated transactions, tender offer,
exchange offer or otherwise. Alternatively, such actions may involve the sale of
all or a portion of the Common Stock in the open market, in privately negotiated
transactions, through a public offering or otherwise. Except as set forth above,
the Purchaser has no plan or proposals which relate to or would result in any of
the transactions described in subparagraphs (a) through (j) of Item 4 of
Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Bear, Stearns beneficially owns 634,173 shares of Common Stock (all of
which are the subject of warrants), constituting 7.5% of the issued and
outstanding shares of Common Stock of the Issuer.(1)
To the best knowledge and belief of the Purchaser, none of the persons
listed on Annex A hereto beneficially owns any shares of Common Stock.
(b) Subject to the provisions of the Voting Agreement, the Purchaser has
sole power to vote and dispose of the shares of Common Stock beneficially owned
by it.
(c) Annex C hereto sets forth all transactions in shares of Common Stock
that were effected during the past sixty days by the persons referred to in
paragraph (a).
(d) No person other than the persons described in paragraph (a) has the
right to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, Common Stock beneficially owned by it.
(e) Inapplicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
Reference is made to the information disclosed under Items 3 and 4 of this
Statement which is incorporated by reference in response to this Item. In
addition to such information, the following contracts, arrangements,
understandings or relationships are reported hereunder.
(a) Unconditional Warrant. Pursuant to Section 2.1 of the Agreement, the
Issuer has issued Warrants, which are presently exercisable, dated as of July
30, 1997 which allow each of Bear, Stearns and BT Capital Partners to purchase
up to 570,755 shares of Common Stock of the Issuer.
(b) Conditional Warrant. Pursuant to Section 2.1 of the Agreement, the
Issuer has issued Warrants, which are exercisable upon the satisfaction of
certain conditions, dated as of July 30, 1997 which allow each of Bear, Stearns
and BT Capital Partners to purchase up to 63,418 shares of Common Stock of the
Issuer.
- ------------------------
(1) Percentages used in this Item 5 are based on the number of securities
outstanding as contained in the most recently available filing by the Issuer
with the Securities and Exchange Commission.
<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Voting Agreement dated as of July 30, 1997 among Michael Lerner,
Michael S. Bernstein, BT Capital Partners, Inc. and
Bear, Stearns & Co. Inc.
2. Warrant dated as of July 30, 1997 to purchase Common Stock of
Safety 1st, Inc.
3. Warrant dated as of July 30, 1997 to purchase Common Stock of
Safety 1st, Inc.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: August __, 1997
BEAR, STEARNS & CO. INC.
By: /s/ John D. Howard
--------------------------------
Name: John D. Howard
Title: Senior Managing Director
<PAGE>
ANNEX A
BEAR, STEARNS & CO. INC.
The following sets forth the name, mailing address, occupation or principal
business affiliation and citizenship of each director and executive officer of
Bear, Stearns. To the best knowledge and belief of Bear, Stearns, none of the
following person beneficially owns any shares of Common Stock.
OCCUPATION OR PRINCIPAL BUSINESS
NAME AND MAIL ADDRESS AFFILIATION CITIZENSHIP
- -------------------------- --------------------------------- -----------
Alan C. Greenberg Chairman of the Board and U.S
245 Park Avenue Director
New York, New York 10167
James E. Cayne President, Chief Executive Officer U.S.
245 Park Avenue and Director
New York, New York 10167
Alan D. Schwartz Executive Vice President and U.S.
245 Park Avenue Director
New York, New York 10167
Warren J. Spector Executive Vice President and U.S.
245 Park Avenue Director
New York, New York 10167
Michael L. Tarnopol Executive Vice President and U.S.
245 Park Avenue Director
New York, New York 10167
John L. Knight Director U.K.
One Canada Square
London, E16 5AD England
John M. Slade Director Emeritus U.S.
245 Park Avenue
New York, New York 10167
Kenneth L. Edlow Secretary U.S.
245 Park Avenue
New York, New York 10167
Samuel L. Molinaro, Jr. Chief Financial Officer U.S.
245 Park Avenue
New York, New York 10167
<PAGE>
OCCUPATION OR PRINCIPAL BUSINESS
NAME AND MAIL ADDRESS AFFILIATION CITIZENSHIP
- -------------------------- ---------------------------------- -----------
Michael J. Abatemarco Controller and Assistant Secretary U.S.
One Metrotech Center North
Brooklyn, New York 11201
Michael Minikes Treasurer U.S.
245 Park Avenue
New York, New York 10167
Frederick B. Casey Assistant Treasurer U.S.
245 Park Avenue
New York, New York 10167
Mark E. Lehman Executive Vice President, General U.S.
245 Park Avenue Counsel and Director
New York, New York 10167
William J. Montgoris Chief Operating Officer U.S.
245 Park Avenue
New York, New York 10167
<PAGE>
ANNEX B
None.
<PAGE>
ANNEX C
Except as set forth below, neither Bear, Stearns nor, to the best of its
knowledge, any of the persons referred to Item 5, paragraph (a) had any
transactions in shares of Common Stock within the last 60 days.
PRICE PER
IDENTITY TRADE DATE TRANSACTION QUANTITY SHARE
- -------- ----------- ---------------- --------- -----
Bear, Stearns................ 07/30/97 Private Purchase 634,173 $0.01
<PAGE>
EXHIBIT INDEX
DOCUMENT
1. Voting Agreement dated as of July 30, 1997 among Michael Lerner,
Michael S. Bernstein, BT Capital Partners, Inc. and
Bear, Stearns & Co. Inc.
2. Warrant dated as of July 30, 1997 to purchase Common Stock of
Safety 1st, Inc.
3. Warrant dated as of July 30, 1997 to purchase Common Stock of
Safety 1st, Inc.
<PAGE>
EXHIBIT 1
VOTING AGREEMENT, dated as of July 30,
1997 (this "Agreement"), among SAFETY
1ST, INC., a Massachusetts Corporation
(the "Company"), MICHAEL LERNER
("Lerner"), MICHAEL S. BERNSTEIN
("Bernstein", and together with Lerner,
the "Stockholders"), BT CAPITAL
PARTNERS, INC. ("BT") and BEAR, STEARNS
& CO. INC. ("BS") (each, an "Investor,"
and collectively, the "Investors").
As of the date hereof each Stockholder owns (either beneficially or of
record) the number of shares of Common Stock, par value $.01 per share (the
"Safety 1st Stock"), of the Company set forth opposite such Stockholder's
name on Exhibit A hereto (all such shares and any shares hereafter acquired
by the Stockholders prior to the termination of this Agreement including
shares of Safety 1st Stock, and shares of Safety 1st Stock obtained by a
Stockholder upon the exercise, exchange or conversion of any option, warrant
or other security, being referred to herein as the "Shares").
Pursuant to the Stock and Warrant Purchase Agreement dated as of the
date hereof, among the Company and the Investors (the "Purchase Agreement"),
the Company is issuing and the Investors are purchasing Preferred Stock and
Warrants for an aggregate purchase price of $15,000,000. In order to induce
the Investors to enter into the Stock and Warrant Purchase Agreement and
consummate the transactions contemplated thereby, the Company has requested
that each Stockholder agree, and each Stockholder has agreed, to grant the
Company irrevocable proxies to vote his Shares in favor of appointing one
Director designated by each of the Investors to the Board of Directors of the
Company (the "Board") on the terms and conditions set forth in this Agreement.
ACCORDINGLY, in consideration of the promises and of the mutual
agreements and covenants set forth herein and in the Stock and Warrant
Purchase Agreement, the parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby represents and
warrants to the Investors, as follows:
1.1. Due Authority.
(a) Such Stockholder has full power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by or on behalf of such
Stockholder and, constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally
and subject, as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered in proceeding
in equity or at law).
(b) There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which such Stockholder is trustee whose
consent is required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
<PAGE>
(c) If such Stockholder is married and such Stockholder's Shares
constitute community property, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of,
such Stockholder's spouse, enforceable against such person in accordance with
its terms.
1.2. No Conflict; Consents.
(a) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of the transaction contemplated by this Agreement by
such Stockholder and the compliance by such Stockholder with any provisions
hereof shall not (i) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to such Stockholder or by which such
Stockholders assets are bound or affected, (ii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or encumbrance on any of such Stockholder's assets pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which such Stockholder is a
party or by which such Stockholder or such Stockholder's assets are bound or
affected or (iii) violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to such Stockholder or any of
such Stockholder's properties or assets.
(b) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of this Agreement by such Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority except for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended, and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or delay the performance by such Stockholder of his, her or its
obligations under this Agreement in any material respect.
1.3. Title to Shares.
(a) Such Stockholder is the record or beneficial owner of his Shares
free and clear of any proxy or voting restriction other than pursuant to this
Agreement. The Shares set forth opposite such Stockholder's name on Exhibit
A hereto constitute all of the shares of Safety 1st Stock owned of record or
beneficially by such Stockholder.
(b) Except as noted on Exhibit A, such Stockholder has sole power of
disposition with respect to all the Shares set forth opposite such
Stockholder's name on Exhibit A hereto and the sole voting power with respect
to the matters set forth in Article II hereof and the sole power to demand
dissenter's or appraisal rights, in each case with respect to all of the
Shares set forth opposite such Stockholder's name on Exhibit A hereto, with
no restrictions on such rights, subject to applicable federal securities laws
and the terms of this Agreement.
1.4. No Encumbrances.
Except as noted on Exhibit A, such Stockholder's Shares and the
certificates representing such Shares are now and at all times during the
Term will be held by such Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever except for any such
encumbrances or proxies arising hereunder, provided that nothing herein shall
prevent the bona fide pledge of such Stockholder's Shares, so long as the
pledgee thereof (except in the case of the pledges referred to on Exhibit A)
agrees to be subject to the terms hereof or such other agreement with
provisions reasonably acceptable to the Investors that provide for the proxy
agreement to remain in full force and effect.
1.5.Acknowledgment of Reliance.
<PAGE>
Such Stockholder understands and acknowledges that the Investors are
entering into the Stock and Warrant Purchase Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
ARTICLE II
VOTING OF SHARES
2.1. Voting of Shares; Further Assurances.
(a) Each Stockholder (which term under this Section 2.1 shall be deemed
to include each of the Investors), with respect to those Shares that such
Stockholder owns of record, does hereby, during and for the Term, agree to
vote (except as noted on Exhibit A) each of such Shares at every annual,
special or adjourned meeting of the stockholders of the Company to authorize
the Company to take all actions necessary to cause the Company to be managed
at all times by a Board which shall be comprised (x) so long as BT owns at
least 5% of the 10,155,626 Common Equivalents (as hereinafter defined) which
are outstanding on the date hereof (comprised of 7,187,288 shares of issued
and outstanding shares of Common Stock, 1,699,993 shares of Common Stock
issuable pursuant to outstanding options granted pursuant to the Stock Option
Plans (as defined in the Purchase Agreement) and out of plan grants and
1,268,345 shares of Common Stock issuable pursuant to the Warrants (as
defined in the Purchase Agreement) as the same may be adjusted by stock
splits, consolidations, reclassifications, reorganizations or like
adjustments; provided, that for the purpose of calculating the foregoing
percentage of Common Equivalents there shall be excluded any changes in the
number of Common Equivalents outstanding and the number of Common Equivalents
owned by the Investors resulting from any adjustments made pursuant to
Sections 4(c) or (d) of the Warrants), of one Director designated by BT, and
(y) so long as BS owns at least 5% of the 10,155,626 Common Equivalents (as
hereinafter defined) which are outstanding on the date hereof (comprised of
7,187,288 shares of issued and outstanding shares of Common Stock, 1,699,993
shares of Common Stock issuable pursuant to outstanding options granted
pursuant to the Stock Option Plans (as defined in the Purchase Agreement) and
out of plan grants and 1,268,345 shares of Common Stock issuable pursuant to
the Warrants (as defined in the Purchase Agreement) as the same may be
adjusted by stock splits, consolidations, reclassifications, reorganizations
or like adjustments; provided, that for the purpose of calculating the
foregoing percentage of Common Equivalents there shall be excluded any
changes in the number of Common Equivalents outstanding and the number of
Common Equivalents owned by the Investors resulting from any adjustments made
pursuant to Sections 4(c) or (d) of the Warrants), of one Director designated
by BS. In this Section 2.1 (a) the term "Common Equivalents" shall mean a
share of Common Stock or the right to acquire a share of Common Stock
pursuant to a Warrant or Stock Option Plans and out of plan stock option
grants.
(b) For the purposes of this Agreement, "Term" shall mean the period
from the execution of this Agreement, until the earlier to occur of (x) the
date that both BT and BS cease to have the right to designate a Director
under Section 2.1(a), (y) the tenth anniversary of the date hereof and (z)
the occurrence of the situation described in (i) of the definition of Change
of Control (as defined in the Certificate of Designation of the Company dated
July 28, 1997) with respect to 51% or more of the total voting stock of the
Company (and not 30%) or of the occurrence of any of the situations described
in (ii) of the definition of Change of Control (as defined in the Certificate
of Designation of the Company dated July 28, 1997).
Each Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in
the Company the power to carry out the intent and provisions of this
Agreement.
2.2. Certain Events.
Each Stockholder agrees that this Agreement and the obligations
hereunder shall attach to such Stockholder's Shares and shall be binding upon
any person or entity to which legal or beneficial ownership of such Shares
<PAGE>
shall pass, whether by operation of law or otherwise, including without
limitation such Stockholder's heirs, guardians, administrators or successors
or as a result of any divorce.
2.3. Company Obligation.
The Company undertakes and agrees with each of the Investors and the
Stockholders that it shall during the Term (a) use its best efforts to cause
the Directors designated by BT and BS in accordance with Section 2.1(a) to be
nominated to the Board, and (b) without limiting the generality of Section
2.3 (a), use its best efforts to cause that, as of the Closing (as defined in
the Purchase Agreement) the original designees of BT and BS, being,
respectively, James Dworkin and John Howard, shall be appointed to the Board.
