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STOCK PURCHASE AGREEMENT
Series A Voting Convertible
Preferred Stock
Dated July 15, 1998
By and Among
SALTON/MAXIM HOUSEWARES, INC.
AND
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
THE STATE BOARD OF ADMINISTRATION OF FLORIDA
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
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STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
1. Authorization of Issuance of Shares............................... 1
2. Sale and Purchase of Shares....................................... 1
3. Closing Date; Termination......................................... 2
4. Representations and Warranties of the Company..................... 2
(a) Organization, Standing and Power of the
Company and its Subsidiaries; Holdings of the
Company..................................................... 2
(b) Authority; No Conflict...................................... 3
(c) Capitalization.............................................. 4
(d) Status of Shares............................................ 5
(e) Financial Statements; Corporate Records..................... 6
(f) Liabilities................................................. 7
(g) Actions Pending............................................. 7
(h) Compliance with Law......................................... 8
(i) No Consents................................................. 8
(j) SEC Filings................................................. 8
(k) Environmental Matters....................................... 9
(l) Disclosure of Facts......................................... 10
(m) No Violations; Restrictive Agreements....................... 10
(n) Offering of Securities...................................... 11
(o) Use of Proceeds............................................. 11
(p) Taxes....................................................... 11
(q) Registration under the Exchange Act......................... 12
(r) ERISA....................................................... 12
(s) Absence of Specified Changes................................ 14
(t) Intellectual Property....................................... 15
(u) Unlawful Payments and Contributions......................... 16
(v) Contracts and Commitments................................... 16
(w) Labor Matters............................................... 18
(x) Insurance................................................... 19
(y) Related Party Transactions.................................. 19
5. Representations and Warranties of the Purchasers.................. 19
(a) Organization of Purchasers.................................. 19
(b) Authority and Authorization of the Purchasers............... 20
(c) Non-Contravention........................................... 20
(d) No Consents................................................. 21
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(e) Experience of Purchasers; Acquisition for Investment........ 21
(f) Rule 144.................................................... 21
(g) HSR Act..................................................... 22
6. Covenants of the Company......................................... 22
(a) Reporting................................................... 22
(b) Inspection of Property; Access to Information............... 22
(c) Financial Records........................................... 23
(d) Election of Directors....................................... 23
(e) Transactions with Shareholders and Affiliates............... 24
(f) Exchange of Stock Certificates.............................. 25
(g) Lost Certificates Evidencing Shares......................... 25
(h) Pre-Emptive Rights of Purchasers............................ 25
7. Covenants of the Purchasers...................................... 27
(a) Prohibited Actions.......................................... 27
(b) Exempt Voting Securities.................................... 30
8. Conditions to the Obligations of the Parties..................... 30
(a) Obligations of the Purchasers............................... 30
(b) Obligations of the Company.................................. 32
(c) Obligations of Each of the Company and the Purchasers....... 32
9. Definitions...................................................... 33
10. Indemnification.................................................. 35
(a) Company Indemnification..................................... 35
(b) Purchaser Indemnification................................... 36
(c) Expenses, Reimbursement..................................... 36
(d) Contribution................................................ 37
(e) Indemnification Procedure................................... 38
(f) Survival.................................................... 39
(g) Indemnification Threshold................................... 39
11. Miscellaneous.................................................... 39
(a) Home Office Payment......................................... 39
(b) Expenses.................................................... 39
(c) Survival of Representations and Warranties.................. 40
(d) Assignment and Binding Effect............................... 40
(e) Independent Investment Banking Firm......................... 40
(f) Headings.................................................... 41
(g) Notices..................................................... 41
(h) Governing Law............................................... 41
(i) Entire Agreement............................................ 42
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(j) Counterparts............................................... 42
(k) Severability............................................... 42
(l) Words in Singular and Plural Form.......................... 42
(m) Amendment and Modification................................. 42
(n) Waiver..................................................... 42
(o) Sections, Exhibits, Schedules.............................. 43
(p) Specific Enforcement....................................... 43
(q) Confidentiality............................................ 43
(r) Restrictive Legend......................................... 44
SCHEDULES AND EXHIBITS
Schedule I -- Purchasers
Schedule 4(a) -- Subsidiaries and Minority Investments
Schedule 4(b) -- No Conflicts
Schedule 4(c) -- Capitalization
Schedule 4(f) -- Liabilities
Schedule 4(g) -- Litigation
Schedule 4(h) -- Compliance with Law
Schedule 4(i) -- Consents
Schedule 4(k) -- Environmental Matters
Schedule 4(m) -- No Violations
Schedule 4(p) -- Taxes
Schedule 4(r) -- ERISA
Schedule 4(s) -- Absence of Specified Changes
Schedule 4(t) -- Intellectual Property
Schedule 4(v) -- Contracts
Schedule 4(w) -- Labor Matters
Schedule 4(y) -- Related Party Transactions
Schedule 11(a) -- Home Office Payment
Exhibit A -- Registration Rights Agreement
Exhibit B -- Certificate of Designation
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of July 15, 1998, among SALTON/MAXIM
HOUSEWARES, INC., a Delaware corporation (the "Company"), and each of the
parties listed on Schedule I annexed hereto (each, a "Purchaser," and
collectively, the "Purchasers").
W I T N E S S E T H
WHEREAS, the Company desires to raise capital by issuing and selling
shares of a new series of Preferred Stock (as hereinafter defined); and
WHEREAS, the Purchasers desire to purchase such shares of the Company's
Preferred Stock; and
WHEREAS, certain terms used in this Agreement are defined in Section 9
hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Authorization of Issuance of Shares. The Company has authorized the
issuance and sale of 40,000 shares of its Preferred Stock, such shares to be
constituted as a new series of Preferred Stock, and being designated as the
Series A Voting Convertible Preferred Stock (herein referred to as the
"Convertible Preferred Stock"). The relative powers, preferences and rights
and qualifications, limitations and restrictions of the Convertible Preferred
Stock shall be set forth in the Certificate of Designation.
2. Sale and Purchase of Shares. Subject to the terms and conditions
herein set forth, and in reliance on the representations, warranties and
agreements of the Company (in the case of the Purchasers) or the Purchasers (in
the case of the Company), on the Closing Date (as defined below), the Company
will issue and sell to the Purchasers and the Purchasers will purchase from the
Company the number of shares of Convertible Preferred Stock set forth opposite
each Purchaser's name on Schedule I hereto, in each case at a price of $1,000
per share. The shares of Convertible Preferred Stock being purchased pursuant
hereto are referred to herein as the "Shares".
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3. Closing Date; Termination. The closing (the "Closing") of the purchase
and sale of the Shares contemplated hereby shall take place on such date and at
such time as agreed to by the Company and the Purchasers but in no event later
than three business days following the date upon which all of the conditions
set forth in Section 8 are satisfied or waived (the date of the Closing is
hereinafter referred to as the "Closing Date"). The Closing shall be held at
the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New
York, or at such other place as agreed to by the Company and the Purchasers.
Delivery of the Shares to be purchased by the Purchasers pursuant to this
Agreement shall be made at the Closing by the Company delivering to each of the
Purchasers a separate single certificate in definitive form representing the
Shares being purchased by such Purchaser, registered in each such Purchaser's
name (or in the name of its respective nominee), against payment of the amount
set forth opposite such Purchaser's name on Schedule I hereto by wire transfer
of immediately available funds to the account of the Company specified in
writing to the Purchasers two business days prior to the Closing.
Prior to the Closing, the Second Amended and Restated Certificate of the
Company shall be amended and supplemented by the Certificate of Designation,
filed with the Secretary of State of the State of Delaware in accordance with
the General Corporation Law of such state.
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned by action of the Purchasers, on the one hand, or the Company,
on the other, if the Closing shall not have occurred by August 31, 1998.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers as follows:
(a) Organization, Standing and Power of the Company and its Subsidiaries;
Holdings of the Company. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware;
and each of the subsidiaries of the Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and each subsidiary of the Company has all
requisite corporate power and authority
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to own, lease and operate its properties and to carry on its business as now
being conducted. The Company and its subsidiaries are duly qualified to
transact business and are in good standing as foreign corporations in the States
of Illinois, California, New Jersey and New York which constitute each
jurisdiction where the character of their activities requires such
qualification, except where the failure of the Company or its subsidiaries to be
so qualified would not have a Material Adverse Effect.
The Company owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of its subsidiaries free and clear
of any liens, encumbrances, equities and claims.
Except as set forth in Schedule 4(a), there are no options, warrants or
other rights outstanding for the purchase of, nor any securities convertible
into, capital stock of any class of any subsidiary, whether issued, unissued or
held in the treasury.
Except for the investments in the Persons set forth on Schedule 4(a) (the
"Minority Investments"), the Company and its subsidiaries do not own any
interest in any Person other than its subsidiaries. The class of security,
number of shares, percentage of such class and percentage of the Total Voting
Power of such Person owned by the Company and its subsidiaries with respect to
each Minority Investment is listed on Schedule 4(a) hereto.
(b) Authority; No Conflict. The Company has the requisite corporate power
and authority to enter into this Agreement and the Registration Rights
Agreement and to carry out its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by the Company (including the issuance of the Shares and the
issuance of shares of Common Stock upon the conversion of the Shares) have been
duly and validly authorized by all requisite corporate proceedings on the part
of the Company and do not require the approval or consent of any stockholders
of the Company. Each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by the Company and is (assuming the due
authorization, execution and delivery by each of the Purchasers) a valid and
binding agreement of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy and
insolvency laws and by other laws affecting
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the rights of creditors generally or by the availability of equitable remedies
and except as rights of indemnity or contribution may be limited by federal or
state securities or other laws or the public policy underlying such laws.
