SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT dated as of December 20, 1996 among:
A. ROBERT B. WHITNEY, STEVEN A. MARTELLO, JOHN T. RUOCCO, MICHAEL A.
SYLVESTER and JOSEPH M. LIVELY (each, an "Existing Shareholder" and,
collectively, the "Existing Shareholders");
B. AMERICAN INTERNATIONAL INSURANCE COMPANY, a New York corporation
(the "Investor"); and
C. ALCOHOL SENSORS INTERNATIONAL, LTD., a New York corporation (the
"Company").
RECITALS:
1. Pursuant to the Purchase Agreement (as defined below), the Investor
has agreed to purchase from the Company, and the Company has agreed to issue
and sell to the Investor, shares of the Company's Series A Cumulative
Non-redeemable Convertible Preferred Stock, par value $0.001 per share (the
"Series A Preferred Stock"), and certain warrants of the Company (the
"Warrants") exercisable into shares of the Company's Common Stock, par value
$0.001 per share (the "Common Stock"), all in accordance with the terms and
conditions of the Purchase Agreement.
2. As of the Effective Date (as defined below), each of the Existing
Shareholders owns the number of shares of Common Stock and the number of
options exercisable for Common Stock, respectively, specified with respect to
such individual on Schedule I attached hereto, and such shares, as of the
Effective Date, represent the percentage ownership of all of the Capital Stock
of the Company on a fully diluted basis (assuming, for this purpose only, that
all Capital Stock of the Company that is convertible or exercisable into or
exchangeable for Common Stock has been so converted, exercised or exchanged in
full) as specified with respect to such individual on Schedule I.
3. It is a condition precedent to the consummation of the transactions
under the Purchase Agreement that the parties hereto enter into this Agreement.
4. The parties hereto desire to set forth their mutual agreements and
understandings with respect to, among other things, certain of their respective
rights, duties and obligations and certain transactions and arrangements in
respect of the Company, the Capital Stock of the Company and related matters.
NOW, THEREFORE, the parties hereto, intending legally to be bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS AND INTERPRETATION. (a) As used in this Agreement,
the following terms shall have the following meanings:
"Affiliate": of any specified Person means any other Person directly
or indirectly Controlling or Controlled by or under direct or indirect common
Control with such specified Person.
"Agreement": this Shareholders Agreement, together with all Schedules
and Exhibits hereto, as the same may be amended, supplemented or modified in
accordance with the terms hereof from time to time.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all rights, warrants or options to purchase any of the foregoing.
"Confidential Material": confidential records and information,
including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative,
manufacturing, production, distribution and sales information, data,
specifications and processes presently owned or at any time hereafter developed
by the Company, any of its Subsidiaries or their respective officers,
employees, agents, consultants or Affiliates or used presently or at any time
hereafter in the course of the business of the Company or any of its
Subsidiaries, that are not otherwise part of the public domain.
"Control": (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Effective Date": the date of this Agreement.
"Exempt Transfer": with respect to each Existing Shareholder, a direct
or indirect Transfer of Common Stock to another Existing Shareholder, provided
that prior to each such Transfer the Company and each Shareholder not a party
to such proposed Transfer shall have received in writing the information
required in a Transfer Notice with respect to such Transfer from the proposed
transferor.
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"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
or any other regulatory authority.
"Investor Holder": the Investor and each Person that has purchased or
otherwise acquired shares of Series A Preferred Stock from the Investor or
another Investor Holder.
"Involuntary Transfer": a Transfer or proposed Transfer by an Existing
Shareholder by reason of (i) death, (ii) long-term disability or (iii)
termination of employment with the Company by the Company.
"Person": any individual, company, corporation, partnership, limited
liability company, trust, division, Governmental Authority or other entity.
"Public Transfer": a public Transfer by an Existing Shareholder of
Capital Stock of the Company pursuant to Rule 144, as amended, under the
Securities Act or an effective registration statement relating to such Capital
Stock.
"Purchase Agreement": the Convertible Preferred Stock and Warrant
Purchase Agreement dated as of December 20, 1996 between the Investor and the
Company.
"Registration Rights Agreement": the Registration Rights Agreement
dated as of the date hereof between the Investor and the Company.
"Related Documents": the Purchase Agreement and any and all
instruments, documents or agreements referred to therein or related thereto,
including, without limitation, the Warrant Certificate (as such term is defined
in the Purchase Agreement) and the Registration Rights Agreement.
"Related Transferee": as to any Existing Shareholder, a Transferee
that (i) has purchased or otherwise acquired shares of Capital Stock of the
Company from such Existing Shareholder and (ii) is a spouse, parent, sibling,
child, stepchild or grandchild of such Existing Shareholder or a trust which is
for the benefit of such a Person or Persons, or is an Affiliate of such
Existing Shareholder.
"Requirement of Law": as to any Person, the articles or certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, statute, treaty, rule or regulation, order or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property, or
to which such Person or any of its property is subject.
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"Securities Act": the Securities Act of 1933, as amended.
"Shareholder": each of the following Persons: each of the Existing
Shareholders, the Investor and each other Person that becomes a party to this
Agreement from time to time pursuant to Section 3.1(b) hereof.
"Stock Option Issuance": the issuance by the Company to employees,
directors or consultants pursuant to the Company's 1996 Stock Option Plan or
another similar plan hereafter approved by the Board of Directors of the
Company, of (A) options to acquire Common Stock not to exceed (x) 300,000
shares of Common Stock in the aggregate in any fiscal year of the Company and
(y) 600,000 shares of Common Stock in the aggregate and (B) Common Stock upon
the exercise of such options. The number of shares of Common Stock specified in
this definition shall be adjusted for stock splits, stock dividends, stock
combinations, recapitalizations and like occurrences.
"Subsidiary": as to any Person, any entity (whether now existing or
hereafter formed or acquired) of which shares of each class of Capital Stock
having ordinary voting power (other than Capital Stock having such power only
by reason of the happening of a contingency) to elect a majority of the board
of directors or other managers of such entity are at the time owned by such
Person or by one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person. The Company's Subsidiaries shall include,
without limitation, Alcohol Sensors Europe, plc, a British Company.
"Transfer": with respect to any Capital Stock, (a) any sale,
assignment or transfer of such Capital Stock or any right or interest therein;
(b) any pledge or hypothecation of such Capital Stock or any interest therein;
(c) any grant, sale or other transfer of securities convertible or exchangeable
into or exercisable for or other options, warrants or rights to acquire such
Capital Stock or any interest therein; and (d) any other direct or indirect
transfer of such Capital Stock or any interest therein.
"Transfer Notice": as defined in Section 3.2(a).
"Transferee": as defined in Section 3.1(b) hereof.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, Section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(c) The meanings given to terms defined herein shall be equally applicable
to the singular and plural forms of such terms.