2.4. Cooperation of Other Stockholders.
Each Stockholder agrees to cooperate with the Company in all reasonable
respects in complying with the terms and provisions of the letter agreement
between the Company and Investor, a copy of which is attached hereto as
Exhibit B, regarding small business matters (the "Small Business
Sideletter"), including without limitation, voting to approve amending the
Company's Articles of Organization, the Company's by-laws or this Agreement
in a manner reasonably requested by Investor or any Regulated Holder (as
defined in the Small Business Sideletter) entitled to make such request
pursuant to the Small Business Sideletter. Anything contained in this
Section 2.4 to the contrary notwithstanding, no Stockholder shall be required
under this Section 2.4 to take any action that would adversely affect in any
material respect such Stockholder's rights under this Agreement or as a
stockholder of the Company.
2.5. Covenant Not to Amend.
The Company and each Stockholder agree not to amend or waive the voting
or other provisions of the Company's Articles of Organization, the Company's
by-laws or this Agreement if such amendment or waiver would cause any
Regulated Holder to have a Regulatory Problem (as defined in the Small
Business Sideletter), provided that any such Regulated Holder notifies the
Company that it would have a Regulatory Problem promptly after it has notice
of such proposed amendment or waiver.
ARTICLE III
TRANSFERS
On or before the expiration of the Term no Stockholder shall Transfer
(as hereinafter defined) any Shares to a Person (as hereinafter defined) not
already a party to this Agreement as a Stockholder unless and until such
Person executes and delivers to the Company a written agreement, in form and
substance reasonably acceptable to the Investors, pursuant to which such
Person shall (unless he is already a Stockholder) agree to become a party to,
and to be bound by and to comply with the provisions of, this Agreement in
the same capacity and to the same extent as the Stockholder Transferring such
Shares. Any Transfer of Shares that is not made in compliance with the
provisions hereof shall be void ab initio. The foregoing provisions of this
Article III shall not apply to a Transfer of Shares by a Stockholder pursuant
to Public Sale (as hereinafter defined); and with respect to a Transfer
pursuant to a Public Sale, the transferee shall take the Shares free and
clear of any provisions of this Agreement. In this Article III "Person"
shall be construed broadly and shall include an individual, a partnership, a
Company, an association, a joint stock company, a limited liability company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof; "Public
Sale" means any sale of securities of the Company to the public pursuant to
an offering registered under the Securities Act of 1933, as amended, or to
the public through a broker, dealer or market maker pursuant to the
provisions of Rule 144 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, as such rule may be amended
from; "Transfer" shall be construed broadly and shall include any transfer
<PAGE>
(whether voluntary, involuntary or by operation of law) of securities or any
interest therein, including without limitation, by way of issuance, sale,
participation, pledge, gift, bequeath, intestate transfer, distribution,
liquidation, merger or consolidation.
ARTICLE IV
GENERAL PROVISIONS
4.1. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest
extent pertained by applicable law in an acceptable manner to the end that
the transactions contemplated hereby are fulfilled to the extent possible.
4.2. Entire Agreement.
This Agreement constitutes the entire agreement of the parties and
supersedes all prior agreements and undertakings, both written and oral,
between the parties, or any of them, with respect to the subject matter
hereof.
4.3. Amendments.
This Agreement may not be modified, amended, altered or supplemented,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that Exhibit A hereto may be supplemented by the
Company by adding the name and other relevant information concerning any
stockholder of the Company who agrees to be bound by the terms of this
Agreement without the agreement of any other party hereto, and thereafter
such added stockholder shall be treated as a "Stockholder" for all purposes
of this Agreement.
<PAGE>
4.4. Assignment.
This Agreement shall not be assigned by operation of law or otherwise;
provided that this Agreement may be assigned to an affiliate of such
Stockholder so long as such affiliate shall continue to be bound by the
obligations hereof as a Stockholder hereunder.
4.5. Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any person any right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement.
4.6. Specific Performance.
The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement was not performed in accordance with
the terms hereof and that the parties shall be entitled to an injunction to
prevent breaches of this Agreement and specific performance of the terms
hereof, in addition to any other remedy at law or in equity.
4.7. Further Assurances.
At the other party's request and without further consideration, each
party hereto shall execute and deliver such additional documents and take all
such further action as may be necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
4.8. Governing Law; Waiver of Jury Trial.
(a) All questions concerning the construction, interpretation and
validity of this Agreement shall be governed by and construed and enforced in
accordance with the domestic laws of the Commonwealth of Massachusetts,
without giving effect to any choice or conflict of law provision or rule
(whether in the Commonwealth of Massachusetts or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
Commonwealth of Massachusetts. In furtherance of the foregoing, the internal
law of the Commonwealth of Massachusetts will control the interpretation and
construction of this Agreement, even if under such jurisdiction's choice of
law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily or necessarily apply.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
<PAGE>
4.9. Counterparts.
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Voting Agreement as
of the date first written above.
SAFETY 1ST, INC.
By:---------------------
Name:
Title:
BT CAPITAL PARTNERS, INC.
By:---------------------
Name:
Title:
BEAR, STEARNS & CO. INC.
By:---------------------
Name:
Title:
------------------------
MICHAEL LERNER
------------------------
MICHAEL S. BERNSTEIN
<PAGE>
Exhibit A
Name and Address Number of Shares of Safety 1st,
of Stockholder Inc. Owned by Stockholder
Michael Lerner 2,990,667*
c/o Safety 1st, Inc.
210 Boylston St.
Chestnut Hill, MA 02167
Michael S. Bernstein 744,901*
c/o Safety 1st, Inc.
210 Boylston St.
Chestnut Hill, MA 02167
* Exceptions to Sections 1.3(b) and 1.4:
Pledge Agreement dated January 31, 1997, between Michael Lerner, as Pledgor,
and Fleet National Bank, as Agent for itself, The First National Bank of
Boston and USTrust, pledging 27,043 shares of Safety 1st common stock. Upon
default of obligations to the Pledgee, Pledgee has the right to vote these
shares.
Pledge Agreement dated January 31, 1997, between Michael Bernstein, as
Pledgor, and Fleet National Bank, as Agent for itself, The First National
Bank of Boston and USTrust, pledging 6,761 shares of Safety 1st common stock.
Upon default of obligations to the Pledgee, Pledgee has the right to vote
these shares.
<PAGE>
EXHIBIT B
July 30, 1997
Safety lst, Inc.
210 Boylston St.
Chestnut Hill, MA 02167
Ladies and Gentlemen:
Reference is made to that certain Stock and Warrant Purchase Agreement
(the "Purchase Agreement"), dated as of the date hereof, among Safety lst,
Inc. (the "Company"), BT Capital Partners, Inc. ("Investor"), and the other
parties identified therein, pursuant to which Investor is purchasing shares
of the Company's Series A Preferred Stock and Warrants to purchase shares of
the Company's Common Stock (collectively referred to herein as the "Shares").
Investor is a Small Business Investment Company ("SBIC") licensed by the
United States Small Business Administration ("SBA"). In order for Investor
to acquire and hold the Shares, it must obtain from the Company certain
representations and rights as set forth below. As a material inducement to
Investor to enter into the Purchase Agreement and to purchase the Shares, the
Company hereby makes the following representations and warranties and agrees
to comply with the following covenants:
(a) Small Business Matters.
(1) The Company, together with its "affiliates" (as that term is
defined in Title 13, Code of Federal Regulations, Section 121.103), is a
"small business concern" within the meaning of the Small Business Investment
Act of 1958, as amended ("SBIA"), and the regulations thereunder, including
Title 13, Code of Federal Regulations, Section 121.301(c). The information
set forth in the Small Business Administration Forms 480, 652 and Parts A and
B of Form 1031 regarding the Company and its affiliates, when delivered to
Investor, will be accurate and complete and will be in form and substance
acceptable to Investor. Copies of such forms shall be completed and executed
by the Company and delivered to Investor at the closing of the sale of the
Shares under the Purchase Agreement (the "Closing").
(2) The proceeds from the sale of the Shares will be used by the
Company to (1) repay in part indebtedness due and payable under the Existing
Credit Agreement (as defined in the Purchase Agreement), (2) pay expenses
related to the transactions contemplated by the Purchase Agreement and (3)
for ongoing working capital requirements. No portion of such proceeds (i)
will be used to provide capital to a corporation licensed under the Small
Business Investment Act of 1958, as amended ("SBIA"), (ii) will be used to
acquire farm land, (iii) will be used to fund production of a single item or
defined limited number of items, generally over a defined production period,
and such production will constitute the majority of the activities of the
Company and its Subsidiaries (examples include motion pictures and electric
generating plants), or (iv) will be used for any purpose contrary to the
public interest (including, but not limited to, activities which are in
violation of law) or inconsistent with free competitive enterprise, in each
case, within the meaning of 13 C.F.R. Section 107.720.
(3) Neither the Company's nor any of its Subsidiaries' primary
business activity involves, directly or indirectly, providing funds to
others, the purchase or discounting of debt obligations, factoring or
long-term leasing of equipment with no provision for maintenance or repair,
and neither the Company nor any of its Subsidiaries is classified under Major
Group 65 (Real Estate) of the SIC Manual. The assets of the business of the
Company and its Subsidiaries (the "Business") will not be reduced or
consumed, generally without replacement, as the life of the Business
progresses, and the nature of the Business does not require that a stream of
cash payments be made to the Business's financing sources, on a basis
associated with the continuing sale of assets (examples of such businesses
would include real estate development projects and oil and gas wells). (See
13 CFR Section 107.720)
<PAGE> (4) The proceeds from the sale of the Shares will not be used
substantially for a foreign operation; and at Closing or within one year
thereafter, no more than 49 percent of the employees or tangible assets of
the Company and its Subsidiaries will be located outside the United States
(unless the Company can show, to SBA's satisfaction, that the proceeds from
the sale of the Shares will be used for a specific domestic purpose). This
subsection (d) does not prohibit such proceeds from being used to acquire
foreign materials and equipment or foreign property rights for use or sale in
the United States.
(5) To the best knowledge of the Company, each SBIC that owns any
Securities issued by the Company, together with a description of the kinds
and amounts of Securities held, are listed on Schedule I hereto. Without the
Investor's consent, the Company will not issue Securities to any SBIC in the
future if such issuance would cause Investor to be deemed to be a member of
an "Investor Group" in "Control" of the Company (as such terms are defined in
13 CFR Section 107.865).
(b) Small Business Matters.
(1)Regulatory Compliance Cooperation.
a) In the event that Investor determines that it has a
Regulatory Problem, the Company agrees to take all such actions as are
reasonably requested by Investor in order (A) to effectuate and facilitate
any transfer by Investor of any Securities of the Company then held by
Investor to any Person designated by Investor, (B) to permit Investor (or any
of its Affiliates) to exchange all or any portion of the voting Securities
then held by such Person on a share-for-share basis for shares of a class of
non-voting Securities of the Company, which non-voting Securities shall be
identical in all respects to such voting Securities, except that such new
Securities shall be non-voting and shall be convertible into voting
Securities on such terms as are requested by Investor in light of regulatory
considerations then prevailing, and (C) to continue and preserve the
respective allocation of the voting interests with respect to the Company
arising out of Investor's ownership of voting Securities and/or provided for
in the Voting Agreement before the transfers and amendments referred to above
(including entering into such additional agreements as are requested by
Investor to permit any Person(s) designated by Investor to exercise any
voting power which is relinquished by Investor upon any exchange of voting
Securities for nonvoting Securities of the Company); and the Company shall
enter into such additional agreements, adopt such amendments to this
Agreement, the Company's Articles of Organization and the Company's By-laws
and other relevant agreements and taking such additional actions, in each
case as are reasonably requested by Investor in order to effectuate the
intent of the foregoing. If Investor elects to transfer Securities of the
Company to a Regulated Holder in order to avoid a Regulatory Problem, the
Company shall enter into such agreements with such Regulated Holder as it may
reasonably request in order to assist such Regulated Holder in complying with
applicable laws, and regulations to which it is subject. Such agreements may
include restrictions on the redemption, repurchase or retirement of
Securities of the Company that would result or be reasonably expected to
result in such Regulated Holder holding more voting securities or total
securities (equity and debt) than it is permitted to hold under such laws and
regulations.
b) In the event Investor has the right to acquire any of the
Company's Securities from the Company or any other Person (as the result of a
preemptive offer, pro rata offer or otherwise), at Investor's request the
Company will offer to sell to Investor non-voting Securities (or, if the
Company is not the proposed seller, will arrange for the exchange of any
voting securities for non-voting securities immediately prior to or
simultaneous with such sale) on the same terms as would have existed had
Investor acquired the Securities so offered and immediately requested their
exchange for non-voting Securities pursuant to subsection (i) above.
c) In the event that any Affiliate of the Company ever offers
to issue any of its Securities to Investor, then the Company will cause such
Affiliate to enter into agreements with Investor substantially similar to
this Section 2(a) and Section 2(b) below.
<PAGE> d) In the event that the Company is required to authorize
a class of non-voting Securities in order to comply with the foregoing
provisions if the Investor has a Regulatory Problem, Investor agrees to take
all such actions as are reasonably requested by the Company in order (A) to
provide the Company with a sufficient period of time as is reasonably
necessary to create such class of non-voting Securities and (B) to reimburse
the Company all its reasonable expenses in order to create a class of
non-voting Securities.