Except as set forth on Schedule 4(b), the execution and delivery of this
Agreement and the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby (including the issuance of the
Shares and the issuance of shares of Common Stock upon the conversion of the
Shares and the compliance by the Company with the terms of such securities), do
not and will not result in or constitute: (i) a default under, or breach or
violation of, the Second Amended and Restated Certificate or the By-laws, (ii) a
default under, or breach or violation of, any material mortgage, deed of trust,
indenture, note, bond, license, lease or other material agreement, instrument or
obligation to which the Company or any subsidiary is a party or by which any of
their properties or assets are bound, (iii) an event which (with the giving of
notice or the lapse of time or both) would permit any Person to terminate,
accelerate the performance required by, or accelerate the maturity of any
indebtedness or obligation of the Company or any of its subsidiaries under, any
material agreement or commitment to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or by
which any of their properties or assets are bound, (iv) the creation or
imposition of any lien, charge or encumbrance on any property of the Company or
any of its subsidiaries or on the Shares, under any agreement or commitment to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or by which any of their properties or
assets are bound, (v) a violation of any statute, rule, regulation, order,
judgment or decree of any court, public body or authority or any other
restriction of any kind or character by which the Company or any of its
subsidiaries or any of their properties or assets may be bound or (vi) an event
which would require any consent under any material agreement to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or by which any of their properties or assets are
bound.
(c) Capitalization. The authorized capital of the Company consists of (i)
20,000,000 shares of Common Stock, of which as of July 15, 1998, 13,474,644
shares (excluding shares held in treasury) were outstanding, and (ii) 2,000,000
shares of Preferred Stock, par value $.01 per
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share, of which as of the date hereof, no shares are outstanding. All of the
outstanding shares of Common Stock have been duly and validly issued, and are
fully paid and nonassessable and have not been issued in violation of or subject
to any preemptive rights provided for by law or by the Second Amended and
Restated Certificate or the By-laws. Except as set forth in Schedule 4(c),
there are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon the Company for the
purchase or acquisition of any shares of its capital stock or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of capital stock. Since June 28, 1997, the Company has
not changed the amount of its authorized capital stock or purchased any shares
of its capital stock, or subdivided or otherwise changed any shares of any class
of its capital stock, whether by way of reclassification, recapitalization,
stock split or otherwise, or issued or reissued, or agreed to issue or reissue,
any of its capital stock, except as expressly provided in this Agreement, except
pursuant to the exercise of stock options and except as set forth on Schedule
4(c), and the Company has not since such date declared or paid any dividend in
cash or stock or made any other distribution of assets to its shareholders.
(d) Status of Shares. The Shares have been duly authorized by all
necessary corporate action on the part of the Company (no consent or approval
of stockholders being required by law, the Second Amended and Restated
Certificate or the By-laws, subject to the confirmation by the NASDAQ National
Market System that the issuance and sale of the Shares does not constitute a
"change of control" or otherwise require a shareholder vote under the rules of
the NASDAQ National Market System. The Shares, when delivered pursuant to this
Agreement, will be validly issued and outstanding, fully paid and nonassessable
and free and clear of any liens, and the issuance of such Shares is not and
will not be subject to preemptive or similar rights of any other stockholder of
the Company. The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized by all necessary corporate action on the part of the
Company (no consent or approval of stockholders being required by law, the
Second Amended and Restated Certificate or the By-laws, subject to the
confirmation described hereinabove in this Section 4(d) in connection with the
rules of the NASDAQ National Market System), and such shares of Common Stock
have been validly reserved for issuance, and upon issuance upon such conversion
will be validly issued
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and outstanding, fully paid and nonassessable, and free and clear of any liens
and preemptive or similar rights.
(e) Financial Statements; Corporate Records. (i) The Company has
furnished to the Purchasers copies of the Financial Statements. The Financial
Statements, including in each case the related notes, fairly present the
financial position of the Company and its subsidiaries as of the respective
dates of said balance sheets and the results of the operations of the Company
and its subsidiaries for the respective periods covered by said statements of
income and cash flows and changes in financial position (subject, in the case
of unaudited Financial Statements, to normal year-end audit adjustments), and
have been prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited Financial Statements, for the absence of
footnotes) consistently applied by the Company throughout the periods involved,
except as may be indicated in any notes thereto.
(ii) The minute books of the Company previously made available to the
Purchasers contain complete and accurate records of all meetings and accurately
reflect all other corporate action of the stockholders and Board of Directors
(including committees thereof) of the Company. The share certificate books and
share transfer ledgers of the Company previously made available to the
Purchasers are true, correct and complete. All share transfer taxes levied or
payable with respect to all transfers of shares or share capital of the Company
prior to the date hereof have been paid and appropriate transfer tax stamps
affixed.
(iii) The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles. The books, records and accounts of the Company
accurately and fairly reflect in all material respects, in reasonable detail,
the transactions and the assets and liabilities of the Company with respect to
its business. The Company has not engaged in any material transaction with
respect to its business, maintained any bank account for its business or used
any material funds, except for transactions, bank accounts and material funds
which have been and are reflected in the normally maintained books, records and
accounts of the Company. The Company maintains a system of internal accounting
control sufficient in the reasonable judgment of the Company to provide
reasonable assurances that (i) transactions are executed in
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accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles, (iii)
access to assets, properties, books, records and accounts is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accounting for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(f) Liabilities. Except (i) as disclosed on Schedule 4(f) hereto, (ii) as
disclosed in the Financial Statements, (iii) for liabilities or obligations
that were incurred after June 28, 1997 in the ordinary course of business and
consistent with past practices (none of which is a liability for breach of
warranty, tort, infringement claim or lawsuit in excess of $250,000
individually or $1,000,000 in the aggregate for all such liabilities) and (iv)
liabilities the maximum amount of which do not exceed $250,000 individually or
$1,000,000 in the aggregate, the Company and its subsidiaries do not have any
liabilities or obligations (whether absolute, accrued, contingent or otherwise
and whether due or to become due and whether or not the amount thereof is
readily ascertainable) that were not either fully reflected or disclosed in the
June 28, 1997 Balance Sheet and, in the reasonable judgment of the Company, the
reserves referred to in the Financial Statements are appropriate and
reasonable.
(g) Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened, against the
Company or any of its subsidiaries or any of their respective properties or
assets by or before any court, arbitrator or governmental body department,
commission, board, bureau, agency or instrumentality, that questions the
validity or enforceability of this Agreement, the Registration Rights
Agreement, the Certificate of Designation or the Shares or any action taken or
to be taken pursuant hereto or thereto. Except as disclosed in Schedule 4(g),
there is no material litigation or governmental proceeding or investigation
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries. Neither the Company nor any of its subsidiaries is in
default in any material respect with respect to any material judgment, order,
writ, injunction, decree or award.
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(h) Compliance with Law. Except as disclosed in Schedule 4(h), the
business of the Company and each of its subsidiaries has been and is presently
being conducted in all material respects in compliance with applicable U.S. and
foreign federal, state, and local governmental laws, rules, regulations and
ordinances. Except as disclosed in Schedule 4(h), the Company and each of its
subsidiaries has all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it that are material to the
business of the Company and its subsidiaries, taken as a whole, and each of the
Company and its subsidiaries is in compliance with all material terms thereof.
(i) No Consents. Except as set forth in Schedule 4(i), no consent,
authorization or approval of or filing with any person or any U.S. or foreign
federal, state or local governmental department, commission, board, agency or
instrumentality is required to be obtained or made by the Company for the valid
execution and performance by the Company of this Agreement or the Registration
Rights Agreement or the valid authorization, issuance and sale of the Shares or
the valid authorization, issuance and delivery of the shares of Common Stock
issuable upon conversion of the Shares, except as described in Section 4(d)
with respect to the NASDAQ National Market System and, in the case of any
registration pursuant to the Registration Rights Agreement, for (i) those
required by federal and state securities laws, and (ii) those required by the
NASDAQ National Market.
(j) SEC Filings. The Company has furnished to the Purchasers its (i)
Annual Report on Form 10-K for the fiscal year ended June 28, 1997 and
Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 1998, (ii)
Proxy Statement for the Company's Annual Meeting of Shareholders held on
December 16, 1997, and (iii) all other reports or registration statements filed
by the Company or any of its subsidiaries with the Securities and Exchange
Commission (the "SEC") since January 1, 1995, each as filed with the SEC
(collectively, the "SEC Reports"). As of their respective dates, such reports
and statements complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations thereunder, and did not contain any untrue statement
of a material fact or omit to state a material fact required to
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be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(k) Environmental Matters. (i) Except as set forth in Schedule 4(k), (x)
each of the Company and its subsidiaries is in compliance in all material
respects with all Environmental Laws and all permits required thereunder for
the operation of the Company and its subsidiaries; (y) to the knowledge of the
Company, neither the Company nor any of its subsidiaries has received any
communication (written or oral) from a governmental authority with respect to
such compliance or the failure thereof and (z) the Company and its subsidiaries
are in full compliance in all material respects with the New Jersey
Environmental/Cleanup Responsibility Act, as amended by the Industrial Site
Recovery Act, and any orders or decrees issued thereunder.
(ii) Except as set forth in Schedule 4(k), (x) there is no civil, criminal
or administrative action, claim, demand, investigation or notice relating to a
violation of an Environmental Law (an "Environmental Claim") pending or, to the
knowledge of the Company, threatened and (y) there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release or threatened release, emission, discharge or
disposal of any chemical, pollutant, contaminant, waste, toxic substance,
asbestos or asbestos containing material, petroleum or petroleum product, that
could reasonably be expected to form the basis of any material Environmental
Claim, in either case (1) against the Company or any of its subsidiaries, (2)
against any Person whose liability for any Environmental Claim the Company or
any of its subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (3) involving any real or personal
property which the Company or any of its subsidiaries owns, leases, operates or
manages, or formerly owned, leased, operated or managed.
"Environmental Laws" shall mean any applicable foreign, federal, state,
provincial or local law, rule, regulation, directive, decree, order or
agreement concerning releases of chemicals, substances, materials, wastes,
contaminants or pollutants into any part of the natural environment, or
protection of natural resources, the environment and public and employee health
and safety including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as
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amended by the Superfund Amendment, and Reauthorization Act, (42 U.S.C. Section
9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et seg.), the Clean
Air Act (33 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 7401 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seq.), and the Occupational Health and
Safety Act 29 U.S.C. Section 651 et seq., as such laws have been and may be
amended or supplemented through the Closing Date, and the regulations
promulgated pursuant thereto.