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ARTICLE II
VOTING AGREEMENT AND RELATED MATTERS
2.1 DESIGNEE TO THE BOARD OF DIRECTORS. (a) As specified in the
Company's Certificate of Incorporation, as amended from time to time (the
"Certificate of Incorporation"), a copy of which is attached hereto as Exhibit
A, so long as at least 250,000 shares of Series A Preferred Stock are
outstanding (as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences), the holders of the Series A Preferred
Stock, voting separately as a class, shall have the special and exclusive right
to elect one director to the Board of Directors of the Company in accordance
with the terms and conditions set forth in the Certificate of Incorporation.
The Company agrees that it shall take all actions reasonably requested from
time to time by the holders of record of shares representing at least 51% of
the voting power of the Series A Preferred Stock then outstanding (the
"Majority Holders") in order to give full force and effect to and to carry out
the full intent of this paragraph (a) and Article Fourth, Section 7 of the
Certificate of Incorporation. The Shareholders agree to vote their shares of
Capital Stock of the Company in order to give full force and effect to and to
carry out the full intent of this paragraph (a) and Article Fourth, Section 7
of the Certificate of Incorporation.
(b) If, at any time, less than 250,000 shares of Series A Preferred
Stock are outstanding (as adjusted for stock splits, stock dividends, stock
combinations, recapitalizations and like occurrences), but the Investor then
holds in excess of 166,666 shares of Common Stock (as adjusted for stock
splits, stock dividends, stock combinations, recapitalizations and like
occurrences), then the Investor shall have the special and exclusive right to
designate one director to the Board of Directors of the Company. The director
to be designated pursuant to this paragraph (b) may be removed with or without
cause by the Investor at any time. If the director designated by the Investor
pursuant to this paragraph (b) ceases to or is unable to continue in that
capacity, the Investor shall nominate a replacement director for election to
the Board of Directors of the Company. The Company agrees, for the purposes of
this paragraph (b), that it shall (w) nominate the Investor's designee to the
Board of Directors of the Company at each applicable meeting held to elect
members to the Board of Directors of the Company from time to time, (x) take
all actions to remove such director if requested by the Investor, (y) take all
actions to cause the Investor's nominee as a replacement director, if any, to
be elected from time to time and (z) take all other actions reasonably
requested from time to time by the Investor in order to give full force and
effect to and to carry out the full intent of this paragraph (b). The
Shareholders agree, for the purposes of this paragraph (b), to vote their
shares of Capital Stock of the Company in order to (i) elect the Investor's
designee to the Board of Directors of the Company from time to time, (ii)
oppose any and all attempts to remove such director without the consent of the
Investor, (iii) remove such director if requested by the Investor and (iv)
otherwise give full force and effect to and to carry out the full intent of
this paragraph (b).
2.2 REIMBURSEMENT OF EXPENSES. The Company shall promptly reimburse
the reasonable expenses (including, without limitation, reasonable travel
expenses) of any
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director elected to the Board of Directors of the Company pursuant to Section
2.1 hereof related to (x) attending meetings of (i) the Board of Directors of
the Company or any of its Subsidiaries of which such director is also a
director and (ii) any committee of the Board of Directors of the Company or any
such Subsidiary of which such director is a member and (y) the performance of
his or her duties as a director of the Company or any such Subsidiary or as a
committee member of the Board of Directors of the Company or any such
Subsidiary, to the extent not accounted for in clause (x) above.
2.3 NUMBER OF DIRECTORS. Each of the parties hereto agrees that it
shall not permit any increase in the number of directors on the Board of
Directors of the Company beyond such number of directors at the Effective Date
(after accounting for the director to be designated by the holders of Series A
Preferred Stock on the Effective Date pursuant to Section 2.1 hereof and the
Certificate of Incorporation), unless the prior written consent of the Investor
is obtained prior thereto, which consent shall not be unreasonably withheld or
delayed.
ARTICLE III
AGREEMENTS RELATING TO THE CAPITAL STOCK
OF THE COMPANY AND OTHER MATTERS
3.1 TRANSFER OF CAPITAL STOCK. (a) For the period beginning on the
Effective Date and ending on the date that is two years thereafter (the
"Restricted Period"), the Existing Shareholders severally agree with the
Company, the Investor and with each other Shareholder that they will not,
directly or indirectly, Transfer any Capital Stock of the Company (or any
interest therein), now or hereafter at any time owned by them, except that each
Existing Shareholder may Transfer, upon written notice to the Company, the
Investor and each other Shareholder, in accordance with applicable law: (i) any
Common Stock of the Company pursuant to an Involuntary Transfer; (ii) any
Common Stock of the Company for estate planning purposes to such Existing
Shareholder's spouse, parents, siblings, children, stepchildren or
grandchildren or to a trust which is for the benefit of such Existing
Shareholder or such Existing Shareholder's spouse, parents, siblings, children,
stepchildren or grandchildren; (iii) during the period from (and including) the
Effective Date through (but excluding) the date that is one year thereafter
(the "Initial Period"), any Common Stock which does not exceed five percent
(5%) of all of the Common Stock held by such Existing Shareholder on the
Effective Date; and (iv) during the period from (and including) the last day of
the Initial Period through (and including) the last day of the Restricted
Period, any Common Stock which does not exceed fifteen percent (15%) of all of
the Common Stock held by such Existing Shareholder on the Effective Date;
provided, however, that, in connection with any Transfer permitted under this
Section 3.1(a), prior to such Transfer, such Existing Shareholder shall comply
with Section 3.1(b) hereof.
(b) Any Transfer of Capital Stock of the Company by any Existing
Shareholder during the Restricted Period or at any time thereafter to a Related
Transferee shall not relieve the transferor of its obligations hereunder and
shall only be valid if the Person to whom such Capital Stock is Transferred (a
"Transferee"), prior to the Transfer, agrees in writing to be bound by the
terms of this Agreement as and to the same extent that the transferor
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was bound by this Agreement immediately prior to such Transfer. Any such
Transferee that agrees to be bound by the terms of this Agreement as provided
in this paragraph (b) shall be deemed, upon execution and delivery of such
agreement, to be a Shareholder hereunder. Each such Transferee shall be
entitled to all of the rights under this Agreement to which the transferor was
entitled immediately prior to such Transfer. Any purported Transfer without
obtaining this agreement by the Transferee shall be deemed void and of no
further effect and shall be governed by the provisions of paragraph (c) below.
The provisions of this paragraph (b) shall not apply in connection with a
Public Transfer by an Existing Shareholder.
