-----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, OiJLY05XWJeYIucAgkVxENY9HNIz/LyG4nYJBOFs3HijJkEKySTF1oN1gm2osFve 81RvFoLZDV7xVb7huz3Axw== 0000918964-97-000013.txt : 19970826 0000918964-97-000013.hdr.sgml : 19970826 ACCESSION NUMBER: 0000918964-97-000013 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19970825 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SAFETY COMPONENTS INTERNATIONAL INC CENTRAL INDEX KEY: 0000918964 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 330596831 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-45337 FILM NUMBER: 97669244 BUSINESS ADDRESS: STREET 1: 3190 PULLMAN STREET CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7146627756 MAIL ADDRESS: STREET 1: 3190 PULLMAN STREET CITY: COSTA MESA STATE: CA ZIP: 92626 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SAFETY COMPONENTS INTERNATIONAL INC CENTRAL INDEX KEY: 0000918964 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 330596831 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 3190 PULLMAN STREET CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7146627756 MAIL ADDRESS: STREET 1: 3190 PULLMAN STREET CITY: COSTA MESA STATE: CA ZIP: 92626 SC 13D 1 SCHEDULE 13-D FRANCIS SOUZZI UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. )* Safety Components International, Inc. (Name of Issuer) Common Stock (Title of Class of Securities) 786474106 (CUSIP Number) Mr. Francis X. Suozzi Nabisco Holdings Corporation 7 Campus Drive Parsippany, NJ 07054 (201) 682-6300 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 22, 1997 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this statement because of Rule 13d-1(b) (3) or (4), check the following: [ ]. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 SCHEDULE 13D CUSIP No. 786474106 Page of Pages 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Francis X. Suozzi 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS SC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States NUMBER OF 7 SOLE VOTING POWER SHARES 328,051 BENEFICIALLY OWNED 8 SHARED VOTING POWER BY 0 EACH REPORTING 9 SOLE DISPOSITIVE POWER PERSON 328,051 WITH 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 328,051 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.5 % 14 TYPE OF REPORTING PERSON IN Page 2 Schedule 13D Item 1. Security and Issuer. This Schedule 13D relates to the common stock, par value $.01 per share (the "Common Stock"), of Safety Components International, Inc., a Delaware corporation (the "Company"), whose principal executive office is located at 3190 Pullman Street, Costa Mesa, CA 92626. Item 2. Identity and Background. (a), (b), (c) and (f). This statement is being filed by Francis X. Suozzi, an individual (sometimes referred to herein as the "Reporting Person"). Francis X. Suozzi's principal occupation is Senior Vice President and Treasurer of Nabisco Holdings Corporation. Mr. Suozzi is also a director of the Company and his business address is 7 Campus Drive, Parsippany, NJ 07054. Mr. Suozzi is a citizen of the United States. The principal executive office of Nabisco Holdings Corporation is located at 7 Campus Drive, Parsippany, NJ 07054. Nabisco Holdings Corporation is engaged in the business of producing consumer food products consisting primarily of cookies and crackers. (d) and (e). During the past five years, the Reporting Person has not been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. Pursuant to a definitive Stock Purchase Agreement, dated as of May 22, 1997, the Company acquired (the "Valentec Acquisition") all of the outstanding stock of Valentec International Corporation, a Delaware corporation ("Valentec"), from Robert A. Zummo, Francis X. Suozzi and the Valentec International Corporation Employee Stock Ownership Plan (the "Valentec ESOP"). Valentec had been the Company's largest shareholder immediately prior to the Valentec Acquisition owning 1,379,200 shares of the Company's Common Stock or approximately 27% of the issued and outstanding shares of the Company's Common Stock. Immediately prior to the Valentec Acquisition, Francis X. Suozzi, a consultant to and a director of Valentec and a director of the Company, was the owner of 457,778 shares of common stock of Valentec (approximately 21% of the outstanding common stock of Valentec). The consideration paid to the shareholders of Valentec in connection with the Valentec Acquisition consisted of an aggregate of 1,369,200 newly issued shares of Common Stock, of which Mr. Suozzi received 325,801 shares (the "Suozzi Shares"). The shares of Common Page 3 Stock held by Valentec have become treasury shares and are not considered outstanding. Therefore, there has been no increase in the Company's outstanding shares as a result of the Valentec Acquisition. Francis X. Suozzi now beneficially owns, directly, approximately 6.5% of the outstanding Common Stock of the Company. The indebtedness assumed by the Company in connection with the Valentec Acquisition was approximately $14.1 million as of May 22, 1997, inclusive of intercompany indebtedness of $4.3 million, which has been eliminated in consolidation as a result of the Valentec Acquisition) of which approximately $7.1 million has been repaid. The sources of the funds used by the Company and Valentec to pay such $7.1 million of indebtedness consisted of funds obtained under the Company's revolving line of credit with Keybank National Association, a mortgage financing on the Company's Czechoslovakian facility, a capital lease financing with Transamerica Business Credit Corp. and working capital. Item 4. Purpose of Transaction. Francis X. Suozzi acquired his shares of Common Stock for investment purposes. Except as set forth below, Francis X. Suozzi does not have any present plans or proposals which relate to or would result in any of the actions or events described in paragraphs (a) through (j) of Item 4 of Schedule 13D. Mr. Suozzi reserves the right to acquire additional shares of the Common Stock or to dispose of shares of the Common Stock, directly or indirectly, in open-market or privately negotiated transactions, depending upon the