(l) Disclosure of Facts. No representation, warranty or statement made by
the Company in (i) this Agreement (including, without limitation, the
representations and warranties made by the Company herein and in the schedules
and exhibits hereto which are incorporated by reference herein and which
constitute an integral part of this Agreement) or (ii) any other written
materials furnished on or prior to the Closing Date, by the Company to the
Purchasers or any of their representatives, attorneys and accountants pursuant
to this Agreement, contains any untrue statement of a material fact, or omits
to state a material fact required to be stated herein or therein or necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were or will be made, not misleading; provided,
however, that no representation or warranty is made in this Section 6(l) with
respect to any financial projections furnished to the Purchasers by the
Company.
(m) No Violations; Restrictive Agreements. Except as disclosed in
Schedule 4(m), neither the Company nor any of its subsidiaries is in violation
of or default under any term of the Second Amended and Restated Certificate or
the By-laws. Except as set forth in Schedule 4(m), neither the Company nor any
of its subsidiaries (i) is a party to any contract or agreement that limits in
any material respect the amount of, or otherwise imposes material restrictions
on the incurring of indebtedness or the paying of dividends by the Company,
(ii) is a party to any contract or agreement, or subject to any charter or
other corporate restriction, that has a Material Adverse Effect or (iii) has
any net worth maintenance, "keep-well", capital contribution or other similar
financial obligations or commitments with respect to any of its subsidiaries or
any other Person in which it holds an interest.
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(n) Offering of Securities. Neither the Company nor any agent acting on
its behalf has offered or will offer the Shares or any part thereof or any
similar securities for issue or sale to, or has solicited or will solicit any
offer to acquire any of the same from, anyone other than the Purchasers so as
to require the registration of the Shares in connection with the issuance
thereof pursuant to this Agreement under the provisions of Section 5 of the
Securities Act.
(o) Use of Proceeds. The proceeds from the sale of the Shares will be
used by the Company to (i) redeem the shares of Common Stock held by
Windmere-Durable Holdings, Inc. (the "Windmere Shares") or (ii) for general
corporate purposes.
(p) Taxes. (i) Except as set forth in Schedule 4(p), the Company and its
subsidiaries have timely filed or caused to be filed all material Tax Returns
that are required to be filed by or with respect to them, their operations and
assets, and all such Tax Returns were complete and correct in all material
respects. The Company and its subsidiaries have paid or caused to be paid all
Taxes as shown on said returns and on all assessments received by them to the
extent that such Taxes have become due, except Taxes disclosed on Schedule 4(p)
that are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside.
(ii) The Company and its subsidiaries have paid or caused to be paid, or
have established reserves which, in the reasonable judgment of the Company,
are adequate, in all material respects, for all Tax liabilities applicable to
the Company and its subsidiaries for all fiscal years which have not been
examined and reported on by the taxing authorities (or closed by applicable
statutes).
(iii) The term "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, premium, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, estimated
severance, stamp, occupation, property or other taxes, fees, custom duties,
assessments or charges of any kind whatsoever, including any joint,
consolidated, combined, uniform or transferee liability in respect of taxes
or any
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liability for taxes imposed by any tax shoring, tax indemnity or similar
agreement, in each case together with any interest and any penalties
(including penalties for failure to file in accordance with applicable
information reporting requirements), and additions to tax by any authority
(domestic or foreign). The term "Tax Return" shall mean any report,
return, form, declaration or other document or information required to be
supplied to any authority in connection with the reporting or collection of
Taxes.
(q) Registration under the Exchange Act. The Company has not registered
the Convertible Preferred Stock as a class pursuant to Section 12 of the
Exchange Act. When issued, the Convertible Preferred Stock will not be
registered as such a class and as of the date of such issuance such
registration will not be required.
(r) ERISA.
(i) Schedule 4(r) sets forth a complete and correct list of (i) all
"employee benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and any other pension plans
or employee benefit arrangements, programs or payroll practices (including,
without limitation, severance pay, vacation pay, company awards, salary
continuation for disability, sick leave, retirement, deferred compensation,
bonus or other incentive compensation, stock purchase arrangements or policies,
hospitalization, medical insurance, life insurance and scholarship programs)
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries contributes or is obligated to contribute thereunder
with respect to employees of the Company ("Employee Benefit Plans"). None of
the Employee Benefit Plans are "pension plans" within the meaning of Section
3(2) of ERISA. Neither the Company or any of its subsidiaries nor any trade or
business (whether or not incorporated) which is under common control, or which
is treated as a single employer, with Company under Section 414(b), (c), (m) or
(o) of the Code ("ERISA Affiliate") maintains, contributes or is obligated to
contribute to any "employee pension plans", as defined in Section 3(2) of
ERISA, which are subject to Title IV of ERISA or Section 412 of the Code
("Pension Plans"), "Multiemployer Plans" within the meaning of Section 3(37) of
ERISA ("Multiemployer Plan") or "welfare benefit plans", within the meaning of
Section 3(1) of ERISA providing continuing benefits after the
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termination of employment (other than as required by Section 4980B of the Code
or Part 6 of Title I of ERISA and at the former employee's or his beneficiary's
sole expense).
(ii) All contributions and premiums required by law or by the terms of
any Employee Benefit Plan have been timely made.
(iii) There has been no material violation of ERISA with respect to the
filing of applicable returns, reports, documents and notices regarding any of
the Employee Benefit Plans with the Secretary of Labor or the Secretary of the
Treasury or the furnishing of such notices or documents to the participants or
beneficiaries of the Employee Benefit Plans.
(iv) True, correct and complete copies of the following documents, with
respect to each of the Employee Benefit Plans, have been delivered or made
available to the Purchasers (A) any plans and related trust documents, and all
amendments thereto, (B) the most recent Forms 5500 for the past three years and
schedules thereto, (C) the most recent financial statements for the past three
years, (D) the most recent summary plan descriptions (including letters or
other documents updating such descriptions) and (E) written descriptions of all
non-written agreements relating to the Employee Benefit Plans.
(v) There are no pending judicial or administrative proceedings which
have been asserted or instituted against any of the Employee Benefit Plans, the
assets of any such plans or the Company, or the plan administrator or any
fiduciary of the Employee Benefit Plans with respect to the operation of such
plans (other than routine, uncontested benefit claims), and, to the knowledge
of the Company, there are no facts or circumstances which could form the basis
for any such proceeding.
(vi) Each of the Employee Benefit Plans has been maintained, in all
material respects, in accordance with its terms and all provisions of
applicable law. All amendments and actions required to bring each of the
Employee Benefit Plans into conformity in all material respects with all of the
applicable provisions of ERISA and other applicable Laws have been made or
taken except to the extent that such amendments or actions are not required by
law to be made or taken until a date after the Closing Date and are disclosed
on Schedule 4(s).
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(vii) The Company and any ERISA Affiliate which maintains a "group health
plan" within the meaning of Section 5000(b)(1) of the Code, have complied in
all material respects with the notice and continuation requirements of Section
4980B of the Code or Part 6 of Title I of ERISA and the applicable regulations
thereunder.
(viii) Neither the Company or any of its subsidiaries nor a "party in
interest" or "disqualified person" with respect to the Employee Benefit Plans
has engaged in a non-exempt "prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA.
(ix) No stock or other security issued by Company or any of its
subsidiaries forms or has formed a material part of the assets of any Employee
Benefit Plan.
(s) Absence of Specified Changes. Except as disclosed in the SEC Reports,
and except as disclosed in Schedule 4(s) or contemplated by this Agreement,
since June 28, 1997, there has not been with respect to the Company or its
subsidiaries, taken as a whole, any:
(1) material adverse change in its business, financial condition or results
of operations;
(2) material contract, agreement, license, commitment or other transaction
entered into or assumed by or on behalf of the Company or any of its
subsidiaries except in the ordinary course of business;
(3) material change in accounting principles, methods or practices;
(4) any purchase, sale, transfer, assignment, conveyance or pledge of any
material assets or properties of the Company or any of its subsidiaries,
except in the ordinary course of business consistent with past practice;
(5) any waiver or modification by the Company or any of its subsidiaries of
any right or rights of substantial value, or of any payment, direct or
indirect, in satisfaction of any liability, in each case, having a Material
Adverse Effect;
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(6) any loan or advance by the Company or any of its subsidiaries, except
for loans or advances made in the ordinary course of business;
(7) declaration, setting aside, or payment of a dividend or other
distribution in respect of its capital stock, or any direct or indirect
redemption, purchase or other acquisition of any shares of its capital stock;
(8) amendment to its Second Amended and Restated Certificate or By-laws;
(9) issuance of capital stock or change in the authorized capitalization of
the Company (except pursuant to the exercise of stock options and except as
contemplated by this Agreement), or any event which would have required an
adjustment to the Conversion Price (as defined in the Certificate of
Designation) or the number of shares of Common Stock issuable upon conversion
of a Share if the Shares had been issued and the Certificate of Designation
had been in effect as of June 28, 1997; or
(10) agreement or understanding to take any of the actions described above
in this paragraph 4(t).
(t) Intellectual Property. Schedule 4(t) sets forth (A) a true and
complete list and summary description of all material patents, registered or
common law trademarks, trade names, service marks, licenses and copyrights and
applications for any of the foregoing (collectively, "Intellectual Property")
owned by to the Company or its subsidiaries and (B) each agreement, whether
oral or in writing, pursuant to which the Company is obligated to pay any
Person, in consideration of a license of or other agreement with respect to
Intellectual Property or in consideration of any other rights with respect to
the development or marketing of any product or products, an amount which is in
excess for fiscal year 1998, or can reasonably be expected to be in excess, for
fiscal year 1999, of $500,000 per annum. The Purchasers have been supplied
with true and correct copies of each such written agreement (and a written
description of any oral agreement) as in effect on the date hereof. The
Intellectual Property identified on Schedule 4(t) constitutes all the material
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Intellectual Property necessary for use in the United States and in such other
jurisdictions as is necessary for the conduct of the business of the Company and
its subsidiaries as presently conducted. Except as set forth in Schedule 4(t),
the Company has no notice or knowledge of any objection or claim being asserted
by any person with respect to the ownership, validity, enforceability or use of
any Intellectual Property listed on Schedule 4(t) or challenging or questioning
the validity or effectiveness of any such license, and has not received any such
notice within the last five years.