(2)Information Rights and Related Covenants.
a) Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year), the Company shall provide to Investor a
written assessment, in form and substance reasonably satisfactory to
Investor, of the economic impact of Investor's financing hereunder,
specifying the full-time equivalent jobs created or retained, the impact of
the financing on the consolidated revenues and profits of the Business and on
taxes paid by the Business and its employees (See 13 CFR Section
107.630(e)).
b) Upon the request of Investor or any of their Affiliates, the
Company will (A) provide to such Person such financial statements and other
information as such Person may from time to time reasonably request for the
purpose of assessing the Company's financial condition and (B) furnish to
such Person all information reasonably requested by it in order for it to
prepare and file SBA Form 468 and any other information reasonably requested
or required by any governmental agency asserting jurisdiction over such
Person.
c) For a period of one year following the date hereof, neither
the Company nor any of its Subsidiaries will change its business activity if
such change would render the Company ineligible to receive financial
assistance from an SBIC under the SBIA and the regulations thereunder (within
the meanings of 13 CFR Sections 107.720 and 107.760(b)).
d) The Company will at all times comply with the
non-discrimination requirements of 13 C.F.R., Parts 112, 113 and 117.
(c) Stockholder Cooperation. The Company shall use its best efforts
to cause the provisions attached hereto as Exhibit A to be included in the
Voting Agreement.
(d) Definitions.
"Affiliate" means, with respect to any Person, (i) a director,
officer or stockholder of such Person, (ii) a spouse, parent, sibling or
descendant of such Person (or spouse, parent, sibling or descendant of any
director or executive officer of such Person), and (iii) any other Person
that, directly or indirectly through one or more intermediaries, Controls, or
is Controlled by, or is under common Control with, such Person.
"Control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Person" shall be construed broadly and shall include an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity (or any department,
agency or political subdivision thereof).
"Regulated Holder" means any holder of the Company's Securities
that is (or that is a subsidiary of a bank holding company that is) subject
to the various provisions of Regulation Y of the Board of Governors of the
Federal Reserve Systems, 12 C.F.R., Part 225 (or any successor to Regulation
Y).
<PAGE>
"Regulatory Problem" means (i) any set of facts or
circumstances wherein it has been asserted by any governmental regulatory
agency (or Investor believes that there is a significant risk of such
assertion) that such Person (or any bank holding company that controls such
Person) is not entitled to hold, or exercise any material right with respect
to, all or any portion of the Securities of the Company which such Person
holds or (ii) when such Person and its Affiliates would own, control or have
power (including voting rights) over a greater quantity of Securities of the
Company than is permitted under any law or regulation or any requirement of
any governmental authority applicable to such Person or to which such Person
is subject.
"Securities" means, with respect to any Person, such Person's
capital stock or any options, warrants or other Securities which are directly
or indirectly convertible into, or exercisable or exchangeable for, such
Person's capital stock (whether or not such derivative Securities are issued
by the Company). Whenever a reference herein to Securities refers to any
derivative Securities, the rights of Investor shall apply to such derivative
Securities and all underlying Securities directly or indirectly issuable upon
conversion, exchange or exercise of such derivative Securities.
"Subsidiary" means, with respect to any Person, any other
Person of which the securities having a majority of the ordinary voting power
in electing the board of directors (or other governing body), at the time as
of which any determination is being made, are owned by such first Person
either directly or through one or more of its Subsidiaries.
"Voting Agreement" means the Voting Agreement to be entered
into on the date of the Closing among the Company and certain shareholders of
the Company.
* * * * *
<PAGE>
Please indicate your acceptance of the terms of this letter agreement
by returning a signed copy to the undersigned.
BT Capital Partners, Inc.
By:----------------------------
Name:
Title:
Agreed as of the date
first set forth above:
Safety lst, Inc.
By:--------------------------
Name:
Title:
<PAGE>
Schedule I
----------
SBIC Securities
- ---- ----------
BT Capital Partners, Inc. The Shares
<PAGE>
EXHIBIT A
INSERT INTO VOTING AGREEMENT
SECTION ---. Regulatory Matters.
(1) Cooperation of Other Stockholders. Each Stockholder agrees to
cooperate with the Company in all reasonable respects in complying with the
terms and provisions of the letter agreement between the Company and
Investor, a copy of which is attached hereto as Exhibit , regarding small
business matters (the "Small Business Sideletter"), including without
limitation, voting to approve amending the Company's Certificate of
Incorporation, the Company's by-laws or this Agreement in a manner reasonably
requested by Investor or any Regulated Holder (as defined in the Small
Business Sideletter) entitled to make such request pursuant to the Small
Business Sideletter. Anything contained in this Section to the contrary
notwithstanding, no Stockholder shall be required under this Section to
take any action that would adversely affect in any material respect such
Stockholder's rights under this Agreement or as a stockholder of the Company.
(2) Covenant Not to Amend. The Company and each Stockholder agree not
to amend or waive the voting or other provisions of the Company's Articles of
Organization, the Company's by-laws or this Agreement if such amendment or
waiver would cause any Regulated Holder to have a Regulatory Problem (as
defined in the Small Business Sideletter), provided that any such Stockholder
notifies the Company that it would have a Regulatory Problem promptly after
it has notice of such amendment or waiver.
<PAGE>
EXHIBIT 2
WARRANT
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES WHICH MAY BE ACQUIRED ON THE EXERCISE HEREOF
ARE SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK AND WARRANT PURCHASE
AGREEMENT DATED AS OF JULY 30, 1997 AMONG SAFETY 1ST, INC., A MASSACHUSETTS
CORPORATION (THE "ISSUER"), BT CAPITAL PARTNERS, INC. AND BEAR, STEARNS & CO.
INC., AS SUCH AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM
TIME TO TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. A COPY OF SUCH AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE
PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH
AGREEMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH MAY
BE ACQUIRED ON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND,
ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM.
No. of Shares Warrant No. U-2
of Common Stock: 570,755
WARRANT
to Purchase Common Stock of
SAFETY 1ST, INC.
THIS IS TO CERTIFY THAT Bear, Stearns & Co. Inc., or its registered
assigns, is entitled to purchase in whole or in part from time to time from
Safety 1st, Inc., a Massachusetts corporation (the "Issuer"), at any time on
and after the Effective Date (as hereinafter defined), but not later than
5:00 p.m., New York time, on July 30, 2007 (the "Expiration Date"), 570,755
shares of Common Stock (as hereinafter defined) at a purchase price of $0.01
per share (the "Exercise Price"), subject to the terms and conditions
provided herein and in the Purchase Agreement (as hereinafter defined). The
number of shares of Common Stock for which this Warrant shall be exercisable
and the Exercise Price are subject to adjustment from time to time as
provided herein.
This Warrant is issued pursuant to the Stock and Warrant Purchase
Agreement dated as of July 30, 1997 (as modified and supplemented and in
effect from time to time, the "Purchase Agreement") among the Issuer, BT
Capital Partners, Inc. and Bear, Stearns & Co. Inc. and is subject to the
provisions of the Purchase Agreement and the Registration Rights Agreement
(as hereinafter defined).
SECTION 1. Certain Definitions. (a) Each capitalized term used
herein without definition shall have the meaning assigned thereto (or
incorporated by reference) in the Purchase Agreement and in the Exhibits
thereto.
<PAGE>
(b) As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1 or in other provisions of this
Warrant in the singular to have the same meanings when used in the plural and
vice versa):
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, controls, is under common control with,
or is owned or controlled by, such specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, the
power to direct the management or policies of the specified Person through
the ownership of voting securities, by contract, voting agreement or
otherwise, and (ii) the terms "controlling", "control with" and "controlled
by", etc. shall have meanings correlative to the foregoing.
"Appraisal Procedure", if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for
purposes of the definition of "Current Market Price" or the fair market
value, as to any other property (in either case, the "valuation amount").
The valuation amount shall be determined in good faith jointly by the Board
and the Majority Holders; provided, however, that if such parties are not
able to agree on the valuation amount within a reasonable period of time (not
to exceed twenty (20) Business Days) the valuation amount shall be determined
by an investment banking firm of national recognition, which firm shall be
reasonably acceptable to the Board and the Majority Holders. If the Board
and the Majority Holders are unable to agree upon an acceptable investment
banking firm within ten (10) Business Days after the date either party
proposed that one be selected, the investment banking firm will be selected
by an arbitrator located in New York City, New York, selected by the American
Arbitration Association (or if such organization ceases to exist, the
arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of
his appointment) from a list, jointly prepared by the Board and the Majority
Holders, of not more than six investment banking firms of national standing
in the United States, of which no more than three may be named by the Board
and no more than three may be named by the Majority Holders. The arbitrator
may consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The
Board and the Majority Holders shall submit to the investment banking firm
their respective determinations of the valuation amount, and any supporting
arguments and other data as they may desire, within ten (10) days of the
appointment of the investment banking firm, and the investment banking firm
shall as soon as practicable thereafter make its own determination of the
valuation amount. The final valuation amount for purposes hereof shall be
the average of the two valuation amounts closest together, as determined by
the investment banking firm, from among the valuation amounts submitted by
the Issuer and the Majority Holders and the valuation amount calculated by
the investment banking firm. Such determination of the final valuation amount
by such investment banking firm shall be final and binding upon the parties.
The fees and expenses of the investment banking firm and arbitrator (if any)
used to determine the valuation amount shall be paid by the Issuer or the
applicable Warrant Holders (on a pro rata basis), whichever party's valuation
amount is excluded from the average referred to above, unless the investment
banking firm's valuation amount is excluded from the average, in which case
such fees and expenses will be divided evenly between the Issuer and such
Warrant Holders. If required by any such investment banking firm or
arbitrator, the Issuer shall execute a retainer and engagement letter
containing reasonable terms and conditions, including, without limitation,
customary provisions concerning the rights of indemnification and
contribution by the Issuer in favor of such investment banking firm or
arbitrator and its officers, directors, partners, employees, agents and
Affiliates.
"Articles of Organization" means the Restated Articles of
Organization of the Issuer as amended and restated and in effect at the time
in question.
"Board" shall mean the Board of Directors of the Issuer.
"By-laws" means the by-laws of the Issuer, as amended and in effect
at time in question.
"Common Stock" shall mean the Issuer's Common Stock, par value $.01
per share.
<PAGE>
"Convertible Securities" shall have the meaning given to such term
in Section 4(d).
"Current Market Price" shall mean, as to any security, the average
of the closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York
City time, on such day, or, if on any day such security is not quoted in the
NASDAQ System, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar or successor organization (and
in each such case (i) averaged over a period of 21 days consisting of the day
immediately preceding the day as of which "Current Market Price" is being
determined and the 20 consecutive Business Days prior to such immediately
preceding day and (ii) excluding any trades that are not bona fide, arm's
length transactions). If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Current Market Price" of such security shall be
the fair market value thereof as determined in accordance with the Appraisal
Procedure, using an appropriate valuation method, assuming an arms-length
sale to an independent party. In determining the fair market value of the
Common Stock, a sale of all of the issued and outstanding Common Stock of the
Issuer will be assumed, without giving regard to the lack of liquidity of
such stock due to any restrictions (contractual or otherwise) applicable
thereto or any discount for minority interests and assuming the conversion or
exchange of all securities then outstanding that are convertible into or
exchangeable for Common Stock and the exercise of all rights and warrants
(including the Warrants) then outstanding and exercisable to purchase shares
of such stock or securities convertible into or exchangeable for shares of
such stock. Common Stock issued in an underwritten public offering shall be
deemed to be issued for fair market value.
"Effective Date" shall mean the date set forth on the signature page
of this Warrant.
"Excluded Stock" shall mean (i) any shares of Common Stock issuable
upon the exercise of any options granted pursuant to the Stock Option Plans,
and (ii) any shares of Common Stock issuable upon exercise of any Warrants.
"Exercise Condition" shall have the meaning assigned to it in
Section 2 hereof.
"Exercise Notice" shall have the meaning assigned to such term in
Section 2 hereof.
"Exercise Price" shall have the meaning assigned to such term in the
first paragraph of this Warrant.
"Expiration Date" shall have the meaning assigned to such term in
the first paragraph of this Warrant.
"Fundamental Documents" means the documents by which any Person
(other than an individual) establishes its legal existence or which govern
its internal affairs. The Fundamental Documents of the Issuer are the
Articles of Organization and By-laws.
"Holder" shall mean the registered holder of this Warrant and the
registered holder of any Warrant Stock issued upon exercise hereof.
"include" and "including" shall be construed as if followed by the
phrase ", without being limited to,".
"Issuer" shall have the meaning assigned to such term in the first
paragraph of this Warrant.
<PAGE>
"Majority Holders" shall mean those Warrant Holders holding (or
having the right to receive upon exercise of Warrants) Warrant Stock
representing a majority of the total amount of Warrant Stock held by, or
issuable to, all Warrant Holders.
"NASDAQ System" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Options" shall have the meaning given to such term in Section 4(d).
"Person" shall be construed in its broadest possible sense and shall
include any individual, corporation, general or limited partnership, joint
venture, association, limited liability company, joint stock company, trust,
business trust, bank, trust company, estate (including any beneficiaries
thereof), unincorporated organization, cooperative, association or
governmental branch, authority, agency or political subdivision thereof.
"Purchase Agreement" shall have the meaning assigned to such term in
the second paragraph of this Warrant.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of July 30, 1997 between the Issuer and the Holders, as
modified and supplemented and in effect from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series A Preferred Stock" shall mean the Issuer's Series A
Preferred Stock, par value $1 per share.
"Stock Option Plans" shall have the meaning assigned to such term in
the Purchase Agreement and any other stock option plans adopted by the Issuer
and any other grants of stock options made by the Issuer, in each case
granted to employees, directors and independent contractors of the Issuer or
its subsidiaries.
"Voting Agreement" shall mean the Voting Agreement dated as of July
30, 1997 among the Issuer, the Holders and the other signatories thereto, as
modified and supplemented and in effect from time to time.
"Warrant" shall mean this Warrant and all other warrants originally
issued by the Issuer pursuant to the Purchase Agreement and all warrants
issued upon transfer, division, or combination of, or in substitution for,
this Warrant or any such other warrant. All Warrants shall be substantially
in the form of Exhibit D attached to the Purchase Agreement except that the
Warrants need not bear the legends appearing on the first page of this
Warrant from and after such time as the restrictions set forth therein no
longer apply.
"Warrant Holder" shall mean any Person who acquires Warrants or
Warrant Stock pursuant to the provisions of the Purchase Agreement or any
Warrant, including any transferees of Warrants or Warrant Stock.