evaluation of the performance and prospects of the Company by him and upon other developments and circumstances, including, but not limited to, general economic and business conditions and stock market conditions Item 5. Interest in Securities of Issuer. (a). Francis X. Suozzi is the beneficial owner of 328,051 shares of Common Stock, of which 325,801 shares were acquired in connection with the Valentec Acquisition and 2,250 shares are issuable under currently exercisable options held by Mr. Suozzi. Such shares represent, in the aggregate, approximately 6.5% of the issued and outstanding shares of Common Stock. The number of shares beneficially owned by the Reporting Person and the percentage of outstanding shares represented thereby are based on the number of outstanding shares as of July 31, 1997, which information is known to the Reporting Person as a director of the Company. (b). Mr. Suozzi has sole voting and dispositive power with respect to all shares of Common Stock beneficially owned by him. See Item 6 for information regarding an arrangement between Mr. Suozzi and Robert A. Zummo, the Chairman of the Board, Chief Executive Officer, President and beneficial owner of approximately 20.2% of the outstanding Common Stock. Page 4 (c). The Reporting Person has not effected any transactions in the Common Stock within the past 60 days. (d) and (e). Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of Issuer. In connection with the Valentec Acquisition, the Company entered into a Registration Rights Agreement (the "Registration Rights Agreement"), dated as of May 22, 1997, with Robert A. Zummo, Francis X. Suozzi and the Valentec ESOP, pursuant to which the Company will, (i) upon the request of Mr. Suozzi, file up to one registration statement under the Securities Act of 1933, as amended (the "Act"), in order to permit Mr. Suozzi (or any subsequent holder of Registrable Securities (as defined in the Registration Rights Agreement) representing at least 5% of the outstanding Common Stock on the date thereof) to offer and sell all or a portion of the Suozzi Shares and (ii) notify Mr. Suozzi (or any such subsequent holder) if at any time the Company proposes to file a registration statement under the Act and offer to Mr. Suozzi (or any such subsequent holder) the opportunity to register such number of Suozzi Shares as Mr. Suozzi (or such subsequent holder) may request. The Registration Rights Agreement is attached as Exhibit 6 hereto and incorporated herein by reference. In connection with the Valentec Acquisition, Mr. Zummo and Mr. Suozzi entered into a Reallocation Agreement (the "Reallocation Agreement") pursuant to which, among other things, 36,430 shares of Common Stock to be received by Mr. Zummo under the Valentec Acquisition were reallocated to Mr. Suozzi in consideration of Mr. Suozzi's release of certain claims relating to consulting fees. As a result, Mr. Suozzi received 325,801 shares of Common Stock under the Valentec Acquisition (rather than 289,371 shares). In addition, pursuant to such Reallocation Agreement, Messrs. Zummo and Suozzi agreed that for a period of three years from the date thereof, Mr. Suozzi will vote all shares of Common Stock beneficially owned by him on any manner put to a vote of the shareholders of the Company in the same manner as recommended by a majority of the Board of Directors of the Company, or if no such recommendation has been made, as directed by Mr. Zummo; provided, that such agreement shall terminate if Mr. Suozzi shall cease to be on the Board of Directors of the Company (other than as a result of his resignation). Robert A. Zummo is the Chairman of the Board, Chief Executive Officer, President and beneficial owner of approximately 20.2% of the outstanding Common Stock of the Company. Mr. Zummo's business address is 3190 Pullman Steet, Costa Mesa, CA 92626. Mr. Zummo is a citizen of the United States. During the past five years, Mr. Zummo has not been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violation of, or prohibiting or mandating activities subject to, Page 5 federal or state securities laws or finding any violation with respect to such laws.1 Sections 1, 2 and 4 of the Reallocation Agreement, which is attached as Exhibit 7 hereto, are incorporated herein by reference. The Company and Mr. Suozzi are parties to four Stock Option Agreements, dated May 6, 1994, January 2, 1995, January 2, 1996 (collectively, the "Pre-1997 Stock Option Agreements") and January 2, 1997, pursuant to which, Mr. Suozzi was given the option to purchase, under the Company's 1994 Stock Option Plan, (i) 1,500 shares of Common Stock under each of the Pre-1997 Stock Option Agreements and (ii) 2,500 shares of Common Stock under the January 1997 Stock Option Agreement at an exercise price of $10.00, $21.00, $14.88 and $10.25 per share, respectively. Such options vest in equal annual installments over four years from the date of grant. Options to purchase 2,250 of such shares are currently exercisable. Item 7. Materials to Be Filed as Exhibits. 1. Stock Option Agreement, dated as of May 6, 1994, between the Company and Francis X. Suozzi. 2. Stock Option Agreement, dated as of January 2, 1995, between the Company and Francis X. Suozzi. 3. Stock Option Agreement, dated as of January 2, 1996, between the Company and Francis X. Suozzi. 4. Stock Option Agreement, dated as of January 2, 1997, between the Company and Francis X. Suozzi. 5. Stock Purchase Agreement, dated as of May 22, 1997, by and among Robert A. Zummo, Francis X. Suozzi, the Valentec International Corporation Employee Stock Ownership Plan and the Company. 6. Registration Rights Agreement, dated as of May 22, 1997, by and among Robert A. Zummo, Francis X. Suozzi, the Valentec International Corporation Employee Stock Ownership Plan and the Company. 