(u) Unlawful Payments and Contributions. Neither the Company nor its
subsidiaries or any of their respective directors, officers or, to the
Company's knowledge, any of their other employees or agents has (a) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment
or other unlawful expense relating to political activity; (b) made any direct
or indirect unlawful payment to any government official or employee from
Company funds; (c) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended in connection with the Company's and
its subsidiaries' business; or (d) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any Person (whether or not a
government official) with respect to matters pertaining to the Company.
(v) Contracts and Commitments. (i) Except as expressly contemplated by
this Agreement or as set forth on Schedule 4(v), neither the Company nor any of
its subsidiaries is a party to any written or oral:
(A) profit sharing, stock option, employee stock purchase or other plan or
arrangement providing for deferred or other compensation to employees or any
other employee benefit plan or arrangement, or any contract with any labor
union, or any severance agreements (in each case excluding items disclosed on
Schedule 4(r));
(B) contract for the employment of any officer, individual employee or
other Person on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $100,000 or contract relating to loans to
officers, directors or affiliates;
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(C) contract under which the Company or any of its subsidiaries has
advanced or loaned any other Person amounts in the aggregate exceeding
$100,000;
(D) agreement or indenture relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a lien on any material asset or
material group of assets of the Company and its subsidiaries;
(E) guarantee of any obligation of any other Person in excess of $100,000
(other than by the Company of a wholly-owned subsidiary's debts or a
guarantee by a subsidiary of the Company's debts or another subsidiary's
debts);
(F) agreement under which it has granted any Person any registration rights
(including piggyback rights);
(G) contract or agreement with any officer, director, employee or
Affiliate, or any Affiliate of any officer, director or employee;
(H) contract or agreement prohibiting it from freely engaging in any
business or competing anywhere in the world; or
(I) contract or group of related contracts with the same party or group of
affiliated parties the performance of which involves consideration in excess
of $500,000 per annum, other than purchase orders and sale orders made in the
ordinary course of business;
(ii) All of the contracts, agreements and instruments set forth on
Schedules 4(t) and 4(v) are valid, binding and enforceable in accordance with
their respective terms. Except as set forth on Schedules 4(t) and 4(v), the
Company and each of its subsidiaries have performed all material obligations
required to be performed by them and are not in default under or in breach of
nor in receipt of any claim of default or breach in each case in any material
respect under any contract, agreement or instrument to which the Company or any
of its subsidiaries is subject; no event has occurred which with the passage of
time or the giving of notice or both would result in a default, breach or event
of
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noncompliance in each case in any material respect under any contract, agreement
or instrument to which the Company or any of its subsidiaries is subject;
neither the Company nor any of its subsidiaries has any present expectation or
intention of not fully performing all such obligations; neither the Company nor
any of its subsidiaries has knowledge of any material breach by the other
parties.
(iii) The Purchasers have been supplied with a true and correct copy of
each of the written contracts and an accurate written description of the oral
contracts listed on Schedules 4(t) and 4(v), together with all amendments,
waivers or other changes thereto.
(w) Labor Matters. (i) Except as set forth on Schedule 4(w), neither the
Company nor any of its subsidiaries is party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Company or any of its subsidiaries.
(ii) No employees of the Company or any of its subsidiaries are
represented by any labor organization. Except as set forth in Schedule 4(w),
no labor organization or group of employees of the Company or any of its
subsidiaries has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the
Company, threatened to be brought or filed, with the National Labor Relations
Board or any other labor relations tribunal or authority. To the knowledge of
the Company, there are no organizing activities involving the Company or any of
its subsidiaries pending with, or threatened by, any labor organization.
(iii) There are no material strikes, work stoppages, slowdowns, lockouts,
arbitrations or grievances or other material labor disputes pending or, to the
knowledge of the Company, threatened against or involving the Company or any of
its subsidiaries. Except as would not have a Material Adverse Effect, there
are no unfair labor practice charges, grievances or complaints pending or, to
the knowledge of the Company, threatened by or on behalf of any employees or
group of employees of the Company or any of its subsidiaries.
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(x) Insurance. Each insurance policy maintained by the Company and its
subsidiaries with respect to its properties, assets and businesses is in full
force and effect as of the date hereof. Neither the Company nor any of its
subsidiaries is in default in any material respect with respect to its
obligations under any insurance policy maintained by it. The insurance
coverage of the Company and its subsidiaries is customary for corporations of
similar size engaged in similar lines of business.
(y) Related Party Transactions. Except as set forth on Schedule 4(y)
hereto, no Affiliate of the Company has borrowed any monies from or has
outstanding any indebtedness or other similar obligations to the Company or any
of its subsidiaries which exceed $5,000 principal amount in any one case or
$50,000 principal amount in the aggregate. Except as set forth on Schedule
4(y) hereto, no Affiliate of the Company (i) owns any direct or indirect
interest of any kind (excluding holdings of less than five (5%) percent of the
common stock of any publicly traded company) in, or is a director, officer,
employee, partner or Associate (as such term is defined in Rule 12b-2 under the
Exchange Act) of, or consultant or lender to, or borrower from, or has the
right to participate in the management, operations or profits of, any person or
entity which is (a) a competitor, supplier, customer, distributor, lessor,
tenant, creditor or debtor of the Company or any of its subsidiaries, (b)
engaged in a business related to the business of the Company or (c)
participating in any transaction to which the Company or any of its
subsidiaries is a party or (ii) is otherwise a party to any contract,
arrangement or understanding with the Company or any of its subsidiaries. The
Company believes that each of the contracts, arrangements or understandings set
forth on Schedule 4(y) hereto to which the Company or any of its subsidiaries
is a party provides for terms and conditions that are no less favorable to the
Company then could be obtained from a non-Affiliate third-party in an
arms-length transaction.
5. Representations and Warranties of the Purchasers. The Purchasers
hereby represent and warrant to the Company as follows:
(a) Organization of Purchasers. Each of the Purchasers is duly organized
and validly existing under the laws of the jurisdiction of its organization.
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(b) Authority and Authorization of the Purchasers. Each of the Purchasers
has the requisite power and authority to enter into this Agreement and the
Registration Rights Agreement and to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Registration Rights Agreement by each of the Purchasers has been duly and
validly authorized and no other proceedings on their part are necessary to
authorize this Agreement or the Registration Rights Agreements or the
transactions contemplated hereby or thereby. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by each of
the Purchasers and is (assuming the due authorization, execution and delivery
by the Company) a valid and binding agreement of each of the Purchasers,
enforceable against each of the Purchasers in accordance with its terms except
as may be limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally and except as may be limited by the
availability of equitable remedies and except as rights of indemnity or
contribution may be limited by federal or state securities or other laws or the
public policy underlying such laws.
(c) Non-Contravention. The execution, delivery and performance of this
Agreement by each of the Purchasers and the consummation of any of the
transactions contemplated hereby by such Purchaser will not (a) conflict with
or result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default), under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of such Purchaser
pursuant to any agreement, instrument, franchise, license or permit to which
such Purchaser is a party or by which any of its properties or assets may be
bound or (b) violate or conflict with any judgment, decree, order, statue, rule
or regulation of any court or any public, governmental or regulatory agency or
body applicable to such Purchaser or any of its properties or assets, other
than such breaches, defaults or violations that are not reasonably expected to
impair the ability of Purchaser to consummate the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement by
each of the Purchasers and the consummation of the transactions contemplated
hereby by such Purchaser do not and will not violate or conflict with any
provision of the organizational documents of such Purchaser, as currently in
effect.
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(d) No Consents. No consent, authorization or approval of, or filing
with, any person or any U.S. or foreign federal, state or local governmental
department, commission, board, agency or instrumentality is required to be made
or obtained by any of the Purchasers in connection with their execution and
performance of this Agreement, the Registration Rights Agreement or the
purchase of the Shares, except for such consents, authorizations, approvals or
filings, the absence of which would not prevent, impair, hinder or delay the
consummation of the transactions contemplated by this Agreement or the
Registration Rights Agreement.
(e) Experience of Purchasers; Acquisition for Investment. Each of the
Purchasers is an accredited investor as defined in Regulation D under the
Securities Act. Each of the Purchaser's financial condition and investments is
such that it is in a position to hold the Shares and the shares of Common Stock
issuable upon conversion of the Shares for an indefinite period, bear the
economic risks of the investment and to withstand the complete loss of the
investment. Each Purchaser has extensive knowledge and experience in financial
and business matters and has the capability to evaluate the merits and risks of
an investment in the Shares and the shares of Common Stock issuable upon
conversion of the Shares. Each of the Purchasers represents that it is
acquiring the Shares solely for its own account for the purpose of investment
and not with a view to or for sale in connection with any distribution thereof,
and that it has no present intention or plan to effect any distribution of the
Shares or the shares of Common Stock issuable upon conversion of the Shares;
provided, however that the disposition of each Purchaser's property shall at
all times be and remain within such Purchaser's control and subject to the
provisions of this Agreement and the Registration Rights Agreement. Each
Purchaser understands that the Shares and the shares of Common Stock issuable
upon conversion of the Shares have not been registered under the Securities Act
by reason of specific exemptions therefrom which depend upon, among other
things, the bona fide nature of the investment intent and the accuracy of such
Purchaser's representations as expressed herein. The Shares and the shares of
Common Stock shall bear a legend as set forth in Section 11(r) hereof.
(f) Rule 144. Each Purchaser acknowledges that the Shares and the shares
of Common Stock issuable upon conversion of the Shares must be held
indefinitely unless
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subsequently registered under the Securities Act or any applicable state
securities laws or unless exemptions from such registrations are available.
Each Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of securities purchased in a private
placement subject to the satisfaction of certain conditions.
(g) HSR Act. No person has the right to 50% or more of the profits or 50%
or more of the assets upon dissolution of any of the Purchasers and each
Purchaser is its own ultimate parent entity for purposes of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
6. Covenants of the Company. The Company hereby covenants to the
Purchasers as follows:
(a) Reporting. The Company will, so long as the Shares or the shares of
Common Stock issuable upon conversion thereof are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, file reports and other information with the Commission under
Section 13 or 15(d) of the Exchange Act.