"Warrant Stock" shall mean (a) all shares of Common Stock issued or
issuable from time to time upon exercise of this Warrant, (b) all other
securities or other property issued or issuable upon any such exercise and
(c) any securities distributed with respect to the securities referred to in
the preceding clauses (a) and (b); provided, however, that the term "Warrant
Stock" shall not include shares of Common Stock or other securities following
the time such shares or other securities have been sold in a public offering
registered under the Securities Act or sold under Rule 144 promulgated
thereunder. As used in this Warrant, the phrase "Warrant Stock then held"
shall mean Warrant Stock held at the time of
<PAGE>
determination by the Holder, and shall include Warrant Stock issuable upon
exercise of any Warrants held at the time of determination by such Holder.
SECTION 2. Exercise of Warrant. (a) On and after the Effective
Date and until 5:00 p.m., New York City time, on the Expiration Date, the
Holder may exercise this Warrant, on one or more occasions, on any Business
Day, in whole or in part, by delivering to the Issuer, at its office
maintained for such purpose pursuant to Section 5 hereof, (i) a written
notice of the Holder's election to exercise this Warrant, which notice shall
be substantially in the form of Annex A attached hereto and shall be properly
completed (the "Exercise Notice"), (ii) payment of the Exercise Price
(payable as set forth in Section 2(b) below) for the Warrant Stock as to
which this Warrant is being exercised, and (iii) this Warrant. Except to the
extent necessary to cause the number of shares of Common Stock deliverable as
provided in Section 2(b) to be a whole number of shares, this Warrant shall
be exercisable in part only for a whole number of shares.
(b) At the option of the Holder, the Exercise Price shall be
payable (i) in cash or by certified or official bank check payable to the
order of the Issuer or (ii) by exchange of this Warrant in accordance with
the further provisions of this Section 2(b). In exchange for the portion of
this Warrant that is being exercised at such time, the Holder shall receive
the number of shares of Common Stock determined by multiplying (A) the number
of shares of Common Stock for which this Warrant is being exercised at such
time by (B) a fraction, (1) the numerator of which shall be the difference
between (x) Current Market Price per share of Common Stock at such time and
(y) the Exercise Price per share of Common Stock, and (2) the denominator of
which shall be the Current Market Price per share of Common Stock at such
time. The Issuer shall issue a new Warrant for the portion, if any, of this
Warrant not being exercised as provided in Section 2(f).
(c) Subject to the provisions of Section 2(d), upon receipt of an
Exercise Notice, the aggregate Exercise Price payable and this Warrant, the
Issuer shall, as promptly as practicable and in any event within five (5)
Business Days thereafter, issue to the Holder one or more stock certificates
representing the aggregate number of shares of Common Stock to which the
Holder is entitled and transfer to the Holder of this Warrant appropriate
evidence of ownership of other securities or property (including any cash) to
which the Holder is entitled, in such denominations, and registered or
otherwise placed in, or payable to the order of, such name or names, as may
be directed in writing by the Holder, and shall deliver such stock
certificates, evidence of ownership and any other securities or property
(including any cash) to the Person or Persons entitled to receive the same,
together with an amount in cash in lieu of any fraction of a share (or
fractional interest in any other security), as hereinafter provided. The
Issuer shall pay all expenses in connection with, and any and all
documentary, stamp or similar issue or transfer taxes of the United States or
any state thereof payable in respect of, the issue or delivery of the Warrant
Stock upon exercise of this Warrant. However, the Issuer shall not be
required to pay any tax or other charge imposed in connection with any
assignment or transfer involved in the issue of any certificate or other
evidence of ownership of Warrant Stock.
(d) The Holder's election to exercise this Warrant may, in the sole
discretion of the Holder, be conditioned upon, and in such event, the
exercise shall be subject in all respects to a Change of Control, the Issuer
ceasing to be a reporting company under the Securities and Exchange Act of
1934, as amended, the consummation of a sale of the Issuer, any public
offering of the Issuer's Common Stock registered under the Securities Act or
other similar transaction involving the Issuer (collectively referred to
herein as the "Exercise Conditions"), as specified in the Exercise Notice,
and the Issuer shall provide the Holder with written notice no less than 20
business days prior to the occurrence of an Exercise Condition. If any
exercise of this Warrant is so conditioned, then, subject to delivery of the
items required by Section 2(b), the Issuer shall deliver the certificates and
other evidence of ownership of other securities or other property in such
manner as the Holder shall direct as required in connection with the
consummation of the transaction upon which the exercise is conditioned. At
any time that the Issuer shall give notice to the Holder that such
transaction has been abandoned or the Issuer has withdrawn from participation
in such transaction, the Issuer shall return the items delivered pursuant to
Section 2(c) and the Holder's election to exercise this Warrant shall be
deemed rescinded.
<PAGE>
(e) The stock certificate or certificates or other evidence of
ownership of Warrant Stock to be delivered pursuant to Section 2(c) hereof
shall be deemed to have been issued, and the Holder or any other Person so
designated to be named therein shall, to the extent permitted by law and the
Purchase Agreement, be deemed to have become a holder of record of the
Warrant Stock represented thereby, including having the right to vote any
voting securities included therein or to consent or to receive notice as a
shareholder, as of the date on which the last of the Exercise Notice, payment
of the Exercise Price and this Warrant is received by the Issuer as aforesaid
(subject, in the case of an exercise to which Section 2(d) applies, to the
consummation of the transaction upon which such exercise is conditioned),
notwithstanding that the transfer books of the Issuer shall then be closed or
that such certificates or other evidence of ownership shall not then actually
have been delivered to the Holder.
(f) If this Warrant shall have been exercised only in part, the
Issuer shall, at the time of delivery of the certificate or certificates or
other evidence of ownership of Warrant Stock, execute and deliver to the
Holder, without charge, a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Stock called for by this Warrant, which new
Warrant shall in all other respects be identical to this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and
the same returned to the Holder.
(g) The Issuer shall not be required to issue any fractional share
of Common Stock (or fractional interest in any other security) upon exercise
of this Warrant. As to any fraction of a share (or fractional interest in
any other security) that the Holder would otherwise be entitled to receive
upon such exercise, the Issuer shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Market Price
per share of Common Stock (and/or other security) on the date of exercise;
provided, however, that in the event that the Issuer undertakes a reduction
in the number of shares of Common Stock or other securities outstanding, it
shall be required to issue fractional shares or fractional interests in such
other securities to the Holder if the Holder exercises all or any part of
this Warrant, unless the Holder shall have consented in writing to such
reduction and provided the Issuer with a written waiver of its right to
receive fractional shares or interests in accordance with this paragraph. If
the Holder shall exercise more than one Warrant in the same transaction, any
payment in respect of fractional shares (or other fractional interests) shall
be based on the final fraction resulting from aggregating all such exercises.
(h) The Issuer hereby agrees at all times to keep reserved for
issuance and delivery upon exercise of this Warrant such number of its
authorized but unissued shares (or treasury shares) of Common Stock or other
securities of the Issuer from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares and other securities shall be duly authorized and, when
issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale (except to the extent of any
applicable provisions set forth in the Purchase Agreement, Voting Agreement,
Registration Rights Agreement or the Issuer's Fundamental Documents) and free
and clear of all preemptive or similar rights.
(i) If the issuance of any shares of Common Stock or other
securities required to be reserved for purposes of the exercise of this
Warrant requires the registration with, or approval of, any governmental
authority or requires listing on any national securities exchange or national
market system before such shares or other securities may be so issued, the
Issuer shall at its expense use its best efforts to cause such shares to be
duly registered, approved or listed, as the case may be, so that such shares
or other securities may be issued in accordance with the terms hereof;
provided, however, that this provision shall not obligate the Issuer to
register such shares or other securities under the Securities Act or qualify
them under state securities or blue sky laws.
SECTION 3. Transfer, Division and Combination. (a) This
Warrant, all rights hereunder and any Warrant Stock issued or issuable upon
exercise hereof are assignable and transferable, at any time in whole or in
part, to any Person or Persons subject in all cases to the provisions of
Article
<PAGE>
VII of the Purchase Agreement. Any such transfer shall not require the
consent of any security holder of the Issuer.
(b) Upon a transfer permitted by Section 3(a), this Warrant shall
be transferable upon surrender of this Warrant to the Issuer, together with a
written assignment of this Warrant substantially in the form of Annex B
attached hereto, duly executed by the Holder hereof or such Holder's agent or
attorney. Upon such surrender, the Issuer shall, without charge, execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees
(and, if the Holder's entire interest is not being assigned, in the name of
the Holder), and in the denominations specified in such instrument of
assignment, and this Warrant shall promptly be canceled.
(c) This Warrant may be exchanged for, or combined with, other
Warrants upon presentation of this Warrant and any other Warrants with which
this Warrant is to be combined to the Issuer, together with a written notice
specifying the denominations in which a new Warrant or Warrants are to be
issued, signed by the Holder. The Issuer shall execute and deliver a new
Warrant or Warrants to the Holder in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
(d) The Issuer shall maintain books for the registration and
transfer of the Warrants, and shall allow each Warrant Holder to inspect such
books at such reasonable times as such holder shall request.
SECTION 4. Adjustments.
(a) Dividends and Distributions. If at any time the Issuer shall
pay any dividend or make any other distribution to holders of its Common
Stock of any cash, evidence of indebtedness or other property (including any
rights or warrants to purchase any securities of the Issuer) of any nature
whatsoever (other than as contemplated by subsections (b), (c)(i)(A) and
(d)(i)(A) of this Section 4), the Issuer shall at the same time pay or
distribute to the Holder (whether or not the Holder exercises this Warrant)
the cash evidence of indebtedness or other property the Holder would have
been entitled to receive if such Holder had exercised this Warrant
immediately prior to the record date for such dividend or distribution.
(b) Subdivisions and Combinations. If at any time the Issuer shall
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution of Common
Stock;
(ii) subdivide, split or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then immediately after the occurrence of any such event (A) the number of
shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted so as to equal the number of shares of Common Stock such holder
would have held immediately after the occurrence of such event (in the case
of an event referred to in clause (i), after giving effect to such dividend
or distribution) if such holder had exercised this Warrant immediately prior
to the occurrence of such event and (B) the Exercise Price shall be adjusted
to be equal to (x) the Exercise Price immediately prior to the occurrence of
such event multiplied by (y) a fraction (1) the numerator of which is the
number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the adjustment in clause (A) and (2) the denominator of
which is the number of shares of Common Stock issuable upon exercise of this
Warrant immediately after the adjustment in clause (A).
<PAGE>
(c) Issuance of Common Stock. If at any time the Issuer (i) shall
(A) take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock or (B) otherwise sell or issue any shares of any class or series
of Common Stock (other than Excluded Stock) and (ii) the consideration per
share of Common Stock paid or to be paid upon such subscription, purchase,
sale or issuance is less than the Current Market Price per share of Common
Stock immediately before such record date or immediately before the date of
such sale or issuance, as the case may be, then the number of shares of
Common Stock issuable upon exercise of this Warrant shall be adjusted to be
that number determined by multiplying (x) the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to such record
date or sale or issuance date, as the case may be, by (y) a fraction (not to
be less than one) (i) the numerator of which shall be equal to the product of
(A) the number of shares of Common Stock outstanding (determined on a
fully-diluted basis) after giving effect to such subscription, purchase, sale
or issuance (and assuming all such subscription or purchase offers are
exercised) and (B) the Current Market Price per share of Common Stock
determined immediately before such record date or sale or issuance date, as
the case may be, and (ii) the denominator of which shall be equal to the sum
of (A) the product of (1) the number of shares of Common Stock outstanding
(determined on a fully-diluted basis) immediately before such record date or
sale or issuance date, as the case may be, and (2) the Current Market Price
per share of Common Stock determined immediately before such record date or
sale or issuance date, as the case may be, and (B) the aggregate
consideration received or to be received by the Issuer for the total number
of shares of Common Stock to be subscribed for or purchased, sold or issued.
Simultaneously with the adjustment in the preceding sentence, the Exercise
Price shall be adjusted to be equal to (x) the Exercise Price immediately
prior to the occurrence of such event multiplied by (y) a fraction (1) the
numerator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to the adjustment in the preceding
sentence and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment
in the preceding sentence.
(d) Issuance of Convertible Securities or Options. If at any time
(i) the Issuer shall (A) take a record of the holders of its Common Stock for
the purpose of entitling them to subscribe for or purchase options to
purchase or rights to subscribe for Common Stock, securities directly or
indirectly convertible into or exchangeable for Common Stock ("Convertible
Securities") or options or rights with respect to Convertible Securities
(options or rights with respect to Common Stock or Convertible Securities
being referred to as "Options") or (B) otherwise issue or sell any Options or
Convertible Securities (other than Options exercisable for Excluded Stock)
and (ii) the consideration per share paid or to be paid for the Common Stock
deliverable upon exercise of such Options and/or conversion or exchange of
such Convertible Securities (determined by dividing (x) the total amount
received or receivable by the Issuer in consideration of the subscription,
purchase, sale or issuance of such Options or Convertible Securities plus any
amount payable to the Issuer upon such exercise and/or conversion or
exchange, by (y) the total maximum number of shares of Common Stock necessary
to effect the exercise and/or conversion or exchange of all such Options or
Convertible Securities) shall be less than the Current Market Price per share
of Common Stock on such record date or sale or issuance date, as the case may
be, then the number of shares of Common Stock issuable upon exercise of this
Warrant shall be adjusted to be that number determined by multiplying the
number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such date by a fraction (not to be less than one) (i)
the numerator of which shall be equal to the product of (A) the total maximum
number of shares of Common Stock outstanding (determined on a fully diluted
basis) after giving effect to the assumed exercise and/or conversion of all
such Options or Convertible Securities and (B) the Current Market Price per
share of Common Stock determined immediately before such record date or sale
or issuance date, as the case may be, and (ii) the denominator of which shall
be equal to the sum of (A) the product of (1) the number of shares of Common
Stock outstanding (determined on a fully-diluted basis) immediately before
such record date or sale or issuance date, as the case may be, and (2) the
Current Market Price per share of the Common Stock determined immediately
before such record date or sale or issuance date, as the case may be, and (B)
the aggregate consideration for which Common Stock is deliverable upon
exercise and/or conversion or exchange for such Options or Convertible
Securities. Simultaneously with the adjustment in the preceding sentence,
the Exercise Price shall be adjusted to be equal to (x) the Exercise Price
<PAGE>
immediately prior to the occurrence of such event multiplied by (y) a
fraction (1) the numerator of which is the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to the adjustment in
the preceding sentence and (2) the denominator of which is the number of
shares of Common Stock issuable upon exercise of this Warrant immediately
after the adjustment in the preceding sentence. The adjustment of the
exercise price of an Option shall not be deemed to be the issuance or sale of
an Option at less than the Current Market Price per share of Common Stock if
the exercise price as adjusted is not less than the Current Market Price per
share of Common Stock on the date of such adjustment.
