-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E+neVDGtzlZSOjC5Qu+UbS94Viv0h10iXprntpqjiipcsP6dhiA8YW42SK9M918k z9QXtSTszV/i3YJOpH2cug== 0001012975-06-000258.txt : 20060613 0001012975-06-000258.hdr.sgml : 20060613 20060612180823 ACCESSION NUMBER: 0001012975-06-000258 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20060613 DATE AS OF CHANGE: 20060612 GROUP MEMBERS: HARBERT MANAGEMENT CORPORATION GROUP MEMBERS: HARBINGER CAPITAL PARTNERS OFFSHORE MANAGER, L.L.C. GROUP MEMBERS: HMC INVESTORS, L.L.C. GROUP MEMBERS: MICHAEL D. LUCE GROUP MEMBERS: PHILIP FALCONE GROUP MEMBERS: RAYMOND J. HARBERT SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SALTON INC CENTRAL INDEX KEY: 0000878280 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 363777824 STATE OF INCORPORATION: DE FISCAL YEAR END: 0626 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-42085 FILM NUMBER: 06900823 BUSINESS ADDRESS: STREET 1: 1955 FIELD COURT STREET 2: - CITY: LAKE FOREST STATE: IL ZIP: 60045 BUSINESS PHONE: 8478034600 MAIL ADDRESS: STREET 1: 1955 FIELD COURT CITY: LAKE FOREST STATE: IL ZIP: 60045 FORMER COMPANY: FORMER CONFORMED NAME: SALTON MAXIM HOUSEWARES INC DATE OF NAME CHANGE: 19930328 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. CENTRAL INDEX KEY: 0001233563 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O INTERNATIONAL FUND SERVICES STREET 2: THIRD FL BISHOP SQUARE REDMONDS HILL CITY: DUBLIN IRELAND STATE: L2 ZIP: 00000 BUSINESS PHONE: 2125216972 MAIL ADDRESS: STREET 1: C/O INTERNATIONAL FUND SERVICES STREET 2: THIRD FL BISHOP SQUARE REDMONDS HILL CITY: DUBLIN IRELAND STATE: L2 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: HARBERT DISTRESSED INVESTMENT MASTER FUND LTD DATE OF NAME CHANGE: 20030516 SC 13D 1 e8587495.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- SCHEDULE 13D (RULE 13D-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(A) SALTON, INC. . ---------------------------------------- (Name of Issuer) COMMON STOCK, $0.01 PAR VALUE -------------------------------- (Title of Class of Securities) 795757103 ----------------------------- (CUSIP Number) ----------------------------------------------------------------------------- Joel Piassick One Riverchase Parkway South Birmingham, Alabama 35244 - ------------------------------------------------------------------------------ (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) JUNE 2, 2006 -------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13(d)-1(f) or 13(d)- 1(g), check the following box [__]. NOTE. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. SEE Rule 13d-7(b) for other parties to whom copies are to be sent. (Continued on following pages) SCHEDULE 13D - ------------------------- CUSIP NO. 795757103 - ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [_] (B) [x] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------- EACH 8 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 2,647,067 ------------------------------------------------------- 9 0 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,647,067 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,647,067 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.54% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- - ------------------------- CUSIP NO. 795757103 - ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS HARBINGER CAPITAL PARTNERS OFFSHORE MANAGER, L.L.C. S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [_] (B) [x] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING 2,647,067 PERSON WITH ------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,647,067 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,647,067 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.54% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- - ------------------------- CUSIP NO. 795757103 - ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS HMC INVESTORS, L.L.C. S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [_] (B) [x] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------- EACH 8 REPORTING 2,647,067 PERSON WITH ------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,647,067 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,647,067 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.54% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- - ------------------------- CUSIP NO. 795757103 - ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS HARBERT MANAGEMENT CORPORATION S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [_] (B) [x] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION ALABAMA - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING 2,647,067 PERSON WITH ------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,647,067 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,647,067 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.54% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- - ------------------------- CUSIP NO. 795757103 - ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS PHILIP FALCONE S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [_] (B) [x] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING 2,647,067 PERSON WITH ------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,647,067 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,647,067 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.54% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- - ------------------------- CUSIP NO. 795757103 - ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS RAYMOND J. HARBERT S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [_] (B) [x] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH 2,647,067 ------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,647,067 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,647,067 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.54% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- - ------------------------- CUSIP NO. 795757103 - ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS MICHAEL D. LUCE S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Intentionally Omitted) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [_] (B) [x] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 U.S.A. - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY ------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING 2,647,067 PERSON WITH ------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 2,647,067 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,647,067 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.54% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- STATEMENT ON SCHEDULE 13D PURSUANT TO RULE 13D-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D (this "Statement") relates to the beneficial ownership of Common Stock, par value $0.01 per share (the "Shares"), of Salton, Inc., a Delaware corporation (the "Issuer"). The principal executive offices of the Issuer are located at 1955 Field Court, Lake Forest, Illinois 60045. ITEM 2. IDENTITY AND BACKGROUND. (a) - (c) and (f) This statement is being filed by Harbinger Capital Partners Master Fund I, Ltd. (the "Master Fund"), Harbinger Capital Partners Offshore Manager, L.L.C. ("Harbinger Management"), the investment manager of the Master Fund, HMC Investors, L.L.C., its managing member ("HMC Investors"), Harbert Management Corporation ("HMC"), the managing member of HMC Investors, Philip Falcone, a member of HMC and the portfolio manager of the Master Fund, Raymond J. Harbert, a member of HMC, and Michael D. Luce, a member of HMC (each of the Master Fund, Harbinger Management, HMC Investors, HMC, Philip Falcone, Raymond J. Harbert and Michael D. Luce may be referred to herein as a "Reporting Person" and collectively may be referred to as "Reporting Persons"). The Master Fund is a Cayman Islands corporation with its principal business address at c/o International Fund Services (Ireland) Limited, Third Floor, Bishop's Square, Redmond's Hill, Dublin 2, Ireland. Each of Harbinger Management and HMC Investors is a Delaware limited liability company. HMC is an Alabama corporation. Each of Philip Falcone, Raymond J. Harbert and Michael D. Luce is a United States citizen. The principal business address for each of HMC Management, HMC Investors, HMC, Raymond J. Harbert and Michael D. Luce is One Riverchase Parkway South, Birmingham, Alabama 35244. The principal business address for Philip Falcone is 555 Madison Avenue, 16th Floor, New York, New York 10022. (d) None of Philip Falcone, Raymond J. Harbert or Michael D. Luce has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons have, during the past five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding were or are subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. As of the date hereof, the Master Fund may be deemed to beneficially own, 2,647,067 of Shares. As of the date hereof, HMC Management may be deemed to beneficially own, 2,647,067 of Shares. As of the date hereof, HMC Investors may be deemed to beneficially own, 2,647,067 of Shares. As of the date hereof, HMC may be deemed to beneficially own, 2,647,067 of Shares. As of the date hereof, Philip Falcone may be deemed to beneficially own, 2,647,067 of Shares. As of the date hereof, Raymond J. Harbert may be deemed to beneficially own, 2,647,067 of Shares. As of the date hereof, Michael D. Luce may be deemed to beneficially own, 2,647,067 of Shares. No borrowed funds were used to purchase the Shares, other than any borrowed funds used for working capital purposes in the ordinary course of business. ITEM 4. PURPOSE OF TRANSACTION. The Reporting Persons recognize the strength of the Issuer's portfolio of products and the well recognized brand names. The Reporting Persons are committed to working with the Issuer to capitalize on these strengths and enhance stockholder value. Accordingly, among other things, (a) Mr. Maura (see Item 6 regarding Mr. Maura) intends to communicate with the management of the Issuer, its other directors, or both, (b) Mr. Maura may communicate with the Master Fund, (c) the Master Fund may, in its capacity as a stockholder, communicate with Mr. Maura, the other directors, the management of the Issuer or some combination of the foregoing,(d) the Master Fund may seek to acquire or dispose of additional securities issued by the Issuer, (e) Mr. Maura intends to play an active role as a director, (f) Mr. Maura intends, and the Master Fund may seek, to play a constructive role in assisting the Issuer to enhance stockholder value and (g) consistent with his fiduciary duties, Mr. Maura is evaluating and may pursue, and the Master Fund may pursue, actions intended to enhance stockholder value, which may include the sale of Issuer assets to enhance liquidity; a restructuring of the Issuer's indebtedness; and changes in the present board of directors and/or management of the Issuer. The Reporting Persons further reserve the right to act in concert with any other stockholders of the Issuer, or other persons, for a common purpose should it determine to do so, and/or to recommend courses of action to the Issuer's management, the Issuer's Board of Directors, the Issuer's creditors, the Issuer's stockholders and others. Other than as set forth above, the Reporting Persons have no plan or proposal as of the date of this filing which, other than as expressly set forth above, relates to, or would result in, any of the actions enumerated in Item 4 of the instructions to Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a, b) As of the date hereof and upon conversion of the Series A Voting Convertible Preferred Stock of Issuer (the "Preferred Stock") purchased by the Master Fund, the Master Fund may be deemed to be the beneficial owner of 2,647,067 Shares, constituting 15.54% of the Shares of Issuer, based upon 14,386,390 Shares outstanding as of June 2, 2006 plus 2,647,067 Shares if the 30,000 shares of Preferred Stock purchased by the Master Fund are converted into Shares. The Master Fund has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 2,647,067 Shares; has sole power to dispose or direct the disposition of 0 Shares; and has shared power to dispose or direct the disposition of 2,647,067 Shares. As of the date hereof, the Master Fund also has a short position of 709,560 Shares. (a, b) As of the date hereof and upon conversion of the Preferred Stock purchased by the Master Fund, HMC Management may be deemed to be the beneficial owner of 2,647,067 Shares, constituting 15.54% of the Shares of Issuer, based upon 14,386,390 Shares outstanding as of June 2, 2006 plus 2,647,067 Shares if the 30,000 shares of Preferred Stock purchased by the Master Fund are converted into Shares. HMC Management has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 2,647,067 Shares; has sole power to dispose or direct the disposition of 0 Shares; and has shared power to dispose or direct the disposition of 2,647,067 Shares. HMC Management specifically disclaims beneficial ownership in the Shares reported herein except to the extent of its pecuniary interest therein. (a, b) As of the date hereof and upon conversion of the Preferred Stock purchased by the Master Fund, HMC Investors may be deemed to be the beneficial owner of 2,647,067 Shares, constituting 15.54% of the Shares of Issuer, based upon 14,386,390 Shares outstanding as of June 2, 2006 plus 2,647,067 Shares if the 30,000 shares of Preferred Stock purchased by the Master Fund are converted into Shares. HMC Investors has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 2,647,067 Shares; has sole power to dispose or direct the disposition of 0 Shares; and has shared power to dispose or direct the disposition of 2,647,067 Shares. HMC Investors specifically disclaims beneficial ownership in the Shares reported herein except to the extent of its pecuniary interest therein. (a, b) As of the date hereof and upon conversion of the Preferred Stock purchased by the Master Fund, HMC may be deemed to be the beneficial owner of 2,647,067 Shares, constituting 15.54% of the Shares of Issuer, based upon 14,386,390 Shares outstanding as of June 2, 2006 plus 2,647,067 Shares if the 30,000 shares of Preferred Stock purchased by the Master Fund are converted into Shares. HMC has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 2,647,067 Shares; has sole power to dispose or direct the disposition of 0 Shares; and has shared power to dispose or direct the disposition of 2,647,067 Shares. HMC specifically disclaims beneficial ownership in the Shares reported herein except to the extent of its pecuniary interest therein. (a, b) As of the date hereof and upon conversion of the Preferred Stock purchased by the Master Fund, Philip Falcone may be deemed to be the beneficial owner of 2,647,067 Shares, constituting 15.54% of the Shares of Issuer, based upon 14,386,390 Shares outstanding as of June 2, 2006 plus 2,647,067 Shares if the 30,000 shares of Preferred Stock purchased by the Master Fund are converted into Shares. Mr. Falcone has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 2,647,067 Shares; has sole power to dispose or direct the disposition of 0 Shares; and has shared power to dispose or direct the disposition of 2,647,067 Shares. Mr. Falcone specifically disclaims beneficial ownership in the Shares reported herein except to the extent of his pecuniary interest therein. (a, b) As of the date hereof and upon conversion of the Preferred Stock purchased by the Master Fund, Raymond J. Harbert may be deemed to be the beneficial owner of 2,647,067 Shares, constituting 15.54% of the Shares of Issuer, based upon 14,386,390 Shares outstanding as of June 2, 2006 plus 2,647,067 Shares if the 30,000 shares of Preferred Stock purchased by the Master Fund are converted into Shares. Mr. Harbert has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 2,647,067 Shares; has sole power to dispose or direct the disposition of 0 Shares; and has shared power to dispose or direct the disposition of 2,647,067 Shares. Mr. Harbert specifically disclaims beneficial ownership in the Shares reported herein except to the extent of his pecuniary interest therein. (a, b) As of the date hereof and upon conversion of the Preferred Stock purchased by the Master Fund, Michael D. Luce may be deemed to be the beneficial owner of 2,647,067 Shares, constituting 15.54% of the Shares of Issuer, based upon 14,386,390 Shares outstanding as of June 2, 2006 plus 2,647,067 Shares if the 30,000 shares of Preferred Stock purchased by the Master Fund are converted into Shares. Mr. Luce has the sole power to vote or direct the vote of 0 Shares; has the shared power to vote or direct the vote of 2,647,067 Shares; has sole power to dispose or direct the disposition of 0 Shares; and has shared power to dispose or direct the disposition of 2,647,067 Shares. Mr. Luce specifically disclaims beneficial ownership in the Shares reported herein except to the extent of his pecuniary interest therein. (c) The trading dates, number of Shares purchased and sold and price per share for all transactions in the Shares in the past 60 days by the Reporting Persons are set forth in Exhibit B. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. On June 2, 2006, the Master Fund entered into a Securities Purchase Agreement pursuant to which it purchased (a) 9,234 shares of Issuer's Preferred Stock from Centre Capital Investors II, LP for $4,617,000, (b) 3,004 shares of Preferred Stock from Centre Capital Tax -Exempt Investors II, L.P. for $1,502,000, (c) 2,009 shares of Preferred Stock from Centre Capital Offshore Investors II, L.P. for $1,004,500, (d) 142 shares of Preferred Stock from Centre Parallel Management Partners, L.P. for $71,000, (e) 1,588 shares of Preferred Stock from Centre Partners Coinvestment, L.P. for $794,000 and (f) 14,023 shares of Preferred Stock from State Board of Administration of Florida. In the aggregate, the Master Fund purchased 30,000 shares of Preferred Stock from the sellers (out of the 40,000 shares of Preferred Stock that the sellers collectively owned) for $15,000,000. Each share of Preferred Stock is convertible at any time (subject to mandatory conversion on September 15, 2008) into that number of Shares obtained by dividing $1,000 by the conversion price in effect at such time. As of the date hereof, the conversion price is $11.3333. The 30,000 shares of Preferred Stock are convertible into 2,647,067 Shares. The Certificate of Designation of the Preferred Stock is filed as Exhibit 3.2 to the Issuer's Form 10-K for the year ended July 3, 2004. Also, on June 2, 2006, the Master Fund and the Issuer executed the Joinder Agreement to the Registration Rights Agreement, pursuant to which the Master Fund became a party to the Registration Rights Agreement, subject to all the rights and obligations thereunder. The Registration Rights Agreement provides the Master Fund with certain registration rights and contains provisions related thereto. The Joinder Agreement to Registration Rights Agreement is attached as Exhibit A to the Securities Purchase Agreement and the Consent and Agreement (which, among other things, modifies the Registration Rights Agreement) is attached as Exhibit B to the Securities Purchase Agreement. To induce the Master Fund to enter into the Securities Purchase Agreement, on June 2, 2006, the Issuer delivered to the Master Fund an Acknowledgement pursuant to which the Issuer agreed that (a) the present conversion price of the Preferred Stock is $11.3333; (b) the number of outstanding shares of its common stock is 14,386,390; (c) the 30,000 shares of Preferred Stock are convertible into 2,647,067 shares of its common stock, which constitutes approximately 15.54% under the Issuer's Rights Agreement, dated as of June 28, 2004 between the Issuer and UMB Bank, N.A. (the "Rights Plan"); (d) the Master Fund will have the right to designate one director until it no longer owns at least 20,000 shares of Preferred Stock; (e) the Issuer's Board elected David Maura, a consultant to the Master Fund, to the Issuer's Board as a Class II Director, effective immediately after the closing of the purchase of the Preferred Stock; (f) the Issuer will use its reasonable efforts to modify its Rights Plan as to certain designated matters; (g) the Master Fund will not be deemed an "Acquiring Person" under the Rights Plan as a result of signing and becoming a party to the Registration Rights Joinder Agreement; and (h) the purchase will not result in the Master Fund becoming an "Acquiring Person" under the Rights Plan. The Acknowledgment is attached as Exhibit C to the Securities Purchase Agreement. On June 7, 2006 the Issuer filed a Form 8-K disclosing certain amendments to its Rights Plan. The summary of the Securities Purchase Agreement and the Joinder Agreement to the Registration Rights Agreement contained in this Item 6 are each qualified in their entirety by reference to the Securities Purchase Agreement and the Joinder Agreement to the Registration Rights Agreement, respectively, each of which is filed herewith as an exhibit and incorporated herein by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. EXHIBIT DESCRIPTION A Agreement between the Reporting Persons to file jointly B Schedule of Transactions in the Shares of the Issuer C Securities Purchase Agreement, dated June 2, 2006, by and among each of the parties listed on Schedule I annexed thereto and Harbinger Capital Partners Master Fund I, Ltd. D Joinder Agreement to the Registration Rights Agreement, dated June 2, 2006, by and between Salton, Inc. and Harbinger Capital Partners Master Fund I, Ltd. SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Harbinger Capital Partners Master Fund I, Ltd. By: Harbinger Capital Partners Offshore Manager, L.L.C. By: HMC Investors, L.L.C., Managing Member By: /s/ Joel B. Piassick ------------------------ Harbinger Capital Partners Offshore Manager, L.L.C. By: HMC Investors, L.L.C., Managing Member By: /s/ Joel B. Piassick ------------------------ Harbert Management Corporation By: /s/ Joel B. Piassick ------------------------ HMC Investors, L.L.C. By: /s/ Joel B. Piassick ------------------------ /s/ Philip Falcone ------------------------ Philip Falcone /s/ Raymond J. Harbert ------------------------ Raymond J. Harbert /s/ Michael D. Luce ------------------------ Michael D. Luce June 12, 2006 Exhibit A AGREEMENT The undersigned agree that this Schedule 13D dated June 12, 2006 relating to the Common Stock of Salton, Inc. shall be filed on behalf of the undersigned. Harbinger Capital Partners Master Fund I, Ltd. By: Harbinger Capital Partners Offshore Manager, L.L.C. By: HMC Investors, L.L.C., Managing Member By: /s/ Joel B. Piassick ------------------------ Harbinger Capital Partners Offshore Manager, L.L.C. By: HMC Investors, L.L.C., Managing Member By: /s/ Joel B. Piassick ------------------------ Harbert Management Corporation By: /s/ Joel B. Piassick ------------------------ HMC Investors, L.L.C. By: /s/ Joel B. Piassick ------------------------ /s/ Philip Falcone ------------------------ Philip Falcone /s/ Raymond J. Harbert ------------------------ Raymond J. Harbert /s/ Michael D. Luce ------------------------ Michael D. Luce June 12, 2006 Exhibit B TRANSACTIONS IN THE COMMON STOCK, $0.01 PAR VALUE -------------------------------------- TRANSACTIONS BY HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. DATE OF TRANSACTION NUMBER OF SHARES PRICE PER SHARE PURCHASED/SOLD 04/03/06 (33,030) 2.805900 04/04/06 (7,610) 2.790100 04/05/06 (19,740) 2.768800 04/06/06 114,995 3.071500 05/01/06 (4,039) 2.980000 05/01/06 (32,962) 2.980000 05/25/06 41,100 1.957400 05/26/06 13,102 2.426800 05/26/06 82,198 2.426800 05/30/06 61,700 3.048805 05/30/06 51,500 2.452100 05/31/06 54,500 2.527600 06/01/06 48,040 2.986300