(b) Inspection of Property; Access to Information. The Company covenants
that it will permit each of the Purchasers and the Purchasers' Affiliates, for
so long as they own any Shares or shares of Common Stock that, in the
aggregate, represent either (x) at least 50% of the Shares purchased hereunder
(or shares of Common Stock issued upon conversion thereof) or (y) at least 7.5%
of the Total Voting Power of the Company (the "Minimum Threshold"), and any
Person acting in a representative capacity on behalf of any of the Purchasers
and who is designated in writing by the Purchasers, to (i) upon reasonable
notice to the Company and at such Person's expense, visit any of the properties
and inspect any of the corporate books and financial records of the Company and
its subsidiaries during normal business hours, provided that such visitations
do not unreasonably disrupt the business of the Company or its subsidiaries and
(ii) reasonably request and be furnished with such data, books and records as
will enable the Purchasers to confirm the Company's compliance with its
obligations set forth in Section 6(e) hereof. The Purchasers shall, and shall
cause any Person designated by them pursuant to the first sentence of this
Section 6(b) to, keep confidential all information furnished to, or made
available to, them pursuant to this Section 6(b), nor shall any of them use, or
permit any such
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Person to use, any such information for any purpose other than to evaluate their
investment in the Shares (or shares of Common Stock into which Shares have been
converted); except that the Purchasers and such other holders shall have no
obligation to keep confidential information which is or becomes generally
available to the public other than as a result of a disclosure by the Purchasers
or any such other holders or their representatives.
(c) Financial Records. The Company will, and will cause each of its
subsidiaries to, maintain in all material respects its financial records
(including, but not limited to, its journals and ledgers) in accordance with
generally accepted accounting principles and in accordance with any prescribed
system of accounts applicable to the Company or any such subsidiary, as the
case may be.
(d) Election of Directors. (i) The Purchasers shall be entitled, with
respect to each election of directors, to designate two persons to be elected
to the Company's Board of Directors and such persons have been elected as
directors of the Company at the meeting of the Company's Board of Directors on
the date hereof (it being understood that one of such directors shall be in the
class of directors whose terms expire in 1999 and one of such directors shall
be in the class of directors whose terms expire in 2000), and the Company shall
use its reasonable best efforts to have such persons elected to the Company's
Board of Directors at each annual meeting (or special meeting, if applicable)
of stockholders held thereafter (or, at each such meeting at which directors of
the applicable class are to be elected). Such efforts by the Company shall
include, without limitation, including the nominees of the Purchasers in
management's slate for election and nomination, solicitation of proxies on
their behalf and voting any Voting Securities held by the Company or its
subsidiaries entitled to vote for such nominees. Prior to making the
designation of any person to serve as a director of the Company, the Purchasers
shall consult with the Company. In the event that any person so designated and
elected to the Company's Board of Directors shall cease to serve as a director
for any reason, the vacancy resulting therefrom shall be filled by such Board
with a substitute nominee designated by the Purchasers.
(ii) Notwithstanding the foregoing, the number of persons the Purchasers
shall be entitled to designate for
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election to the Company's Board of Directors pursuant to this Section 6(d) shall
be reduced as follows:
(A) in the event the Purchasers and the Purchaser Affiliates both
(x) shall have sold, transferred or otherwise disposed of not less than
25% of the Shares purchased hereunder (or shares of Common Stock issued
upon conversion thereof) other than to a Purchaser Affiliate and (y) do
not own Shares or shares of Common Stock that, in the aggregate,
represent at least 12.5% of the Total Voting Power of the Company, the
Purchasers shall be entitled to designate one director; or
(B) in the event the Purchasers and the Purchaser Affiliates both
(x) shall have sold, transferred or otherwise disposed of not less than
50% of the Shares purchased hereunder (or shares of Common Stock issued
upon conversion thereof) other than to a Purchaser Affiliate and (y) do
not own Shares or shares of Common Stock that, in the aggregate,
represent at least 7.5% of the Total Voting Power of the Company, the
Purchasers shall not be entitled to designate any directors;
it being understood that any such determination shall be made only as of the
date and after giving effect to any such transfer.
(iii) Each of the persons designated by the Purchasers for election
to the Company's Board of Directors shall be entitled to compensation,
including, without limitation, in the form of fees, option grants and expense
reimbursements, that shall be not less favorable than that paid by the Company
in respect of the services of any other non-management director of the Company.
(e) Transactions with Shareholders and Affiliates. For so long as
the Purchasers and the Purchaser Affiliates own Shares or shares of Common Stock
that, in the aggregate, represent at least the Minimum Threshold, the Company
will not, and will not permit any of its subsidiaries to, directly or
indirectly, make loans, advances or payments to, or sell, transfer or lease any
assets or property to, any Person who beneficially owns in the aggregate 5% or
more of the Voting Securities of the Company or any Affiliate or Associate (as
such terms are defined in the rules and regulations under the Exchange Act)
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of such owner (a "Prohibited Transaction"), other than a Prohibited Transaction
to which the Company or any of its subsidiaries is contractually bound on the
Closing Date and which is disclosed in Schedule 4(y), unless a majority of the
disinterested members of the Board of Directors of the Company has approved such
transaction (and in connection therewith any director interested in such
transaction shall recuse himself from the discussion and vote on such
transaction); provided, however, that a change in the terms of any existing
Prohibited Transaction shall require a similar Board determination.
Notwithstanding the foregoing, a Prohibited Transaction shall not include any
transactions involving payments by or obligations or transfers of property in
the ordinary course of business with a value less than $25,000.
(f) Exchange of Stock Certificates. Upon surrender of any certificate
representing Shares for exchange at the office of the Company, the Company at
its expense will cause to be issued in exchange therefor new certificates in
such denomination or denominations as may be requested for the same aggregate
number of Shares represented by the certificate so surrendered and registered as
such holder may request.
(g) Lost Certificates Evidencing Shares. Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any certificate evidencing any of the Shares, and (in case of
loss, theft or destruction) of indemnity reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such certificate, if mutilated, the Company
will make and deliver in lieu of such certificate a new certificate of like
tenor and for the number of shares evidenced by such certificate which remain
outstanding. A Purchaser's agreement of indemnity shall constitute indemnity
satisfactory to the Company for the purposes of this Section 6(g).
(h) Pre-Emptive Rights of Purchasers. For so long as the Purchaser
and the Purchaser Affiliates own Shares or shares of Common Stock that, in the
aggregate, represent at least the Minimum Threshold:
(i) Each Purchaser shall have the right to purchase, pro rata, a
portion of any New Securities (as hereinafter defined) that the Company may,
from time to time
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hereafter, propose to sell and issue. Each such Purchaser's pro rata share of
New Securities, for the purposes of this right, is the ratio of the sum of (x)
the number of shares of Common Stock into which the Shares have been converted
and which are held by such Purchaser at the time the New Securities are offered
and (y) the number of shares of Common Stock into which the Shares held by such
Purchaser at the time the New Securities are offered are then convertible (the
"Conversion Shares") to the total number of then outstanding shares of Common
Stock, including such Conversion Shares. "New Securities" shall mean any shares
of capital stock or securities or rights convertible, exercisable or
exchangeable for capital stock of the Company ("Convertible Securities");
provided, however, that New Securities does not include
(A) capital stock issued or issuable on conversion or exercise of
the Convertible Preferred Stock, options to purchase Common Stock or
other Convertible Securities outstanding on the date hereof, or issued
after the date hereof provided that the rights established by this
Section 6(h) applied with respect to the initial issuance by the Company
of such convertible securities;
(B) capital stock or Convertible Securities issued by the Company
pursuant to any public offering;
(C) Common Stock issued in connection with any share split, payment
of a dividend or other distribution in respect of its capital stock or
recapitalization of the Company;
(D) capital stock or Convertible Securities issued to a third party
in connection with any acquisition of the stock or assets of another
Person by the Company by merger, purchase, joint venture or other
reorganization or business combination;
(E) options to purchase Common Stock issued to employees, officers
or independent directors of the Company, provided that any such issuance
is or has been duly approved by the Compensation Committee of the Board
of Directors of the Company and a majority of the disinterested members
of the Board of Directors of the Company; and
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(F) capital stock or Convertible Securities issued to a third party
in consideration of services provided by such third party.
(ii) If the Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser having a right under this Section 6(h)
written notice of its intention, describing the type of New Securities, the
price and the general terms and conditions upon which the Company proposes to
issue the same. Each such Purchaser shall have twenty-five (25) calendar days
from the giving of such notice to agree to purchase its pro rata share of New
Securities for the price and upon the terms and conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased.
(iii) If any of the Purchasers fail to exercise its right under this
Section 6(h) to purchase its pro-rata share of the New Securities within
twenty-five (25) calendar days following the date of the first notice
contemplated by Section 6(h)(ii), the Company shall have until the ninetieth
(90th) day following such date to enter into a letter of intent or definitive
agreement and a period of ninety (90) days thereafter to sell any of the New
Securities in respect of which such Purchaser's rights were not exercised, at a
price and upon terms and conditions no more favorable to the purchasers thereof
than specified in the Company's notice to the Purchasers pursuant to Section
6(h). If the Company has not entered into such a letter of intent or agreement
or sold such New Securities within such period, the Company shall not thereafter
issue or sell any such New Securities, without again first offering such
securities to the Purchasers in the manner provided in this Section 6(h).