(c) In the event a Transfer of any Capital Stock of the Company has
taken place or remains in place in violation of the provisions of this Article
III, such Transfer shall be void and of no effect, and no dividend of any kind
whatsoever nor any distribution pursuant to liquidation or otherwise shall be
paid by the Company or the related Shareholder to the Transferee in respect of
such Capital Stock (all such dividends and distributions being deemed waived),
and any voting rights of such Capital Stock on any matter whatsoever shall
remain vested in the transferor.
(d) The provisions of this Section 3.1 shall be in addition to, and
shall not in any way limit the application of, any other provision of this
Agreement.
3.2 TAG-ALONG RIGHTS. (a) If, at any time, any Existing Shareholder
and/or a Related Transferee or Related Transferees of such Existing Shareholder
(a "Section 3.2 Transferor") desires to Transfer any of its Common Stock in an
amount in excess of fifteen percent (15%) of all of the Common Stock held by
such Existing Shareholder on the Effective Date in one transaction or a series
of transactions to any Person or Persons (a "Section 3.2 Transferee"), except
pursuant to an Exempt Transfer or a Public Transfer, prior to any such
Transfer, such Section 3.2 Transferor shall promptly (and in any event at least
20 business days prior to the closing date thereof), provide each Investor
Holder (each, a "Prospective Participating Shareholder") with written notice of
the proposed Transfer (the "Transfer Notice") containing the following:
(i) the name and address of the proposed Section 3.2 Transferee;
(ii) the number of shares of Common Stock to be Transferred by such
Section 3.2 Transferor; and
(iii) the purchase price and other terms and conditions of payment and
the closing date for the proposed Transfer (including, when available, a
copy of any purchase agreement related thereto).
(b) If any of such Prospective Participating Shareholders (each, a
"Participating Shareholder") wishes to participate in such Transfer, each such
Participating Shareholder may notify the Section 3.2 Transferor by written
notice (the "Tag-Along Notice") on or before the expiration of 15 business days
following receipt of the Transfer Notice that such Participating Shareholder
desires to Transfer to the proposed Section 3.2 Transferee a part of its shares
of Capital Stock of the Company (as determined pursuant to the following
sentence)
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on the same terms and conditions set forth in the Transfer Notice. The
Tag-Along Notice shall specify the number of shares of such Capital Stock such
Participating Shareholder desires to Transfer (the "Tag-Along Amount"); for
purposes of making any determination or calculation pursuant to this Section
3.2, but for such purposes only, as of any date of determination or
calculation, all of the Capital Stock of the Company held by an Investor Holder
shall be deemed to have been fully converted, exercised or exchanged, to the
extent applicable, as of such date of determination or calculation. The maximum
number of shares of such Capital Stock that each such Participating Shareholder
separately shall be entitled to Transfer hereunder shall be determined by
multiplying the number of shares of such Capital Stock held by such
Participating Shareholder at the time of the Transfer Notice by a fraction, the
numerator of which is the number of shares of Common Stock proposed to be
Transferred to the Section 3.2 Transferee by the Section 3.2 Transferor and the
denominator of which is the number of shares of Common Stock then owned by the
Section 3.2 Transferor. If no Prospective Participating Shareholder provides
the Section 3.2 Transferor with a Tag-Along Notice within the period specified
above, the Section 3.2 Transferor shall be free to sell all or a portion of
such Common Stock to the Section 3.2 Transferee in the amount and on the same
terms and conditions set forth in the Transfer Notice, subject to paragraph (h)
below. If there is any Participating Shareholder(s), the Section 3.2 Transferor
may not effect such Transfer unless the Section 3.2 Transferee shall have
purchased the Tag-Along Amount or the Reduced Tag-Along Amount (as defined
below) from each such Participating Shareholder on the same terms and
conditions set forth in the Transfer Notice.
(c) If the sum (the "Aggregate Shares Offered") of (i) the number of
shares of Common Stock proposed to be Transferred to the Section 3.2 Transferee
by the Section 3.2 Transferor and (ii) the aggregate Tag-Along Amounts for all
Participating Shareholders exceeds the number of shares of Common Stock that
such Section 3.2 Transferee is willing to purchase, then each such
Participating Shareholder shall be obligated to Transfer a number of shares of
Common Stock or its equivalent (the "Reduced Tag-Along Amount") equal to the
product of the number of shares of Common Stock which the Section 3.2
Transferee is willing to purchase and a fraction, the numerator of which is the
Tag-Along Amount with respect to such Person and the denominator of which is
the Aggregate Shares Offered, and the Section 3.2 Transferor shall be obligated
to Transfer a number of shares of Common Stock equal to the number of shares of
Common Stock which the Section 3.2 Transferee is willing to purchase minus the
Reduced Tag-Along Amount or Reduced Tag-Along Amounts for all Participating
Shareholders.
(d) Any indemnity provided by a Participating Shareholder to the
Section 3.2 Transferee in a purchase agreement relating to such Transfer will
only relate to the shares of Capital Stock Transferred by it. Any indemnity
provided to the Section 3.2 Transferee by the Section 3.2 Transferor will only
relate to the shares of Common Stock Transferred by it.
(e) The Section 3.2 Transferor and the Participating Shareholders
whose shares of Capital Stock are Transferred pursuant to this Section 3.2
shall be required to bear their pro rata share, based on the number of shares
of Capital Stock included in such Transfer, of the expenses of the transaction
including, without limitation, legal, accounting and investment banking fees
and expenses.
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(f) The Company shall, upon request by any Participating Shareholder,
issue to such Participating Shareholder one or more stock certificates
registered in the names and in the denominations (aggregating in a number equal
to the original denomination) requested by such Participating Shareholder, to
facilitate any partial sale of shares of any Capital Stock pursuant to this
Section 3.2.
(g) To the extent that any prospective Section 3.2 Transferee is
unwilling or otherwise refuses to purchase Capital Stock from any Participating
Shareholder, the Section 3.2 Transferor shall not Transfer to such prospective
Section 3.2 Transferee any Common Stock, unless and until, simultaneously with
such Transfer, the Section 3.2 Transferor shall purchase such Capital Stock
from such Participating Shareholder on the same terms and conditions specified
in the Transfer Notice.
(h) Subject to the rights of each Prospective Participating
Shareholder, if it has so elected, to participate in the Transfer of Common
Stock as provided in this Section 3.2, the Section 3.2 Transferor may, not
later than sixty (60) days following delivery to the Prospective Participating
Shareholders of the Transfer Notice, conclude a Transfer of Common Stock
covered by the Transfer Notice on the terms and conditions described in the
Transfer Notice. Any proposed Transfer on terms and conditions more favorable
to the Section 3.2 Transferee than those described in the Transfer Notice, as
well as any proposed Transfer of any Common Stock by the Section 3.2 Transferor
more than sixty (60) days following delivery to the Prospective Participating
Shareholders of the Transfer Notice, shall again be subject to the tag-along
rights of the Prospective Participating Shareholders and shall require
compliance by the prospective Section 3.2 Transferor with the procedures
described in this Section 3.2.