(e) Superseding Adjustment. If, at any time after any adjustment
in the number of shares of Common Stock issuable upon exercise of this
Warrant shall have been made on the basis of the issuance of any Options or
Convertible Securities:
(i) any such Options shall expire prior to exercise or the right
to convert or exchange any such Convertible Securities shall terminate
prior to conversion or exchange; or
(ii) the consideration per share for which shares of Common Stock
are issuable pursuant to the terms of such Options or Convertible
Securities shall be increased or decreased;
then such previous adjustment shall be rescinded and annulled (without
affecting any other adjustments resulting from any other events). Thereupon,
a recomputation shall be made of the adjustment in the number of shares of
Common Stock issuable upon exercise of this Warrant on the basis of
(A) treating the number of shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the
previous exercise, conversion or exchange of such Options or
Convertible Securities as having been issued on the date or
dates of such exercise and/or conversion or exchange and for
the consideration actually received and receivable therefor,
and
(B) treating any such Options or Convertible Securities that
then remain outstanding as having been granted or issued
immediately after the time of such increase or decrease for
the consideration per share for which shares of Common Stock
are issuable upon exercise and/or conversion or exchange of
such Options or Convertible Securities,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled. For purposes of the computation of such new adjustment, the
Current Market Price shall be deemed to be the Current Market Price used in
computing the previous adjustment.
(f) Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of
the number of shares of Common Stock issuable upon exercise of this Warrant:
(i) The sale or other disposition of any issued shares of Common
Stock owned or held by or for the account of the Issuer shall be
deemed to be an issuance thereof for purposes of this Section.
(ii) In computing adjustments under this Section, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(iii) If the Issuer shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase
<PAGE>
rights and shall, thereafter and before the payment of such dividend
or distribution or the granting of such subscription or purchase
rights, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no
adjustment shall be required by reason of the taking of such record
and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(iv) Aggregate consideration for purposes of Sections 4(c) and
4(d) shall be determined as follows: In case any Common Stock,
Options, or Convertible Securities shall be issued or sold, or be
exercisable, convertible or exchangeable for cash, the consideration
received therefor shall be deemed to be the amount payable to the
Issuer therefor, after deduction therefrom of any expenses incurred or
any underwriting commissions or concessions or discounts or, in the
case of a private placement thereof, finders' fees or commissions paid
or allowed by the Issuer in connection therewith. In case any such
Common Stock, Options, or Convertible Securities shall be issued or
sold, or be exercisable, convertible or exchangeable for a
consideration other than cash payable to the Issuer, the consideration
received therefor shall be deemed to be the fair market value of such
consideration (as determined in accordance with the Appraisal
Procedure), after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed
by the Issuer in connection therewith. In case any such Common Stock,
or Options, Convertible Securities shall be issued or sold, or be
exercisable, convertible or exchangeable in connection with any merger
of another corporation into the Issuer, the amount of consideration
therefor shall be deemed to be the fair market value (as determined in
accordance with the Appraisal Procedure) of such portion of the assets
of such merged corporation as the Board shall reasonably determine
(such determination to be reasonably acceptable to the Majority
Holders) in good faith to be attributable to such options, rights or
securities.
(g) Merger, Consolidation or Disposition of Assets. If the Issuer
shall merge, consolidate or effect a share exchange with another entity, or
shall sell, transfer or otherwise dispose of all or substantially all of its
assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of
Common Stock or other securities of the successor or acquiring entity, or
property of any nature is to be received by or distributed to the holders of
Common Stock of the Issuer, then the Holder shall be entitled to receive in
respect of the Warrant Stock issuable upon exercise of this Warrant, and upon
delivery to the Issuer of this Warrant for cancellation, the amount of cash,
shares of Common Stock, other securities or other property that it would have
been entitled to receive if such Holder had exercised this Warrant in full
immediately prior to the occurrence of such merger, consolidation, share
exchange or disposition of assets. In the case of any such merger,
consolidation, share exchange or disposition of assets, the successor or
acquiring entity (and any Affiliate thereof issuing securities) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by
the Issuer and all of the obligations and liabilities hereunder, subject to
such modifications as may be deemed appropriate (as determined by resolution
of the Board and reasonably acceptable to the Majority Holders) in order to
provide for adjustments of the Warrant Stock issuable upon exercise of this
Warrant that shall be as nearly equivalent as practicable to the adjustments
provided for in this Section 4. The foregoing provisions shall similarly
apply to successive mergers, consolidations, share exchanges and dispositions
of assets.
(h) Capital Reorganization or Capital Reclassification. If the
Issuer shall effect any capital reorganization or any reclassification of its
capital stock (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the Issuer
shall cause effective provision to be made so that this Warrant shall be
exercisable for the kind and number of shares of stock, other securities,
cash or other property to which a holder of the Warrant Stock deliverable
upon exercise of this Warrant would have been entitled upon such
reorganization or reclassification and any such provision shall include
adjustments in respect of such stock, securities or other property that shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Section 4 with respect to this Warrant.
<PAGE>
(i) Other Action Affecting Common Stock. If at any time or from
time to time the Issuer shall take any action affecting its Common Stock,
other than any action described in this Section 4, then, unless such action
will not have an adverse effect upon the Holder's rights, the number of
shares of Warrant Stock issuable upon exercise of this Warrant and the
Exercise Price shall be adjusted in such manner and at such time as the Board
shall in good faith determine (such determination to be reasonably acceptable
to the Majority Holders) to be equitable in the circumstances, but no such
adjustment shall decrease the number of shares of Warrant Stock issuable upon
exercise of this Warrant or increase the Exercise Price.
(j) If at any time the Issuer shall issue any shares of its Common
Stock pursuant to the exercise of an option granted under a Stock Option
Plan, then the number of shares of Common Stock issuable upon the exercise of
this Warrant shall be increased by an amount equal to the product of (x) the
number of such shares issued pursuant to the option exercise and (y) 0.1764.
The provisions of this Section 4(j) shall only apply to issuances after the
date hereof of the first 1,300,000 shares of Common Stock pursuant to the
Stock Option Plans, as such number may be adjusted pursuant to any stock
splits, divisions, combinations or similar adjustments.
(k) Notice of Adjustments. Whenever the number of shares of
Warrant Stock issuable upon exercise of this Warrant shall be adjusted
pursuant to this Agreement, the Issuer shall forthwith obtain a certificate
signed by a firm of independent accountants of recognized national standing
selected by the Issuer setting forth, in reasonable detail, the event
requiring the adjustment, the method by which such adjustment was calculated
and specifying the number of shares of Warrant Stock issuable upon exercise
of this Warrant after giving effect to such adjustment (except in the case of
adjustments pursuant to Section 4(j) in which event a certificate shall be
obtained on December 31 and June 30). The Issuer shall promptly cause a
signed copy of such certificate to be delivered to the Holder. The Issuer
shall keep at its office maintained for purposes of Section 7(a) hereof
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the registered Holder hereof.
(l) Notice of Certain Corporate Action. If the Issuer shall
propose (i) to pay any dividend to the holders of its Common Stock or to make
any other distribution to the holders of its Common Stock; (ii) to offer to
the holders of its Common Stock rights to subscribe for or to purchase any
additional shares of Common Stock or any Options or Convertible Securities;
(iii) to effect any reorganization or reclassification of its Common Stock;
(iv) to otherwise issue any Common Stock, Options, or Convertible Securities;
(v) to effect any other capital reorganization; (vi) to effect any
consolidation, merger or share exchange or any sale, transfer or other
disposition of all or substantially all of its assets; or (vii) to effect the
liquidation, dissolution or winding up of the Issuer, then, in each such
case, the Issuer shall give to the Holder a notice of such proposed action,
which shall specify the date on which a record is to be taken for the
purposes of such dividend, distribution or rights offer, or the date on which
such reclassification, issuance, reorganization, consolidation, merger, share
exchange, sale, transfer, disposition, liquidation, dissolution or winding up
is to take place and the date of participation therein by the holders of
Common Stock, if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Common Stock, and the number of shares of
Warrant Stock that are issuable upon exercise of this Warrant after giving
effect to any adjustment that will be required as a result of such action.
Such notice shall be so given in the case of any action covered by clause (i)
or (ii) above at least 10 days prior to the record date for determining
holders of the Common Stock for purposes of such action, and in the case of
any other such action, at least 10 days prior to the date of the taking of
such proposed action.
(m) No Impairment. The Issuer will not, by amendment of its
Articles of Organization or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Issuer, but will at
all times in good faith assist in the carrying out of all the provisions of
this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder against
impairment.
<PAGE>
(n) Miscellaneous. The computations of all amounts under this
Section 4 shall be made assuming all other anti-dilution or similar
adjustments to be made to the terms of all other securities resulting from
the transaction causing an adjustment pursuant to this Section 4 have
previously been made so as to maintain the relative economic interest of this
Warrant vis a vis all other securities issued by the Issuer.
SECTION 5. Miscellaneous.
(a) Office of Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in the continental United States where
the Warrants may be presented for exercise, transfer, division or combination
as provided in this Warrant. Such office shall be at 210 Boylston Street,
Chestnut Hill, MA 02167, unless and until the Issuer shall designate and
maintain some other office for such purposes and give notice thereof to the
Holder.
(b) Notices Generally. Any notices and other communications
pursuant to the provisions hereof shall be sent in accordance with the
provisions of Section 10.6 of the Purchase Agreement.
(c) Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflicts of laws rules. The Issuer agrees that it may be served with
process in the State of New York and any action for breach of this Warrant
may be prosecuted against it in the courts of such State or any Federal court
located in such State.
(d) Limitation of Liability. Except as otherwise provided herein,
this Warrant does not entitle the Holder to any voting rights or other rights
of a shareholder of the Issuer, as a shareholder. No provision hereof, in
the absence of affirmative action by the Holder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the Exercise Price
or as a shareholder of the Issuer, whether such liability is asserted by the
Issuer, by any creditor of the Issuer or any other Person.
(e) Loss or Destruction of Warrant. Upon receipt by the Issuer of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant and (in the case
of loss, theft or destruction), if requested by the Issuer, of reasonably
satisfactory indemnification (if the Holder is a nationally-chartered
financial institution or an Affiliate thereof, its own agreement being
satisfactory), or (in the case of mutilation) upon surrender and cancellation
of this Warrant, the Issuer shall, without charge, execute and deliver a new
Warrant exercisable for the same amount of Warrant Stock; provided, however,
that (in the case of loss, theft or destruction) no indemnity bond shall be
required unless the Issuer has a class of securities registered pursuant to
the Securities Exchange Act of 1934, as amended, and the Issuer's transfer
agent requires such indemnity bond as a condition to the issuance of a new
Warrant.
(f) Amendments and Waivers. Any provision of this Warrant may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Issuer and the Holders and, in
the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
* * *
<PAGE>
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: July __, 1997
SAFETY 1ST, INC.
By:_________________________________
Name:
Title:
<PAGE>
ANNEX A
FORM OF EXERCISE NOTICE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant exercises this
Warrant for the purchase of ________ shares of Common Stock of Safety 1st,
Inc., a Massachusetts corporation, and herewith makes payment therefor of
$__________ (such payment being made [check one] (x) [ ] in cash or by
certified or official bank check or (y) [ ] by acceptance of a reduced
number of shares of Common Stock upon cancellation of this Warrant as
provided in Section 2(b) of this Warrant, all on the terms and conditions
specified in this Warrant, and requests that (i) certificates and/or other
instruments covering such shares of Common Stock be issued in accordance with
the instructions given below and (ii) if such shares of Common Stock shall
not include all of the shares of Common Stock to which the Holder is entitled
under this Warrant, that a new Warrant for the unpurchased balance of the
shares of Common Stock issuable hereunder be delivered to the undersigned.
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
[This Exercise Notice is being delivered contingent upon the
consummation of [describe transaction] as contemplated by Section 2(d) of this
Warrant].1
Dated:________________________
__________________________________
(Signature of Registered Holder)2
Instructions for issuance and
registration of shares of
Common Stock:
_________________________ Social Security or Other
Name of Registered Holder Identifying Number:________________
(please print)
Please deliver certificate to
the following address:
______________________________
Street
______________________________
City, State and Zip Code
________________________
1 Include if applicable.
2 The signature must correspond with the name as written upon the face of
the attached Warrant in every particular, without alteration.
<PAGE>
ANNEX B
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all the
rights of the undersigned under this Warrant with respect to the number of
shares of Common Stock covered thereby set forth below to:
Number of
Shares of
Name of Assignee Address Common Stock
- ---------------- ------- ------------
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
Dated:____________________________
_________________________________
(Signature of Registered Holder)3
_________________________________
Name of Registered Holder
(Please Print)
Witness:
___________________________________
- -----------------------------
3 The signature must correspond with the name as written upon the face of the
attached Warrant in every particular, without alteration.