EX-99.1 2 e34460.txt SECURITIES PURCHASE AGREEMENT ----------------------------- THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of June 2, 2006, by and among each of the parties listed on Schedule I annexed hereto (each, a "Seller" and collectively, the "Sellers"), and Harbinger Capital Partners Master Fund I, Ltd., a Cayman Islands exempt company (the "Purchaser"). WHEREAS, the Sellers are the beneficial owners of an aggregate of 40,000 shares of Series A Voting Convertible Preferred Stock (the "Preferred Stock") of Salton, Inc., a Delaware corporation (the "Company"); WHEREAS, the Sellers are party to that certain Registration Rights Agreement, dated as of July 15, 1998, among the Company and the Sellers (the "Registration Rights Agreement"); and WHEREAS, the Sellers desire to sell to the Purchaser, and the Purchaser desires to purchase from the Sellers, an aggregate of 30,000 shares of Preferred Stock (the "Purchased Shares") on the terms set forth herein. NOW, THEREFORE, in consideration of the foregoing recitals and the representations, warranties, covenants, and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE 1 SALE AND PURCHASE OF PREFERRED STOCK 1.1 Sale and Purchase of Preferred Stock. At the Closing (as defined below) and on the terms set forth herein, each Seller shall sell and deliver to the Purchaser all of its right, title, and interest in and to an amount of the Purchased Shares owned by such Seller as set forth opposite such Seller's name on Schedule I hereto (which in the aggregate shall equal 30,000 shares of Preferred Stock), and (ii) the Purchaser shall purchase and accept from each such Seller, all right, title, and interest of such Seller in and to such Purchased Shares, free and clear of all mortgages, liens, claims, pledges, security interests, transfer restrictions and other encumbrances ("Liens"), other than restrictions on transfer imposed by applicable securities laws, in each case in the amount as set forth opposite each Seller's name on Schedule I hereto. The closing (the "Closing") of the purchase and sale of the Purchased Shares is taking place on the date hereof concurrently with the execution and delivery of this Agreement. 1.2 Purchase Price. At the Closing, the Purchaser shall pay each Seller an amount in cash set forth opposite such Seller's name on Schedule I hereto (collectively, the "Purchase Price") as consideration for the purchase of the Purchased Shares being purchased from each Seller by the Purchaser hereunder. The Purchase Price payable to each Seller shall be paid by wire transfer of immediately available funds to accounts set forth on Schedule II hereto. 1.3 Deliveries. At the Closing, (i) the Sellers shall deliver to the Purchaser (A) stock certificates representing and evidencing the Preferred Stock owned by the Sellers (in such amounts as set forth opposite each such Seller's name on Schedule I hereto) duly endorsed in blank or with an appropriate stock power in a form reasonably acceptable to Purchaser duly executed by Sellers relating to the transfer of the Purchased Shares contemplated hereby, (B) a copy of the executed resignation letter of both of the Sellers representatives on the Company's Board of Directors and (C) the Acknowledgement attached hereto as Exhibit C duly executed by the Company; and (ii) the Purchaser shall deliver (A) to each Seller the Purchase Price in accordance with Section 1.2 above and (B) to the Company a duly executed counterpart of a Joinder Agreement to the Registration Rights Agreement in the form attached hereto as Exhibit A (the "Joinder Agreement"). The Sellers and the Purchaser shall cooperate with each other to cause the Company and its transfer agent to issue and deliver, as soon as practicable after the date hereof, (i) to Purchaser a stock certificate evidencing and representing the Purchased Shares being purchased by Purchaser hereunder, and (ii) to each Seller a stock certificate representing the shares of Preferred Stock that each Seller will continue to own after giving effect to the transaction contemplated hereby; it being understood that all such certificates delivered to the Purchaser and the Sellers will contain thereon the legends in substantially the form set forth on Schedule III hereto. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS Each Seller hereby represents and warrants to the Purchaser as follows: 2.1 Authorization. Such Seller has the requisite power and authority to execute and deliver this Agreement and to perform the transactions contemplated hereby to be performed by it. The execution and delivery by such Seller of this Agreement and the performance by it of the transactions contemplated hereby to be performed by it have been duly authorized on the part of such Seller. This Agreement has been duly executed and delivered by such Seller and, assuming the due execution and delivery of this Agreement by the Purchaser, constitutes a valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms. 2.2 Consents and Approvals. Other than as required under this Agreement or by the Securities Exchange Act of 1934, as amended, no consent, approval, waiver, order, or authorization of, or registration, declaration, or filing with, or notice to, the Company, any holder or third party, any federal, state, or foreign governmental agency, authority, or body or any instrumentality or political subdivision thereof is required to be obtained or made by such Seller in connection with the execution and delivery of this Agreement by such Seller, the performance by such Seller of the transactions contemplated hereby to be performed by it, or the consummation of the transactions contemplated hereby. 2.3 Title to Preferred Stock. Such Seller is the beneficial owner of, and has good title to, the Purchased Shares set forth opposite such Seller's name on Schedule I hereto free and clear of all Liens, other than restrictions on transfer imposed by applicable securities laws. Upon the consummation of the transactions contemplated hereby and assuming that the Purchaser has not otherwise received notice of any "adverse claim" (as defined in the Uniform Commercial 2 Code of the State of New York) with respect to the Purchased Shares, each Seller will transfer good and valid title to the Purchased Shares, free and clear of all Liens, other than restrictions on transfer imposed by applicable securities laws. Other than as set forth on Schedule IV hereto, there are no written agreements, rights or understandings of any kind affecting the Purchased Shares to which such Seller is a party. No demand rights by any Seller have been exercised under the certain Registration Rights Agreement, a true, complete (excluding schedules and exhibits thereto) and correct copy of which has been provided to the Purchaser by the Sellers. The Purchased Shares were initially acquired by Sellers on July 28, 1998, and have been continuously held since such date. 2.4 No Conflicts. The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the performance of such Seller's obligations hereunder will not conflict with, or result in any violation of or default under (a) any provision of any governing instrument applicable to such Seller, (b) any material agreement or other instrument to which such Seller is a party or by which such Seller or any of its properties is bound, or (c) to such Seller's knowledge, any material foreign or domestic permit, franchise, judgment, decree, statute, rule or regulation applicable to such Seller or such Seller's business or properties. 2.5 Evaluation. Such Seller has conducted its own independent evaluation and made its own analysis as it has deemed necessary, prudent or advisable in order for it to make its own determination and decision to transfer the Purchased Shares, enter into this Agreement and consummate the transactions contemplated hereby. Such Seller is entering into this Agreement and the transactions contemplated hereby relying entirely upon such independent evaluation and analysis and without reliance upon any oral or written representations and warranties of any kind or nature by the Purchaser (other than as provided in Section 3 below). 2.6 Value. Such Seller understands and acknowledges that the value of the Purchased Shares may be worth more or less than the aggregate consideration being delivered by the Purchaser in connection with the transactions contemplated by this Agreement. 2.7 Conversion Price. The Conversion Price (as defined in the Company's Certificate of Designation of Series A Voting Convertible Preferred Stock (the "Series A Certificate of Designations")) as of the date of this Agreement is $11.3333 (rounded to the nearest one hundredth). 2.8 Consent Agreement. The Consent Agreement (as defined below) constitutes a legal, valid and binding obligation of each Seller, enforceable against such Seller in accordance with its terms, and is in full force and effect with respect to each such Seller, and, following execution of this Agreement, will continue to constitute a legal, valid and binding obligation of each Seller, enforceable against such Seller in accordance with its terms. To such Seller's knowledge, no party to the Consent Agreement is in breach or default thereof and no event has occurred that with notice or lapse of time would constitute a breach or default, or permit termination or modification of the Consent Agreement. Such Seller has not received written notice from any party to the Consent Agreement that such party has repudiated any provision thereof. Upon consummation of the transactions contemplated by the Purchase Agreement, the Purchaser shall be deemed a "Transferee" (as defined in the Consent Agreement) under Section 8 3 of the Consent Agreement. Each Seller shall take such requisite actions to support any of the Company's obligations under Section 8 of the Consent Agreement with regard to the election of the Purchaser's designee to the Company's Board of Directors. 2.9 Stock Purchase Agreement. The Purchaser shall not, solely as a result of the consummation of the transactions contemplated by this Agreement, become subject to provisions of Section 7(a) of the Stock Purchase Agreement, dated as of July 15, 1998, by and among the Sellers and the Company (the "Stock Purchase Agreement"). The Sellers have provided the Purchaser with a true, complete (excluding schedules and exhibits thereto) and correct copy of the Stock Purchase Agreement. 2.10 No Other Representations. The representations and warranties of such Seller contained in this Article 2 (or otherwise expressly made by such Seller in this Agreement) constitute the sole and exclusive representations and warranties of such Seller to the Purchaser in connection with this Agreement and the transactions contemplated hereby, and Purchaser acknowledges that all other representations and warranties are expressly disclaimed and may not be relied upon or serve as a basis for a claim against such Seller. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser hereby represents and warrants to the Sellers as follows: 3.1 Authorization. The Purchaser has the requisite power and authority to execute and deliver this Agreement and to perform the transactions contemplated hereby to be performed by it. The execution and delivery by the Purchaser of this Agreement and the performance by it of the transactions contemplated hereby to be performed by it have been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and, assuming the due execution and delivery of this Agreement by the Sellers, constitutes a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms. 3.2 Consents and Approvals. No consent, approval, waiver, order, or authorization of, or registration, declaration, or filing with, or notice to, any federal, state, or foreign governmental agency, authority, or body or any instrumentality or political subdivision thereof is required to be obtained or made by the Purchaser in connection with the execution and delivery of this Agreement by the Purchaser, the performance by the Purchaser of the transactions contemplated hereby to be performed by it, or the consummation of the transactions contemplated hereby other than as may be required by applicable securities laws. 3.3 Securities Law Matters. The Purchaser: (a) is an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3), or (7) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act")) and/or a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act); 4 (b) has sufficient knowledge and experience in investment transactions of the type contemplated hereby to evaluate the merits and risks of an investment in the Preferred Stock and is able to bear the risk of loss of its entire investment in the Preferred Stock; (c) is aware that an investment in the Preferred Stock is highly speculative and that there can be no assurance as to what return, if any, there might be; (d) is purchasing the Purchased Shares despite having had extremely limited or no opportunity to ask questions and receive answers from the Sellers or its representatives or from the Company or its representatives, or to conduct a diligence review of the Company or its business, prospects or financial condition, other than its ability to review information that is publicly available about the Company, but has nevertheless freely determined to purchase the Purchased Shares as contemplated hereby and has independently, and without reliance on the Sellers except as otherwise provided herein, and based upon such information as such Purchaser deemed appropriate, made its own analysis of the Company and its respective future financial performance and prospects and the value of the Preferred Stock; (e) has consulted with or has had an opportunity to consult with its legal and tax advisors in respect of the terms of and an investment in the Preferred Stock; (f) is acquiring the Purchased Shares for its own account solely for investment purposes and not with a view to the distribution thereof, without prejudice, however to its rights to sell or otherwise dispose of all or any part of the Purchased Shares under an effective registration statement under the Securities Act and applicable state securities laws, or pursuant to an exemption from such registration available under the Securities Act and applicable state securities laws; (g) understands and acknowledges that Seller is an "affiliate" within the meaning of the Securities Act and, as a result thereof, understands and acknowledges that the Purchased Shares are "restricted" securities and may not be sold, transferred, or otherwise disposed of, except pursuant to an effective registration statement in respect of the Purchased Shares or pursuant to an exemption from the registration requirements of the Securities Act, and further understands that the certificates representing the Purchased Shares will bear a legend reflecting same; (h) understands and acknowledges that Sellers are not making any representation or warranty as to the value or liquidity of the Preferred Stock or the business, condition (financial or otherwise), or prospects of the Company; (i) (1) is proceeding with the transactions contemplated hereby on the assumption that the Sellers may be in possession of material, non-public information concerning the Company and its direct and indirect subsidiaries (the "Company Information") that is not or may not be known to the Purchaser and that the Sellers have not disclosed to the Purchaser and that such Company Information may be material to a reasonable investor, such as Purchaser, when making investment decision, including the decision to enter in this Agreement and purchase the Purchased Shares; (2) is consummating the transactions contemplated hereby with full recognition and acknowledgment that the Sellers are privy to the Company Information, (3) 5 is voluntarily entering into this transaction without the benefit of the Company Information and expressly warrants and represents that (x) except as expressly set forth in Article 2 hereof (or otherwise expressly made by the Sellers in this Agreement), the Sellers have not made, and the Purchaser disclaims the existence of or its reliance on, any representation by the Sellers or their affiliates or representatives concerning the Company or the Purchased Shares, and (y) it is not relying on any disclosure or non-disclosure made or not made with respect to the Company Information, or the completeness thereof, in connection with or arising out of the purchase of the Purchased Shares, and therefore has no claim against the Sellers, with respect to the disclosure or non-disclosure of Company Information; (4) if any such claim may exist, the Purchaser, recognizing its disclaimer of reliance with respect to the Company Information and the Sellers' reliance on such disclaimer as a condition to entering into this transaction, covenants and agrees not to assert it against the Sellers or any of their affiliates or any of their respective officers, directors, shareholders, partners, representatives or agents; and (5) the Sellers shall have no liability, and the Purchaser waives and forever releases any claim that it might have against the Sellers or their affiliates or any of their respective officers, directors, shareholders, partners, representatives or agents, whether under applicable securities law or otherwise, based on the Sellers' knowledge, possession or nondisclosure to the Purchaser of the Company Information; and (j) understands and acknowledges that the Sellers are relying on the representations set forth in this Section 3.3 as a condition to entering into the transactions contemplated hereby. 3.4 Acknowledgment. The Purchaser acknowledges that it has received and reviewed that certain Consent and Agreement, dated as of August 15, 2005, by and among the Company and the Sellers (the "Consent Agreement"), a true, correct and complete copy of which is attached hereto as Exhibit B, which remains in full force and effect as of the date hereof and has not been amended, modified or supplemented. The Purchaser hereby acknowledges that the Purchased Shares will be subject to, and agrees to be bound by, the terms of, and agreements of the Sellers under, the Consent Agreement as though an original party thereto; provided, as set forth in the Acknowledgment, Purchaser's right to designate one member to the Company's Board of Directors shall be irrespective of the continued ownership of the Sellers in the Company. The Purchaser further acknowledges that (i) it has reviewed the terms and provisions of the Registration Rights Agreement, the Series A Certificate of Designations, and such other publicly available information concerning the Company, and/or the Preferred Stock or the Company's other securities that it has deemed appropriate (including the Company's Certificate of Incorporation (and all Certificates of Designations that form a part thereof) and Bylaws, and that certain Rights Agreement, dated as of June 28, 2004, between the Company and UMB Bank, N.A.), and (ii) the terms of the Stock Purchase Agreement that inure to the benefit of Sellers are not, and will not be assignable, to Purchaser, except for the right to designate one director to the Company's Board of Directors, which is provided for in the Consent Agreement. 3.5 No Other Representations. The representations and warranties of the Purchaser contained in this Article 3 (or otherwise expressly made by Purchaser in this Agreement) constitute the sole and exclusive representations and warranties of the Purchaser to the Sellers in connection with this Agreement and the transactions contemplated hereby, and the Sellers 6 acknowledges that all other representations and warranties are expressly disclaimed and may not be relied upon or serve as a basis for a claim against the Purchaser. ARTICLE 4 MISCELLANEOUS 4.1 Counterparts. This Agreement may be executed in multiple counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. 4.2 Entire Agreement. This Agreement (including the Schedules and Exhibits attached hereto) constitutes the entire agreement of the parties hereto in respect of the subject matter hereof, and supersedes all prior agreements or understandings among the parties hereto in respect of the subject matter hereof. 4.3 Further Assurances. Each party hereto shall execute and deliver all such further and additional instruments and agreements and shall take such further and additional actions, as may be reasonably requested by any other party in order to evidence or carry out the provisions of this Agreement or to consummate the transactions contemplated hereby. 