7. Reallocation Agreement, dated as of May 22, 1997, by and between Robert A. Zummo and Francis X. Suozzi. - -------- 1 All information contained herein with respect to Robert A. Zummo, including his beneficial ownership of Common Stock, is based on a Schedule 13D, dated August 22, 1997. Page 6 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. Dated: August 22, 1997 /s/ Francis X. Suozzi --------------------- FRANCIS X. SUOZZI Page 7 EX-10 2 MAY 6, 1994 STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT Agreement, made as of the 6th day of May, 1994, between Safety Components International, Inc. (the "Company"), a Delaware Corporation, and Francis Suozzi, (the "Optionee"), residing at 62 West 62nd Apt. 15D, New York, NY 10023. The Company has duly adopted the Safety Components International, Inc. 1994 Stock Option Plan (the "Plan"), the terms of which are hereby incorporated by reference. In the case of any conflict between the provisions hereof and those of the Plan, the provisions of the Plan shall be controlling. A copy of the Plan (as such may have been amended to date) will be made available for inspection by the Optionee during normal business hours at the principal office of the Company. All capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Plan. In accordance with Section 3 of the Plan, a committee of the Board of Directors of the Company which administers the Plan (the "Committee") has adopted a resolution granting the Optionee a stock option (the "Option) under the Plan to purchase 1,500 shares (the "Shares") of the Company's Common Stock, par value $.01 per share (the "Common Stock"), for the price and on the terms and conditions set forth in this Agreement and in the Plan. The Option is not intended to satisfy the requirements for an incentive stock option (an "ISO") under the Internal Revenue Code of 1986, as amended (the "Code"). The Company makes no representations or warranties as to the income, estate or other tax consequences to the Optionee of the grant or exercise of the Option or the sale or other disposition of the Shares acquired pursuant to the exercise thereof. 1. (a) The price at which the Optionee shall have the right to purchase the Shares under this Agreement is $10.00 per share subject to adjustment as provided in Paragraph 4 below. (b) Unless the Option is previously terminated pursuant to the Plan or this Agreement and subject to the terms of any other agreement between Optionee and the Company (including, without limitation, any employment or other agreement which may provide for, among other things, an accelerated vesting schedule), the Option shall be exercisable in four equal installments of 375 Shares each on the first, second, third, and fourth anniversary of the date of grant. In no event shall any Shares be purchasable under this Agreement after May 6, 2004 (ten years from the date of grant) (the "Expiration Date"). Except as provided in subparagraph (c) hereof, the Option shall cease to be exercisable thirty (30) days after the date the Optionee terminates services as an employee of the Company or any Affiliate of the Company for reasons other than cause and immediately upon the termination of the employee for cause, and all rights of the Optionee hereunder shall thereupon terminate. (c) If the Optionee ceases to be an employee of the Company or any Affiliate of the Company and this cessation is due to retirement (as defined by the Committee in its sole discretion), or to disability (as defined in each case by the Committee in its sole discretion) or to death, the Option shall be exercisable as provided in this subparagraph. The Optionee, or in the event of his disability, his duly appointed guardian or conservator, or in the event of his death, his executor or administrator shall have the privilege of exercising the unexercised portion of the Option which the Optionee could have exercised on the day on which he ceased to be an employee of the Company or any Affiliate of the Company, provided, however, that such exercise must be in accordance with the terms of this Agreement and within (i) three (3) months after the Optionee's retirement or disability or (ii) (A) twelve (12) months after the Optionee's death or (B) three (3) months after the Optionee's death if such death occurs during the three (3) month period following the termination of the Optionee's employment by reason of retirement or mental or physical disability, as the case may be. In no event, however, shall the Optionee or his executor or administrator, as the case may be, exercise the option after the Expiration Date specified in subparagraph 1 (b). For all purposes of this Agreement, an approved leave of absence shall not constitute an interruption or cessation of the Optionee's service as an employee of the Company or any Affiliate of the Company. 2. Nothing contained herein shall be construed to confer on the Optionee any right to continue as an employee of the Company or any Affiliate of the Company or to derogate from any right of the Company or any Affiliate thereof to retire, request the resignation thereof or discharge the Optionee, or to layoff or require a leave of absence of the Optionee, with or without pay, at any time, with or without cause. 3. The Option shall not be sold, pledged, assigned, or transferred in any manner except to the extent that the Option may be exercised by an executor or administrator as provided in subparagraph 1 (c) above. The Option may be exercised, during the lifetime of the Optionee, only by the Optionee, or in the event of his disability, his duly appointed guardian or conservator. 4. (a) If the outstanding shares of Common Stock are affected by any (i) subdivision or consolidation of shares, (ii) dividend or other distribution (whether in the form of cash, shares of Common Stock, other securities, or other property), (iii) recapitalization or other capital adjustment of the Company of (iv) merger, consolidation or other reorganization of the Company or other rights to purchase shares of Common Stock or other securities of the Company, or other similar corporate transaction or event, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem necessary to prevent dilution or enlargement of the benefits or potential benefits intended to be made under the Plan, adjust any or all of (x) the number and type of Shares subject to the unexercised portion of the Option, and (y) the exercise price with respect to the unexercised portion of the Option, or if deemed appropriate, make provision for a cash payment with respect to the unexercised portion of the Option. In computing any adjustment under this paragraph, any fractional share shall be eliminated. 