<PAGE>
EXHIBIT 3
WARRANT
THE TRANSFER, SALE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES WHICH MAY BE ACQUIRED ON THE EXERCISE HEREOF ARE
SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 30, 1997 AMONG SAFETY 1ST, INC., A MASSACHUSETTS CORPORATION
(THE "ISSUER"), BT CAPITAL PARTNERS, INC. AND BEAR, STEARNS & CO. INC., AS SUCH
AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF SUCH AGREEMENT
IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF SUCH AGREEMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES WHICH MAY BE
ACQUIRED ON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY,
SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
No. of Shares Warrant No. C-2
of Common Stock: 63,418
WARRANT
to Purchase Common Stock of
SAFETY 1ST, INC.
THIS IS TO CERTIFY THAT Bear, Stearns & Co. Inc., or its registered
assigns, is entitled to purchase in whole or in part from time to time from
Safety 1st, Inc., a Massachusetts corporation (the "Issuer"), at any time on and
after the Effective Date (as hereinafter defined), but not later than 5:00 p.m.,
New York time, on July 30, 2007 (the "Expiration Date"), 63,418 shares of
Common Stock (as hereinafter defined) at a purchase price of $0.01 per share
(the "Exercise Price"), subject to the terms and conditions provided herein and
in the Purchase Agreement (as hereinafter defined). The number of shares of
Common Stock for which this Warrant shall be exercisable and the Exercise Price
are subject to adjustment from time to time as provided herein.
This Warrant is issued pursuant to the Stock and Warrant Purchase
Agreement dated as of July 30, 1997 (as modified and supplemented and in effect
from time to time, the "Purchase Agreement") among the Issuer, BT Capital
Partners, Inc. and Bear, Stearns & Co. Inc. and is subject to the provisions of
the Purchase Agreement and the Registration Rights Agreement (as hereinafter
defined).
SECTION 1. Certain Definitions. (a) Each capitalized term used
herein without definition shall have the meaning assigned thereto (or
incorporated by reference) in the Purchase Agreement and in the Exhibits
thereto.
<PAGE>
(b) As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1 or in other provisions of this
Warrant in the singular to have the same meanings when used in the plural and
vice versa):
"Accountants" shall have the meaning given to such term in Section
5(a).
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, controls, is under common control with, or
is owned or controlled by, such specified Person. For purposes of this
definition, (i) "control" means, with respect to any specified Person, the power
to direct the management or policies of the specified Person through the
ownership of voting securities, by contract, voting agreement or otherwise, and
(ii) the terms "controlling", "control with" and "controlled by", etc. shall
have meanings correlative to the foregoing.
"Appraisal Procedure", if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for purposes
of the definition of "Current Market Price" or the fair market value, as to any
other property (in either case, the "valuation amount"). The valuation amount
shall be determined in good faith jointly by the Board and the Majority Holders;
provided, however, that if such parties are not able to agree on the valuation
amount within a reasonable period of time (not to exceed twenty (20) Business
Days) the valuation amount shall be determined by an investment banking firm of
national recognition, which firm shall be reasonably acceptable to the Board and
the Majority Holders. If the Board and the Majority Holders are unable to agree
upon an acceptable investment banking firm within ten (10) Business Days after
the date either party proposed that one be selected, the investment banking firm
will be selected by an arbitrator located in New York City, New York, selected
by the American Arbitration Association (or if such organization ceases to
exist, the arbitrator shall be chosen by a court of competent jurisdiction).
The arbitrator shall select the investment banking firm (within ten (10) days of
his appointment) from a list, jointly prepared by the Board and the Majority
Holders, of not more than six investment banking firms of national standing in
the United States, of which no more than three may be named by the Board and no
more than three may be named by the Majority Holders. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
and the Majority Holders shall submit to the investment banking firm their
respective determinations of the valuation amount, and any supporting arguments
and other data as they may desire, within ten (10) days of the appointment of
the investment banking firm, and the investment banking firm shall as soon as
practicable thereafter make its own determination of the valuation amount. The
final valuation amount for purposes hereof shall be the average of the two
valuation amounts closest together, as determined by the investment banking
firm, from among the valuation amounts submitted by the Issuer and the Majority
Holders and the valuation amount calculated by the investment banking firm. The
determination of the final valuation amount by such investment banking firm
shall be final and binding upon the parties. The fees and expenses of the
investment banking firm and arbitrator (if any) used to determine the valuation
amount shall be paid by the Issuer or the applicable Warrant Holders (on a pro
rata basis), whichever party's valuation amount is excluded from the average
referred to above, unless the investment banking firm's valuation amount is
excluded from the average, in which case such fees and expenses will be divided
evenly between the Issuer and such Warrant Holders. If required by any such
investment banking firm or arbitrator, the Issuer shall execute a retainer and
engagement letter containing reasonable terms and conditions, including, without
limitation, customary provisions concerning the rights of indemnification and
contribution by the Issuer in favor of such investment banking firm or
arbitrator and its officers, directors, partners, employees, agents and
Affiliates.
"Articles of Organization" means the Restated Articles of Organization
of the Issuer, as amended and restated and in effect at the time in question.
"Board" shall mean the Board of Directors of the Issuer.
"By-laws" means the by-laws of the Issuer, as amended and in effect at
the time in question.
<PAGE>
"Capital Stock" means any and all shares, interests, participation or
other equivalents (however designated) of corporate stock, including all common
stock and preferred stock.
"Certificate of Designation" shall have the meaning ascribed to such
term in the Purchase Agreement.
"Change of Control" shall have the meaning ascribed to such term in
the Certificate of Designation.
"Common Stock" shall mean the Issuer's Common Stock, par value $.01
per share.
"Convertible Securities" shall have the meaning given to such term in
Section 4(d).
"Current Market Price" shall mean, as to any security, the average of
the closing prices of such security's sales on all domestic securities exchanges
on which such security may at the time be listed, or, if there have been no
sales on any such exchange on any day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York City time, on such
day, or, if on any day such security is not quoted in the NASDAQ System, the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar or successor organization (and in each such case
(i) averaged over a period of 21 days consisting of the day immediately
preceding the day as of which "Current Market Price" is being determined and the
20 consecutive Business Days prior to such immediately preceding day and
(ii) excluding any trades that are not bona fide, arm's length transactions).
If at any time such security is not listed on any domestic securities exchange
or quoted in the NASDAQ System or the domestic over-the-counter market, the
"Current Market Price" of such security shall be the fair market value thereof
as determined in accordance with the Appraisal Procedure, using an appropriate
valuation method, assuming an arms-length sale to an independent party. In
determining the fair market value of the Common Stock, a sale of all of the
issued and outstanding Common Stock of the Issuer will be assumed, without
giving regard to the lack of liquidity of such stock due to any restrictions
(contractual or otherwise) applicable thereto or any discount for minority
interests and assuming the conversion or exchange of all securities then
outstanding that are convertible into or exchangeable for Common Stock and the
exercise of all rights and warrants (including the Warrants) then outstanding
and exercisable to purchase shares of such stock or securities convertible into
or exchangeable for shares of such stock. Common Stock issued in an underwritten
public offering shall be deemed to be issued for fair market value.
"EBIT" means, for Fiscal 1998, the Net Income of the Issuer and its
consolidated Subsidiaries plus (without the duplication) (a) Interest Expense,
net of interest income and (b) income tax expense, refunds or credits for such
period all determined in accordance with GAAP.
"EBIT Target" shall mean $16,000,000 as adjusted pursuant to Section
5(b).
"Effective Date" shall mean the earlier to occur of (i) the date of
the determination by the Accountants pursuant to Section 5(a) that EBIT for
Fiscal 1998 is less than the EBIT Target and (ii) the occurrence of an Exercise
Condition.
"Equity Interest" means (a) with respect to a corporation, any and all
Capital Stock or warrants, options or other rights to acquire Capital Stock (but
excluding any debt security which is convertible into, or exchangeable for,
Capital Stock) and (b) with respect to a partnership, limited liability company
or similar Person, any and all units, interests, rights to purchase, warrants,
options or other equivalents of, or other ownership interests in, any such
Person.
<PAGE>
"Excluded Stock" shall mean (i) any shares of Common Stock issuable
upon the exercise of any options granted pursuant to the Stock Option Plans and
(ii) any shares of Common Stock issuable upon exercise of any Warrants.
"Exercise Condition" shall have the meaning assigned to it in
Section 2 hereof.
"Exercise Notice" shall have the meaning assigned to such term in
Section 2 hereof.
"Exercise Price" shall have the meaning assigned to such term in the
first paragraph of this Warrant.
"Expiration Date" shall have the meaning assigned to such term in the
first paragraph of this Warrant.
"Fiscal 1998" shall have the meaning assigned to such term in Section
5 (a) hereof.
"Fundamental Documents" means the documents by which any Person (other
than an individual) establishes its legal existence or which govern its internal
affairs. The Fundamental Documents of the Issuer are the Articles of
Organization and By-laws.
"GAAP" means generally accepted accounting principles in the United
States and statements and interpretations (if applicable) issued by the
Financial Accounting Standards Board, or any successor body, as in effect from
time to time, unless otherwise stated.
"Guaranty" has the meaning set forth in the Certificate of
Designation.
"Holder" shall mean the registered holder of this Warrant and the
registered holder of any Warrant Stock issued upon exercise hereof.
"Include" and "Including" shall be construed as if followed by the
phrase ", without being limited to,".
"Indebtedness" has the meaning set forth in the Certificate of
Designation.
"Interest Expense" means, for Fiscal 1998, all interest (including
capitalized interest) and all amortization of debt discount and expense on any
particular Indebtedness (including, without limitation payment-in-kind, zero
coupon and other like securities and the interest component of capital lease
obligations applicable to such period) of the Issuer and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Investment" in any Person, means any loan or advance to such Person,
any purchase or other acquisition of any Equity Interest or other ownership or
profit interest, warrants, rights, options, obligations or other securities of
such Person, any capital contribution to such Person or any other investment in
such Person, including any arrangement pursuant to which an investing Person
incurs Indebtedness of the types referred to in clause (f) or (i) of the
definition of "Indebtedness" in respect of such Person.
"Issuer" shall have the meaning assigned to such term in the first
paragraph of this Warrant.
"Majority Holders" shall mean those Warrant Holders holding (or having
the right to receive upon exercise of Warrants) Warrant Stock representing a
majority of the total amount of Warrant Stock held by, or issuable to, all
Warrant Holders.
<PAGE>
"NASDAQ System" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Net Income" means, for Fiscal 1998, the gross revenues of the Issuer
and its consolidated Subsidiaries for such period less all expenses and other
proper charges, including returns and allowances, in each case determined in
accordance with GAAP, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets or from any transaction classified as
extraordinary under GAAP, any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
(c) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings and losses of any corporation, substantially all the
assets of which have been acquired in any manner by the Company and its
consolidated subsidiaries, realized by such corporation prior to the date of
such acquisition;
(d) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings and losses of any corporation which shall have merged
into the Issuer or any of its consolidated Subsidiaries prior to the date of
such merger;
(e) to the extent not reflected in adjustments made pursuant to
Section 5(b), net earnings of any business entity in which the Issuer or its
consolidated Subsidiaries has an ownership interest unless such net earnings
actually shall have been received by the Issuer or its Subsidiaries in the form
of cash distributions;
(f) earnings resulting from a reappraisal, revaluation or write-up of
assets;
(g) any charge to net earnings resulting from the amortization of the
value of stock options given to employees to the extent required by APB 25;
(h) to the extent not reflected in adjustments made pursuant to
Section 5(b), any increase or decrease of net income arising from a change in
the Issuer's accounting methods;
(i) any gains resulting from the forgiveness of Indebtedness or the
retirement of Indebtedness at a discount;
(j) any gain arising from the acquisition of any securities of the
Issuer or its consolidated subsidiaries; and
(k) any reversal of any contingency reserve, except that provision
for such contingency reserve shall have been made from income arising during
such period.
"Options" shall have the meaning given to such term in Section 4(d).
"Person" shall be construed in its broadest possible sense and shall
include any individual, corporation, general or limited partnership, joint
venture, association, limited liability company, joint stock company, trust,
business trust, bank, trust company, estate (including any beneficiaries
thereof), unincorporated organization, cooperative, association or governmental
branch, authority, agency or political subdivision thereof.
"Purchase Agreement" shall have the meaning assigned to such term in
the second paragraph of this Warrant.
<PAGE>
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of July 30, 1997 between the Issuer and the Holders, as
modified and supplemented and in effect from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series A Preferred Stock" shall mean the Issuer's Series A Preferred
Stock, par value $1 per share.
"Stock Option Plans" shall have the meaning assigned to such term in
the Purchase Agreement and any other stock option plans adopted by the Issuer
and any other grants of stock options made by the Issuer, in each case granted
to employees, directors and independent contractors of the Issuer or its
subsidiaries.
"Subsidiaries" shall have the meaning given to such term in the
Purchase Agreement.
"Voting Agreement" shall mean the Voting Agreement dated as of July
30, 1997 among the Issuer, the Holders and the other signatories thereto, as
modified and supplemented and in effect from time to time.
"Warrant" shall mean this Warrant and all other warrants originally
issued by the Issuer pursuant to the Purchase Agreement and all warrants issued
upon transfer, division, or combination of, or in substitution for, this Warrant
or any such other warrant. All Warrants shall be substantially in the form of
Exhibit C attached to the Purchase Agreement except that the Warrants need not
bear the legends appearing on the first page of this Warrant from and after such
time as the restrictions set forth therein no longer apply.
"Warrant Holder" shall mean any Person who acquires Warrants or
Warrant Stock pursuant to the provisions of the Purchase Agreement or any
Warrant, including any transferees of Warrants or Warrant Stock.