4.4 Governing Law; Jurisdiction; Venue. This Agreement shall be enforced, governed, and construed in all respects (whether in contract or in tort) in accordance with the laws of the State of New York applicable to contracts made and performed in such State, without regard to its conflicts of law provisions. Any action, suit, or proceeding seeking to enforce any provision of, or based on any matter arising out of or relating to, this Agreement or the transactions contemplated hereby can be brought exclusively in federal court sitting in the Southern District of New York or, if such court does not have jurisdiction, any district court sitting in the Borough of Manhattan, the County of New York, New York, and each of the parties hereto hereby consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such action, suit, or proceeding and irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such action, suit, or proceeding in any such court or that any such action, suit, or proceeding that is brought in any such court has been brought in an inconvenient forum. 4.5 Notices. Any notice, request, demand, or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if sent by hand delivery, mail (first class, certified mail, postage prepaid), facsimile, or overnight courier if to any party hereto, at the address or facsimile number set forth below such party's name on the signature pages hereto or to such other address or facsimile number as such party shall have last designated by notice to the other parties hereto in accordance with this Section 4.5. Notices sent by hand delivery shall be deemed to have been given when received or delivery is refused; notices mailed in accordance with this Section 4.5 shall be deemed to have been given three days after the date so mailed; notices sent by facsimile shall be deemed to have been given when electronically confirmed; and notices sent by overnight courier shall be deemed to have been given on the next business day after the date so sent. 7 4.6 Public Statements. Each of the Sellers and the Purchaser shall use reasonable efforts to consult with each other before issuing any press release or making any public statement in respect of this Agreement or the transactions contemplated hereby and, except for any press release, public statement or filing with any regulatory authority the making of which is required by applicable law, will not issue any such press release or make any such public statement prior to such consultation. 4.7 No Recourse. Notwithstanding any other provision of this Agreement to the contrary, neither the Purchaser nor any person acting on its behalf may not assert any claim or cause of action against any controlling person, officer, director, partner, agent, employee, or other representative of the Sellers in connection with, arising out of, or relating to this Agreement or the transactions contemplated hereby. 4.8 Severability. If any provision of this Agreement or the application of such provision to any person or circumstance shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable under the applicable law of any jurisdiction, (i) the remainder of this Agreement or the application of such provision to other persons or circumstances or in other jurisdictions shall not be affected thereby, and (ii) such invalid, illegal, or unenforceable provision shall not affect the validity or enforceability of any other provision of this Agreement. 4.9 Successors and Assigns. Except as otherwise expressly provided herein, (i) this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and (ii) nothing express or implied in this Agreement, is intended or shall be construed to confer upon or give any person other than the parties hereto and their respective successors and permitted assigns any right, benefit, or remedy under or by reason of this Agreement. 4.10 Amendments. This Agreement may be amended, modified or supplemented only pursuant to a written instrument making specific reference to this Agreement and signed by each of the parties hereto. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. PURCHASER: HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. By: Harbinger Capital Partners Offshore Manager, L.L.C., as its investment manager By:/s/ Philip A. Falcone --------------------- Name: Philip A. Falcone Title: Vice President Address for Notices: ------------------- c/o Harbinger Capital Partners Offshore Manager, L.L.C. One Riverchase Parkway South Birmingham, AL 35244 Attn: Legal Department Facsimile No.: (205) 987-5505 [Signature page to Securities Purchase Agreement] SELLERS 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., as General Partner By: Centre Partners Management LLC, Attorney in Fact By: /s/ Bruce G. Pollack -------------------- Name: Bruce G. Pollack Title: Managing Director STATE BOARD OF ADMINISTRATION OF FLORIDA By: Centre Parallel Management Partners, L.P. as Manager By: Centre Partners Management LLC, Attorney in Fact By: /s/ Bruce G. Pollack -------------------- Name: Bruce G. Pollack Title: Managing Director CENTRE PARALLEL MANAGEMENT PARTNERS, L.P. CENTRE PARTNERS COINVESTMENT, L.P. By: Centre Partners II, LLC, as General Partner By: /s/ Bruce G. Pollack -------------------- Name: Bruce G. Pollack Title: Managing Director Address for Notices: ------------------- 30 Rockefeller Plaza, 50th Floor New York, NY 10020 Attn: Bruce G. Pollack and Robert A. Bergmann Facsimile No.: (212) 332-5801 [Signature page to Securities Purchase Agreement] SCHEDULE I ---------- PREFERRED STOCK BEING SOLD BY SELLERS - ------------------------------------------------------------------- NAME NO. OF SOLD PURCHASE PRICE SHARES - ------------------------------------------------------------------- CENTRE CAPITAL 9,234 $4,617,000 INVESTORS II, LP - ------------------------------------------------------------------- CENTRE CAPITAL 3,004 $1,502,000 TAX-EXEMPT INVESTORS II, L.P. - ------------------------------------------------------------------- CENTRE CAPITAL 2,009 $1,004,500 OFFSHORE INVESTORS II, L.P. - ------------------------------------------------------------------- CENTRE PARALLEL 142 $71,000 MANAGEMENT PARTNERS, L.P. - ------------------------------------------------------------------- CENTRE PARTNERS 1,588 $794,000 COINVESTMENT, L.P. - ------------------------------------------------------------------- STATE BOARD OF 14,023 $7,011,500 ADMINISTRATION OF FLORIDA - ------------------------------------------------------------------- TOTAL 30,000 $15,000,000 - ------------------------------------------------------------------- SCHEDULE II ----------- WIRE TRANSFER INSTRUCTIONS - ------------------------------------------------------------------------------- NAME ACCOUNT INFORMATION - ------------------------------------------------------------------------------- CENTRE CAPITAL Bank Name: First Republic Bank, New York INVESTORS II, LP ABA Routing Number: 321-081-669 Reference: Centre Capital Investors II, L.P. Account number to receive credit: 979-000-36041 - ------------------------------------------------------------------------------- CENTRE CAPITAL Bank Name: First Republic Bank, New York TAX-EXEMPT INVESTORS II, L.P. ABA Routing Number: 321-081-669 Reference: Centre Capital Tax-Exempt Investors II, L.P. Account number to receive credit: 979-000-38708 - ------------------------------------------------------------------------------- CENTRE CAPITAL Bank Name: First Republic Bank, New York OFFSHORE INVESTORS II, L.P. ABA Routing Number: 321-081-669 Reference: Centre Capital Offshore Investors II, L.P. Account number to receive credit: 979-000-36090 - ------------------------------------------------------------------------------- CENTRE PARALLEL Bank Name: First Republic Bank, New York MANAGEMENT PARTNERS, L.P. ABA Routing Number: 321-081-669 Reference: Centre Parallel Management Partners, L.P. Account number to receive credit: 979-000-38716 - ------------------------------------------------------------------------------- CENTRE PARTNERS Bank Name: First Republic Bank, New York COINVESTMENT, L.P. ABA Routing Number: 321-081-669 Reference: Centre Partners Coinvestment, L.P. Account number to receive credit: 979-000-36108 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NAME ACCOUNT INFORMATION - ------------------------------------------------------------------------------- STATE BOARD OF Bank Name: Chase Manhattan Bank ADMINISTRATION OF FLORIDA ABA Routing Number: 021-000-021 Name on account: Lazard Freres & Co. LLC Account number to receive credit: 140-080102 Further credit to: State Board of Administration of Florida Account number: 450-59452-14 Reference: State Board Administration of Florida - ------------------------------------------------------------------------------- SCHEDULE III ------------ LEGENDS ------- 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 SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF THAT CERTAIN CONSENT AND AGREEMENT DATED AS OF AUGUST 15, 2005 BY AND AMONG SALTON, INC., 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. AND CENTRE PARTNERS COINVESTMENT, L.P. A COPY OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY. SCHEDULE IV ----------- 1. Stock Purchase Agreement, dated as of July 15, 1998, by and among the Sellers and the Company 2. Consent and Agreement, dated as of August 15, 2005, by and among the Company and the Sellers 3 Letter Agreement, dated July 15, 1998, by and between the Company and Centre Partners Management LLC 4. Registration Rights Agreement, dated as of July 15, 1998, by and among the Company and the investors named therein EXHIBIT A --------- JOINDER AGREEMENT TO REGISTRATION RIGHTS AGREEMENT -------------------------------------------------- Reference is hereby made to that certain Registration Rights Agreement, dated as of July 15, 1998, among Salton, Inc., a Delaware corporation (the "Company"), and the investors named therein (as amended and in effect from time to time, the "Registration Rights Agreement"), a true and correct copy of which is attached hereto as Exhibit A; it being understood that the same was modified by the certain Consent Agreement dated August 15, 2005. The undersigned hereby joins and agrees to be a party to and a "Purchaser" under the Registration Rights Agreement with respect to a number of shares of Series A Preferred Stock (as defined in the Registration Rights Agreement) set forth below such person's signature below, subject to all of the rights and obligations applicable to a Purchaser thereunder. This Joinder Agreement shall take effect and shall become a part of the Registration Rights Agreement immediately upon the execution and delivery hereof. [Signatures appear on the following page] IN WITNESS WHEREOF, this Joinder Agreement has been duly executed and delivered by each of the undersigned as of -------------------, 2006. HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. By: Harbinger Capital Partners Offshore Manager, L.L.C., as its investment manager By:--------------------------- Name: Philip A. Falcone Title: Vice President No. of shares of Series A Preferred Stock: 30,000 AGREED AND ACCEPTED: SALTON, INC By:----------------------- Name:--------------------- Title:-------------------- EXHIBIT B --------- CONSENT AGREEMENT ----------------- (see attached) CONSENT AND AGREEMENT This Consent and Agreement is dated as of August 15 2005 by and among Salton, Inc., a Delaware corporation (the "Company"), and each of 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. and Centre Partners Coinvestment, L.P. (each, a "Series A Preferred Holder" and collectively, the "Series A Preferred Holders"). WHEREAS, the Company plans on making an offer to holders of certain outstanding senior subordinated debt securities of the Company to exchange (the "Exchange Offer") such indebtedness for certain newly issued senior debt securities, shares of common stock of the Company and shares of Series C Preferred Stock, $.01 par value per share, of the Company (the "Series C Preferred"); WHEREAS, immediately prior to the Exchange Offer, the Company would file the Certificate of Designation of Series C Preferred Stock, a copy of which is attached hereto as Exhibit A (the "Series C Preferred Certificate of Designation") with the Delaware Secretary of State; WHEREAS, the Company would issue up to 150,000 shares of Series C Preferred Stock in connection with the Exchange Offer, WHEREAS, the Series A Preferred Holders, which constitute all of the holders of the outstanding shares of Series A Voting Convertible Preferred Stock, $.01 par value per share (the "Series A Preferred") of the Company desire to consent to, among other things, the authorization and issuance of the Series C Preferred in connection with the Exchange Offer in accordance with the terms of the Certificate of Designation of the Series A Preferred which is part of the Company's Second Amended and Restated Certificate of Incorporation (the "Series A Preferred Certificate of Designation"); NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt of sufficiency of which are acknowledge, each of the parties signatory to this Agreement agrees as follows: 1. The Series A Preferred Holders hereby consent to the filing of the Series C Preferred Certificate of Designation with the Delaware Secretary of State and the authorization and issuance of up to 150,000 shares of Series C Preferred in connection with the Exchange Offer. 2. The Series A Preferred Holders hereby acknowledge and agree that, notwithstanding anything to the contrary in the Series A Preferred Certificate of Designation, the shares of Series C Preferred shall rank, as to distribution of assets upon liquidation, dissolution or winding up, within the meaning of Section 6 of the Series A Preferred Certificate and Section 3 of the Series C Certificate of Designation, of the Company, whether voluntary or involuntary, senior, in preference of, and prior to, all shares of Series A Preferred. 3. The Series A Preferred Holders acknowledge and agree that, notwithstanding anything to the contrary in the Series A Preferred Certificate of Designation, in the event of any Change of Control (as defined in the Series C Preferred Certificate of Designation), purchases of shares of Series A Preferred and Series C Preferred by the Company resulting from such Change of Control shall be made in accordance with the last sentence of Section 4(e) of the Series C Preferred Certificate of Designation. 4. The Series A Preferred Holders agree that, notwithstanding anything in the Series A Preferred Certificate of Designation to the contrary, the issuance of shares of common stock of the Company and shares of Series C Preferred in connection with the Exchange Offer shall not result in any adjustment to the "Conversion Price" pursuant to Section 3 of such Certificate of Designation or otherwise. 5. The Series A Preferred Holders hereby agree that, notwithstanding anything that may be to the contrary in Section 5 of the Registration Rights Agreement dated July 15, 1998 (the "Series A Preferred Registration Rights Agreement") by and among the Company and each of the Series A Preferred Holders, the Company may enter into the Registration Rights Agreement attached hereto as Exhibit B (the "New Registration Rights Agreement") in connection with the Exchange Offer. The parties acknowledge and agree that any amendment to the New Registration Rights Agreement must comply with Section 5 of the Series A Preferred Registration Rights Agreement. 6. The Series A Preferred Holders hereby agree that, notwithstanding anything in Section 2 of the Series A Preferred Registration Rights Agreement to the contrary, the Series A Preferred Holders agree that the Investors (as defined in the New Registration Rights Agreement) shall be entitled to the piggyback rights set forth in Section 3 of the New Registration Rights Agreement for shares of common stock of the Company covered by such Agreement with respect to, and subject to the terms of, any registration pursuant to Section 2.01 of the Series A Preferred Registration Rights Agreement. 7. The Series A Preferred Holders hereby waive Section 2.10(a) of the Series A Preferred Registration Rights Agreement to the extent such provision would prevent the Company from complying with the New Registration Rights Agreement. The Company agrees that, notwithstanding that the Company is registering shares of Common Stock pursuant to a demand registration under the New Registration Rights Agreement, Section 2.10(b) shall not prohibit the Series A Preferred Holders from exercising their rights and registering Registrable Securities pursuant to Section 2.01. 8. The Company agrees that to the extent that the Series A Preferred Holders sell or otherwise transfer 75% or more of the aggregate shares of Series A Preferred owned by the Series A Holders on the date hereof to a single person or group of affiliated persons (the "Transferee"), then such Transferee shall have the non-assignable right to designate one director for the election to the Company's Board of Directors and the Company shall use its reasonable best efforts to have such director elected to the Company's Board of Directors at the first meeting of the Board of Directors thereafter and at each annual meeting (or special meeting, if applicable) of stockholders held thereafter, provided that: (i) the director so designated by the Transferee shall count as a director designated by the Series A Preferred Holders pursuant to Section 6(d) of the Stock Purchase Agreement dated July 15, 1998 (the "Series A Preferred Stock Purchase Agreement) by and among the Company and the Series A Preferred Holders; (ii) the number of directors designated by the Series A Preferred Holders (including the director designated by the Transferee) shall in no event exceed the number of directors the Series A Preferred Holders are entitled to designate pursuant to Section 6(d) of the Series A Preferred Stock Purchase Agreement; and (iii) the Series A Preferred Holders shall promptly cause the termination or resignation of any director designated by the Series A Preferred Holders to comply with the foregoing clause (ii). Notwithstanding the foregoing, (i) the right of the Transferee to designate a director shall terminate if such Transferee fails to own at least 50% of the shares of Series A Preferred outstanding on the date hereof, and (ii) any person designated to be elected to the Board of Directors by the Transferee shall, prior to such election, agree in writing in a form reasonably -2- acceptable to the Company to resign from the Board of Directors if the Transferee fails to own at least 50% of the shares of Series A Preferred outstanding on the date hereof. 9. Each Series A Preferred Holder agrees that on or immediately prior to the Exchange Offer it will deliver to the Company all certificates representing shares of Series A Preferred to 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 and promptly returned to such Holders): 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 REGISTRATION OR EXEMPTIONS THEREFROM UNDER SAID ACT OF LAWS. 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 SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF THAT CERTAIN CONSENT AND AGREEMENT DATED AS OF JULY 5, 2005 BY AND AMONG SALTON, INC., 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. AND CENTRE PARTNERS COINVESTMENT, L.P. A COPY OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY. 10. The Company agrees to reimburse the Series A Preferred Holders for the reasonable fees and expenses of a single counsel in connection with this Agreement and any amendment to this Agreement and, so long as the Series A Preferred Holders continue to own all of the outstanding shares of Series A Preferred, general legal advice (not relating to any litigation or dispute with the Company) pertaining to the rights and obligations of the Series A Preferred Holders as stockholders of the Company. 11. The Company agrees that, without the written consent of the Series A Preferred Holders, it will not prior to consummation of the Exchange Offer amend the terms of the Series C Preferred Certificate of Designation or the New Registration Rights Agreement. 12. The Company represents that except for this Agreement, the New Registration Rights Agreement and the Support Agreement to be entered into by and between the Company and certain holders of outstanding senior subordinated debt securities of the Company (the "Support Agreement"), the Company has not entered into, and will not enter into, any agreement in connection with the Exchange Offer with any persons or entities which will receive shares of common stock of the Company or shares of Series C Preferred Stock in such Exchange Offer relating to their rights as stockholders. 13. This Agreement, together with the exhibits referred to herein and the Series A Preferred Stock Purchase Agreement, the Series A Preferred Registration Rights Agreement, the Series A Preferred Certificate of Designation, the New Registration Rights Agreement and the Series C Preferred Certificate of Designation, represents the entire agreement and understanding among the -3- parties hereto with respect to the subject matter hereof and supersedes any and all prior oral and written agreements, arrangements and understandings among the parties hereto with respect to such subject matters. This Agreement may be amended, waived or modified only by a written instrument signed by each of the parties hereto. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the holders of Series C Preferred solely with respect to Sections 2, 3, 5, 6 and the first sentence of Section 7 of this Agreement, any rights or remedies under or by reason of this Agreement. 14. This Agreement shall terminate and shall be null and void if the Support Agreement terminates or the Exchange Offer is terminated without the Company accepting the tender of senior subordinated notes. 15. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware, applicable to contracts to be made, executed, delivered and performed wholly within such state and, in any case, without regard to the conflicts of law principles of such state. 16. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement. 