2 (b) In the event of (i) a merger or consolidation to which the Corporation is a party of (ii) a sale by the Company of all or substantially all of its assets, the Option shall, after such merger, consolidation or sale, be exercisable into the kind and number of shares of stock and/or securities, cash or other property which Optionee would have been entitled to receive if Optionee had held the Common Stock issuable upon the exercise of the Option immediately prior to such consolidation, merger or sale. 5. The Option shall be exercised when written notice of such exercise, signed by the person entitled to exercise the Option, has been delivered or transmitted by registered or certified mail, to the Secretary of the Company at its principal office. Said written notice shall specify the number of Shares purchasable under the Option which such person then wishes to purchase and shall be accompanied by such documentation, if any, as may be required by the Company as provided in Paragraph 7 below and be accompanied by payment of the aggregate Option price. Such payment shall be, without limitation, in the form of (i) cash, shares of Common Stock, outstanding options or other consideration, or any combination thereof, having a Fair Market Value (as defined in the Plan) on the exercise date equal to the exercise price of the Option or portion thereof being exercised or (ii) a broker-assisted cashless exercise program established by the Committee. Delivery of said notice and such documentation shall constitute an irrevocable election to purchase the Shares specified in said notice and the date on which the Company receives said notice and documentation shall, subject to the provisions of Paragraphs 6 and 7, be the date as of which the Shares so purchased shall be deemed to have been issued. The person entitled to exercise the Option shall not have the right or status as a holder of the Shares to which such exercise relates prior to receipt by the Company of such payment, notice and documentation. 6. Anything in this Agreement to the contrary notwithstanding, in no event may the Option be exercisable if the Company shall, at any time and in its sole discretion, determine that (i) the listing, registration or qualification of any shares otherwise deliverable upon such exercise, upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any regulatory body or the satisfaction of withholding tax or other withholding liabilities is necessary or desirable in connection with such exercise. In such event, such exercise shall be held in abeyance and shall not be effective unless and until such withholding, listing, registration, qualification, or approval shall have been affected or obtained free of any conditions not acceptable to the Company. 7. The Committee may require as a condition to the right to exercise the Option hereunder that the Company receive from the person exercising the Option, representations, warranties and agreements, at the time of any such exercise, to the effect that the Shares are being purchased for investment only and without any present intention to sell or otherwise distribute such Shares and that the Shares will not be disposed of in transactions which, in the opinion of counsel to the Company, would violate the registration provisions of the Securities Act of 1933, as then amended, and the rules and regulations thereunder. The certificate issued to evidence such Shares shall bear appropriate legends summarizing such restrictions on the disposition thereof. 3 8. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware and applicable Federal law. Subject to subparagraph 1 (c) hereof, this Agreement shall be binding upon and shall insure to the benefit of the parties hereto and their respective heirs, personal representatives, successors or assigns, as the case may be. 4 IN WITNESS WHEREOF, the parties have witnessed this Agreement to be duly executed and delivered as of the date first above written. SAFETY COMPONENTS INTERNATIONAL, INC. By: Optionee EX-10 3 JANUARY 2, 1995 STOCK OPTION AGREEMENT SAFETY COMPONENTS INTERNATIONAL, INC. STOCK OPTION AGREEMENT Agreement, made as of the 2nd day of January, 1995, between Safety Components International, Inc. (the "Company"), a Delaware Corporation, and Francis Souzzi, (the "Optionee"), residing at 62 West 62nd Street, Apt. 15D, New York, New York 10023. The Company has duly adopted the Safety Components International, Inc. 1994 Stock Option Plan (the "Plan"), the terms of which are hereby incorporated by reference. In the case of any conflict between the provisions hereof and those of the Plan, the provisions of the Plan shall be controlling. A copy of the Plan (as such may have been amended to date) will be made available for inspection by the Optionee during normal business hours at the principal office of the Company. All capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Plan. In accordance with Section 3 of the Plan, a committee of the Board of Directors of the Company which administers the Plan (the "Committee") has adopted a resolution granting the Optionee a stock option (the "Option) under the Plan to purchase 1,500 shares (the "Shares") of the Company's Common Stock, par value $.01 per share (the "Common Stock"), for the price and on the terms and conditions set forth in this Agreement and in the Plan. The Option is intended to satisfy the requirements for an incentive stock option (an "ISO") under the Internal Revenue Code of 1986, as amended (the "Code"). The Company makes no representations or warranties as to the income, estate or other tax consequences to the Optionee of the grant or exercise of the Option or the sale or other disposition of the Shares acquired pursuant to the exercise thereof. 