(i) The exercise or non-exercise of the rights of any Prospective
Participating Shareholder under this Section 3.2 to participate in one or more
Transfers of Common Stock shall not adversely affect its right to participate
in subsequent Transfers of Common Stock pursuant to this Section 3.2.
(j) The provisions of this Section 3.2 shall be subject in all
respects to the provisions of Section 3.1 hereof (except as otherwise set forth
herein).
(k) This Section 3.2 shall remain in effect only so long as at least
250,000 shares of Series A Preferred Stock are outstanding (as adjusted for
stock splits, stock dividends, stock combinations, recapitalizations and like
occurrences).
3.3 NO ISSUANCE OF CAPITAL STOCK. For the period beginning on the
Effective Date and ending nine (9) months thereafter, the Company shall not
issue or Transfer any of its Capital Stock without the Investor's prior written
consent, except for the issuance by the Company of shares of Common Stock (or,
in the case of clause (i) below, options to purchase Common Stock) in
connection with (i) the Stock Option Issuance (provided that during such nine
(9)-month period, such issuances shall not exceed options to purchase up to
225,000 shares of Common Stock and the issuance of Common Stock upon the
exercise of such options and provided, further, that no such options or shares
of Common Stock may be issued by the Company prior to January 1, 1997), (ii)
the conversion of the Series A Preferred Stock or the
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exercise of the Warrants or (iii) the exercise of warrants or options that are
outstanding as of the Effective Date and which are specified in Section 3.2 of
the Purchase Agreement.
3.4 PARTICIPATION RIGHT ON NEW SECURITIES. During the Restricted
Period, the Company hereby grants to each of the Investor Holders
(collectively, the "Eligible Holders") the right of first refusal to purchase a
pro rata share of New Securities (as defined below) that the Company may, from
time to time, propose to sell and issue (the "Participation Right"). Each
Eligible Holder's pro rata share, for purposes of this Participation Right, is
the ratio of (X) the number of shares of Common Stock then owned by such
Eligible Holder to (Y) the total number of shares of Common Stock of the
Company outstanding immediately prior to the issuance of the New Securities,
assuming, in each case but for purposes of this Section 3.4 only, full
conversion of all shares of then outstanding Series A Preferred Stock and full
exercise of all then outstanding Warrants and other rights, options and
warrants to purchase or acquire Common Stock. This Participation Right shall be
subject to the following provisions:
(a) "New Securities" shall mean any offering by the Company of any
Capital Stock of the Company, whether now authorized or not; provided, however,
that "New Securities" does not include (i) Common Stock issued pursuant to the
Stock Option Issuance; (ii) Common Stock issuable upon conversion of the Series
A Preferred Stock or upon exercise of the Warrants; (iii) Capital Stock issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization, whereby
the Company owns more than 50% of the voting power of such corporation; and
(iv) Common Stock issuable upon the exercise of warrants or options that are
outstanding as of the Effective Date and which are specified in Section 3.2 of
the Purchase Agreement.
(b) In the event that the Company proposes to undertake an
issuance of New Securities, it shall give each Eligible Holder 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 Eligible Holder shall have twenty (20) business days from the date of
receipt of any such notice to agree to purchase its pro rata share of such New
Securities for the price and upon the general 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.
(c) In the event that the Eligible Holders fail to exercise in
full the Participation Right within said twenty (20) business day period, the
Company shall have sixty (60) days thereafter to sell the New Securities
respecting which the Eligible Holders' Participation 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. In the event the Company has
not sold the New Securities within said sixty (60) day period, the Company
shall not thereafter issue or sell any New Securities without first offering
such securities to the Eligible Holders in the manner provided above.
(d) This Section 3.4 shall not limit in any respect the
obligations of the Company under Section 3.3.
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(e) This Section 3.4 shall remain in effect only so long as at
least 250,000 shares of Series A Preferred Stock are outstanding (as adjusted
for stock splits, stock dividends, stock combinations, recapitalizations and
like occurrences).
3.5 LEGENDS ON STOCK. Each Capital Stock certificate of the Company
held by an Existing Shareholder or any Transferee of an Existing Shareholder
shall bear the following legend on the face thereof:
"THIS CERTIFICATE IS ISSUED SUBJECT TO THE PROVISIONS OF A
SHAREHOLDERS AGREEMENT DATED AS OF DECEMBER 20, 1996, AND NEITHER THIS
CERTIFICATE NOR THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE
TRANSFERABLE, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SAID AGREEMENT, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
Capital Stock represented thereby) shall also bear such legend unless, in the
opinion of counsel for the holder of such Capital Stock (which counsel shall be
reasonably satisfactory to the Company), the Capital Stock represented thereby
is not, at such time, required by law to bear such legend. The Company agrees
that it will not Transfer on its books any certificate for its Capital Stock in
violation of the provisions of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE EXISTING SHAREHOLDERS. Each
of the Existing Shareholders severally represents and warrants to the Investor,
the other Shareholders and the Company that:
(a) Authority. Each Existing Shareholder has all requisite power
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement and each of the Related Documents to which it is a party
have been duly executed and delivered by each Existing Shareholder, have been
effectively authorized by all necessary action and constitute the legal, valid
and binding obligation of each such Person, enforceable against each such
Person in accordance with its terms, except as enforceability may be subject to
the
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application of general equitable principles and to bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights generally.
(b) Agreements Not in Breach of Other Instruments. The execution
and delivery of this Agreement and the Related Documents to which it is a
party, the consummation of the transactions contemplated hereby and thereby and
the fulfillment of the terms hereof and thereof will not result in a breach of
any of the terms or provisions of, or constitute a default under, or conflict
with (x) any agreement, indenture or other instrument to which any Existing
Shareholder is a party or by which it is bound, (y) any judgment, decree, order
or award of any court, governmental body, Governmental Authority or arbitrator
by which any Existing Shareholder is bound or (z) any Requirement of Law
applicable to any Existing Shareholder.
(c) Regulatory Approvals. There are no consents, approvals,
authorizations or other requirements prescribed by any applicable Requirement
of Law that must be obtained or satisfied in connection with the Existing
Shareholder's execution, delivery and performance of this Agreement or any of
the Related Documents to which it is a party.
(d) No Legal Bar. Except as set forth on Schedule 4.1(d) hereto,
there is no suit, action or proceeding pending or, to each Existing
Shareholder's knowledge, threatened against any Existing Shareholder that
questions the validity of this Agreement or any of the Related Documents, any
of the transactions contemplated hereby or thereby or any action which has been
taken by any of the parties in connection herewith or therewith or in
connection with any of the transactions contemplated hereby or thereby or that
seeks to enjoin the consummation thereof.