"Warrant Stock" shall mean (a) all shares of Common Stock issued or
issuable from time to time upon exercise of this Warrant, (b) all other
securities or other property issued or issuable upon any such exercise and
(c) any securities distributed with respect to the securities referred to in the
preceding clauses (a) and (b); provided, however, that the term "Warrant Stock"
shall not include shares of Common Stock or other securities following the time
such shares or other securities have been sold in a public offering registered
under the Securities Act or sold under Rule 144 promulgated thereunder. As used
in this Warrant, the phrase "Warrant Stock then held" shall mean Warrant Stock
held at the time of determination by the Holder, and shall include Warrant Stock
issuable upon exercise of any Warrants held at the time of determination by such
Holder.
SECTION 2. Exercise of Warrant. (a) On and after the Effective Date
and until 5:00 p.m., New York City time, on the Expiration Date, the Holder may
exercise this Warrant, on one or more occasions, on any Business Day, in whole
or in part, by delivering to the Issuer, at its office maintained for such
purpose pursuant to Section 6 hereof, (i) a written notice of the Holder's
election to exercise this Warrant, which notice shall be substantially in the
form of Annex A attached hereto and shall be properly completed (the "Exercise
Notice"), (ii) payment of the Exercise Price (payable as set forth in
Section 2(b) below) for the Warrant Stock as to which this Warrant is being
exercised, and (iii) this Warrant. Except to the extent necessary to cause the
number of shares of Common Stock deliverable as provided in Section 2(b) to be a
whole number of shares, this Warrant shall be exercisable in part only for a
whole number of shares.
(b) At the option of the Holder, the Exercise Price shall be payable
(i) in cash or by certified or official bank check payable to the order of the
Issuer or (ii) by exchange of this Warrant in
<PAGE>
accordance with the further provisions of this Section 2(b). In exchange for
the portion of this Warrant that is being exercised at such time, the Holder
shall receive the number of shares of Common Stock determined by multiplying
(A) the number of shares of Common Stock for which this Warrant is being
exercised at such time by (B) a fraction, (1) the numerator of which shall be
the difference between (x) Current Market Price per share of Common Stock at
such time and (y) the Exercise Price per share of Common Stock, and (2) the
denominator of which shall be the Current Market Price per share of Common Stock
at such time. The Issuer shall issue a new Warrant for the portion, if any, of
this Warrant not being exercised as provided in Section 2(f).
(c) Subject to the provisions of Section 2(d), upon receipt of an
Exercise Notice, the aggregate Exercise Price payable and this Warrant, the
Issuer shall, as promptly as practicable and in any event within five (5)
Business Days thereafter, issue to the Holder one or more stock certificates
representing the aggregate number of shares of Common Stock to which the Holder
is entitled and transfer to the Holder of this Warrant appropriate evidence of
ownership of other securities or property (including any cash) to which the
Holder is entitled, in such denominations, and registered or otherwise placed
in, or payable to the order of, such name or names, as may be directed in
writing by the Holder, and shall deliver such stock certificates, evidence of
ownership and any other securities or property (including any cash) to the
Person or Persons entitled to receive the same, together with an amount in cash
in lieu of any fraction of a share (or fractional interest in any other
security), as hereinafter provided. The Issuer shall pay all expenses in
connection with, and any and all documentary, stamp or similar issue or transfer
taxes of the United States or any state thereof payable in respect of, the issue
or delivery of the Warrant Stock upon exercise of this Warrant. However, the
Issuer shall not be required to pay any tax or other charge imposed in
connection with any assignment or transfer involved in the issue of any
certificate or other evidence of ownership of Warrant Stock.
(d) The Holder's election to exercise this Warrant may, in the sole
discretion of the Holder, be conditioned upon, and in such event, the exercise
shall be subject in all respects to a Change of Control, the Issuer ceasing to
be a reporting company under the Securities and Exchange Act of 1934, as
amended, the consummation of a sale of the Issuer, any public offering of the
Issuer's Common Stock registered under the Securities Act or other similar
transaction involving the Issuer (each of the foregoing referred to herein as an
Exercise Condition and collectively referred to herein as the "Exercise
Conditions"), as specified in the Exercise Notice, and the Issuer shall provide
the Holder with written notice no less than 20 business days prior to the
occurrence of an Exercise Condition. If any exercise of this Warrant is so
conditioned, then, subject to delivery of the items required by Section 2(b),
the Issuer shall deliver the certificates and other evidence of ownership of
other securities or other property in such manner as the Holder shall direct as
required in connection with the consummation of the transaction upon which the
exercise is conditioned. At any time that the Issuer shall give notice to the
Holder that such transaction has been abandoned or the Issuer has withdrawn from
participation in such transaction, the Issuer shall return the items delivered
pursuant to Section 2(c) and the Holder's election to exercise this Warrant
shall be deemed rescinded.
(e) The stock certificate or certificates or other evidence of
ownership of Warrant Stock to be delivered pursuant to Section 2(c) hereof shall
be deemed to have been issued, and the Holder or any other Person so designated
to be named therein shall, to the extent permitted by law and the Purchase
Agreement, be deemed to have become a holder of record of the Warrant Stock
represented thereby, including having the right to vote any voting securities
included therein or to consent or to receive notice as a shareholder, as of the
date on which the last of the Exercise Notice, payment of the Exercise Price and
this Warrant is received by the Issuer as aforesaid (subject, in the case of an
exercise to which Section 2(d) applies, to the consummation of the transaction
upon which such exercise is conditioned), notwithstanding that the transfer
books of the Issuer shall then be closed or that such certificates or other
evidence of ownership shall not then actually have been delivered to the Holder.
(f) If this Warrant shall have been exercised only in part, the
Issuer shall, at the time of delivery of the certificate or certificates or
other evidence of ownership of Warrant Stock, execute and deliver to the Holder,
without charge, a new Warrant evidencing the rights of the Holder to purchase
the
<PAGE>
unpurchased Warrant Stock called for by this Warrant, which new Warrant shall in
all other respects be identical to this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant and the same returned
to the Holder.
(g) The Issuer shall not be required to issue any fractional share of
Common Stock (or fractional interest in any other security) upon exercise of
this Warrant. As to any fraction of a share (or fractional interest in any
other security) that the Holder would otherwise be entitled to receive upon such
exercise, the Issuer shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction of the Current Market Price per share of
Common Stock (and/or other security) on the date of exercise; provided, however,
that in the event that the Issuer undertakes a reduction in the number of shares
of Common Stock or other securities outstanding, it shall be required to issue
fractional shares or fractional interests in such other securities to the Holder
if the Holder exercises all or any part of this Warrant, unless the Holder shall
have consented in writing to such reduction and provided the Issuer with a
written waiver of its right to receive fractional shares or interests in
accordance with this paragraph. If the Holder shall exercise more than one
Warrant in the same transaction, any payment in respect of fractional shares (or
other fractional interests) shall be based on the final fraction resulting from
aggregating all such exercises.
(h) The Issuer hereby agrees at all times to keep reserved for
issuance and delivery upon exercise of this Warrant such number of its
authorized but unissued shares (or treasury shares) of Common Stock or other
securities of the Issuer from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares and other securities shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable, free
and clear of all liens, security interests, charges and other encumbrances or
restrictions on sale (except to the extent of any applicable provisions set
forth in the Purchase Agreement, Voting Agreement, Registration Rights Agreement
or the Issuer's Fundamental Documents) and free and clear of all preemptive or
similar rights.
(i) If the issuance of any shares of Common Stock or other securities
required to be reserved for purposes of the exercise of this Warrant requires
the registration with, or approval of, any governmental authority or requires
listing on any national securities exchange or national market system before
such shares or other securities may be so issued, the Issuer shall at its
expense use its best efforts to cause such shares to be duly registered,
approved or listed, as the case may be, so that such shares or other securities
may be issued in accordance with the terms hereof; provided, however, that this
provision shall not obligate the Issuer to register such shares or other
securities under the Securities Act or qualify them under state securities or
blue sky laws.
SECTION 3. Transfer, Division and Combination. (a) This Warrant,
all rights hereunder and any Warrant Stock issued or issuable upon exercise
hereof are assignable and transferable, at any time in whole or in part, to any
Person or Persons subject in all cases to the provisions of Article VII of the
Purchase Agreement. Any such transfer shall not require the consent of any
security holder of the Issuer.
(b) Upon a transfer permitted by Section 3(a), this Warrant shall be
transferable upon surrender of this Warrant to the Issuer, together with a
written assignment of this Warrant substantially in the form of Annex B attached
hereto, duly executed by the Holder hereof or such Holder's agent or attorney.
Upon such surrender, the Issuer shall, without charge, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees (and, if the
Holder's entire interest is not being assigned, in the name of the Holder), and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled.
(c) This Warrant may be exchanged for, or combined with, other
Warrants upon presentation of this Warrant and any other Warrants with which
this Warrant is to be combined to the Issuer, together with a written notice
specifying the denominations in which a new Warrant or Warrants are to be
issued, signed by the Holder. The Issuer shall execute and deliver a new
Warrant or Warrants
<PAGE>
to the Holder in exchange for the Warrant or Warrants to be divided or combined
in accordance with such notice.
(d) The Issuer shall maintain books for the registration and transfer
of the Warrants, and shall allow each Warrant Holder to inspect such books at
such reasonable times as such holder shall request.
SECTION 4. Adjustments.
(a) Dividends and Distributions. If at any time the Issuer shall
pay any dividend or make any other distribution to holders of its Common
Stock of any cash, evidence of indebtedness or other property (including any
rights or warrants to purchase any securities of the Issuer) of any nature
whatsoever (other than as contemplated by subsections (b), (c)(i)(A) and
(d)(i)(A) of this Section 4), the Issuer shall at the same time pay or
distribute to the Holder (whether or not the Holder exercises this Warrant)
the cash, evidence of indebtedness or other property the Holder would have
been entitled to receive if such Holder would have been entitled to receive
if such had exercised this Warrant immediately prior to the record date for
such dividend or distribution.
(b) Subdivisions and Combinations. If at any time the Issuer shall
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution of Common
Stock;
(ii) subdivide, split or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then immediately after the occurrence of any such event (A) the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted so as
to equal the number of shares of Common Stock such holder would have held
immediately after the occurrence of such event (in the case of an event referred
to in clause (i), after giving effect to such dividend or distribution) if such
holder had exercised this Warrant immediately prior to the occurrence of such
event and (B) the Exercise Price shall be adjusted to be equal to (x) the
Exercise Price immediately prior to the occurrence of such event multiplied by
(y) a fraction (1) the numerator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to the adjustment
in clause (A) and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
clause (A).
(c) Issuance of Common Stock. If at any time the Issuer (i) shall
(A) take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock or (B) otherwise sell or issue any shares of any class or series of
Common Stock (other than Excluded Stock) and (ii) the consideration per share of
Common Stock paid or to be paid upon such subscription, purchase, sale or
issuance is less than the Current Market Price per share of Common Stock
immediately before such record date or immediately before the date of such sale
or issuance, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying (x) the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such record date or sale or
issuance date, as the case may be, by (y) a fraction (not to be less than one)
(i) the numerator of which shall be equal to the product of (A) the number of
shares of Common Stock outstanding (determined on a fully-diluted basis) after
giving effect to such subscription, purchase, sale or issuance (and assuming all
such subscription or purchase offers are exercised) and (B) the Current Market
Price per share of Common Stock determined immediately before such record date
or sale or issuance date, as the case may be, and (ii) the denominator of which
shall be equal to the sum of (A) the product of (1) the number of
<PAGE>
shares of Common Stock outstanding (determined on a fully-diluted basis)
immediately before such record date or sale or issuance date, as the case may
be, and (2) the Current Market Price per share of Common Stock determined
immediately before such record date or sale or issuance date, as the case may
be, and (B) the aggregate consideration received or to be received by the Issuer
for the total number of shares of Common Stock to be subscribed for or
purchased, sold or issued. Simultaneously with the adjustment in the preceding
sentence, the Exercise Price shall be adjusted to be equal to (x) the Exercise
Price immediately prior to the occurrence of such event multiplied by (y) a
fraction (1) the numerator of which is the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to the adjustment in
the preceding sentence and (2) the denominator of which is the number of shares
of Common Stock issuable upon exercise of this Warrant immediately after the
adjustment in the preceding sentence.
(d) Issuance of Convertible Securities or Options. If at any time
(i) the Issuer shall (A) take a record of the holders of its Common Stock for
the purpose of entitling them to subscribe for or purchase options to purchase
or rights to subscribe for Common Stock, securities directly or indirectly
convertible into or exchangeable for Common Stock ("Convertible Securities") or
options or rights with respect to Convertible Securities (options or rights with
respect to Common Stock or Convertible Securities being referred to as
"Options") or (B) otherwise issue or sell any Options or Convertible Securities
(other than Options exercisable for Excluded Stock) and (ii) the consideration
per share paid or to be paid for the Common Stock deliverable upon exercise of
such Options and/or conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount received or receivable by the
Issuer in consideration of the subscription, purchase, sale or issuance of such
Options or Convertible Securities plus any amount payable to the Issuer upon
such exercise and/or conversion or exchange, by (y) the total maximum number of
shares of Common Stock necessary to effect the exercise and/or conversion or
exchange of all such Options or Convertible Securities) shall be less than the
Current Market Price per share of Common Stock on such record date or sale or
issuance date, as the case may be, then the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted to be that number
determined by multiplying the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such date by a fraction (not to be
less than one) (i) the numerator of which shall be equal to the product of
(A) the total maximum number of shares of Common Stock outstanding (determined
on a fully diluted basis) after giving effect to the assumed exercise and/or
conversion of all such Options or Convertible Securities and (B) the Current
Market Price per share of Common Stock determined immediately before such record
date or sale or issuance date, as the case may be, and (ii) the denominator of
which shall be equal to the sum of (A) the product of (1) the number of shares
of Common Stock outstanding (determined on a fully-diluted basis) immediately
before such record date or sale or issuance date, as the case may be, and
(2) the Current Market Price per share of the Common Stock determined
immediately before such record date or sale or issuance date, as the case may
be, and (B) the aggregate consideration for which Common Stock is deliverable
upon exercise and/or conversion or exchange for such Options or Convertible
Securities. Simultaneously with the adjustment in the preceding sentence, the
Exercise Price shall be adjusted to be equal to (x) the Exercise Price
immediately prior to the occurrence of such event multiplied by (y) a fraction
(1) the numerator of which is the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to the adjustment in the preceding
sentence and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
the preceding sentence. The adjustment of the exercise price of an Option shall
not be deemed to be the issuance or sale of an Option at less than the Current
Market Price per share of Common Stock if the exercise price as adjusted is not
less than the Current Market Price per share of Common Stock on the date of such
adjustment.