1. (a) The price at which the Optionee shall have the right to purchase the Shares under this Agreement is $21.00 per share subject to adjustment as provided in Paragraph 4 below. (b) Unless the Option is previously terminated pursuant to the Plan or this Agreement and subject to the terms of any other agreement between Optionee and the Company (including, without limitation, any employment or other agreement which may provide for, among other things, an accelerated vesting schedule), the Option shall be exercisable in four equal installments of 375 Shares each on the first, second, third, and fourth anniversary of the date of grant. In no event shall any Shares be purchasable under this Agreement after January 2, 2005 (ten years from the date of grant) (the "Expiration Date"). Except as provided in subparagraph (c) hereof, the Option shall cease to be exercisable thirty (30) days after the date the Optionee terminates services as an employee of the Company or any Affiliate of the Company for reasons other than cause and immediately upon the termination of the employee for cause, and all rights of the Optionee hereunder shall thereupon terminate. (c) If the Optionee ceases to be an employee of the Company or any Affiliate of the Company and this cessation is due to retirement (as defined by the Committee in its sole discretion), or to disability (as defined in each case by the Committee in its sole discretion) or to death, the Option shall be exercisable as provided in this subparagraph. The Optionee, or in the event of his disability, his duly appointed guardian or conservator, or in the event of his death, his executor or administrator shall have the privilege of exercising the unexercised portion of the Option which the Optionee could have exercised on the day on which he ceased to be an employee of the Company or any Affiliate of the Company, provided, however, that such exercise must be in accordance with the terms of this Agreement and within (i) three (3) months after the Optionee's retirement or disability or (ii) (A) twelve (12) months after the Optionee's death or (B) three (3) months after the Optionee's death if such death occurs during the three (3) month period following the termination of the Optionee's employment by reason of retirement or mental or physical disability, as the case may be. In no event, however, shall the Optionee or his executor or administrator, as the case may be, exercise the option after the Expiration Date specified in subparagraph 1 (b). For all purposes of this Agreement, an approved leave of absence shall not constitute an interruption or cessation of the Optionee's service as an employee of the Company or any Affiliate of the Company. 2. Nothing contained herein shall be construed to confer on the Optionee any right to continue as an employee of the Company or any Affiliate of the Company or to derogate from any right of the Company or any Affiliate thereof to retire, request the resignation thereof or discharge the Optionee, or to layoff or require a leave of absence of the Optionee, with or without pay, at any time, with or without cause. 3. The Option shall not be sold, pledged, assigned, or transferred in any manner except to the extent that the Option may be exercised by an executor or administrator as provided in subparagraph 1 (c) above. The Option may be exercised, during the lifetime of the Optionee, only by the Optionee, or in the event of his disability, his duly appointed guardian or conservator. 4. (a) If the outstanding shares of Common Stock are affected by any (i) subdivision or consolidation of shares, (ii) dividend or other distribution (whether in the form of cash, shares of Common Stock, other securities, or other property), (iii) recapitalization or other capital adjustment of the Company of (iv) merger, consolidation or other reorganization of the Company or other rights to purchase shares of Common Stock or other securities of the Company, or other similar corporate transaction or event, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem necessary to prevent dilution or enlargement of the benefits or potential benefits intended to be made under the Plan, adjust any or all of (x) the number and type of Shares subject to the unexercised portion of the Option, and (y) the exercise price with respect to the unexercised portion of the Option, or if deemed appropriate, make provision for a cash payment with respect to the unexercised portion of the Option. In computing any adjustment under this paragraph, any fractional share shall be eliminated. (b) In the event of (i) a merger or consolidation to which the Corporation is a party of (ii) a sale by the Company of all or substantially all of its assets, the Option shall, after such merger, consolidation or sale, be exercisable into the kind and number of shares of stock and/or securities, cash or other property which Optionee would have been entitled to receive if Optionee had held the Common Stock issuable upon the exercise of the Option immediately prior to such consolidation, merger or sale. 5. The Option shall be exercised when written notice of such exercise, signed by the person entitled to exercise the Option, has been delivered or transmitted by registered or certified mail, to the Secretary of the Company at its principal office. Said written notice shall specify the number of Shares purchasable under the Option which such person then wishes to purchase and shall be accompanied by such documentation, if any, as may be required by the Company as provided in Paragraph 7 below and be accompanied by payment of the aggregate Option price. Such payment shall be, without limitation, in the form of (i) cash, shares of Common Stock, outstanding options or other consideration, or any combination thereof, having a Fair Market Value (as defined in the Plan) on the exercise date equal to the exercise price of the Option or portion thereof being exercised or (ii) a broker-assisted cashless exercise program established by the Committee. Delivery of said notice and such documentation shall constitute an irrevocable election to purchase the Shares specified in said notice and the date on which the Company receives said notice and documentation shall, subject to the provisions of Paragraphs 6 and 7, be the date as of which the Shares so purchased shall be deemed to have been issued. The person entitled to exercise the Option shall not have the right or status as a holder of the Shares to which such exercise relates prior to receipt by the Company of such payment, notice and documentation. 