7. Covenants of the Purchasers. Each of the Purchasers covenants
with the Company as follows:
(a) Prohibited Actions. From the Closing Date and until the date
when the Purchasers and the Purchaser Affiliates do not own any Shares or any
shares of Common Stock, the Purchasers shall not, singly or as part of a group,
directly or indirectly, through one or more intermediaries or otherwise: (i)
purchase, acquire or own, or offer, propose or agree to purchase, acquire or
own, directly or indirectly, any Voting Securities, any option, warrant or other
right to acquire, directly or indirectly, any Voting Securities or any
securities which are
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convertible into or exchangeable or exercisable for Voting Securities
(excluding, in each case, the Shares purchased pursuant to this Agreement and
the Permitted Additional Securities (as defined below) and any securities issued
upon conversion, exchange or otherwise in respect thereof); (ii) make, or in any
way participate, directly or indirectly, in any "solicitation" of "proxies" to
vote (as such terms are used in the proxy rules of the SEC), initiate, propose
or otherwise solicit stockholders of the Company for the approval of one or more
stockholder proposals, or induce or attempt to induce any other person to
initiate any stockholder proposal, or advise or influence, or seek to advise or
influence, any person with respect to the voting of any Voting Securities of the
Company; (iii) deposit any Voting Securities in a voting trust or subject any
Voting Securities to any agreement or arrangement with respect to the voting of
any Voting Securities or other agreement having similar effect; (iv) form a
partnership, syndicate or other group (as defined in Rule 13d-3 under the
Exchange Act) for the purpose of acquiring, holding, voting or disposing of
Voting Securities with any person that is not a Purchaser or Purchaser
Affiliate, (v) vote for directors of the Company (other than the Purchasers'
designees in accordance with Section 6(d)) except, at the Purchasers' election,
voting in proportion to the votes of the stockholders of the Company that are
not Affiliates of the Company or in accordance with the recommendations of the
Board of Directors of the Company or (vi) prior to any conversion of the Shares,
without the Company's consent, effect any short sales of the Common Stock;
provided, however, that actions taken by any representative of the Purchasers on
the Board of Directors of the Company, acting in his or her capacity as such a
director, shall not violate this Section 7(a). The Purchasers further covenant
to promptly cause the termination or resignation of any director of the Company
designated by the Purchasers if, pursuant to Section 6(d)(ii) hereof, there is a
reduction in the number of persons the Purchasers are entitled to designate as
directors. In addition to and not in limitation of any other remedies at law or
in equity available to the Purchasers for a breach of any provision of this
Agreement or of the Certificate of Designation, the restrictions contained in
this Section 7(a) shall not apply following the occurrence and during the
continuation of any Restriction Event pursuant to clauses (i) or (ii) of Section
5(a) of the Certificate of Designation. The Company may not assign any of its
rights under this Section 7(a) and the obligations of the Purchasers under this
Section 7(a) shall
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not be binding upon any subsequent holders of the Shares other than Purchaser
Affiliates. Notwithstanding anything in this paragraph to the contrary, in the
event that (i) a third party (which term for purposes of this Section shall
include any group as defined in Section 13(d)(3) of the Exchange Act) makes a
tender or exchange offer which, if consummated, would result in such third party
owning at least a majority of the Voting Securities and the Company's Board of
Directors does not oppose such tender or exchange offer at the time at which it
is required by applicable securities laws to make a recommendation regarding
such tender or exchange offer to the Company's stockholders, (ii) the Company
agrees to an acquisition by such a third party of shares representing at least
30% of the Voting Securities of the Company or a substantial portion of the
assets of the Company (other than the purchase of assets in the ordinary course
of business), (iii) the Company publicly announces its intent to consider a
possible sale of the Company or any other transaction specified in this sentence
or (iv) the Company's Board of Directors approves a definitive written agreement
with respect to a business combination or other extraordinary transaction
involving the Company as a result of which more than 50% of the assets of the
Company would be transferred or a Change of Control (as defined below) would
occur, then the restrictions in this Section 7(a) shall terminate. In addition,
in the event that the Company enters into any confidentiality or "standstill"
agreement with any third party in connection with a possible sale of the Company
or other transaction specified in the preceding sentence, which agreement
contains terms and conditions more favorable to such party than those contained
in this Section 7(a) (other than solely with respect to the stated term of any
such "standstill" obligations), the Company shall promptly notify the Purchasers
in writing of such terms and conditions and the provisions of this Section 7(a)
shall be deemed to be modified to reflect such terms and conditions to the
extent they are in fact more favorable. For purposes hereof, (x) "Change of
Control" shall mean any transaction as a result of which (i) the owners of a
majority of the Voting Securities of the Company immediately prior to
consummation of the transaction will not continue to own upon completion of the
transaction (A) a majority of the Voting Securities of the Company or (B) a
majority of the Voting Securities of any other person into or for the securities
of which the Voting Securities of the Company will be converted or exchanged as
a result of the transaction or (ii) as a result of which any third party is
entitled to elect a majority of the members of the Board of
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Directors of the Company, and (y) "Permitted Additional Securities" shall mean,
with respect to the Purchasers, in the aggregate, up to an additional 400,000
shares of Common Stock plus 200,000 additional shares commencing on each of the
fourth, fifth and sixth anniversaries of the Closing Date (subject to
proportionate adjustment to reflect any stock dividends, stock splits,
combinations or recapitalizations after the date of this Agreement) and any
securities purchased pursuant to the preemptive rights pursuant to Section 6(h),
and such additional purchases of securities as shall be approved by the Board of
Directors of the Company.
(b) Exempt Voting Securities. Notwithstanding anything to the
contrary contained in this Agreement, (i) the restrictions and obligations
contained in Section 7(a) shall not apply to any Voting Securities acquired or
held by the State Board of Administration of Florida (the "State Board") with
respect to which none of Centre Parallel Management Partners, L.P. ("CPMP"), the
Purchasers, nor any of the Purchaser Affiliates has sole or shared voting or
dispositive power with respect thereto pursuant to the Investment Management
Agreement between the State Board and CPMP (the "Management Agreement"), but in
any event such restrictions and obligations shall apply to the Shares acquired
by the State Board pursuant to this Agreement (or shares of Common Stock into
which such Shares have been converted), and (ii) except with respect to the
Shares acquired pursuant to this Agreement (or shares of Common Stock into which
such Shares have been converted, the State Board shall not be bound by the
obligations or prohibitions set forth in Section 7(a); provided, however, that
the foregoing shall not be deemed to be a limitation of any of the obligations
imposed by this Agreement upon CPMP, acting on behalf of the State Board.
8. Conditions to the Obligations of the Parties.
(a) Obligations of the Purchasers. The obligation of each of the
Purchasers to consummate the transactions contemplated hereby is subject to the
satisfaction or waiver by the Purchasers of each of the following conditions:
(i) General Conditions to Obligations of the Purchasers. The
representations and warranties of the Company herein contained shall be true and
correct in all material respects, as of the date hereof and as of the
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Closing Date, and the Company shall have performed in all material respects its
obligations hereunder.
(ii) Registration Rights Agreement. The Registration Rights
Agreement shall have been executed and delivered by each of the parties thereto
and shall continue to be in full force and effect.
(iii) Officers' Certificates. The Purchasers at the Closing Date
shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company, dated the Closing Date, to the effect that (1)
as of the date hereof and as of the Closing Date, the representations and
warranties of the Company set forth in Section 4 hereof are true and correct in
all material respects and (2) as of the Closing Date, the obligations of the
Company to be performed hereunder on or prior to the Closing Date have been duly
performed in all material respects.
(iv) Opinions. Each of the Purchasers at the Closing Date shall
have received the opinion of Sonnenschein Nath & Rosenthal, in form and
substance reasonably satisfactory to the Purchasers.
(v) Certificate of Designation. The Certificate of Designation
attached hereto as Exhibit B shall have been duly adopted by the Company and
filed with the Secretary of State of Delaware.
(vi) Material Adverse Effect. Since March 28, 1998 there shall
have occurred no fact or condition which would have, or insofar as reasonably
can be foreseen could have, a Material Adverse Effect.
(vii) Schedules. The Purchasers shall have received from the
Company the Schedules to this Agreement (other than Schedule I appended hereto)
which Schedules shall be in form and substance in all material respects
satisfactory to the Purchasers.
(viii) Transfer Agent Certificate. The Purchasers shall have
received a certificate of the Company's transfer agent with respect to the
number of issued and outstanding shares of the Company's common stock.
(ix) Loan Facilities. The Loan Facilities shall have closed and
the Company shall have received at
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least $82 million in cash thereunder, and the terms of such Loan Facilities
shall be satisfactory to the Purchasers.
(x) Windmere. The Proposed Transactions with Windmere-Durable
Holdings, Inc. referred to in the "highly confident" letter dated June 25, 1998
from Centre Partners Management LLC to the Special Committee of the Board of
Directors of the Company shall have been, or shall concurrently with the Closing
be, consummated.
(xi) Directors. Concurrently with the Closing, the designees of the
Purchasers shall have been elected to the Board of Directors of the Company as
provided in Section 6(d) hereof.
(xii) Incumbency; Resolutions. The Company shall have delivered to
the Purchasers a certificate, dated the Closing Date and in form and substance
reasonably satisfactory to the Purchasers, of the President or the Chief
Executive Officer of the Company as to (i) the incumbency of those officers of
the Company who shall be executing and delivering this Agreement and the
Registration Rights Agreement, which shall be certified by the Secretary of the
Company, and (ii) the adoption of appropriate corporate resolutions authorizing
the execution and delivery of each of this Agreement and the Registration Rights
Agreement and consummation of the transactions contemplated hereby and thereby.
(b) Obligations of the Company. The obligation of the Company to
sell the Shares to each of the Purchasers is subject to the accuracy of the
representations and warranties of each of the Purchasers herein contained except
to the extent any inaccuracies do not materially impair the ability of the
Purchasers to consummate the transaction contemplated by the Agreement, as of
the date hereof and as of the Closing Date, and to the performance in all
material respects by each of the Purchasers of its obligations hereunder.
(c) Obligations of Each of the Company and the Purchasers. The
obligations of each of the Company and the Purchasers to consummate the
transactions contemplated herein are subject to the satisfaction of the
following conditions:
(i) No Injunction. No temporary restraining order, preliminary
or permanent injunction or other order
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shall have been issued by any court of competent jurisdiction prohibiting or
preventing consummation of the transactions contemplated herein shall be in
effect.
(ii) NASDAQ. The NASDAQ National Market System shall have
confirmed that the issuance and sale of the Shares does not constitute a "change
of control" or otherwise require shareholder consent under the rules of the
NASDAQ National Market System.
9. Definitions.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement) and any person who is
a director of, or beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) five percent or more of the outstanding
Common Stock, of the Company.
"By-laws" shall mean the By-laws of the Company, as amended to the
Closing Date.