(e) Superseding Adjustment. If, at any time after any adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant
shall have been made on the basis of the issuance of any Options or Convertible
Securities:
<PAGE>
(i) any such Options shall expire prior to exercise or the right
to convert or exchange any such Convertible Securities shall terminate
prior to conversion or exchange; or
(ii) the consideration per share for which shares of Common Stock
are issuable pursuant to the terms of such Options or Convertible
Securities shall be increased or decreased;
then such previous adjustment shall be rescinded and annulled (without
affecting any other adjustments resulting from any other events). Thereupon, a
recomputation shall be made of the adjustment in the number of shares of Common
Stock issuable upon exercise of this Warrant on the basis of
(A) treating the number of shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the
previous exercise, conversion or exchange of such Options or
Convertible Securities as having been issued on the date or
dates of such exercise and/or conversion or exchange and for
the consideration actually received and receivable therefor,
and
(B) treating any such Options or Convertible Securities that
then remain outstanding as having been granted or issued
immediately after the time of such increase or decrease for
the consideration per share for which shares of Common Stock
are issuable upon exercise and/or conversion or exchange of
such Options or Convertible Securities,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled. For purposes of the computation of such new adjustment, the Current
Market Price shall be deemed to be the Current Market Price used in computing
the previous adjustment.
(f) Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock issuable upon exercise of this Warrant:
(i) The sale or other disposition of any issued shares of Common
Stock owned or held by or for the account of the Issuer shall be
deemed to be an issuance thereof for purposes of this Section.
(ii) In computing adjustments under this Section, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(iii) If the Issuer shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase rights and shall,
thereafter and before the payment of such dividend or distribution or
the granting of such subscription or purchase rights, legally abandon
its plan to pay or deliver such dividend, distribution, subscription
or purchase rights, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment previously
made in respect thereof shall be rescinded and annulled.
(iv) Aggregate consideration for purposes of Sections 4(c) and
4(d) shall be determined as follows: In case any Common Stock,
Options, or Convertible Securities shall be issued or sold, or be
exercisable, convertible or exchangeable for cash, the consideration
received therefor shall be deemed to be the amount payable to the
Issuer therefor, after deduction therefrom of any expenses incurred or
any underwriting commissions or concessions or discounts or, in the
case of a private placement thereof, finders' fees or commissions paid
or allowed by the Issuer in connection therewith. In
<PAGE>
case any such Common Stock, Options, or Convertible Securities shall
be issued or sold, or be exercisable, convertible or exchangeable for
a consideration other than cash payable to the Issuer, the
consideration received therefor shall be deemed to be the fair market
value of such consideration (as determined in accordance with the
Appraisal Procedure), after deduction therefrom of any expenses
incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Issuer in connection therewith. In case any
such Common Stock, or Options, Convertible Securities shall be issued
or sold, or be exercisable, convertible or exchangeable in connection
with any merger of another corporation into the Issuer, the amount of
consideration therefor shall be deemed to be the fair market value (as
determined in accordance with the Appraisal Procedure) of such portion
of the assets of such merged corporation as the Board shall reasonably
determine (such determination to be reasonably acceptable to the
Majority Holders) in good faith to be attributable to such options,
rights or securities.
(g) Merger, Consolidation or Disposition of Assets. If the Issuer
shall merge, consolidate or effect a share exchange with another entity, or
shall sell, transfer or otherwise dispose of all or substantially all of its
assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of Common
Stock or other securities of the successor or acquiring entity, or property of
any nature is to be received by or distributed to the holders of Common Stock of
the Issuer, then the Holder shall be entitled to receive in respect of the
Warrant Stock issuable upon exercise of this Warrant, and upon delivery to the
Issuer of this Warrant for cancellation, the amount of cash, shares of Common
Stock, other securities or other property that it would have been entitled to
receive if such Holder had exercised this Warrant in full immediately prior to
the occurrence of such merger, consolidation, share exchange or disposition of
assets. In the case of any such merger, consolidation, share exchange or
disposition of assets, the successor or acquiring entity (and any Affiliate
thereof issuing securities) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Issuer and all of the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board and reasonably acceptable
to the Majority Holders) in order to provide for adjustments of the Warrant
Stock issuable upon exercise of this Warrant that shall be as nearly equivalent
as practicable to the adjustments provided for in this Section 4. The foregoing
provisions shall similarly apply to successive mergers, consolidations, share
exchanges and dispositions of assets.
(h) Capital Reorganization or Capital Reclassification. If the
Issuer shall effect any capital reorganization or any reclassification of its
capital stock (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the Issuer
shall cause effective provision to be made so that this Warrant shall be
exercisable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the Warrant Stock deliverable upon
exercise of this Warrant would have been entitled upon such reorganization or
reclassification and any such provision shall include adjustments in respect of
such stock, securities or other property that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4 with
respect to this Warrant.
(i) Other Action Affecting Common Stock. If at any time or from time
to time the Issuer shall take any action affecting its Common Stock, other than
any action described in this Section 4, then, unless such action will not have
an adverse effect upon the Holder's rights, the number of shares of Warrant
Stock issuable upon exercise of this Warrant and the Exercise Price shall be
adjusted in such manner and at such time as the Board shall in good faith
determine (such determination to be reasonably acceptable to the Majority
Holders) to be equitable in the circumstances, but no such adjustment shall
decrease the number of shares of Warrant Stock issuable upon exercise of this
Warrant or increase the Exercise Price.
(j) If at any time the Issuer shall issue any shares of its Common
Stock pursuant to the exercise of an option granted under a Stock Option Plan,
then the number of shares of Common Stock issuable upon the exercise of this
Warrant shall be increased by an amount equal to the product of (x) the
<PAGE>
number of such shares issued pursuant to the option exercise and (y) 0.1764.
The provisions of this Section 4(j) shall only apply to issuances after the date
hereof of the first 1,300,000 shares of Common Stock pursuant to the Stock
Option Plans, as such number may be adjusted pursuant to any stock splits,
divisions, combinations or similar adjustments.
(k) Notice of Adjustments. Whenever the number of shares of
Warrant Stock issuable upon exercise of this Warrant shall be adjusted
pursuant to this Agreement, the Issuer shall forthwith obtain a certificate
signed by a firm of independent accountants of recognized national standing
selected by the Issuer setting forth, in reasonable detail, the event
requiring the adjustment the method by which such adjustment was calculated
and specifying the number of shares of Warrant Stock issuable upon exercise
of this Warrant after giving effect to such adjustment (except in the case of
adjustments pursuant to Section 4(j) in which event a certificate shall be
obtained on December 31 and June 30). The Issuer shall promptly cause a
signed copy of such certificate to be delivered to the Holder. The Issuer
shall keep at its office maintained for purposes of Section 7(a) hereof
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the registered Holder hereof.
(l) Notice of Certain Corporate Action. If the Issuer shall propose
(i) to pay any dividend to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock; (ii) to offer to the holders of
its Common Stock rights to subscribe for or to purchase any additional shares of
Common Stock or any Options or Convertible Securities; (iii) to effect any
reorganization or reclassification of its Common Stock; (iv) to otherwise issue
any Common Stock, Options, or Convertible Securities; (v) to effect any other
capital reorganization; (vi) to effect any consolidation, merger or share
exchange or any sale, transfer or other disposition of all or substantially all
of its assets; or (vii) to effect the liquidation, dissolution or winding up of
the Issuer, then, in each such case, the Issuer shall give to the Holder a
notice of such proposed action, which shall specify the date on which a record
is to be taken for the purposes of such dividend, distribution or rights offer,
or the date on which such reclassification, issuance, reorganization,
consolidation, merger, share exchange, sale, transfer, disposition, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of Common Stock, if any such date is to be fixed, and shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Common Stock, and the number of shares
of Warrant Stock that are issuable upon exercise of this Warrant after giving
effect to any adjustment that will be required as a result of such action. Such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Common Stock for purposes of such action, and in the case of any other such
action, at least 10 days prior to the date of the taking of such proposed
action.
(m) No Impairment. The Issuer will not, by amendment of its Articles
of Organization or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Issuer, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder against
impairment.
(n) Miscellaneous. The computations of all amounts under this
Section 4 shall be made assuming all other anti-dilution or similar adjustments
to be made to the terms of all other securities resulting from the transaction
causing an adjustment pursuant to this Section 4 have previously been made so as
to maintain the relative economic interest of this Warrant vis a vis all other
securities issued by the Issuer.
SECTION 5. EBIT Condition
(a) As promptly after the expiration of the Issuer's fiscal year for
1998 ("Fiscal 1998") as reasonably practicable, the Issuer's independent public
accountants (the "Accountants) shall calculate the Issuer's EBIT for Fiscal 1998
and the Accountants shall notify the Holder and the Issuer in writing of
<PAGE>
their determination of EBIT for Fiscal 1998. The determination of the
Accountants with respect to any calculations pursuant to this Section 5 (absent
manifest error) shall be final and binding on the Issuer and all Holders. If
EBIT for Fiscal 1998 is equal to or exceeds the EBIT Target, the Holder shall,
promptly following receipt of a written request from the Issuer, surrender this
Warrant to the Issuer for cancellation for no consideration.
(b) In the event the Issuer makes any capital expenditures not
contemplated by the projections upon which the EBIT Target is based, or
consummates any mergers or acquisitions (whether of assets or equity or other
interests) or other extraordinary transactions, the Issuer and the Majority
Holders will determine in good faith an appropriate adjustment to the EBIT
Target.
SECTION 6. Miscellaneous.
(a) Office of Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in the continental United States where the
Warrants may be presented for exercise, transfer, division, combination or
cancellation as provided in this Warrant. Such office shall be at 210 Boylston
Street, Chestnut Hill, MA 02167, unless and until the Issuer shall designate and
maintain some other office for such purposes and give notice thereof to the
Holder.
(b) Notices Generally. Any notices and other communications pursuant
to the provisions hereof shall be sent in accordance with the provisions of
Section 10.6 of the Purchase Agreement.
(c) Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflicts of laws rules. The Issuer agrees that it may be served with process
in the State of New York and any action for breach of this Warrant may be
prosecuted against it in the courts of such State or any Federal court located
in such State.
(d) Limitation of Liability. Except as otherwise provided herein,
this Warrant does not entitle the Holder to any voting rights or other rights of
a shareholder of the Issuer, as a shareholder. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the Exercise Price or as a
shareholder of the Issuer, whether such liability is asserted by the Issuer, by
any creditor of the Issuer or any other Person.
(e) Loss or Destruction of Warrant. Upon receipt by the Issuer of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant and (in the case of
loss, theft or destruction), if requested by the Issuer, of reasonably
satisfactory indemnification (if the Holder is a financial institution or an
Affiliate thereof, its own agreement being satisfactory), or (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Issuer shall,
without charge, execute and deliver a new Warrant exercisable for the same
amount of Warrant Stock; provided, however, that (in the case of loss, theft or
destruction) no indemnity bond shall be required unless the Issuer has a class
of securities registered pursuant to the Securities Exchange Act of 1934, as
amended, and the Issuer's transfer agent requires such indemnity bond as a
condition to the issuance of a new Warrant.
(f) Amendments and Waivers. Any provision of this Warrant may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Issuer and the Holders and, in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
* * *
<PAGE>
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: July __, 1997
SAFETY 1ST, INC.
By:_____________________
Name:
Title:
<PAGE>
ANNEX A
FORM OF EXERCISE NOTICE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant exercises this
Warrant for the purchase of shares of Common Stock of Safety 1st,
Inc., a Massachusetts corporation, and herewith makes payment therefor of $
(such payment being made [check one] (x) [ ] in cash or by certified
or official bank check or (y) [ ] by acceptance of a reduced number of
shares of Common Stock upon cancellation of this Warrant as provided in
Section 2(b) of this Warrant, all on the terms and conditions specified in
this Warrant, and requests that (i) certificates and/or other instruments
covering such shares of Common Stock be issued in accordance with the
instructions given below and (ii) if such shares of Common Stock shall not
include all of the shares of Common Stock to which the Holder is entitled
under this Warrant, that a new Warrant for the unpurchased balance of the
shares of Common Stock issuable hereunder be delivered to the undersigned.
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
[This Exercise Notice is being delivered contingent upon the
consummation of [describe transaction] as contemplated by Section 2(d) of this
Warrant].4
Dated:------------------
---------------------------------
(Signature of Registered Holder)5
Instructions for issuance and
registration of shares of
Common Stock:
- ------------------------- Social Security or Other
Name of Registered Holder Identifying Number:--------------------
(please print)
Please deliver certificate to
the following address:
- ----------------------------
Street
- ----------------------------
City, State and Zip Code
- --------------------------------
4 Include if applicable.
5 The signature must correspond with the name as written upon the face of the
attached Warrant in every particular, without alteration.
<PAGE>
ANNEX B
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all the rights
of the undersigned under this Warrant with respect to the number of shares of
Common Stock covered thereby set forth below to:
Number of
Shares of
Name of Assignee Address Common Stock
- ---------------- ------- ------------
References in this Exercise Notice to "Common Stock" shall include other
securities or other property to the extent included in Warrant Stock.
Dated:-------------------
-----------------------------
(Signature of Registered Holder)6
-----------------------------
Name of Registered Holder
(Please Print)
Witness:
- ---------------
- --------------------------
6 The signature must correspond with the name as written upon the face of the
attached Warrant in every particular, without alteration.