17. The parties hereto agree that irreparable harm would occur in the event that any of the agreements and provisions of this Agreement were not performed fully by the parties hereto in accordance with their specific terms or conditions or were otherwise breached, and that money damages are an inadequate remedy for breach of this Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or conditions or is otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other parties and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, such remedy being in addition to and not in lieu of, any other rights and remedies to which the other parties are entitled to at law or in equity. 18. The failure of any party at any time or times to require performance of any provision hereof (within the time limitations contained herein) shall not affect the right at a later time to enforce the same. No waiver by any party of any condition, and no breach of any provision, term, covenant, representation or warranty contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be construed as a further or continuing waiver of any such condition or of the breach of any other provision, term, covenant, representation or warranty of this Agreement. -4- This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. THE COMPANY: SALTON, INC. By: /s/ David M. Mulder ------------------- Name: David M. Mulder Title: EVP, SFO, CAO THE SERIES A PREFERRED HOLDERS: 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 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 -5- This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. THE COMPANY: SALTON, INC. By:------------------- Name: Title: THE SERIES A PREFERRED HOLDERS: CENTRE CAPITAL INVESTORS II, L.P. CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P. CENTRE CAPITAL OFFSHORE INVESTORS II, L.P. By: Centre Partner II, L.P. General Partner By: Centre Partners Management LLC Attorney-in-fact By: /s/ Bruce G. Pollack ------------------------------ Bruce G. Pollack Managing Director STATE BOARD OF ADIVYINISTRATION OF FLORIDA By: Centre Parallel Management Partners, L.P. Manager By: Centre Partners Management LLC Attorney-in-fact By:/s/ Bruce G. Pollack ---------------------------- Bruce G. Pollack Managing Director -5- CENTRE PARALLEL MANAGEMENT PARTNERS, L.P. CENTRE PARTNERS COINVESTMENT, L.P. By: /s/ Bruce G. Pollack ------------------------ Bruce G. Pollack Managing Director -6- Exhibit A --------- Salton, Inc. CERTIFICATE OF DESIGNATION OF SERIES C PREFERRED STOCK SETTING FORTH THE POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK Salton, Inc. (hereinafter referred to as the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, as amended (the "Delaware Code"), does HEREBY CERTIFY: That, pursuant to authority conferred by Article IV of the Second Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors of the Corporation has adopted a resolution providing for the issuance of a series of Preferred Stock consisting of 150,000 shares designated "Series C Preferred Stock", which resolution is as follows: RESOLVED, that pursuant to the authority vested in the Board of Directors (the "Board") of Salton, Inc., a Delaware corporation (the "Corporation"), by Article IV of the Second Amended and Restated Certificate of Incorporation of the Corporation (the "Second Restated Certificate"), the Board does hereby create, provide for and approve a series of Preferred Stock, par value $.01 per share (herein called "Preferred Stock"), of the Corporation to be designated "Series C Preferred Stock" (such series being herein called the "Series C Preferred Stock"), consisting of 150,000 shares of the presently authorized but unissued shares of Preferred Stock, and does hereby fix and herein state and express the designations, powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions of the Series C Preferred Stock as follows (all terms used herein which are defined in the Second Restated Certificate shall have the meaning provided in said Second Restated Certificate). Section 1. Rank. All shares of Series C Preferred Stock shall rank, as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, (a) notwithstanding anything in the Second Restated Certificate to the contrary, senior, in preference of, and prior to, all shares of Series A Voting Convertible Preferred Stock, par value $.O1 per share, of the Corporation (the "Series A Preferred Stock") from time to time outstanding, (b) senior, in preference of, and prior to, all other classes and series of the Corporation's Preferred Stock, par value $.01 per share, including without limitation, the Series B Junior Participating Preferred Stock, par value $.01 per share, of the Corporation, and (c) senior, in preference of, and prior to, all of the Corporation's now or hereafter issued Common Stock or other capital stock of the Corporation. The term "Common Stock" shall mean the Common Stock, $.Ol par value per share, of the Corporation as the same exists at the date hereof or as such stock may be constituted from time to time. Section 2. Voting Rights. Except as otherwise required by law or Section 6 hereof, the holders of shares of Series C Preferred Stock, by virtue of their ownership thereof, shall have no voting rights. Section 3. Liquidation Preference. In the event of a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Series C Preferred Stock shall be entitled to receive and be paid out of the assets of the Corporation, whether such assets are stated capital or surplus of any nature, an amount in cash equal to $100.00 per share. Such payments shall be made before any payment shall be made or any assets distributed to the holders of Common Stock or any other class or series of the Corporation's capital stock ranking junior as to liquidation Series C Preferred Stock. If, upon the occurrence of a liquidation, dissolution rights to the or winding up of the Corporation, whether voluntary or involuntary, the assets and funds of the Corporation legally available for distribution to the holders of Series C Preferred Stock shall be insufficient to make payment in full to all such holders of the preferential amount such holders are entitled to, -2- then the entire assets and funds of the Corporation legally available for distribution to such holders shall be distributed ratably among such holders based upon the total preferential amount each holder would be entitled to receive if sufficient funds were distributed to pay the full preferential amounts. Neither a consolidation, merger or other business combination of the Corporation's assets for cash, securities or other property shall be considered a liquidation, dissolution or winding up of the Corporation for purposes of this Section 3 (unless in connection therewith the liquidation, dissolution or winding up of the Corporation is specifically approved). Section 4. Change of Control. (a) (i) In the event that any Change of Control (as hereinafter defined) shall occur at any time and from time to time while any shares of Series C Preferred Stock are outstanding, each holder of Series C Preferred Stock shall have the right to give notice that it is exercising a Change of Control election (a "Change of Control Election"), with respect to all or any number of such holder's shares of Series C Preferred Stock, during the period (the "Exercise Period") beginning on the 30th day and ending on the 90th day after the date of such Change of Control. Upon any such election, the Corporation shall redeem each such holder's shares for which such an election is made, to the extent the Corporation shall have capital and surplus lawfully available therefor, at a redemption price per share payable on the Change of Control Payment Date (as hereinafter defined) equal to the liquidation preference per share plus an amount equivalent to interest accrued thereon at a rate of 5% per annum compounded annually on each anniversary date of the original issuance of the Series C Preferred Stock for the period from the date of such original issuance through the date of the Change of Control Payment Date. (b) As used herein, "Change of Control" shall mean: -3- (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) (the "Acquiring Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under such Act) of 50% or more of the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors, but excluding, for this purpose, any such action by (x) the Corporation or any of its subsidiaries, (y) any of the Centre Partner Entities (as defined below) or any Acquiring Person of which any of the Centre Partners Entities own, either individually or in the aggregate, 50%. or more of the outstanding voting securities, including, without limitation, the receipt by such an Acquiring Person of shares of Common Stock of the Company upon conversion or redemption by the Company of the Series A Preferred Stock, or (z) any corporation or other entity with respect to which, following such acquisition, more than 50% of the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors (or if another entity, more than 50% of the equivalent controlling interests) is then beneficially owned, directly or indirectly, by individuals and entities who were the beneficial owners of voting securities of the Corporation immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (For purposes of this Section 4(b)(i), the "Centre Partners Entities" shall mean Centre Partners 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 Partners -4- Management Partners, L.P., Centre Partners Coinvestment L.P. or any Affiliate (as defined in the Securities Exchange Act of 1934, as amended); or (ii) consummation of a reorganization, merger or consolidation involving the Corporation, in each case, with respect to which the individuals and entities who were the respective beneficial owners of at least 80% of the voting securities of the Corporation immediately prior to such reorganization, merger or consolidation do not or will not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such reorganization, merger or consolidation; or (iii) the sale or other disposition of all or substantially all the assets of the Corporation in one transaction or series of related transactions; or (iv) individuals who would constitute a majority of the members of the Board of Directors elected at any meeting of stockholders or by written consent (without regard to any members of the Board of Directors elected pursuant to the terms of any series of Preferred Stock) shall be elected to the Board of Directors and the election or the nomination for election by the Corporation's stockholders of such directors was not approved by a vote of at least a majority of the directors in office immediately prior to such election or nomination. (c) As used herein, "Change of Control Payment Date" shall mean the date after a Change Control that is 91 days after the earlier of (i) the date on which all of the Specified Debt matures and (ii) the date on which all of the Specified Debt is repaid in full by the Company. -5- (d) As used herein, "Specified Debt" shall mean collectively: (i) the Amended and Restated Credit Agreement dated as of May 9, 2003 and Amended and Restated as of June 15, 2004 among the financial institutions named therein as the Lenders and Wachovia Bank, National Association as the Agent and Silver Point Finance, LLC as the Co-Agent, Syndication Agent, Documentation Agent, Arranger and Book Runner, and Salton, Inc. as the Parent and each of its Subsidiaries that are signatories thereto as the Borrowers and each of its other Subsidiaries that are signatories thereto as Guarantors; (ii) the Credit Agreement dated as of August --, 2005 among the financial institutions named therein as the Lenders and The Bank of New York as the Agent, and Salton, Inc. as the Parent and each of its Subsidiaries that are signatories thereto as the Borrowers and each of its other Subsidiaries that are signatories thereto as Guarantors; (iii) the Indenture dated as of December 16, 1998 by and among Salton, Inc., as issuer, Home Creations Direct, Ltd. and each newly acquired or created domestic restricted subsidiary of the issuer, as guarantors, and Wells Fargo Bank Minnesota, N.A. (as successor to Norwest Bank Minnesota National Association), as the trustee; and (iv) the Indenture dated as of April 23, 2001 by and among Salton, Inc., as issuer, Home Creations Direct Ltd., Toastmaster, Inc., Sonex International Corporation, Sasaki Products Company and each newly acquired or created domestic restricted subsidiary of the issuer, as guarantors, and Wells Fargo Bank Minnesota, N.A., as trustee; -6- (v) in the case of each of the foregoing clauses (i) through (iv), as amended, restated or modified (provided that such amendment, restatement or modification does not extend the respective maturity date or result in such Specified Debt not becoming due upon a Change of Control) from time to time (whether with the original agents and lenders or other agents and lenders). (e) On or before the fourteenth (14th) day after a Change of Control, the Corporation shall mail to all holders of record of the Series C Preferred Stock at their respective addresses as the same shall appear on the books of the Corporation as of such date, a notice disclosing (i) the Change of Control, (ii) the redemption price per share of the Series C Preferred Stock applicable hereunder and (iii) the procedure which the holder must follow to exercise the redemption right provided above. To exercise such redemption right, if applicable, a holder of the Series C Preferred Stock must deliver during the Exercise Period written notice to the Corporation (or an agent designated by the Corporation for such purpose) of the holder's exercise of such redemption right, and, to be valid, any such notice of exercise must be accompanied by each certificate evidencing shares of the Series C Preferred Stock with respect to which the redemption right is being exercised, duly endorsed for transfer. On or prior to the fifth (5th) business day after receipt of such written notice, the Corporation shall accept for payment all shares of Series C Preferred Stock properly surrendered to the Corporation (or an agent designated by the Corporation for such purpose) during the Exercise Period for redemption in connection with the valid exercise of such redemption right and shall cause payment to be made in cash for such shares of Series C Preferred Stock on the Change of Control Payment Date. If at the time of any Change of Control, the Corporation does not have sufficient capital and surplus legally available to purchase all of the outstanding shares of Series C Preferred Stock with -7- respect to which the redemption right has been validly exercised, the Corporation shall take all measures permitted under the Delaware Code to increase the amount of its capital and surplus legally available, and the Corporation shall purchase as many shares of Series C Preferred Stock with respect to which the redemption right has been validly exercised as it has capital and surplus legally available therefor, ratably from the holders thereof in proportion to the total amount which holders are entitled to in connection with the Change of Control, and shall thereafter, whenever it shall have capital and surplus legally available therefor, offer to purchase ratably as many shares of Series C Preferred Stock with respect to which the redemption right has been validly exercised as it has capital and surplus available therefor until it has offered to purchase all of the outstanding shares of Series C Preferred Stock with respect to which the redemption right has been validly exercised. Notwithstanding anything in this Second Restated Certificate to the contrary, in the event of a Change of Control, the Company shall purchase all of the outstanding shares of Series C Preferred Stock with respect to which the redemption right has been validly exercised before any payment shall be made with respect to the redemption of shares of Series A Preferred Stock upon such Change of Control. (f) In the event of any Change of Control, proper provision shall be made to ensure that the holders of shares of Series C Preferred Stock will be entitled to receive the benefits afforded by this Section 4; provided, however, that in the event of any Change of Control effected with the Corporation's consent, such provision to ensure the benefits of this Section 4 shall be made prior to such Change of Control. -8- Section 5. Optional and Mandatory Redemption. (a) The Corporation, at its option, may at any time redeem the Series C Preferred Stock in whole or in part, at a cash redemption price per share equal to 100% of the liquidation preference. (b) On August --, 2010, the Corporation shall redeem all outstanding shares of Series C Preferred Stock at a redemption price equal to the liquidation preference per share. The redemption price shall be paid in cash. (c) Not more than sixty (60) nor less than thirty (30) days prior to the redemption date, notice by first class mail, postage prepaid, shall be given to each holder of record of the Series C Preferred Stock to be redeemed, at such holder's address as it shall appear upon the stock transfer books of the Corporation. Each such notice of redemption shall be irrevocable and shall specify the date fixed for redemption, the redemption price, the identification of the shares to be redeemed (if fewer than all the outstanding shares are to be redeemed), the place or places of payment and that payment will be made upon presentation and surrender of the certificate(s) evidencing the shares of Series C Preferred Stock to be redeemed. (d) Any notice that is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of the Series C Preferred Stock receives such notice; and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series C Preferred Stock. On or after the date fixed for redemption as stated in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such -9- notice and shall thereupon be entitled to receive payment of the redemption price in the manner set forth in the notice. If fewer than all the shares represented by any such surrendered certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. If, on the date fixed for redemption, funds necessary for the redemption shall be available therefor and shall have been irrevocably deposited or set aside, then, notwithstanding that the certificates evidencing any shares so called for redemption shall not have been surrendered, the shares shall no longer be deemed outstanding, the holders thereof shall cease to be stockholders, and all rights whatsoever with respect to the shares so called for redemption (except the right of the holders to receive the redemption price without interest upon surrender of their certificates therefor) shall terminate. (e) If fewer than all the shares outstanding are to be redeemed, the Corporation shall select the shares to be redeemed pro rata. Section 6. Protective Provisions. So long as any shares of the Series C Preferred Stock shall be outstanding, the Corporation shall not, without the prior approval by affirmative vote or prior written consent of the holders of at least a majority of the then outstanding shares of Series C Preferred Stock: (a) amend, waive or repeal any provisions of, or add any provisions to, this Certificate of Designation; (b) take any action that authorizes, creates or issues, or obligates the Corporation to issue, any shares of any capital stock or security or right convertible or exchangeable for shares of capital stock of the Corporation that are senior to or on parity with the Series C Preferred Stock; -10- (c) declare or pay a dividend or distribution on the Common Stock; (d) increase the authorized number of shares of Series C Preferred Stock; (e) enter any agreement, contract or understanding or otherwise incur any obligation which by its terms would violate or be in conflict with the rights, privileges and preferences of the holders of Series C Preferred Stock hereunder or conflict with the terms of the Second Restated Certificate; or (f) amend the Second Restated Certificate or By-laws of the Corporation, if such amendment would adversely affect the rights, privileges or preferences of the holders of the Series C Preferred Stock in any material respect. Section 7. Dividends. The holders of shares of Series C Preferred shall not be entitled to receive dividends. Section 8. Notice. All notices hereunder shall be in writing. Section 9. Reacquired Shares. Any shares of Series C Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares of Series C Preferred Stock shall, upon their cancellation, and upon the filing of an appropriate certificate with the Secretary of the State of Delaware, become authorized but unissued shares of Preferred Stock, par value $.01 per share, of the Corporation, undesignated as to series, and may be reissued as part of another series of Preferred - 11 - Stock, par value $.O1 per share, of the Corporation subject to the conditions of restrictions on issuance set forth therein. Signed on -----------, 2005 ----------------------------------- (Name, Title of authorized officer) -12- Exhibit B --------- REGISTRATION RIGHTS AGREEMENT ----------------------------- This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of July 5, 2005 by and among (i) Salton, Inc. a Delaware corporation (the "Company"), (ii) [Beneficial Owners of Old Notes, defined in the Support Agreement, that enter into - directly or through their investment managers or advisers - the Support Agreement] (collectively, the "Investors") and (iii) each person or entity that subsequently becomes a party to this Agreement pursuant to, and in accordance with, the provisions of Section 9 hereof (each an "Investor Permitted Transferee" and collectively, the "Investor Permitted Transferees"). WHEREAS, the Company and the Investors have entered into the Support Agreement dated as of the date hereof ("Support Agreement") providing for the Investors to support the Exchange Offer (as defined in the Support Agreement); and WHEREAS, it is a condition of the exchange transaction contemplated by the Support Agreement that the Company and the Investors execute and deliver this Agreement. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto hereby agree as follows: 1. Definitions. The following terms shall have the meanings provided therefor below or elsewhere in this Agreement as described below. Capitalized terms used and not defined in this Agreement have the meanings ascribed to them in the Support Agreement or the Term Sheet. "Affiliate" of a party means any other Person controlling, controlled by or under common control with the specified Person. For the purposes of this definition, "control" means the power to direct the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Board" shall mean the board of directors of the Company. "Demand Registration" shall have the meaning as set forth in Section 2(a) herein. "Designated Counsel" shall have the meaning set forth in Section 4(a) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Filing Date Deadline" shall be forty-five (45) days following the date of receipt by the Company of a request for Demand Registration. "Initial Registrable Securities" are the Registrable Securities outstanding upon consummation of the Exchange Offer. "Investor Indemnified Person" has the meaning set forth in Section 7(a) hereof. "Investors" shall mean, collectively, the Investors and the Investor Permitted Transferees; provided, however, that the term "Investors" shall not include any of the Investors or any of the Investor Permitted Transferees that ceases to own or hold any Registrable Securities. "NASD" shall mean the National Association of Securities Dealers. "NYSE" shall mean the New York Stock Exchange, Inc. "Person" shall mean an individual, corporation, company, partnership, firm, association, joint venture, trust, unincorporated organization, government, governmental body, agency, political subdivision or other entity. "Prospectus" means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Registrable Securities" shall mean (i) the shares of Common Stock issued to the Investors upon consummation of the Exchange Offer and held by the Investors, (ii) any shares of Common Stock issued or issuable with respect to such shares of Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iii) any shares of Series C Preferred Stock held by the Investors; provided, however, that shares of Common Stock and Series C Preferred Stock that are considered to be Registrable Securities shall cease to be Registrable Securities (A) upon the sale thereof pursuant to an effective Registration Statement, (B) upon the sale thereof pursuant to Rule 144 or upon the availability for such sale of Rule 144(k) (or successor or substitute rule, law or provision), or (C) when such securities cease to be outstanding. "Registration Expenses" has the meaning set forth in Section 6 hereof. "Registration Statement" means the initial registration statement required to be filed in accordance with Section 2(a), including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" shall mean Rule 144 promulgated under the Securities Act and any successor or substitute rule, law or provision. "SEC" shall mean the U.S. Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 2 2. Demand Registration. (a) Requests for Registration. At any time on or after December 31, 2005, subject to Section 2(d) below, the Investors shall have the right to make a written request to the Company for registration with the SEC under the Securities Act of all or part of their Registrable Securities (a "Demand Registration"). All requests made pursuant to this Section 2(a) shall specify the number of Registrable Securities to be registered and the intended methods of disposition thereof. All such requests shall be delivered to the Company in accordance with the provisions of Section 14(e)(i) of this Agreement. (b) Procedures. Following the receipt of a request for Demand Registration, the Company will promptly give written notice of such request to all Investors other than those that were parties to such request, and, thereupon, will use its commercially reasonable best efforts to cause to be filed and declared effective, as soon as practicable, a Registration Statement on such appropriate form as the Company in its reasonable discretion shall determine providing for the sale of all of such Registrable Securities requested to included by the Investors that were parties to such request and all other Registrable Securities that the Company has been requested to register by other Investors by written request (which shall specify the number of Registrable Securities to be registered and the intended method of disposition thereof) received by the Company within 30 days after the giving of such written notice by the Company; provided, however, that, subject to Section 2(d), below, such Registration Statement shall be filed with the SEC not later than the Filing Date Deadline. Promptly after expiration of the 20 day period referred to in this Section 2(b), the Company will notify all the Investors entitled to be included in the Registration Statement of the other Investors that have requested inclusion and the number of Registrable Securities requested to be included therein. (c) Number of, and Limitations on, Registrations. The Investors will be entitled to request three (3) Demand Registrations. The Company will not be obligated to register any Registrable Securities pursuant to such a Demand Registration unless there is requested to be included in such registration at least five percent (5%) of the then outstanding shares of Common Stock. (d) Suspension Periods. Notwithstanding Section 2(b), the Company may postpone the filing or effectiveness of any Registration Statement for any Demand Registration or the filing or effectiveness of any amendment or supplement to any such Registration Statement (whether required by Section 4(c) or otherwise), if the Company in good faith determines and notifies the Investors that (i) such registration (or such amendment or supplement) would have an adverse effect on any plan or proposal by the Company with respect to any financing, acquisition, recapitalization, reorganization or other material transaction, or (ii) the Company is in possession of material non-public information which would be required to be disclosed in such Registration Statement (or such amendment or supplement) and the Company has a bona fide business purpose for preserving such information as confidential; provided, however, that the Company shall not exercise its rights under this Section 2(d) (A) to the extent that the postponement or postponements relating to any Demand Registration(s) and amendments and supplements thereto would exceed an aggregate of 90 days in any calendar year or (B) to the extent that the postponement or postponements relating to any Demand Registration(s) and 3 amendments and supplements thereto would exceed an aggregate of 30 days in the first six months of 2006. (e) Expenses. In any registration initiated as a Demand Registration, the Company will pay all Registration Expenses, whether or not the Registration Statement has become effective. (f) Effectiveness of Registration Statement. Subject to Section 2(g), a Registration Statement will not count as a registration pursuant to a Demand Registration until it has been declared effective by the SEC. (g) Selection of Underwriters. If any of the Registrable Securities covered by a Demand Registration are to be sold in an underwritten offering, or in a best efforts underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Investors, subject to the approval of the Company, which will not be unreasonably withheld or delayed. If the Investors disapprove of the terms and conditions of the underwriting, the Investors may elect to withdraw all their respective Registrable Securities by written notice to the Company and the managing underwriter and, at the election of' the Investors, either (i) pay the costs and expenses associated therewith (in which case such withdrawn registration shall not constitute a Demand Registration) or (ii) permit the Company to pay the same (in which case such withdrawn registration shall constitute one of the Investors' two Demand Registrations); provided, however, that, if the Company has already filed a Registration Statement pursuant to such demand by the Investor, the Investor's withdrawn registration will nevertheless constitute a Demand Registration pursuant to this Agreement. For purposes of this Section 2(g), the Investors holding a majority of the Registrable Securities (treating shares of Common Stock and shares of Series C Preferred Stock as fungible) to be registered on the Registration Statement filed for the Demand Registration shall have the right to act for the Investors. (h) Underwriter Cutback. If the managing underwriter of any offering of Registrable Securities pursuant to a Demand Registration that is an underwritten offering advises the Company in writing that, in its reasonable opinion, the aggregate amount of Registrable Securities requested to be included in such offering exceeds the number which can be sold in such offering without adversely affecting the success of the offering, the Company will include in such Registration Statement the aggregate amount of Registrable Securities which in the opinion of such managing underwriter can be sold without any such material adverse effect, and such amount of Registrable Securities shall be allocated in the following order: (i) first, to the Investors, pro rata in accordance with the number of Registrable Securities sought to be registered by them on the Registration Statement; and (ii) second, to the Company and to any holder of Common Stock exercising piggyback or incidental registration rights with respect to such Demand Registration. 3. Piggyback Registration Rights. (a) If the Company at any time following the date hereof proposes to register any of its shares of Common Stock on its own behalf or any of its shares of Common Stock on behalf of other stockholders on a form and in a manner that would permit registration of Registrable 4 Securities under the Securities Act, it will each such time give prompt notice in accordance with the provisions of Section 14(e)(ii) of this Agreement to the Investors of its intention to do so, specifying the form and manner and the other relevant facts involved in such proposed registration (including, without limitation, the identity of the managing underwriter, if any). Upon the written request of the Investors delivered to the Company within thirty (30) days after such notice shall have been delivered to the Investors (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Company will use its commercially reasonable best efforts to effect the registration under the Securities Act, as expeditiously as is reasonable, of all Registrable Securities that the Company has been so requested to register by the Investors, to the extent requisite to permit the sale of the Registrable Securities to be so registered; provided, however, that: (i) if, at any time after giving such written notice of its intention to register any Common Stock proposed to be registered by the Company and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register such Common Stock, the Company shall, at its election, give written notice of such determination to the Investors, and thereupon the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith to the extent provided in Section 6); and (ii) if the managing underwriter of such offering shall advise the Company that, in its judgment, the number of shares of Common Stock proposed to be included in such offering should be limited because the inclusion of Registrable Securities is likely to adversely impact the purchase price obtained for the Common Stock proposed to be included in such offering, then the Company will promptly advise the Investors thereof and may require, by written notice to the Investors accompanying such advice, that, to the extent necessary to meet such limitation, all holders of Registrable Securities and of other shares of Common Stock proposing pursuant to piggyback or incidental registration rights to sell Common Stock in such offering shall share pro rata in the number of shares of Common Stock to be excluded from such offering, such sharing to be based on the respective numbers of Registrable Securities and other shares of Common Stock as to which registration has been requested by such holders, and that the distribution of such Registrable Securities and other shares of Common Stock as are so excluded be deferred (in case of a deferral as to a portion of such Registrable Securities and other shares of Common Stock, such portion to be allocated among such holders in proportion to the respective numbers of Common Stock so requested to be registered by such holders) until the completion of the distribution of such Common Stock and any other securities by such underwriters. (b) The holders of Registrable Securities to be distributed by underwriters in an underwritten offering shall be parties to the underwriting agreement between the Company and the underwriters. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registrable 5 Securities and such holder's intended method of distribution and any other representation required by law. (c) In any registration initiated pursuant to this Section 3, the Company will pay all Registration Expenses, whether or not the Registration Statement has become effective, except as otherwise provided on Section 6. (d) Notwithstanding anything in this Section 3 to the contrary, in the event that the Company is registering shares of Common Stock and no other class of security pursuant to a demand registration under the Registration Rights Agreement dated as of July 15, 1998 by and among the Company and the Purchasers (as listed on the signature page thereto), then the rights of the Investors under this Section 3 shall apply only with respect to shares of Common Stock that are Registrable Securities and not any shares of Series C Preferred Stock. 4. Obligations of the Company. In connection with the Company's obligation under Sections 2 and 3, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC such amendments and supplements to the Registration Statement and the Prospectus as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Registration Statement; provided, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, or comparable statements under securities or blue sky laws of the States of New York, ------------------- and --------------------, the Company will furnish to counsel to the Investors participating in the planned offering ("Designated Counsel"), upon delivery by Designated Counsel of its agreement, on terms reasonably satisfactory to the Company, to maintain the confidentiality of material and information furnished pursuant to this Section 4(a), copies of the "Selling Securitvholder" and "Plan of Distribution" sections of such filings, or, at the request of an Investor, of all such documents proposed to be filed (including all exhibits thereto), which documents will be subject to the reasonable review and reasonable comment of such counsel. (b) Furnish to the Investors such number of copies of the Prospectus, including a preliminary Prospectus, in conformity with the requirements of the Securities Act, and such other documents (including, without limitation, Prospectus amendments and supplements as are prepared by the Company in accordance with Section 4(a) above) as the Investors may reasonably request in order to facilitate the disposition of such Investors' Registrable Securities. (c) Promptly notify the Investors, at any time when the Prospectus relating to the Registration Statement is required to be delivered under the Securities Act, of the happening of any event (without disclosing the nature or substance of such event) as a result of which the Prospectus included in or relating to the Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and, thereafter, and subject to Section 2(d), the Company will use commercially reasonable efforts to promptly prepare (and, when completed, give notice to each Investor) a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities pursuant to the Registration Statement, such Prospectus will not contain an untrue statement of a material fact or 6 omit to state any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that upon such notification by the Company of the foregoing and instructing each Investor to cease to offer and sell Registrable Securities, each Investor will use commercially reasonable efforts to cease its offer and sale of Registrable Securities until the Company has notified the Investors that it has prepared a supplement or amendment to such Prospectus and delivered copies of such supplement or amendment to the Investors (it being understood and agreed by the Company that the foregoing proviso shall in no way diminish or otherwise impair the Company's obligation to promptly prepare a Prospectus amendment or supplement as above provided in this Section 4(c) and deliver copies of same as above provided in Section 4(b) hereof). (d) If, at the time, the Common Stock is not a covered security described by Section 18(b)(l) of the Securities Act, use commercially reasonable efforts to register and qualify the Registrable Securities covered by the Registration Statement under the securities or "blue sky" laws of New York, ----------------- and ---------------------. (e) Promptly notify (i) each Investor (A) any time when the Registration Statement, the Prospectus or any Prospectus supplement related thereto or post effective amendment has been filed, and with respect to the Registration Statement or any post-effective amendment, when the same has become effective, and with respect to the Registration Statement, provide each Investor who has provided its current e-mail address to Counsel to the Company, a copy of the Prospectus by e-mail prior to the opening of trading of the Company's Common Stock on the first business day following the date on which the Registration Statement has become effective, (B) of the issuance of any stop order by the SEC suspending the effectiveness of such Registration Statement or the initiation, known to the Company, of any proceedings by the SEC to such effect, and promptly use all commercially reasonable efforts to obtain the release of such suspension, (C) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose, (D) when a Prospectus relating to the registration of the Registrable Securities is required to be delivered under the Securities Act, or (E) of the happening of any event as a result of which the Prospectus included, as then in effect, includes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and (ii) Designated Counsel of any request by the SEC for amendments or supplements to the Registration Statement or Prospectus or for additional information. (f) Cause all Common Stock included in such Registrable Securities registered pursuant to this Agreement to be quoted or listed on each securities exchange or market on which similar securities issued by the Company are then quoted or listed. (g) Provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of registration and, at the time of the sale of the Registrable Securities pursuant to an effective Registration Statement, use commercially reasonable efforts to cause the transfer agent to remove restrictive legends on such Registrable Securities. 7 (h) Upon delivery by Designated Counsel of its agreement, on terms reasonably satisfactory to the Company, to maintain the confidentiality of material and information furnished pursuant to this Section 4(h), promptly deliver to Designated Counsel copies of all correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the Registration Statement, and make reasonably available for inspection by Designated Counsel participating in any disposition to be effected pursuant to the Registration Statement, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply all information reasonably requested by Designated Counsel in connection with such Registration Statement. (i) Use commercially reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement in New York, -------------------- or --------------------. (j) Upon written request, furnish to each Investor participating in the offering, without charge, at least one (1) conformed copy of the Registration Statement and any post effective amendments thereto, including financial statements, all documents incorporated therein by reference and all exhibits (including those incorporated by reference). (k) Comply with applicable law and regulation, including without limitation, the rules and regulations of the SEC, the NASD, and the NYSE. 5. Furnish Information; Other Sales. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement (including, without limitation, to maintain the accuracy of any information previously furnished by Investors for use in the Registration Statement) that the Investors shall furnish to the Company such information regarding them and the securities held by them as the Company shall reasonably request and as shall be required by applicable securities laws and regulations in order to effect any registration by the Company pursuant to this Agreement. The Investors agree, during the 10-day period prior to, and during the 90-day period commencing on, the effective date of the registration statement filed with the Commission (other than on Form S-8) in connection with an underwritten offering of securities of the same class as the then outstanding (or any securities issuable upon conversion or exchange thereof), not to make any sales of Registrable Securities (or such other securities) pursuant to Rule 144, provided that they were given the opportunity, if required by (and subject to) Section 3 hereof, to include in such registration statement all such Registrable Securities as they may have requested. 