"Capital Stock" shall mean with respect to any person any and all
shares, interests, participations or other equivalents (however designated) of
corporate stock, including each class of common stock and preferred stock of
such person.
"Certificate of Designation" shall mean the Certificate of
Designation setting forth the relative powers, preferences and rights and
qualifications, limitations and restrictions of the Convertible Preferred Stock
in the form of Exhibit B hereto.
"Common Stock" shall mean the Common Stock of the Company, par value
$.01 per share.
"Financial Statements" shall mean the consolidated balance sheets of
the Company and its subsidiaries at July 1, 1995, June 29, 1996 and June 28,
1997; March 29, 1997 and March 28, 1998; and May 30, 1998, and the consolidated
statements of income and cash flows for each of the three years in the period
ended June 28, 1997, including the notes thereto, all as reported on by Deloitte
& Touche, independent accountants, and for the thirty-nine weeks ended March 29,
1997 and March 28, 1998, and the one month and year to date periods ended May
30, 1998 and the comparable
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period of the immediately preceding fiscal year of the Company.
"Indebtedness" shall mean, for any entity, (a) its liabilities for
borrowed money or the deferred purchase price of property or services, (b)
capitalized lease obligations of such entity, and (c) all liabilities of any
other entity for borrowed money or for the deferred purchase price of property
or services (other than trade accounts payable, and any such purchase price
payable for goods or services acquired, in either case in the ordinary course of
business) (i) which is or are secured by any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance upon or in property owned
by such entity, whether or not such entity has assumed or become liable for the
payment of such liability, or (ii) for which such entity has assumed or
otherwise become directly or contingently liable for the payment of such
liability.
"June 28, 1997 Balance Sheet" shall mean the balance sheet of the
Company and its subsidiaries as of such date, including the notes thereto,
included in the Financial Statements.
"Loan Facilities" shall mean the Credit Agreement dated on or about
the Closing Date among the Company as Borrower, the lenders party thereto and
Lehman Brothers Inc. or its affiliates, as Arranger and agents thereunder and
all renewals, extensions, amendments and modifications thereof and any refunding
or refinancing of the Indebtedness thereunder so long as the same is in the form
of Indebtedness under a credit facility with banks or other financial
institutions.
"March 28, 1998 Balance Sheet" shall mean the balance sheet of the
Company and its subsidiaries as of such date, including the notes thereto,
included in the Financial Statements.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, condition (financial or otherwise), prospects or results
of operation of the Company and its subsidiaries, taken as a whole.
"Person" shall mean any individual, partnership, joint venture,
corporation, trust, organization, government or department or agency of a
government.
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"Preferred Stock" shall mean the Company's Preferred Stock, par value
$.01 per share designated in Article IV of the Second Amended and Restated
Certificate of Incorporation.
"Purchaser Affiliate" shall mean any Affiliate of a Purchaser, and
shall include any successor to (but not any assignee of) a Purchaser or
Purchaser Affiliate, it being understood that any limited partner of any
Purchaser shall not be an Affiliate of such Purchaser solely by virtue of its
status as such a limited partner.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement with respect to the Shares substantially in the form of Exhibit A
attached hereto.
"Second Amended and Restated Certificate" shall mean the Second
Amended and Restated Certificate of Incorporation of the Company.
"Shares" shall have the meaning set forth in Section 2.
"Subsidiary" shall mean any Person a majority of the voting stock of
which is owned by the Company.
"Total Voting Power" of any Person at any time shall mean the total
combined voting power in the general election of directors of all the
outstanding shares of all classes of capital stock of such Person which are then
entitled to vote generally in the election of directors.
"Voting Securities" shall mean Common Stock and any other securities
of the Company entitled to vote generally for the election of directors.
10. Indemnification.
(a) Company Indemnification. The Company agrees to indemnify and
hold harmless each Purchaser, each person who controls any Purchaser within the
meaning of Section 15 of the Securities Act and/or Section 20 of the Exchange
Act, each member of any advisory or similar committee or Board of each of the
Purchasers, its Affiliates and each of their respective officers, directors,
employees, representatives and agents (the "Purchaser Indemnitees"), to the
fullest extent lawful, from and against (i) any and all actions, suits, claims,
proceedings, costs, losses, liabilities,
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damages, judgments, amounts paid in settlement in accordance with Section 10(c)
and reasonable expenses (including, without limitation, reasonable attorneys'
fees and disbursements)(hereinafter collectively referred to as a "Loss" or
"Losses"), joint or several that may be incurred by or asserted or awarded
against any Purchaser Indemnitee in each case arising out of or in connection
with or relating to any investigation, litigation, or proceeding or the
preparation of any defense with respect thereto arising out of any inaccuracy in
or breach violation or nonobservance of the representations, warranties,
covenants or agreements made by the Company herein or in the Registration Rights
Agreement and (ii) any and all Losses relating to or arising out of any action
or failure to act undertaken by a Purchaser Indemnitee at the specific written
request of or with the written consent of the Company or its Chairman or
otherwise relating to or arising out of the transactions contemplated hereby or
by the Registration Rights Agreement, provided that any Loss referred to in this
clause (ii) shall (x) have been incurred or suffered by a Purchaser Indemnitee
in connection with a threatened or actual investigation, action, suit, claim or
proceeding involving the Purchaser Indemnitee as defendant, co-defendant,
deponent, witness or in any capacity whatsoever other than as a plaintiff
initiating an action, suit, claim or proceeding against any person or entity and
(y) not have resulted from the bad faith, wilful misconduct or gross negligence
of such Purchaser Indemnitee, as determined by a court of competent jurisdiction
in a final, non-appealable order.
(b) Purchaser Indemnification. The Purchasers agree to indemnify and
hold harmless the Company, the directors, officers, employees and agents of the
Company, and each person who controls the Company within the meaning of Section
15 of the Securities Act and/or Section 20 of the Exchange Act from and against
any and all Losses suffered or incurred by the Company as a result of any
inaccuracy in or breach, violation or nonobservance of the representations,
warranties or covenants made by the Purchasers herein.
(c) Expenses, Reimbursement. Any Person (an "Indemnifying Person")
who is obligated to indemnify another Person (an "Indemnified Person") pursuant
hereto promptly shall reimburse any such Indemnified Person for all Losses
constituting reasonable out-of-pocket expenses (including reasonable attorneys'
fees and disbursements) as they are incurred in connection with investigating,
preparing to
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defend or defending any such action, suit, claim or proceeding (including any
inquiry or investigation) for which indemnity is available under Sections 10(a)
or 10(b), whether or not such Indemnified Person is a party thereto. To the
extent that any Indemnifying Person shall indemnify or reimburse any Indemnified
Person for Losses or expenses pursuant to Sections 10(a), 10(b) or this Section
10(c) and it is subsequently judicially determined that such Indemnified Person
is not entitled to such indemnity or reimbursement of expenses hereunder, such
Indemnified Person shall promptly refund to any Indemnifying Person the amounts
so received by it. In the event that any Indemnified Person shall appeal a
judgment contemplated by the preceding sentence that is adverse to such
Indemnified Person and thereafter it shall be judicially determined that such
Indemnified Person was entitled to indemnity hereunder, such Indemnifying Person
shall reimburse the Indemnified Person for all Losses incurred by such
Indemnified Person, including without limitation amounts earlier refunded to
such Indemnifying Person by such Indemnified Person and the costs associated
with pursuing and prosecuting the appeal.
(d) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Sections 10(a) and 10(b) is due in accordance with its terms but is for any
reason held by a court to be unavailable from any Indemnifying Person on grounds
of public policy or otherwise, then such Indemnifying Person shall, to the
fullest extent permitted by law, contribute to the aggregate Losses of such
Indemnified Person in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Purchasers on the other in
connection with the conduct which resulted in the Loss. The parties agree that
it would not be just or equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take account of
relative fault and other equitable considerations. The parties further agree
that if and to the extent that pro rata contribution were nevertheless
considered by a court, all Purchaser Indemnitees collectively on the one hand,
and the Company and each other Person indemnified pursuant to Section 10(b)
collectively on the other hand, shall each be deemed to be one person. No
Purchaser Indemnitee shall in any event have liability to the Company arising
out of any inaccuracy in or breach of the representations, warranties, covenants
or agreements made by the Company herein; other conduct by the Company or its
employees or agents; or any action or failure
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to act undertaken by a Purchaser Indemnitee at the written request of or with
the written consent of the Company.
(e) Indemnification Procedure. An Indemnified Person shall give
written notice to the Indemnifying Person of any claim with respect to which it
seeks indemnification promptly after the discovery by such parties of any
matters giving rise to a claim for indemnification pursuant to Sections 10(a) or
10(b), as the case may be; provided that the failure of any Indemnified Person
to give notice as provided herein shall not relieve any Indemnifying Person of
its obligations under this Section 10 except to the extent that such
Indemnifying Person is actually prejudiced by such failure to give notice. In
case any such action, proceeding or claim is brought against any Indemnified
Person, the Indemnifying Persons shall be entitled to participate in and, unless
in the reasonable good faith judgment of the Indemnified Persons a conflict of
interest between them and the Indemnifying Persons may exist in respect of such
action, proceeding or claim, to assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Persons, and after notice from the
Indemnifying Persons to the Indemnified Persons of their election so to assume
the defense thereof, the Indemnifying Persons shall not be liable to such
Indemnified Persons for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In any event, unless and until the Indemnifying Persons elect in
writing to assume and do so assume the defense of any such claim, proceeding or
action, the Indemnified Persons' reasonable costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be Losses subject to indemnification hereunder in accordance with the
provisions hereof. If the Indemnifying Persons elect to defend any such action
or claim, then the Indemnified Persons shall be entitled to participate in such
defense with counsel of their choice at their sole cost and expense. The
Indemnifying Persons shall not be liable for any settlement of any action, claim
or proceeding effected without its written consent; provided, however, that the
Indemnifying Persons shall not unreasonably withhold, delay or condition their
consent. Anything in this Section 10 to the contrary notwithstanding, the
Indemnifying Persons shall not, without the Indemnified Persons' prior written
consent (which consent shall not be unreasonably withheld), settle or compromise
any claim or consent to entry of any judgment in respect thereof which imposes
any future obligation on the
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Indemnified Persons or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Persons, a
release from all liability in respect of such claim.