6. Anything in this Agreement to the contrary notwithstanding, in no event may the Option be exercisable if the Company shall, at any time and in its sole discretion, determine that (i) the listing, registration or qualification of any shares otherwise deliverable upon such exercise, upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any regulatory body or the satisfaction of withholding tax or other withholding liabilities is necessary or desirable in connection with such exercise. In such event, such exercise shall be held in abeyance and shall not be effective unless and until such withholding, listing, registration, qualification, or approval shall have been affected or obtained free of any conditions not acceptable to the Company. 7. The Committee may require as a condition to the right to exercise the Option hereunder that the Company receive from the person exercising the Option, representations, warranties and agreements, at the time of any such exercise, to the effect that the Shares are being purchased for investment only and without any present intention to sell or otherwise distribute such Shares and that the Shares will not be disposed of in transactions which, in the opinion of counsel to the Company, would violate the registration provisions of the Securities Act of 1933, as then amended, and the rules and regulations thereunder. The certificate issued to evidence such Shares shall bear appropriate legends summarizing such restrictions on the disposition thereof. 8. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware and applicable Federal law. Subject to subparagraph 1 (c) hereof, this Agreement shall be binding upon and shall insure to the benefit of the parties hereto and their respective heirs, personal representatives, successors or assigns, as the case may be. IN WITNESS WHEREOF, the parties have witnessed this Agreement to be duly executed and delivered as of the date first above written. SAFETY COMPONENTS INTERNATIONAL, INC. By: Optionee EX-10 4 JANUARY 2, 1996 STOCK OPTION AGREEMENT SAFETY COMPONENTS INTERNATIONAL, INC. STOCK OPTION AGREEMENT Agreement, made as of the 2nd day of January, 1996, between Safety Components International, Inc. (the "Company"), a Delaware Corporation, and Francis Souzzi, (the "Optionee"), residing at 62 West 62nd Street, Apt. 15D, New York, New York 10023. The Company has duly adopted the Safety Components International, Inc. 1994 Stock Option Plan (the "Plan"), the terms of which are hereby incorporated by reference. In the case of any conflict between the provisions hereof and those of the Plan, the provisions of the Plan shall be controlling. A copy of the Plan (as such may have been amended to date) will be made available for inspection by the Optionee during normal business hours at the principal office of the Company. All capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Plan. In accordance with Section 3 of the Plan, a committee of the Board of Directors of the Company which administers the Plan (the "Committee") has adopted a resolution granting the Optionee a stock option (the "Option) under the Plan to purchase 1,500 shares (the "Shares") of the Company's Common Stock, par value $.01 per share (the "Common Stock"), for the price and on the terms and conditions set forth in this Agreement and in the Plan. The Option is not intended to satisfy the requirements for an incentive stock option (an "ISO") under the Internal Revenue Code of 1986, as amended (the "Code"). The Company makes no representations or warranties as to the income, estate or other tax consequences to the Optionee of the grant or exercise of the Option or the sale or other disposition of the Shares acquired pursuant to the exercise thereof. 1. (a) The price at which the Optionee shall have the right to purchase the Shares under this Agreement is $14.88 per share subject to adjustment as provided in Paragraph 4 below. (b) Unless the Option is previously terminated pursuant to the Plan or this Agreement and subject to the terms of any other agreement between Optionee and the Company (including, without limitation, any employment or other agreement which may provide for, among other things, an accelerated vesting schedule), the Option shall be exercisable in four equal installments of 375 Shares each on the first, second, third, and fourth anniversary of the date of grant. In no event shall any Shares be purchasable under this Agreement after January 02, 2006 (ten years from the date of grant) (the "Expiration Date"). Except as provided in subparagraph (c) hereof, the Option shall cease to be exercisable thirty (30) days after the date the Optionee terminates services as an employee of the Company or any Affiliate of the Company for reasons other than cause and immediately upon the termination of the employee for cause, and all rights of the Optionee hereunder shall thereupon terminate. (c) If the Optionee ceases to be an employee of the Company or any Affiliate of the Company and this cessation is due to retirement (as defined by the Committee in its sole discretion), or to disability (as defined in each case by the Committee in its sole discretion) or to death, the Option shall be exercisable as provided in this subparagraph. The Optionee, or in the event of his disability, his duly appointed guardian or conservator, or in the event of his death, his executor or administrator shall have the privilege of exercising the unexercised portion of the Option which the Optionee could have exercised on the day on which he ceased to be an employee of the Company or any Affiliate of the Company, provided, however, that such exercise must be in accordance with the terms of this Agreement and within (i) three (3) months after the Optionee's retirement or disability or (ii) (A) twelve (12) months after the Optionee's death or (B) three (3) months after the Optionee's death if such death occurs during the three (3) month period following the termination of the Optionee's employment by reason of retirement or mental or physical disability, as the case may be. In no event, however, shall the Optionee or his executor or administrator, as the case may be, exercise the option after the Expiration Date specified in subparagraph 1 (b). For all purposes of this Agreement, an approved leave of absence shall not constitute an interruption or cessation of the Optionee's service as an employee of the Company or any Affiliate of the Company. 