6. Expenses of Registration. Except as otherwise provided herein, all expenses incident to the Company's performance of or compliance with this Agreement including without limitation all registration and filing fees, including with respect to filings required to be made with the NASD, fees and expenses of compliance with securities or blue sky laws of the States of New York, ------------------ and ----------------- (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of the States of New York, - ------------------, and ----------------, printing expenses, messenger, telephone and delivery expenses, and fees and disbursements of counsel for the Company and counsel (but 8 only a single law firm) representing the Investors in connection with each Demand Registration (selected in the manner set forth in the last sentence of Section 2(g)), the fees and disbursements of the Company's independent certified public accountants (including the expenses of any special audit and "comfort" letters required by or incident to such performance), the fees and expenses incurred in connection with the listing of the Common Stock to be registered on each securities exchange on which similar securities issued by the Company are then listed, the reasonable fees and expenses of any special experts retained by the Company in connection with such registration and fees and expenses of other Persons retained by the Company (all such expenses being herein called the "Registration Expenses") will be borne by the Company. The Company shall, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties) and the expense of any annual audit which are not "Registration Expenses" for purposes of this Agreement. In no event shall the Company be liable for the payment (which shall be made by the Investors registering Registrable Securities) of any discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar industry professionals relating to the distribution of the Registrable Securities or any fees of counsel (except as specifically provided in this Section 6) or other advisers to the Investors. 7. Indemnification. (a) To the extent permitted by law, the Company will indemnify and hold harmless each Investor, its directors, officers, employees, fiduciaries, members, managers, or general or limited partners (and the directors, officers, employees and stockholders thereof), any underwriter (as defined in the Securities Act) for each Investor, and each Person, if any, who controls such Investor or underwriter within the meaning of the Securities Act (each, an "Investor Indemnified Person"), against any losses, claims, damages or liabilities, joint or several, and expenses (including reasonable counsel fees and disbursements, any amounts paid in any settlement effected with the Company's prior written consent) to which they may become subject under the Securities Act, the Exchange Act, state securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue or alleged untrue statement of any material fact contained in any Registration Statement pursuant to which Registrable Securities are registered pursuant to Section 2 or Section 3 hereof (including any preliminary prospectus or final prospectus relating thereto, any amendments or supplements thereto and any exhibits thereto) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein in light of the circumstance under which they were made not misleading or any violation or alleged violation by the Company of the Securities Act, the Exchange Act, state securities laws or any rule or regulation promulgated under the Securities Act, the Exchange Act, the NASD, state securities laws or the NYSE or (ii) any failure of the Company to fulfill any undertaking included in any Registration Statement pursuant to which Registrable Securities are registered pursuant to Section 2 or Section 3 hereof (including any preliminary prospectus or final prospectus relating thereto, any amendments or supplements thereto and any exhibits thereto); and will reimburse such Investor Indemnified Person for any fees and expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action (including reasonable fees and expenses of legal counsel); provided, however, that the Company shall not be liable in any such case for any such losses, claims, damages, liabilities or expenses to the extent that they arise out 9 of or are based upon an untrue statement or alleged untrue statement or omission made in connection with the Registration Statement in reliance upon and in conformity with written information furnished by the Investors expressly for use in connection with such Registration Statement. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such Investor Indemnified Person and shall survive the sale of such Registrable Securities by such Investor. (b) To the extent permitted by law, each Investor will severally, and not jointly, indemnify and hold harmless the Company, each of its directors, each of its officers who have signed a Registration Statement pursuant to which Registrable Securities are registered pursuant to Section 2 or Section 3 hereof, any underwriter (as defined in the Securities Act) for each Investor or acting on behalf of the Company, and each person, if any, who controls, within the meaning of the Securities Act, the Company or any such underwriter (as defined in the Securities Act) (a "Company Indemnified Person") against any losses, claims, damages or liabilities to which the Company or any such director, officer, controlling person, or underwriter may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in a Registration Statement pursuant to which Registrable Securities are registered pursuant to Section 2 or Section 3 hereof or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent and only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, in reliance upon and in conformity with written information furnished by such Investor expressly for use in connection with such Registration Statement; and such Investor will reimburse any expenses reasonably incurred by a Company Indemnified Person in connection with investigating or defending any such loss, claim, damage, liability or action (including reasonable counsel fees and disbursements); provided, however, that the liability of each Investor hereunder shall be limited to the proceeds (net of underwriting discounts and commissions, if any) received by such Investor from the sale of Registrable Securities covered by such Registration Statement; as the case may be. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Indemnified Person and, as relevant, shall survive the sale of such Registrable Securities by any Investor. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of "any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof and the indemnifying party shall have the right to participate in and, to the extent the indemnifying party desires, jointly with any other indemnifying party similarly noticed, to assume at its expense the defense thereof with counsel mutually satisfactory to the indemnifying parties with the consent of the indemnified party (which consent will not be unreasonably withheld, conditioned or delayed). If the indemnifying party assumes any such defense, the indemnified party may participate in such defense with its own counsel and at its own expense. 10 (d) If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, claim, damage, liability or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. If, however, the indemnification provided for in this Section 7 and allocation provided in the first sentence of this paragraph are both not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7(d) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 7(d). The amount paid or payable in respect of any claim shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending such loss, claim, damage or liability. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 7(d) to the contrary, no Investor shall be required pursuant to this Section 7(d) to contribute any amount in excess of the net proceeds received by such Investor from the sale of Registrable Securities in the offering to which the loss, claims, damage or liability relates, less the amount of any indemnification payment previously made by such indemnifying party pursuant to Section 7(b). (e) The obligations of the Company and the Investors under this Section 7 shall survive the completion of any offering of Registrable Securities pursuant to a Registration Statement. (f) Notwithstanding anything to the contrary herein, the indemnifying party shall not be entitled to settle any claim, suit or proceeding unless in connection with such settlement the indemnified party receives an unconditional release with respect to the subject matter of such claim, suit or proceeding and such settlement does not contain any admission of fault by the indemnified party. 8. Reports under the Exchange Act. With a view to making available to the Investors the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit the Investors to sell the Registrable Securities to the public without registration, the Company agrees to use commercially reasonable efforts: (i) to make and keep public information available, as that term is understood and defined in Rule 144; (ii) to file with the SEC in a timely 11 manner all reports and other documents required to be filed by an issuer of securities registered under the Securities Act or the Exchange Act; (iii) as long as any Investor owns any Registrable Securities, to furnish in writing upon such Investor's request a written statement by the Company that it has complied with the reporting requirements of Rule 144 and of the Exchange Act; and (iv) subject to Section 2(d) and Section 4(c), undertake any additional actions reasonably necessary to maintain the availability of the Registration Statement (but not for more than nine months after it first became effective) or the use of Rule 144. 9. Transfer of Registration Rights. None of the rights of any Investor under this Agreement shall be transferred or assigned to any person unless (i) such person is (A) an Affiliate of an Investor; or (B) after such transfer or assignment, holds at least 10% of the aggregate number of Initial Registrable Securities; and (ii) such transferee or assignee agrees in writing to become subject to the terms and conditions of this Agreement. 10. No Required Sale. Nothing in this Agreement shall be deemed to create an independent obligation on the part of any Investor to sell any Registrable Securities pursuant to any effective registration statement. 11. Nominees for Beneficial Owners. If Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its option, be treated as the holder of such Registrable Securities for purposes of any request or other action by any Investor pursuant to this Agreement (or any determination of any number or percentage of shares constituting Registrable Securities held by any Investor contemplated by this Agreement); provided that the Company shall have received assurances reasonably satisfactory to it of such beneficial ownership. 12. Limitations on Subsequent Registration Rights. The Company represents and warrants that from and after the date of this Agreement, it shall not, without the prior written consent of the holders of at least 50% of the Registrable Securities then outstanding, enter into any agreement (or amendment or waiver of the provisions of any agreement) with any holder or prospective holder of any securities of the Company that would grant such holder registration rights that are pari passu (except with respect to piggyback or incidental registration rights) or senior to those granted to the Investors hereunder. 13. Entire Agreement. This Agreement and exhibits attached hereto and incorporated herewith constitute and contain the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersedes any and all prior negotiations, correspondence, agreements or understandings with respect to the subject matter hereof and supercedes all prior agreements, negotiations, understandings, representations and statements respecting the subject matter hereof, whether oral or written. 14. Miscellaneous. (a) Amendment. No amendment, modification, alteration, waiver or change in any of the terms of this Agreement shall be valid or binding upon the parties hereto unless made in writing and duly executed by the Company and the holders of at least 50% of the Registrable Securities held by all of the Investors; provided, however, that in each case, no such amendment 12 shall increase the obligations of, or have any adverse effect upon, any Investor without such Investor's written consent. (b) Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to any conflicts of laws concepts that would apply the laws of another jurisdiction. (c) Assignment; Termination. The rights and obligations of the parties hereto shall inure to the benefit of, and shall be binding upon the authorized successors and permitted assigns of each party; provided, that the terms and conditions of Section 9 hereof are satisfied. Notwithstanding anything in this Agreement to the contrary, this Agreement shall terminate for all purposes on January 1, 2008 or, if the Exchange Offer has not been consummated by September 15, 2005, this Agreement shall terminate for all purposes on September 15, 2005. In addition, if at any time any Investor shall have materially breached its obligations under the Support Agreement or shall cease to own any Registrable Securities, all of such Investor's rights under this Agreement shall immediately terminate; provided, however, that if such Investor ceases to own Registrable Securities because all or a portion of such shares were sold pursuant to a Registration Statement, then such Investor shall continue to have the rights and obligations set forth in Section 7 hereof, as provided in Section 7(e) hereof. (d) Specific Performance. Each party acknowledges and agrees that the other parties would be damaged irreparably if any provision of this Agreement were not performed in accordance with its specific terms or were otherwise breached. Accordingly, the parties will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and its provisions in any action or proceeding instituted in any state or federal court sitting in New York, New York having jurisdiction over the parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity. Except as expressly provided herein, the rights, obligations and remedies created by this Agreement are cumulative and in addition to any other rights, obligations or remedies otherwise available at law or in equity. Except as expressly provided herein, nothing herein will be considered an election of remedies. (e) Notice. Any notices, reports or other correspondence required or permitted to be given hereunder shall be sent by courier (overnight or same day) or facsimile or delivered by hand to the party to whom such correspondence is required or permitted to be given hereunder. The date of giving any notice shall be the date of its actual receipt. (i) All notice to the Company shall be addressed as follows: Salton, Inc. 1955 W. Field Court Lake Forest, Illinois 60045 Facsimile: 847-803-8080 Attn: President and Chief Operating Officer 13 with a copy to (which shall not constitute notice): Neal Aizenstein, Esq. Sonnenschein Nath & Rosenthal LLP 8000 Sears Tower Chicago, Illinois 60606 Facsimile: (312) 876-7934 (ii) All notices to the Investors shall be shall be addressed as follows: Angelo Gordon & Co. 245 Park Avenue New York, New York 10167 Facsimile: [to come] Attn: [to come] with a copy to (which shall not constitute notice): Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 Facsimile: (212) 872-1002 Attn: Stephen B. Kuhn, Esq. [INSERT NOTICE PROVISIONS FOR OTHER INVESTORS] (iii) Any Person may change the address to which correspondence to it is to be addressed by notification as provided for herein. (f) Waiver. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or be construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement. (g) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS] 14 IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date and year first above written. SALTON, INC. By:---------------------- Name: Title: [ANGELO GORDON ENTITIES] By:---------------------- Name: Title: [INSERT SIGNATURE LINES FOR OTHER INVESTORS] 15 EXHIBIT C COMPANY ACKNOWLEDGEMENT (see attached) ACKNOWLEDGEMENT Harbinger Capital Partners Master Fund I, Ltd. Re: Securities Purchase Agreement dated June 2, 2006 (the "Purchase Agreement") by and among the parties listed on Schedule I annexed thereto (the "Sellers") and Harbinger Capital Partners Master Fund I, Ltd. ("Purchaser") ----------------------------------------------------------------- In reliance on the Certificate from Purchaser attached hereto, Salton, Inc. (the "Company") hereby acknowledges and agrees that: (a) the Conversion Price (as defined in the Company's Certificate of Designation of Series A Voting Convertible Preferred Stock Setting Forth the Powers, Preferences, Right, Qualifications, Limitations and Restrictions of Such Series of Preferred Stock (the "Preferred Stock")) as of the date of this Acknowledgement is $11.3333; (b) the number of shares of Salton common stock of the Company (the "Common Stock") outstanding on the date hereof is 14,386,390; (c) the 30,000 shares of Preferred Stock are convertible into 2,647,067 shares of Common Stock as of the date of this Acknowledgement, which constitutes approximately 15.54% under the Rights Plan (defined below); (d) upon consummation of the transactions contemplated by the Purchase Agreement, the Purchaser shall have the right in accordance with the first sentence of Section 8 of the Consent and Agreement dated as of August 15, 2005 by and among the Company and the Sellers (the "Consent Agreement") to designate one director for election to the Company's Board of Directors (the "Board"); and will continue to have the right to designate one director irrespective of the continued ownership of the Sellers in the Company, subject only to the last sentence of Section 8 of the Consent Agreement; (e) subject to Company's receipt of the written irrevocable resignation attached hereto, effective immediately after consummation of the transactions contemplated by the Purchase Agreement, the Board has elected David Maura to the Board as a Class II Director in accordance with Section 8 of the Consent Agreement; (f) the Company will use its reasonable best efforts at the next meeting of the Board to approve an amendment to the Rights Agreement, dated as of June 28, 2004 between the Company and UMB Bank, N.A. (the "Rights Plan") that provides that: (i) the issuance or the right to issuance of shares of Common Stock to a Person upon redemption by the Company of the Preferred Stock shall not result in a Person becoming an Acquiring Person; provided that if such Person or its Affiliates shall (x) become the Beneficial Owner of 20% or more of the Common Shares of the Company then outstanding by reason of such issuance and (y) thereafter acquire, in one or more transactions, beneficial ownership of an additional number of Common Shares which exceeds 0.25% of the then outstanding Common Shares, then such Person shall be deemed to be an Acquiring Person; and (ii) the issuance or the right to issuance by the Company of shares of Common Stock to a Person in accordance with the anti-dilution provisions of the Preferred Stock shall not result in a Person becoming an Acquiring Person; provided that if such Person or its Affiliates shall (x) become the Beneficial Owner of 20% or more of the Common Shares of the Company then outstanding by reason of such issuance and (y) thereafter acquire, in one or more transactions, beneficial ownership of an additional number of Common Shares which exceeds 0.25% of the then outstanding Common Shares, then such Person shall be deemed to be an Acquiring Person; (g) the Purchaser shall not be deemed an "Acquiring Person" under the Rights Plan as a result of signing and becoming a party to the Joinder Agreement (as defined in the Purchase Agreement); and (h) assuming that the Purchaser does not "beneficially own" (as defined in the Rights Plan) any shares of Common Stock at the closing of the transactions contemplated by the Purchase Agreement, the purchase of the 30,000 shares of Preferred Stock pursuant to the Purchase Agreement will not result in the Purchaser becoming an Acquiring Person under the Rights Plan. Purchaser may rely on the foregoing in connection with the transactions contemplated by the Purchase Agreement. Except as set forth above, the Company makes no representations or warranties in connection with the Purchase Agreement or the transactions contemplated thereby. SALTON, INC. By: /s/ William B. Rue ------------------- Name: William B. Rue Title: President -2- CERTIFICATE Salton, Inc. Re: Securities Purchase Agreement dated June 2, 2006 (the "Purchase Agreement") by and among the parties listed on Schedule I annexed thereto (the "Sellers") and Harbinger Capital Partners Master Fund I, Ltd. ("Purchaser") ----------------------------------------------------------------- (a) as of the date hereof, immediately prior to the consummation of the transactions contemplated by the Purchase Agreement, the Purchaser and its affiliates (as defined by Rule 12b-2 under the Securities Exchange Act of 1934) do not beneficially own (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) any shares of common stock of Salton, Inc. (the "Company"); (b) except as modified by the Acknowledgement delivered by the Company in connection herewith, the shares of Preferred Stock purchased by the Purchaser pursuant to the Purchase Agreement will be subject to the terms of, and agreements of the Sellers under, the Consent and Agreement dated as of August 15, 2005 by and among the Company and the Sellers; and (c) effective immediately after consummation of the transactions contemplated by the Purchase Agreement, the Purchaser hereby designates, in accordance with the first sentence of Section 8 of the Consent Agreement, David Maura to serve as a director on the Company's Board of Directors. HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. By: Harbinger Capital Partners Offshore Manager, LLC, as its investment manager By: /s/ Philip A. Falcone ----------------------- Name: Philip A. Falcone Title: Vice President AGREEMENT TO RESIGN Salton, Inc. The undersigned hereby irrevocably agrees to resign from the board of directors of Salton, Inc. in the event that Harbinger Capital Partners Master Fund I, Ltd. and/or its affiliates fails to own at least 50% of the shares of Series A Voting Convertible Preferred Stock of Salton, Inc. outstanding on August 15, 2005. /s/ David Maura --------------------- David Maura EX-99.2 3 e33460.txt JOINDER AGREEMENT TO REGISTRATION RIGHTS AGREEMENT Reference is hereby made to that certain Registration Rights Agreement, dated as of July 15, 1998, among Salton, Inc., a Delaware corporation (the "Company"), and the investors named therein (as amended and in effect from time to time, the "Registration Rights Agreement"), a true and correct copy of which is attached hereto as Exhibit A; it being understood that the same was modified by the certain Consent Agreement dated August 15, 2005. The undersigned hereby joins and agrees to be a party to and a "Purchaser" under the Registration Rights Agreement with respect to a number of shares of Series A Preferred Stock (as defined in the Registration Rights Agreement) set forth below such person's signature below, subject to all of the rights and obligations applicable to a Purchaser thereunder. This Joinder Agreement shall take effect and shall become a part of the Registration Rights Agreement immediately upon the execution and delivery hereof. [Signatures appear on the following page] IN WITNESS WHEREOF, this Joinder Agreement has been duly executed and delivered by each of the undersigned as of June 2, 2006. HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. By: Harbinger Capital Partners Offshore Manager, L.L.C., as its investment manager By: /s/ Philip A. Falcone -------------------------------------- Name: Philip A. Falcone Title: Vice President No. of shares of Series A Preferred Stock: 30,000 AGREED AND ACCEPTED: SALTON, INC By: ----------------------- Name: --------------------- Title: -------------------- EXHIBIT A --------- REGISTRATION RIGHTS AGREEMENT ----------------------------- REGISTRATION RIGHTS AGREEMENT dated as of July 15, 1998 by and among SALTON/MAXIM HOUSEWARES, INC., a Delaware corporation (the "Company"), and each of the parties listed on the signature pages hereto under the caption "Purchasers" (each, a "Purchaser," and collectively, the "Purchasers"). This Agreement is made pursuant to the Stock Purchase Agreement (the "Purchase Agreement"), dated as of July 15, 1998, by and among the Company and the Purchasers, whereby the Company has agreed, among other things, to issue to the Purchasers 40,000 shares of its Series A Voting Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"). The Preferred Stock is convertible into shares of the Company's common stock, par value $.01 per share (the "Common Stock"), at a conversion price of $17.00 per share, as such price may be adjusted pursuant to the Certificate of Designation of the relative powers, preferences and rights and qualifications of the Preferred Stock. In order to induce the Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. This Agreement shall become effective upon the issuance of the shares of Preferred Stock to the Purchasers pursuant to the Purchase Agreement. In consideration of the foregoing and the respective covenants and agreements herein contained, the parties hereto, intending to be legally bound hereby, agree as follows: SECTION 1. Definitions. Capitalized terms used and not defined herein have the meanings assigned to such terms in the Purchase Agreement. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: "Blue Sky Filing" is defined in Section 2.07(a) of this Agreement. "Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Common Stock" is defined in the introduction to this Agreement. "Company" is defined in the introduction to this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all 2 as the same shall be in effect at the time. Reference to a particular section therein shall include a reference to the comparable section, if any, of any such successor federal statute. "Person" means a corporation, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency. "Preferred Stock" is defined in the introduction to this Agreement. "Purchase Agreement" is defined in the introduction to this Agreement. "Purchasers" is defined in the introduction to this Agreement. "Registrable Securities" means any (i) shares of Preferred Stock, (ii) shares of Common Stock issued upon the conversion of the Preferred Stock and (iii) securities issued or issuable with respect to any shares of Preferred Stock or Common Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (a) a registration 3 statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been sold to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and in the opinion of counsel reasonably satisfactory to the Company subsequent public distribution of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, or (d) they shall have ceased to be outstanding. "Registration Expenses" is defined in Section 2.09(a) of this Agreement. "Securities Act" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. References to a particular section therein shall include a reference to the comparable section, if any, of any such similar federal statute. 4 SECTION 2. Registration under Securities Act. SECTION 2.01. Demand Registration. (a) Request. At any time after the date hereof, upon the written request of the Purchasers that the Company effect the registration under the Securities Act of all or part (subject to Section 2.01(f)) of the Purchasers' Registrable Securities and specifying the types of Registrable Securities to be registered and the intended method of disposition thereof, the Company will give prompt written notice of such request to all registered holders of Registrable Securities, and thereupon the Company will, subject to the terms of this Agreement, use its reasonable best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been requested to register by the Purchasers, and (ii) all other Registrable Securities which the Company has been requested to register by written request of the holders thereof given to the Company within 30 days after the giving of the aforesaid written notice by the Company (specifying the intended method of disposition of such Registrable Securities), all to the extent 5 requisite to permit the intended disposition of the Registrable Securities to be so registered. (b) Registration of Other Securities. Whenever the Company shall effect a registration pursuant to this Section 2.01 in connection with an underwritten offering by one or more holders of Registrable Securities, no securities other than Registrable Securities shall be included among the securities covered by such registration unless (i) the managing underwriter of such offering shall have advised the Purchasers in writing that the inclusion of such other securities would not adversely affect such offering or (ii) the Purchasers shall have consented in writing to the inclusion of such other securities. (c) Registration Statement Form. Registrations under this Section 2.01 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in their request for such registration; provided, however, that if at the time of such registration the Company satisfies the eligibility requirements for use of a registration statement on Form S-3 under the Securities Act, the Purchasers may request a registration on Form S-3 for an offering to be 6 made on a continuous basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration") and the Company shall use all reasonable efforts to cause the registration to be made on such form. The Company agrees to include in any such registration statement all information which, in the opinion of counsel to the Purchasers or counsel to the Company, is required to be included. (d) Effective Registration Statement. A registration requested pursuant to this Section 2.01 shall not be deemed to have been effected and will not be considered one of the three demand registrations which may be requested pursuant to this Agreement (i) if the registration statement with respect thereto does not become effective, (ii) if after it has become effective, it does not remain effective for a period of at least 90 days or, in the case of a Shelf Registration, one year (or in each case such shorter period during which all the Registrable Securities registered thereunder are sold or disposed of) or such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason and has not thereafter become effective, or (iii) if the conditions to closing specified in the underwriting agreement entered into in connection with such registration are not satisfied 7 or waived other than by reason of the failure or refusal of a holder of Registrable Securities to satisfy or perform a condition to such closing or a default by an underwriter. If a demand is made pursuant to Section 2.01 and the Company files a registration statement and causes (or is in the process of causing) such registration statement to become effective and the holders requesting registration decide not to proceed with such registration for reasons other than a breach by the Company of its obligations hereunder or the Company's inability or failure to obtain the effectiveness of such registration statement, such request shall nevertheless count as one demand under Section 2.01. (e) Priority in Demand Registrations. If a demand registration pursuant to this Section 2.01 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy sent to each holder of the Registrable Securities requesting registration) that the number of securities requested to be included in such registration exceeds the number which can be sold in such offering within a price range acceptable to the Purchasers or such other person entitled to make a demand registration pursuant to Section 8 hereof, such registration will include only that number of Registrable Securities which the Company is so advised can be sold in 8 such offering, drawn pro rata from the holders of the Registrable Securities requesting such registration on the basis of the percentage of Registrable Securities held by the holders of Registrable Securities which have requested that such securities be included. In connection with any such registration, no securities other than Registrable Securities shall be covered by such registration. (f) Limitations on Registration; Expenses. The Company will not be required to effect, in the aggregate, more than three demand registrations pursuant to this Section 2.01 (or any other provision of this Agreement), of which the Company shall pay all Registration Expenses in connection with all three demand registrations. The Company shall not be required to effectuate any registration pursuant to this Section 2.01 within less than six months after the end of the effectiveness period of any other registration pursuant to Section 2.01. Notwithstanding the foregoing, no demand may be made in respect of a number of Registrable Securities by all holders demanding registration which is less than the lesser of (x) 25% of the total Registrable Securities originally issued (or the equivalent thereof in the case of securities issued upon the conversion thereof) or (y) the number of Registrable Securities having 9 a market value (as reasonably estimated in good faith by the holders requesting registration) of at least $10,000,000. SECTION 2.02. Incidental Registration. (a) Right to Include the Registrable Securities. If the Company at any time proposes to register any of its securities under the Securities Act by registration on Forms S-l, S-2 or S-3 or any successor or similar form(s), whether or not for sale for its own account, it will each such time give prompt written notice to the Purchasers and all other holders of Registrable Securities of its intention to do so and of such holders' rights under this Section 2.02. Upon the written request of any such holder made within 30 days after the receipt of any such notice (15 days if the Company gives telephonic notice to all holders of Registrable Securities, with written confirmation to follow promptly thereafter, stating that (i) such registration will be on Form S-3 and (ii) such shorter period of time is required because of a planned filing date) (which request shall specify the Registrable Securities to be disposed of by such holder), the Company will, subject to the next sentence, use its reasonable best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the holders thereof, to the extent requisite to permit the disposition 10 of such Registrable Securities to be so registered. If the Company thereafter determines for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of the obligation to register such Registrable Securities in connection with such registration (but not from any obligation of the Company to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights (if any) of the Purchasers or an assignee to request that such registration be effected as a registration under Section 2.01, and (ii) in the case of a determination to delay registration, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registration of such other securities. All obligations of the Company with respect to any registration described in this Section 2.02(a) shall be subject to the rights of the Company set forth in the immediately preceding sentence. No registration effected under this Section 2.02 shall relieve the Company of its obligation to effect any registration upon request under Section 2.01. The Company will pay all Registration Expenses in connection with registration of 11 Registrable Securities requested pursuant to this Section 2.02. If such offering is to be underwritten, the holders seeking to sell such Registrable Securities agree to join in such underwritten offering. (b) Priority in Incidental Registrations. In a registration pursuant to this Section 2.02 involving an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company by or through one or more underwriters of recognized standing, if the managing underwriter of such underwritten offering shall inform the Company and the holders of Registrable Securities requesting registration in such offering by letter of its belief that the number or type of securities to be included in such registration would interfere with the successful marketing of the securities being distributed by such underwriters, then the Company will be required to include in such registration only that number and type of Registrable Securities which it is so advised can be sold in such offering, drawn pro rata from the holders of Registrable Securities requesting such registration and the holders of any other securities to be registered (whether or not pursuant to the exercise of a demand registration right by such holders) on the basis of the number of securities the registration of which shall have been requested by such 12 holders (it being understood that this provision shall not limit the number of securities that the Company shall be entitled to register for sale for its own account). SECTION 2.03. Registration Procedures. In connection with the Company's obligations pursuant to Sections 2.01 and 2.02 hereof, the Company will use its reasonable best efforts to effect such registrations to permit the sale of Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company will as expeditiously as possible: (a) prepare and, as soon as reasonably practicable and in any event within 30 days after the end of the period within which requests for registration may be given to the Company, file with the Commission (but not earlier than 90 days after the end of the Company's fiscal year or 45 days after the end of the last fiscal quarter), a registration statement or registration statements on the appropriate form under the Securities Act, which form shall be available for the sale of the Registrable Securities by the holders thereof in accordance with the intended method or methods of distribution thereof, and use its reasonable best 13 efforts to cause such registration statement to become effective and to remain continuously effective for a period of 90 days following the date on which such registration statement is declared effective (or, in the case of a Shelf Registration, for a period of one year following such date); provided that the Company shall have no obligation to maintain the effectiveness of such registration statement after the sale of all Registrable Securities registered thereunder or for a period longer than that specified in this paragraph (a); (b) prepare and file with the Commission such amendments and post-effective amendments to the registration statement as may be necessary to keep such registration statement effective for the applicable period; cause the related prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during the applicable period in accordance with the intended 14 methods of disposition by the sellers thereof set forth in such registration statement or supplement to such prospectus; (c) notify the selling holders of Registrable Securities, and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such advice in writing, (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a registration statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission for amendments or supplements to a registration statement or related prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose, (iv)if at any time the representations and warranties of the Company made as contemplated by Section 2.04(a) below cease to be true and correct in any material respect, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of any of the 15 Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the happening of any event which requires the making of any changes in a registration statement or related prospectus so that such documents will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (vii) if the Company reasonably determines that a post-effective amendment to a registration statement would be appropriate; (d) use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any Registrable Securities for sale in any jurisdiction and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment. (e) if requested by the managing underwriters or any holder of Registrable 16 Securities being sold in connection with an underwritten offering, immediately incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters and such holder agree should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering; make all required filings of such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and supplement or make amendments to any registration statement if requested by any holder of Registrable Securities covered by such registration statement or any underwriter of such Registrable Securities; 17 (f) furnish to each selling holder of Registrable Securities and each managing underwriter, without charge, at least one signed copy of the registration statement or statements and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (g) deliver to each holder of Registrable Securities and the underwriters, if any, without charge, as many copies of the prospectus or prospectuses (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto; (h) prior to any public offering of Registrable Securities, use its reasonable best 18 efforts to register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as any selling holder or underwriter reasonably requests in writing; keep each such registration or qualification effective during the period such registration statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable registration statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (i) cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely 19 preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends unless required by applicable law; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of Registrable Securities to the underwriters; (j) use its reasonable best efforts to cause the Registrable Securities covered by the applicable registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities; (k) upon the occurrence of any event contemplated by paragraph (c)(vi) above, prepare a supplement or post-effective amendment to the applicable registration statement or related prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of 20 the Registrable Securities being sold thereunder, such prospectus will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (1) take all such actions in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities; (m) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its security holders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (n) permit any holder of Registrable Securities, which holder, in the judgment of its counsel, might be deemed to be a "control person" of the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), to participate in the preparation of such registration statement and include therein material, furnished to the Company in writing which, in the reasonable judgment of such holder 21 and its counsel, is required to be included therein; (o) use its reasonable best efforts to cause all such Registrable Securities to be listed on each securities exchange, if any, on which Registrable Securities of the type then being registered are listed; and (p) provide and cause to be maintained a transfer agent and registrar (if applicable) for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. The Company may require each holder of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request in writing in order to comply with the Securities Act. Each holder of Registrable Securities as to which any registration is being effected agrees to notify the Company, as promptly as practicable, of any inaccuracy or change in information previously furnished by such holder to the Company or of the happening of any event in either case as a 22 result of which any prospectus relating to such registration contains an untrue statement of a material fact regarding such holder or the distribution of such Registrable Securities or omits to state any material fact regarding such holder or the distribution of such Registrable Securities required to be stated therein or necessary to make the statement therein not misleading in light of the circumstances then existing, and to promptly furnish to the Company any additional information required to correct and update any previously furnished information or required such that such prospectus shall not contain, with respect to such holder or the distribution of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.03(c)(ii), (iii), (v), (vi) or (vii) hereof, such holder will forthwith discontinue disposition of such Registrable Securities covered by such registration statement or prospectus until such holder's receipt of the copies of the supplemented or amended prospectus relating to such registration statement 23 or prospectus, or until it is advised in writing by the Company that the use of the applicable prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in such Prospectus, and, if so directed by the Company, such holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such holder's possession, of the prospectus covering the Registrable Securities current at the time of receipt of such notice. SECTION 2.04. Underwritten Offerings. (a) Demand Underwritten Offerings. In any offering by holders of Registrable Securities pursuant to a registration requested under Section 2.01, sales shall, at the request of the Purchasers, be made through a nationally recognized investment banking firm (or syndicate managed by such a firm) selected by the holders of at least a majority in aggregate principal amount of the Registrable Securities to be included in such offering and approved by the Company (which approval shall not be unreasonably withheld) and the Company shall enter into an underwriting agreement which shall be reasonably satisfactory in form and substance to each holder and the underwriters and which shall contain representations, warranties and agreements (including 24 indemnification agreements to the effect and to the extent provided in Section 2.07(a)) as are customarily included by an issuer in underwriting agreements with respect to primary distributions. The holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder3s Registrable Securities and such holder's intended method of distribution and any other representation required by law. (b) Incidental Underwritten Offerings. If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by 25 Section 2.02 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registrable Securities as provided in Section 2.02 and subject to the provisions of Section 2.02(b), use its reasonable best efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters. The holders of Registrable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. SECTION 2.05. Preparation; Reasonable Investigation. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company will give the holders of Registrable Securities to be registered under such registration statement, their underwriters, and their respective counsel and accountants the opportunity to 26 participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders3 and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. SECTION 2.06. Limitations, Conditions and Qualifications to Obligations Under Registration Covenants. The obligations of the Company to use its reasonable efforts to cause the Registrable Securities to be registered under the Securities Act are subject to each of the following limitations, conditions and qualifications: (a) The Company shall not be obligated to file or keep effective any registration statement pursuant to Section 2.01 hereof at any time if the Company would be required to include financial statements audited as of any date other than the end of its fiscal year. (b) The Company shall be entitled to postpone for a reasonable period of time (but not exceeding 30 days and not more than once in any six-month period) the filing or 27 effectiveness of any registration statement otherwise required to be prepared and filed by it pursuant to Section 2.01 if the Company determines, in its reasonable judgment, that (i) the Company is in possession of material information that has not been disclosed to the public and the Company reasonably determines that it would be significantly detrimental to the Company and its stockholders to disclose such information at such time in a registration statement or (ii) such registration and offering would significantly interfere with any financing, acquisition, corporate reorganization or other material transaction involving the Company or any of its Affiliates (as defined in the rules and regulations adopted under the Exchange Act) and, in any such case, the Company promptly gives the requesting holders of Registrable Securities written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay. If the Company shall so postpone the filing of a registration statement, the requesting holders of Registrable Securities shall have the right to withdraw the request for registration by giving written notice to the Company within 30 days after receipt of the notice of postponement and, in the event of such withdrawal, such request shall not be counted for purposes 28 of the requests for registration to which the Purchasers and their assignees are entitled pursuant to Section 2.01 hereof. (c) No holder of Registrable Securities may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. SECTION 2.07. Indemnification. (a) Indemnification by the Company. In the event of any registration of any Registrable Securities under the Securities Act, the Company will, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, the holder of any Registrable Securities whose Registrable Securities are covered by such registration statement, its directors and officers, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act, against any and all losses, claims, damages, liabilities and 29 expenses, joint or several, (or actions or proceedings, whether commenced or threatened, in respect thereof) to which they or any of them may become subject under the Securities Act or any other statute or common law, including any amount paid in settlement of any litigation, commenced or threatened, and to reimburse them for any reasonable legal or other expenses incurred by them in connection with investigating any claims and defending any actions, insofar as any such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement or prospectus relating to the sale of such securities or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under Blue Sky or other securities laws of jurisdictions in which the Registrable Securities are offered ("Blue Sky Filing"), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, if used prior to the effective date of such registration statement (unless 30 such statement is corrected in the final prospectus and the Company has previously furnished copies thereof to any holder of Registrable Securities seeking such indemnification and the underwriters), or contained in the final prospectus (as amended or supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto) if used within the period during which the Company is required to keep the registration statement to which such prospectus relates current, or the omission or alleged omission to state therein (if so used) a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the indemnification agreement contained herein shall not (i) apply to such losses, claims, damages, liabilities, expenses or actions arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company by such seller or such underwriter specifically stating that it is for use in connection with preparation of the registration statement, any preliminary prospectus or final prospectus contained in the registration statement, any such amendment or supplement thereto or any 31 Blue Sky Filing or (ii) inure to the benefit of any underwriter or any person controlling such underwriter, to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. (b) Indemnification by the Sellers. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2.01 or 2.02, that the Company shall have received an undertaking satisfactory to it from the prospective seller of such securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 2.07(a)) the Company, each 32 director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any untrue statement or alleged untrue statement in, or omission or alleged omission from, such registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in such registration statement, preliminary prospectus, final prospectus, amendment or supplement. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. In no event shall any indemnity or contribution paid by any seller to the Company pursuant to this Section 2.07, or otherwise, exceed the proceeds received by such seller in such offering. In the case of an underwritten offering of Registrable Securities, each holder of Registrable Securities shall agree to indemnify such underwriters, their officers and directors, if any, and each person, if any, who controls such underwriters within the 33 meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act, with respect to information furnished by them for use in the registration statement or prospectus to the extent customary in the circumstances for a selling stockholder in an underwritten public offering. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 2.07(a), such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter within five days of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 2.07(a), except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and, unless in such indemnified party's reasonable good faith judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, to assume the defense thereof, jointly with any other 34 indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. In the event that the indemnifying party advises an indemnified party that it will contest a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party's reasonable out-of-pocket 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. The 35 indemnified party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or claim. The indemnifying party shall keep the indemnified party fully appraised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. If the indemnifying party does not assume such defense, the indemnified party shall keep the indemnifying party appraised at all times as to the status of the defense; provided, however, that the failure to keep the indemnifying party so informed shall not affect the obligations of the indemnifying party hereunder. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent; provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the indemnified party (which consent shall not be 36 unreasonably withheld, delayed or conditioned), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Contribution. (i) If the indemnification from the indemnifying party as provided in this Section 2.07 is unavailable or is otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party shall, to the fullest extent permitted by law, contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party shall be determined by reference to, among other things, whether any action in question, including any untrue (or alleged untrue) statement of a material fact or omission (or alleged omission) to state a 37 material fact, has been made, or related to information supplied by such indemnifying party, and the parties3 relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 2.07(c), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.07 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. If however, indemnification is available under this Section 2.07, the indemnifying parties shall indemnify each indemnified party to the fullest extent provided in Section 2.07(a) and (b) hereof without regard to the relative fault of said indemnifying party or indemnified 38 party or any other equitable consideration provided for in this Section 2.07(d). (e) Indemnification Payments. The indemnification and contribution required by this Section 2.07(a) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Other Rights; Liabilities. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the indemnified party against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law. SECTION 2.08. Adjustments Affecting Registrable Securities. (a) During any period commencing on either (i) the date a request for a demand registration has been made pursuant to Section 2.01(a) hereof or (ii) the date on which any holder of Registrable Securities makes written request in accordance with the terms of Section 2.02(a) hereof to have its Registrable Shares registered, and in either event, terminating on the date which is the earlier of (i) 180 days after the date on which the registration statement 39 registering such Registrable Securities becomes effective and (ii) the date on which all Registrable Securities registered under such registration statement are sold, transferred or disposed of, the Company will not, without the consent of the Purchasers, effect, permit to occur or announce any future intent to effect or permit to occur, any combination or subdivision of shares which would materially adversely affect the ability of the holders of Registrable Securities to include Registrable Securities in any registration of securities contemplated by this Section 2 or the marketability of Registrable Securities under any such registration. SECTION 2.09. Registration Expenses. (a) Except as provided in Section 2.09(b), all expenses incident to the Company's performance of or compliance with this Agreement, including without limitation (i) any allocation of salaries and expenses of Company personnel or other general overhead expenses of the Company, or other expenses for the preparation of historical and pro forma financial statements or other data normally prepared by the Company in the ordinary course of business or customarily prepared by the issuer in a public offering; (ii) all registration, application, filing, listing, transfer and registrar fees; (iii) all National Association of Securities Dealers fees 40 and fees and expenses of registration or qualification of Registrable Securities under state securities or blue sky laws; (iv) all word processing, duplicating and printing expenses, messenger and delivery expenses; and (v) the fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel retained by the holder or holders a majority of the Registrable Securities being registered and the fees and disbursements of the Company's independent public accountants, including the expenses of customary "cold comfort" letters required by or incident to such performance and compliance; and (vi) subject to the proviso hereinbelow, any fees and disbursements of underwriters and broker-dealers customarily paid by issuers or sellers of securities (all such expenses being herein called "Registration Expenses") will be borne or caused to be borne by the Company whether or not any of the Registration Statements become effective provided, however, that in all cases in which the Company is required to pay Registration Expenses hereunder, Registration Expenses shall exclude, and the sellers of the Registrable Securities being registered shall pay, all underwriting discounts and commissions and transfer taxes in respect of the Registrable Securities under state securities or blue sky laws. 41 SECTION 2.10. Other Sales. (a) The Company hereby agrees not to effect, any public sale or distribution of any securities of the same class as (or otherwise similar to) the Registrable Securities, or any securities which, with notice, lapse of time and/or payment of monies, are exchangeable or exercisable for or convertible into any such securities, or to enter into any agreement to make, file a registration statement for, or announce any such public sale or distribution of, any such securities, excluding the grant and exercise of employee stock options and the issuance of shares in connection with acquisitions as long as all executive officers, directors and other affiliates of the entity being acquired have agreed in writing to the restrictions set forth in this Section 2.10(a), during the 15-day period prior to, and during the 90-day period commencing on, the effective date of a registration statement filed with the Commission in connection with an underwritten offering effected pursuant to Section 2.1 of this Agreement without the prior written consent of the managing underwriters of such offering. (b) The Purchasers (and their assigns) agree, during the 10-day period prior to, and during the 90-day period commencing on, the effective date of a registration statement filed with the Commission (other than on Form S-8) 42 in connection with an underwritten offering of securities of the same class as the then outstanding Registrable Securities (or any securities issuable upon conversion or exchange thereof), not to make any sales of Registrable Securities (or such other securities) pursuant to Rule 144, provided that they were given the opportunity, if required by (and subject to) Section 2.02 hereof, to include in such registration statement all such Registrable Securities as they may have requested. SECTION 3. Rule 144. The Company shall take all actions reasonably necessary to enable holders of Registrable Securities to sell such securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission including, without limiting the generality of the foregoing, filing on a timely basis all reports required to be filed by the Exchange Act. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. Notwithstanding anything herein to the contrary, no holder may exercise any right to require the registration of a 43 number of Registrable Securities which he is at such time able to sell pursuant to Rule 144 (without being limited by any volume restriction therein with respect to Registrable Securities desired to be sold immediately by such holder). SECTION 4. Entire Agreement; Amendments and Waivers. This Agreement, together with the Purchase Agreement and the agreements, schedules, exhibits and annexes referred to therein, and the Certificate of Designation, represents the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes any and all prior oral and written agreements, arrangements and understandings among the parties hereto with respect to such subject matters. This Agreement may be amended, waived or modified only by a written instrument signed by the Company and the holder or holders of a majority of the shares of Registrable Securities. SECTION 5. Other Registration Rights. The Company hereby covenants and agrees not to hereafter enter into any agreement, arrangement or understanding with respect to its securities which conflicts with or is inconsistent with the rights granted to the holders of Registrable Securities under this Agreement. 44 SECTION 6. Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election, be treated as the holder of such securities for purposes of any request or other action by any holder or holders of securities pursuant to this Agreement or any determination of any number or percentage of shares of securities held by any holder or holders of securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. SECTION 7. 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 (a) if addressed to the Purchasers, addressed to such party in the manner set forth in the Purchase Agreement, or at such other address as such 45 party shall have furnished to the Company in writing, or (b) if addressed to any other holder of Registrable Securities, at the address that such holder shall have furnished to the Company in writing, or, until any such other holder so furnishes to the Company an address, then to and at the address of the last holder of such securities who has furnished an address to the Company, or (c) if addressed to the Company, at 550 Business Center Drive, Mount Prospect, Illinois, 60656 attention of the General Counsel or at such other address, or to the attention of such other officer, as the Company shall have furnished to each holder of Registrable Securities at the time outstanding. SECTION 8. Assignment. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors by merger, consolidation or amalgamation and permitted assigns. The Company may not assign any of its rights and obligations hereunder without the consent of the holders of all the Registrable Securities then outstanding. Any Purchaser may assign its rights hereunder without the consent of the Company to any Purchaser Affiliate (as defined in the Purchase Agreement) or successor or to any Person who purchases or otherwise duly receives title to 10% or more of the Registrable Securities then outstanding; provided that 46 such assignee agrees in writing to be bound by the terms of this Agreement. This Agreement shall not inure to the benefit of any person who is not a party hereto or a successor to or permitted assignee of a party hereto. SECTION 9. Descriptive Headings. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. SECTION 10. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, APPLICABLE TO CONTRACTS TO BE MADE, EXECUTED, DELIVERED AND PERFORMED WHOLLY WITHIN SUCH STATE AND, IN ANY CASE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE. SECTION 11. Severability. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement. 47 SECTION 12. Equitable Remedies. The parties hereto agree that irreparable harm would occur in the event that any of the agreements and provisions of this Agreement were not performed fully by the parties hereto in accordance with their specific terms or conditions or were otherwise breached, and that money damages are an inadequate remedy for breach of this Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or conditions or is otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other parties and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, such remedy being in addition to and not in lieu of, any other rights and remedies to which the other parties are entitled to at law or in equity. SECTION 13. No Waiver. The failure of any party at any time or times to require performance of any provision hereof (within the time limitations contained herein) shall not affect the right at a later time to enforce the same. No waiver by any party of any condition, and no breach of 48 any provision, term, covenant, representation or warranty contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be construed as a further or continuing waiver of any such condition or of the breach of any other provision, term, covenant, representation or warranty of this Agreement. SECTION 14. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. 49 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. 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 50 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 51 -----END PRIVACY-ENHANCED MESSAGE-----