(f) Survival. The obligations of the Company and the Purchasers
under this Section 10 shall survive the transfer of any Shares or shares of
Common Stock or the Closing or termination of this Agreement and the
transactions contemplated hereby. The agreements contained in this Section 10
shall be in addition to any other rights of any party hereto against any other
party with respect to the matters referred to in Sections 10(a), 10(b) and 10(c)
or others, except that, absent fraud, this Section 10 shall be the exclusive
remedy of the Purchasers for any claims for Losses arising as a consequence of
any breach of the representations and warranties of the Company hereunder other
than the representations and warranties set forth in Sections 4(a), (b), (c),
(d), (e) and (j) hereof (the "Excluded Representations").
(g) Indemnification Threshold. Notwithstanding anything herein to
the contrary, the Company shall not have any liability under Section 10(a)(i)
(other than in respect of the Excluded Representations) unless the aggregate
amount of Losses to the indemnified parties based on, attributable to or
resulting from the failure of the representations and warranties of the Company
hereunder (other than the Excluded Representations) to be true and correct
exceeds $2,000,000 and, in such event, the Company shall be required to pay the
full amount of such Losses including the first $2,000,000.
11. Miscellaneous. (a) Home Office Payment. The Company agrees
that, as long as the Purchasers shall hold any Shares, any payments to be made
on, or in connection with the redemption of, such Shares will be made at the
place and in the manner indicated on Schedule 11(a) hereto or such other place
or manner as the Purchasers may designate in writing.
(b) Expenses. Except for Barrington Associates, who have provided
certain brokerage and financial advisory services to the Company with respect to
the issuance and sale of the Shares, the Company on the one hand and the
Purchasers on the other each represents to the other that it has not used a
broker in connection with the transactions contemplated by this Agreement.
Whether or not the transactions contemplated hereby shall be consummated, the
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Company agrees to pay, and hold the Purchasers harmless against liability for
the payment of, up to $400,000 (or $450,000 if the Closing shall occur) (unless
the Company and the Purchasers agree upon a higher limit) of reasonably
documented out-of-pocket expenses (including amounts paid to third parties)
arising in connection with the preparation, negotiation and execution of this
Agreement, the Registration Rights Agreement and the Closing of the purchase and
sale of the Shares, including, without limitation, the reasonable fees and
expenses of the Purchasers' counsel retained in connection with such agreements
and the Closing. The Company shall be responsible for any and all fees and
expenses owing to Barrington Associates. In addition, at the Closing, the
Company shall pay a transaction fee of $500,000 to Centre Partners Management
LLC.
(c) Survival of Representations and Warranties. The representations
and warranties set forth in this Agreement shall survive until the tenth (10th)
business day following the filing by the Company of its Annual Report on Form
10-K, including all required financial statements, for the 1999 fiscal year. No
action may be brought pursuant to Section 10 with respect to a breach of any
representation or warranty in this Agreement after such time unless, prior to
such time, the party seeking to bring such action has notified the other party
of such claim, specifying in reasonable detail the nature of the loss suffered.
(d) Assignment and Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns of the
parties pursuant to this paragraph. Neither the Company nor the Purchasers
shall assign all or any part of this Agreement without the prior written consent
of the other parties, provided that nothing in this Section 11(d) shall restrict
or require the consent of the Company, subject to Section 11(r), for any
transfer or assignment of the Shares (or shares of Common Stock into which the
Shares shall have been converted) or the rights of the Purchasers under the
Registration Rights Agreement in accordance with the provisions thereof.
(e) Independent Investment Banking Firm. So long as the Purchasers
or any Purchaser Affiliates hold any Shares, any independent investment banking
firm or appraisal firm used pursuant to Section 3 of the Certificate of
Designation shall be mutually acceptable to the Company, on
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the one hand, and the Purchasers or such Purchaser Affiliates on the other hand.
(f) Headings. Subject headings are included for convenience only and
shall not affect the interpretation of any provisions of this Agreement.
(g) Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if personally served or
transmitted via telecopy, (ii) on the next business day after delivery to an
overnight carrier or (iii) on the third day after mailing if mailed to the party
to whom notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:
(i) If to the Company: Salton/Maxim Housewares, Inc
550 Business Center Drive
Mount Prospect, Illinois 60056
Attention: Chairman
With a copy to: Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attn: Neal Aizenstein
Fax: 312-876-7934
(ii)(a) If to a Purchaser, to:
c/o Centre Partners Management LLC
30 Rockefeller Plaza
Suite 5050
New York, New York 10020
Attention: Bruce G. Pollack
Robert A. Bergmann
Telecopier: (212) 332-5801
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Norman D. Chirite, Esq.
Telecopier: (212) 310-8007
(h) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF
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THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
(i) Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, sets forth the entire understanding and agreement of the
parties hereto relating to the purchase and sale of the Shares and supersedes
any and all other understandings, negotiations or agreements between the parties
hereto relating to the sale and purchase of the Shares.
(j) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute a single agreement.
(k) Severability. In the event that any one or more of the
immaterial provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed in a manner
which, as nearly as possible, reflects the original intent of the parties.
(l) Words in Singular and Plural Form. Words used in the singular
form in this Agreement shall be deemed to import the plural, and vice versa, as
the sense may require.
(m) Amendment and Modification. This Agreement may be amended or
modified only by written agreement executed by the Company and the holders of
the Shares (or of the securities issued upon the conversion or exchange of the
Shares) representing a majority of the voting rights of the Shares (or other
securities) outstanding, it being understood that the Shares (or any other
securities other than Common Stock) shall be deemed to have been converted into
Common Stock for such purpose.
(n) Waiver. Any agreement on the part of a party hereto to any
waiver of any provision hereof shall be valid against such party only if set
forth in an instrument in writing signed by such party but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not be deemed to be construed as a further or
continuing waiver of any such obligation, covenant agreement or condition or of
the breach of any other provision, term, covenant, representation or warranty of
this Agreement and shall not operate as a waiver
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of, or estoppel with respect to, any subsequent or future failure.
(o) Sections, Exhibits, Schedules. References to a section are,
unless otherwise specified, to one of the sections of this Agreement and
references to an "Exhibit" or "Schedule" are, unless otherwise specified, to one
of the exhibits or schedules attached to this Agreement. References to this
Agreement include, unless otherwise specified, the exhibits or Schedules
attached hereto.
(p) Specific Enforcement. Purchasers, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the covenants contained in Section 6(d), (e) or (h) or
(k) or Section 7(a) of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, and that money damages are an
inadequate remedy for breach thereof because of the difficulty of ascertaining
and quantifying the amount of damage that will be suffered by the parties hereto
in the event that such covenants are not performed in accordance with their
terms or are otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of the
covenants referred to in the immediately preceding sentence and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state thereof having jurisdiction, this being in addition to any other
rights and remedies to which they may be entitled at law or equity.
(q) Confidentiality. The Purchasers agree that they shall not
disclose any non-public information concerning the Company which they receive
from the Company except (i) such information which is required to be disclosed
by applicable law or in connection with any legal proceeding and (ii)
disclosures to directors, officers, employees, agents and representatives of the
Purchasers who agree to maintain the confidentiality of such information in
accordance with this Section 11(q). The foregoing shall not apply to
information that shall be or hereinafter become publicly available other than as
a result of a disclosure by the Purchasers or information which has been or is
subsequently acquired by the Purchasers from a third party who, to the knowledge
of the Purchasers after due inquiry, is not prohibited from disclosing such
information by a contractual, legal or fiduciary obligation to the Company.
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(r) Restrictive Legend. (i) Each certificate representing (i) the
Shares, (ii) shares of the Common Stock issuable upon conversation of any
Shares, and (iii) any other securities issued in respect of the Shares or Common
Stock issued upon conversation of any Shares upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event (each of the
foregoing securities in (i) through (ii) being referred to herein as "Restricted
Securities"), shall (unless otherwise permitted by the provisions of Section
11(r)(ii) below) be stamped or otherwise imprinted with a legend substantially
in the following form (in addition to the legend required under any applicable
state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATIONS OR EXEMPTIONS THEREFROM UNDER SAID ACT OR LAWS.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
THE COMPANY.
The Company will promptly, upon request, remove any such legend when
no longer required by the terms of this Agreement or by applicable law.
(ii) Transfers. Unless there is in effect a registration statement
under the Securities Act covering a proposed transfer of any Restricted
Securities, each certificate evidencing the Restricted Securities transferred by
the holder thereof shall bear the restrictive legend set forth in Section
11(r)(i) above except that such certificate shall not bear such restrictive
legend if (i) in the opinion of counsel for such holder, such legend is not
required in order to establish compliance with any provisions of the Securities
Act, (ii) a period of at least one year has elapsed since the later of the date
the Restricted Securities were acquired from the Company or from an affiliate of
the Company, and such Person represents to the Company that it is not an
affiliate of the Company and has not been an affiliate during the preceding
three months, or (iii) the Restricted Securities have been sold pursuant to Rule
144(k) and the certificate is accompanied by a representation by such Person
that it is not an affiliate of
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the Company, has not been an affiliate during the three-month period prior to
the sale and has held the Restricted Securities for more than two years.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
THE COMPANY
SALTON/MAXIM HOUSEWARES, INC.
By:
----------------------------
Name:
Title:
THE PURCHASERS:
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.
General Partner
By: Centre Partners Management LLC
Attorney-in-fact
By:
----------------------------
Bruce G. Pollack
Managing Director
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STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Centre Parallel Management Partners,
L.P.
Manager
By: Centre Partners Management LLC
Attorney-in-fact
By:
----------------------------
Bruce G. Pollack
Managing Director
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC
General Partner
By:
---------------------------------
Bruce G. Pollack
Managing Director
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SCHEDULE I
Stock Purchase Agreement - Salton/Maxim Housewares Inc., Centre Capital Investors II LP, Centre Capital Tax-Exempt Investors II LP, Centre Capital Offshore Investors LP, The State Board of Administration of Florida, Centre Parallel Management Partners LP and Centre Partners Coinvestment LP
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