(e) No Brokerage Fees. No broker or finder has acted for any
Existing Shareholder in connection with this Agreement or any of the Related
Documents or the transactions contemplated hereby or thereby, and no broker or
finder is entitled to any brokerage or finder's fees or other commission in
respect of such transactions based in any way on agreements, arrangements or
understandings made by or on behalf of any Existing Shareholder.
(f) Capitalization of the Company. As of the Effective Date, each
of the Existing Shareholders owns all right, title and interest in and to the
number of shares of Common Stock and the number of options exercisable for
Common Stock, respectively, specified with respect to such individual on
Schedule I attached hereto, free and clear of all liens, claims, charges,
security interests and other encumbrances, and such shares, as of the Effective
Date, represent the percentage ownership of all of the Capital Stock of the
Company on a fully diluted basis (assuming, for this purpose only, that all
Capital Stock of the Company that is convertible or exercisable into or
exchangeable for Common Stock has been so converted, exercised or exchanged in
full) as specified with respect to such individual on Schedule I. As of the
Effective Date, no shares of Capital Stock of the Company are owned by any
Existing Shareholder other than as specified on Schedule I with respect to such
Existing Shareholder.
4.2 REPRESENTATIONS AND WARRANTIES OF OTHER SHAREHOLDERS. Each
Shareholder (other than an Existing Shareholder and the Investor) hereby makes
the representations and warranties of the Existing Shareholders set forth in
Section 4.1(b), (c), (d)
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and (e) and the representation and warranty set forth below, in each case with
respect to itself only, to the Company and each other Shareholder.
(a) Organization and Authority. To the extent the Shareholder is a
Person other than an individual, it is a company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has all requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, and is duly
qualified as a foreign company under the laws of each jurisdiction where its
conduct of business or the ownership of its assets requires such qualification.
To the extent the Shareholder is an individual, it has all requisite power to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by such Person, has
been effectively authorized by all necessary action, and constitutes the legal,
valid and binding obligation of such Person, enforceable against such Person in
accordance with its terms, except as enforceability may be subject to the
application of general equitable principles and to bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights generally.
4.3 CERTAIN ADDITIONAL REPRESENTATIONS OF THE SHAREHOLDERS. Each
Shareholder represents and warrants to the Company and to each other
Shareholder that (i) all Capital Stock of the Company purchased or otherwise
acquired by such Shareholder has been or is being acquired by it for its own
account for investment, without any intention of Transferring or further
distributing the same in violation of the securities laws and (ii) it is fully
aware that in agreeing to Transfer or issue such Capital Stock to it the
Company or a Shareholder, as applicable, is relying upon the truth and accuracy
of this representation and warranty.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 COVENANTS AND AGREEMENTS OF THE COMPANY.
5.1.1 BOOKS AND ACCOUNTS. The Company shall, and shall cause each
of its Subsidiaries to: (a) make and keep books, records and accounts, which,
in reasonable detail, accurately and fairly reflect its transactions and
dispositions of its assets; and (b) devise (if not existing on the Effective
Date) and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and in accordance with the Company's past practices or any
other criteria applicable to such statements, and to maintain accountability
for assets, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
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5.1.2 REPORTS; BUDGETS.
(a) The Company shall furnish to each Shareholder, as soon as
practicable and in any event within ninety (90) days after the end of each
fiscal year of the Company, a consolidated annual report of the Company and its
Subsidiaries, including a consolidated balance sheet as at the end of such
fiscal year and consolidated statements of income and retained earnings and
changes of cash flows for such fiscal year, together with the related notes
thereto, setting forth in each case in comparative form corresponding figures
for the preceding fiscal year, all of which shall be correct and complete and
shall present fairly the consolidated financial position of the Company and its
Subsidiaries and the consolidated results of their operations and changes in
their consolidated financial position as of the time and for the period then
ended. The consolidated portions of such financial statements shall be
accompanied by an unqualified report, in form and substance reasonably
satisfactory to the Investor, of independent public accountants of recognized
national standing reasonably satisfactory to the Investor, to the effect that
such financial statements have been prepared in accordance with GAAP applied on
a basis consistent with prior years (except as otherwise permitted under GAAP),
and present fairly the consolidated financial position of the Company and its
Subsidiaries and the consolidated results of their operations and changes in
their consolidated financial position as of the time and for the period then
ended. The Company shall, and shall cause each of its Subsidiaries to, conduct
its business so that such report of the independent public accountants shall
not contain any qualifications as to the scope of the audit or with respect to
the Company's or any of its Subsidiaries' compliance with GAAP consistently
applied, except for changes in methods of accounting in which such accountants
concur.
(b) The Company shall furnish to each Shareholder, as soon as
practicable and in any event within forty-five (45) days after the end of each
of the first three fiscal quarters of each fiscal year of the Company, a
quarterly report of the Company and its Subsidiaries consisting of an unaudited
consolidated balance sheet as at the end of such quarter and an unaudited
consolidated statement of income and retained earnings for such quarter and the
portion of the fiscal year then ended, setting forth in each case in
comparative form corresponding figures for the same period in the prior fiscal
year and for the budget for the current fiscal year. All such reports shall be
certified by the chief financial officer of the Company to be correct and
complete, to present fairly the consolidated financial position of the Company
and its Subsidiaries and the consolidated results of their operations and
changes in their consolidated financial position as of the time and for the
period then ended and to have been prepared in accordance with GAAP
consistently applied.
(c) The Company shall furnish to each Shareholder, as soon as
practicable and in any event within thirty (30) days after the end of each
calendar month, commencing with the month of December 1996, a monthly report of
the Company and its Subsidiaries in such form and containing such information
as the Company and the Investor shall mutually agree promptly following the
Effective Date.
(d) The Company shall furnish to each Shareholder, as soon as
practicable and in any event within fifteen (15) days after delivery of such
Shareholder's request, such additional reports as such Shareholder may
reasonably request with respect to such matters
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and in such form and detail as is reasonably satisfactory to such Shareholder.
All such reports shall be certified by the chief financial officer of the
Company, which certification shall be in form and substance satisfactory to
such Shareholder.
(e) The Company shall furnish to each Shareholder, as soon as
practicable and in any event within ninety (90) days after the end of each
fiscal year of the Company, an annual operating budget for the Company and each
of its Subsidiaries for the succeeding fiscal year, containing, among other
things, budgeted statements of profit and loss for each month of such fiscal
year. Promptly upon preparation thereof, the Company shall furnish to each
Shareholder any other budgets that the Company may prepare and any revisions of
such previously furnished budgets. Each budget or material revision thereof
furnished to the Shareholders pursuant to this Section 5.1.2(e) shall have been
previously submitted to and approved by the Board of Directors of the Company.
5.1.3 OTHER REPORTS AND INSPECTION. The Company shall furnish to
each Shareholder (a) as soon as practicable after issuance, copies of any
financial statements or reports prepared by the Company or its Subsidiaries
for, or otherwise furnished to, its shareholders or the Securities and Exchange
Commission and (b) promptly such other documents, reports and financial data as
such Shareholder may reasonably request. In addition, the Company shall, upon
reasonable prior notice, make available during regular business hours to each
Shareholder or its representatives or designees (x) all assets, properties and
business records of the Company and its Subsidiaries for inspection and/or
copying and (y) the directors, officers and employees of the Company and its
Subsidiaries for interviews concerning the business, affairs and finances of
the Company and its Subsidiaries.
5.1.4 MATERIAL CHANGES. The Company shall promptly notify each
Shareholder of any material adverse change in the business, properties, assets,
prospects or condition, financial or otherwise, of the Company or any of its
Subsidiaries, or any other material adverse event or circumstance affecting the
Company or any of its Subsidiaries, and of any material litigation or material
governmental proceeding pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened against the Company or any of its Subsidiaries or
against any director, officer, employee, consultant or Affiliate of the Company
or any of its Subsidiaries.
5.1.5 CORPORATE EXISTENCE, LICENSES AND PERMITS; MAINTENANCE OF
PROPERTIES. The Company shall, and shall cause each of its Subsidiaries to, at
all times conduct its business in the ordinary course and cause to be done all
things necessary to maintain, preserve and renew its existence and shall
preserve and keep in full force and effect, and shall cause each of its
Subsidiaries to preserve and keep in full force and effect, all licenses,
permits and authorizations necessary or advisable to the conduct of its and
their respective businesses. The Company shall maintain and keep, and shall
cause each of its Subsidiaries to maintain and keep, its and their respective
properties in good repair, working order and condition, and from time to time,
to make all needful and proper repairs, renewals and replacements, so that the
business carried on in connection therewith may be properly conducted at all
times.
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5.1.6 COMPLIANCE WITH OBLIGATIONS AND LAWS. The Company shall, and
shall cause each of its Subsidiaries to, comply with (a) all material
obligations which it or its Subsidiaries are subject to, or become subject to,
pursuant to any contract or agreement, whether oral or written, as such
obligations are required to be observed or performed, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings
diligently prosecuted and the Company and its Subsidiaries have set aside on
their books adequate reserves with respect thereto and (b) all applicable laws,
statutes, rules, regulations, orders, demands and requests of all Governmental
Authorities, including, without limitation, all Environmental Laws (as defined
in the Purchase Agreement).
5.1.7 AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. None of the Company
and its Subsidiaries will amend its certificate of incorporation or by-laws so
as to adversely affect the rights of the Investor under this Agreement, the
Certificate of Incorporation, the by-laws of the Company or the Related
Documents.
5.1.8 TAXES AND LIENS. The Company shall, and shall cause each of
its Subsidiaries to, file all applicable tax returns in a timely manner. The
Company shall duly pay and discharge, and shall cause each of its Subsidiaries
to duly pay and discharge, when payable, all taxes, assessments and
governmental charges imposed upon or against the Company or its Subsidiaries or
their respective properties, or any part thereof or upon the income or profits
therefrom, in each case before the same become delinquent and before penalties
accrue thereon, as well as all claims for labor, materials or supplies which if
unpaid might by law or statute become a lien, claim, charge or encumbrance upon
any of its property or any property of any of its Subsidiaries, unless and to
the extent that the same are being contested in good faith and by appropriate
proceedings diligently prosecuted and the Company and its Subsidiaries have set
aside on their books adequate reserves with respect thereto.
5.1.9 RESTRICTIVE AGREEMENT. From and after the Effective Date,
neither the Company nor any of its Subsidiaries will be a party to any
agreement, instrument or understanding which by its terms would restrict the
Company's performance of its obligations pursuant to this Agreement, the
Certificate of Incorporation or any of the Related Documents.
5.1.10 SERIES A PREFERRED STOCK AND WARRANTS AND RELATED MATTERS.
(a) The Company agrees that all shares of Common Stock that may be
issued upon conversion of the Series A Preferred Stock or upon exercise of the
Warrants will, upon issuance, be duly and validly authorized and issued, fully
paid and nonassessable, and free and clear from all rights, taxes, liens,
claims, charges and encumbrances.
(b) The Company shall pay when due and payable any and all
federal, state, local, transfer, documentary, stamp and other taxes or charges,
if any, attributable to the initial issuance or delivery of any shares of
Common Stock or certificates therefor issuable upon conversion of the Series A
Preferred Stock or upon exercise of the Warrants, other than any taxes measured
or based upon the net income of any Person other than the Company.
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(c) The Company shall at all times have authorized and reserved,
free from preemptive or other rights or claims, a sufficient number of shares
of Common Stock to provide for the conversion of the Series A Preferred Stock
and the exercise of the Warrants. The Company further agrees that if any shares
of its Capital Stock to be reserved for the purpose of the issuance of shares
upon the conversion of the Series A Preferred Stock or upon exercise of the
Warrants require registration with or approval of any Governmental Authority
under any applicable law before such shares may be validly issued or delivered
upon conversion or exercise, then the Company shall in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be.
(d) The Company shall comply in all respects with its Certificate
of Incorporation and by-laws, including, without limitation, Article Fourth,
Section 7(e) of the Certificate of Incorporation.
(e) So long as the Common Stock issuable upon the conversion of
the Series A Preferred Stock may be listed on any national securities exchange
or eligible for trading on NASDAQ (or any other quotation system operated by a
national securities association), the Company covenants and agrees that it
shall take all such action as may be necessary to cause all shares reserved for
such issuance to be listed as expeditiously as reasonably possible on such
exchange or to be made so eligible as expeditiously as possible upon official
notice of issuance upon such exercise.
5.2 COVENANTS AND AGREEMENTS OF THE EXISTING SHAREHOLDERS.
(a) For the period beginning on the Effective Date and ending five
(5) years thereafter (the "Term"), the Existing Shareholders and their
respective Affiliates shall not, directly or indirectly, own, manage, operate,
join or Control or participate (or serve as a consultant or in a similar
position) in the ownership, management, operation or Control of, any business,
entity, firm, partnership, corporation or other Person, whether private,
governmental or quasi-governmental, other than the Company or any of its
Subsidiaries, which is engaged, directly or indirectly, anywhere in North
America and/or Europe, in the business of developing, manufacturing, marketing,
selling and/or distributing breath alcohol ignition interlock devices and
related products.
(b) During the Term, the Existing Shareholders and their
respective Affiliates shall refrain from, directly, indirectly or as an agent
on behalf of or in conjunction with any Person, soliciting (i) or encouraging
any employee of the Company or any of its Subsidiaries who is employed in an
executive, managerial, administrative, technical or professional capacity or
who possesses Confidential Material to leave the employment of the Company or
such Subsidiary or (ii) any customer of the Company or any of its Subsidiaries
on behalf of any Person other than the Company or any such Subsidiary.
(c) Each of the Existing Shareholders has had, and may be expected
in the future to have, access to Confidential Material. All such Confidential
Material is considered secret and has been and/or will be disclosed to each
such Existing Shareholder in confidence, and each Existing Shareholder
acknowledges that, as a consequence of his
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employment and position with the Company, he has had access to and became
acquainted with Confidential Material. Except in the performance of his duties
as a director, officer or consultant of the Company, each Existing Shareholder
shall not, during the Term and at all times thereafter, directly or indirectly
for any reason whatsoever, disclose or use any such Confidential Material. All
records, files, drawings, documents, equipment and other tangible items,
wherever located, relating in any way to or containing Confidential Material,
which any such Existing Shareholder has prepared, used or encountered or shall
in the future prepare, use or encounter, shall be and remain the Company's sole
and exclusive property and shall be included in the Confidential Material.
Whenever requested by the Company, each Existing Shareholder shall promptly
deliver to the Company any and all of the Confidential Material and copies
thereof, not previously delivered to the Company, that may be in the possession
or under the control of such Existing Shareholder. The foregoing restrictions
shall not apply to the use, divulgence, disclosure or grant of access to
Confidential Material to the extent, but only to the extent, (i) such
Confidential Material has been publicly disclosed (not due to a breach by such
Existing Shareholder of his obligations hereunder or by breach of any other
Person of a fiduciary or confidential obligation to the Company) or (ii) such
Existing Shareholder is required to disclose Confidential Material by or to any
court of competent jurisdiction or any governmental or quasi-governmental
agency, authority or instrumentality of competent jurisdiction, provided that
such Existing Shareholder shall, prior to any such disclosure, immediately
notify the Company of such requirement and provided, further, that the Company
shall have the right, at its expense, to object to such disclosures and to seek
confidential treatment of any Confidential Material to be so disclosed on such
terms as it shall determine.
(d) In the case of each registration of any underwritten primary
offering initiated by the Company (other than any registration by the Company
on Form S-4 or Form S-8 (or any successor or substantially similar form), or
the registration of (A) an employee stock option, stock purchase or
compensation plan or of securities issued or issuable pursuant to any such plan
or (B) a dividend reinvestment plan) or any underwritten secondary offering
initiated at the request of any other Person (including, without limitation,
any demand registration initiated by the Investor or an Other Approved Holder
(as defined in the Registration Rights Agreement) under the Registration Rights
Agreement or otherwise, whether or not shares of Capital Stock of the Company
will be included by the Company in any such offering), each Existing
Shareholder severally agrees, if and to the extent requested in writing by the
managing underwriter or underwriters administering such offering as promptly as
reasonably practicable prior to the commencement of the ten (10)-day period
referred to below, not to effect any public Transfer of any Capital Stock of
the Company except as part of such underwritten registration, during the period
beginning ten (10) days prior to the effective date of the applicable
registration statement relating to such underwritten offering and ending on the
earlier of (i) ninety (90) days after such effective date and (ii) the date
such Transfer is permitted by such managing underwriter or underwriters. The
provisions of this paragraph (b) shall (x) be in addition to, and shall not in
any way limit the application of, any other provision of this Agreement and (y)
remain in full force and effect for so long as the Registration Rights
Agreement is in effect, notwithstanding the earlier termination or expiration
of this Agreement.
5.3 TERMINATION OF CURRENT SHAREHOLDERS' AGREEMENTS. Each of the
Existing Shareholders and the Company agree that all existing shareholders'
agreements among
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or between such parties or any of them in relation to the Company and/or its
Capital Stock are hereby terminated and superseded and replaced by this
Agreement.
5.4 WAIVERS BY THE INVESTOR. The parties hereto agree that the
Investor may from time to time in its sole discretion waive any or all of its
rights, privileges or remedies hereunder with respect to any Person or Persons,
subject to Section 7.2 hereof.
ARTICLE VI
EFFECTIVE DATE; TERM; TERMINATION
6.1 EFFECTIVE DATE. This Agreement shall become effective on the
Effective Date.
6.2 TERM. The obligations of each party hereunder shall remain binding
upon such party until such time as:
(a) this Agreement has terminated pursuant to Section 6.3 hereof; or
(b) such party has Transferred all of its Capital Stock in the Company
in accordance with the terms of this Agreement and the by-laws of the Company
and is in compliance with its obligations under this Agreement.
6.3 TERMINATION. Except as otherwise expressly provided herein, this
Agreement shall terminate and all rights and obligations hereunder shall cease,
upon the first to occur of any of the following events:
(i) the date that is ten (10) years after the Effective Date; or
(ii) the voluntary dissolution of the Company; or
(iii) the written agreement of each of the parties hereto to such
termination; or
(iv) (x) there ceases to be at least 250,000 shares of Series A
Preferred Stock outstanding (as adjusted for stock splits, stock dividends,
stock combinations, recapitalizations and like occurrences) and (y) the
Investor ceases to own at least 166,666 shares of Common Stock (assuming,
for this purpose only, that all Capital Stock of the Company owned by the
Investor that is convertible or exercisable into or exchangeable for Common
Stock has been so converted, exercised or exchanged by the Investor in full
and as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences).
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ARTICLE VII
MISCELLANEOUS
7.1 ENTIRE AGREEMENT. This Agreement, together with the other
agreements, instruments and documents expressly referred to herein, constitute
the entire agreement of the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings with
respect thereto, whether written or oral.
7.2 NO WAIVER; MODIFICATIONS IN WRITING. No failure or delay by a
party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to any
party at law or in equity or otherwise. No waiver of or consent to any
departure by a party from any provision of this Agreement shall be effective
unless signed in writing by the parties entitled to the benefit thereof. No
amendment, modification or termination of any provision of this Agreement shall
be effective unless signed in writing by all parties. Any amendment, supplement
or modification of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure from the terms of
any provision of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which made or given.
7.3 NOTICES. All notices, demands and other communications provided
for hereunder shall be in writing, shall be given by registered or certified
mail, return receipt requested, telegram, telecopy, courier service or personal
delivery, addressed
(i) to the Company or any Existing Shareholder as follows:
Alcohol Sensors International, Ltd.
11 Oval Drive
Islandia, New York 11772
Attention: Robert B. Whitney, President
Telecopy: (516) 342-1550
with a copy to:
Berger & Paul
630 Third Avenue
New York, New York 10017
Attention: Harold W. Paul
Telecopy: (212) 661-7060
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(ii) to the Investor as follows:
American International Insurance Company
505 Carr Road
Wilmington, Delaware 19809
Attention: Ernest Hanson
Telecopy: (302) 762-7451
with copies to:
American International Group, Inc.
70 Pine Street
New York, New York 10270
Attention: Florence A. Davis
Telecopy: (212) 785-1584
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Paul S. Pearlman
Telecopy: (212) 715-8000
(iii) to any other Shareholder as specified by such Person in
writing to each party hereto,
or to such other address as any party shall designate in writing, and shall be
deemed given when received.
7.4 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together,
shall constitute but one and the same Agreement.
7.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of the
parties under this Agreement may not be assigned or otherwise transferred to
any other Person, except (i) with the prior written consent of the other
parties hereto and (ii) in connection with a Transfer of Capital Stock of the
Company by a Shareholder made in compliance with all of the provisions of this
Agreement. Except as expressly provided in this Agreement, this Agreement shall
not be construed so as to confer any right or benefit upon any Person other
than the parties to this Agreement and their respective successors, permitted
assigns, heirs and personal representatives. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors, permitted assigns, heirs and personal representatives.
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7.6 GOVERNING LAW. This Agreement shall be deemed to be a contract
made under and shall be governed by and construed in accordance with the
internal laws of the State of New York without reference to the principles of
conflict of laws.
7.7 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Any suit, action
or proceeding arising out of or relating to this Agreement, the Related
Documents or the transactions contemplated hereby or thereby may be instituted
in any Federal court situated in the State of New York or any state court of
the State of New York in each case, in the Borough of Manhattan, City of New
York, and each party agrees not to assert, by way of motion, as a defense or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement, the Related Documents
or the subject matter hereof or thereof may not be enforced in or by such
court. Each party further irrevocably submits to the jurisdiction of such court
in any such suit, action or proceeding. Any and all service of process and any
other notice in any such suit, action or proceeding shall be effective against
any party if given personally or by registered or certified mail, return
receipt requested, or by any other means of mail that requires a signed
receipt, postage fully prepaid, mailed to such party as herein provided.
Nothing herein contained shall be deemed to affect the right of any party to
serve process in any manner permitted by law or to commence legal proceedings
or otherwise proceed against any other party in any other jurisdiction.
7.8 FURTHER ASSURANCES. Each of the parties hereto shall execute and
deliver such documents, instruments and agreements and take such further
actions as may be reasonably required or desirable to carry out the provisions
of this Agreement, the Related Documents and the transactions contemplated
hereby and thereby, and each of the parties hereto shall cooperate with each
other in connection with the foregoing.
7.9 SPECIFIC PERFORMANCE. The parties acknowledge that irreparable
damage would occur to the Investor in the event that any of the provisions of
this Agreement or any of the Related Documents were not performed by the other
parties hereto in accordance with their specific terms or were otherwise
breached by such other parties and that money damages would not provide an
adequate remedy to the Investor. It is accordingly agreed that the Investor
shall be entitled to an injunction and other equitable remedies to prevent
breaches by the other parties hereto of this Agreement and the Related
Documents, and to enforce specifically the terms and provisions hereof or
thereof in any court of the United States or any state thereof having
jurisdiction, this being in addition to any other remedy to which the Investor
may be entitled at law or in equity.
7.10 SEVERABILITY OF PROVISIONS. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. If any provision in Section 5.2 hereof is held to be invalid or
unenforceable because of the scope or duration of or the area covered by such
provision, the parties hereto agree that the court making such determination
shall reduce the scope, duration and/or area of such provision (and
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shall substitute appropriate provisions for any such invalid or unenforceable
provisions) in order to make such provision enforceable to the fullest extent
permitted by law and/or shall delete specific words and phrases, and such
modified provision shall then be enforceable and shall be enforced. The parties
hereto recognize that if, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants contained in Section 5.2 hereof, then
that invalid or unenforceable covenant contained in Section 5.2 hereof shall be
deemed eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants hereof to be enforced. In the event that any court
determines that the time period or the area, or both, are unreasonable and that
any of the covenants in Section 5.2 hereof is to that extent invalid or
unenforceable, the parties hereto agree that such covenants will remain in full
force and effect, first, for the greatest time period, and second, in the
greatest geographical area that would not render them enforceable.
7.11 HEADINGS. The Article and Section headings used or contained in
this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
7.12 COSTS AND EXPENSES. The respective parties hereto shall pay all
costs and expenses that each respectively incurs with respect to the
negotiation, execution and delivery of this Agreement and the Related
Documents.
7.13 WAIVER OF JURY TRIAL. The parties hereto hereby irrevocably waive
all right to a trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement, the Related Documents or the transactions
contemplated hereby or thereby.
7.14 PUBLICITY. The parties agree that no public release or
announcement concerning this Agreement or any of the Related Documents or the
transactions contemplated hereby or thereby shall be made without advance
review and approval by the Company and the Investor, except as otherwise
required by applicable law.
7.15 NATURE OF AGREEMENTS. The covenants and agreements of the parties
in this Agreement are several and not joint covenants and agreements, unless
otherwise expressly specified herein.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement or caused this Agreement to be duly executed by their respective
officers or representatives thereunto duly authorized as of the day and year
first written above.
/s/ Robert B. Whitney
-----------------------------
ROBERT B. WHITNEY
/s/ Steven A. Martello
-----------------------------
STEVEN A. MARTELLO
/s/ John T. Ruocco
-----------------------------
JOHN T. RUOCCO
/s/ Michael A. Sylvester
-----------------------------
MICHAEL A. SYLVESTER
/s/ Joseph M. Lively
-----------------------------
JOSEPH M. LIVELY
AMERICAN INTERNATIONAL INSURANCE
COMPANY
By: /s/ Edward E. Matthews
--------------------------
Name: Edward E. Matthews
Title: Senior Vice President & Director
ALCOHOL SENSORS INTERNATIONAL, LTD.
By: /s/ Robert B. Whitney
--------------------------
Name: Robert B. Whitney
Title: President & CEO
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SCHEDULE I
SHAREHOLDERS' OWNERSHIP
OF CAPITAL STOCK
Percentage
No. of Shares of Ownership of All
Options of the Company's
No. of Shares Exercisable for Capital Stock
of Common Common Stock (on a Fully
Name of Shareholder Stock Owned Owned Diluted Basis)
- ------------------- ------------- ---------------- ----------------
Robert B. Whitney 646,082 5.31%
Steven A. Martello 150,000 1.23%
John T. Ruocco 646,082 5.31%
Michael A. Sylvester 646,082 5.31%
Joseph M. Lively 0 140,000 1.15%
Ariel Enterprises 180,000 100,000 2.30%
Exhibit A: Certificate of Incorporation of the Company
Schedule 4.1(d): Certain Legal Matters