2. Nothing contained herein shall be construed to confer on the Optionee any right to continue as an employee of the Company or any Affiliate of the Company or to derogate from any right of the Company or any Affiliate thereof to retire, request the resignation thereof or discharge the Optionee, or to layoff or require a leave of absence of the Optionee, with or without pay, at any time, with or without cause. 3. The Option shall not be sold, pledged, assigned, or transferred in any manner except to the extent that the Option may be exercised by an executor or administrator as provided in subparagraph 1 (c) above. The Option may be exercised, during the lifetime of the Optionee, only by the Optionee, or in the event of his disability, his duly appointed guardian or conservator. 4. (a) If the outstanding shares of Common Stock are affected by any (i) subdivision or consolidation of shares, (ii) dividend or other distribution (whether in the form of cash, shares of Common Stock, other securities, or other property), (iii) recapitalization or other capital adjustment of the Company or (iv) merger, consolidation or other reorganization of the Company or other rights to purchase shares of Common Stock or other securities of the Company, or other similar corporate transaction or event, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem necessary to prevent dilution or enlargement of the benefits or potential benefits intended to be made under the Plan, adjust any or all of (x) the number and type of Shares subject to the unexercised portion of the Option, and (y) the exercise price with respect to the unexercised portion of the Option, or if deemed appropriate, make provision for a cash payment with respect to the unexercised portion of the Option. In computing any adjustment under this paragraph, any fractional share shall be eliminated. (b) In the event of (i) a merger or consolidation to which the Corporation is a party of (ii) a sale by the Company of all or substantially all of its assets, the Option shall, after such merger, consolidation or sale, be exercisable into the kind and number of shares of stock and/or securities, cash or other property which Optionee would have been entitled to receive if Optionee had held the Common Stock issuable upon the exercise of the Option immediately prior to such consolidation, merger or sale. 5. The Option shall be exercised when written notice of such exercise, signed by the person entitled to exercise the Option, has been delivered or transmitted by registered or certified mail, to the Secretary of the Company at its principal office. Said written notice shall specify the number of Shares purchasable under the Option which such person then wishes to purchase and shall be accompanied by such documentation, if any, as may be required by the Company as provided in Paragraph 7 below and be accompanied by payment of the aggregate Option price. Such payment shall be, without limitation, in the form of (i) cash, shares of Common Stock, outstanding options or other consideration, or any combination thereof, having a Fair Market Value (as defined in the Plan) on the exercise date equal to the exercise price of the Option or portion thereof being exercised or (ii) a broker-assisted cashless exercise program established by the Committee. Delivery of said notice and such documentation shall constitute an irrevocable election to purchase the Shares specified in said notice and the date on which the Company receives said notice and documentation shall, subject to the provisions of Paragraphs 6 and 7, be the date as of which the Shares so purchased shall be deemed to have been issued. The person entitled to exercise the Option shall not have the right or status as a holder of the Shares to which such exercise relates prior to receipt by the Company of such payment, notice and documentation. 6. Anything in this Agreement to the contrary notwithstanding, in no event may the Option be exercisable if the Company shall, at any time and in its sole discretion, determine that (i) the listing, registration or qualification of any shares otherwise deliverable upon such exercise, upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any regulatory body or the satisfaction of withholding tax or other withholding liabilities is necessary or desirable in connection with such exercise. In such event, such exercise shall be held in abeyance and shall not be effective unless and until such withholding, listing, registration, qualification, or approval shall have been affected or obtained free of any conditions not acceptable to the Company. 7. The Committee may require as a condition to the right to exercise the Option hereunder that the Company receive from the person exercising the Option, representations, warranties and agreements, at the time of any such exercise, to the effect that the Shares are being purchased for investment only and without any present intention to sell or otherwise distribute such Shares and that the Shares will not be disposed of in transactions which, in the opinion of counsel to the Company, would violate the registration provisions of the Securities Act of 1933, as then amended, and the rules and regulations thereunder. The certificate issued to evidence such Shares shall bear appropriate legends summarizing such restrictions on the disposition thereof. 8. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware and applicable Federal law. Subject to subparagraph 1(c) hereof, this Agreement shall be binding upon and shall insure to the benefit of the parties hereto and their respective heirs, personal representatives, successors or assigns, as the case may be. IN WITNESS WHEREOF, the parties have witnessed this Agreement to be duly executed and delivered as of the date first above written. SAFETY COMPONENTS INTERNATIONAL, INC. By: Optionee EX-10 5 JANUARY 2, 1997 STOCK OPTION AGREEMENT SAFETY COMPONENTS INTERNATIONAL, INC. STOCK OPTION AGREEMENT Agreement, made as of the 2nd day of January, 1997, between Safety Components International, Inc. (the "Company"), a Delaware Corporation, and Francis Souzzi, (the "Optionee"), residing at 62 West 62nd Street, Apt. 15D, New York, New York 10023. The Company has duly adopted the Safety Components International, Inc. 1994 Stock Option Plan (the "Plan"), the terms of which are hereby incorporated by reference. In the case of any conflict between the provisions hereof and those of the Plan, the provisions of the Plan shall be controlling. A copy of the Plan (as such may have been amended to date) will be made available for inspection by the Optionee during normal business hours at the principal office of the Company. All capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Plan. In accordance with Section 3 of the Plan, a committee of the Board of Directors of the Company which administers the Plan (the "Committee") has adopted a resolution granting the Optionee a stock option (the "Option) under the Plan to purchase 2,500 shares (the "Shares") of the Company's Common Stock, par value $.01 per share (the "Common Stock"), for the price and on the terms and conditions set forth in this Agreement and in the Plan. The Option is not intended to satisfy the requirements for an incentive stock option (an "ISO") under the Internal Revenue Code of 1986, as amended (the "Code"). The Company makes no representations or warranties as to the income, estate or other tax consequences to the Optionee of the grant or exercise of the Option or the sale or other disposition of the Shares acquired pursuant to the exercise thereof. 1. (a) The price at which the Optionee shall have the right to purchase the Shares under this Agreement is $10.25 per share subject to adjustment as provided in Paragraph 4 below. (b) Unless the Option is previously terminated pursuant to the Plan or this Agreement and subject to the terms of any other agreement between Optionee and the Company (including, without limitation, any employment or other agreement which may provide for, among other things, an accelerated vesting schedule), the Option shall be exercisable in four equal installments of 675 Shares each on the first, second, third, and fourth anniversary of the date of grant. In no event shall any Shares be purchasable under this Agreement after January 2, 2007 (ten years from the date of grant) (the "Expiration Date"). Except as provided in subparagraph (c) hereof, the Option shall cease to be exercisable thirty (30) days after the date the Optionee terminates services as an employee of the Company or any Affiliate of the Company for reasons other than cause and immediately upon the termination of the employee for cause, and all rights of the Optionee hereunder shall thereupon terminate. (c) If the Optionee ceases to be an employee of the Company or any Affiliate of the Company and this cessation is due to retirement (as defined by the Committee in its sole discretion), or to disability (as defined in each case by the Committee in its sole discretion) or to death, the Option shall be exercisable as provided in this subparagraph. The Optionee, or in the event of his disability, his duly appointed guardian or conservator, or in the event of his death, his executor or administrator shall have the privilege of exercising the unexercised portion of the Option which the Optionee could have exercised on the day on which he ceased to be an employee of the Company or any Affiliate of the Company, provided, however, that such exercise must be in accordance with the terms of this Agreement and within (i) three (3) months after the Optionee's retirement or disability or (ii) (A) twelve (12) months after the Optionee's death or (B) three (3) months after the Optionee's death if such death occurs during the three (3) month period following the termination of the Optionee's employment by reason of retirement or mental or physical disability, as the case may be. In no event, however, shall the Optionee or his executor or administrator, as the case may be, exercise the option after the Expiration Date specified in subparagraph 1 (b). For all purposes of this Agreement, an approved leave of absence shall not constitute an interruption or cessation of the Optionee's service as an employee of the Company or any Affiliate of the Company. 2. Nothing contained herein shall be construed to confer on the Optionee any right to continue as an employee of the Company or any Affiliate of the Company or to derogate from any right of the Company or any Affiliate thereof to retire, request the resignation thereof or discharge the Optionee, or to layoff or require a leave of absence of the Optionee, with or without pay, at any time, with or without cause. 3. The Option shall not be sold, pledged, assigned, or transferred in any manner except to the extent that the Option may be exercised by an executor or administrator as provided in subparagraph 1 (c) above. The Option may be exercised, during the lifetime of the Optionee, only by the Optionee, or in the event of his disability, his duly appointed guardian or conservator. 4. (a) If the outstanding shares of Common Stock are affected by any (i) subdivision or consolidation of shares, (ii) dividend or other distribution (whether in the form of cash, shares of Common Stock, other securities, or other property), (iii) recapitalization or other capital adjustment of the Company or (iv) merger, consolidation or other reorganization of the Company or other rights to purchase shares of Common Stock or other securities of the Company, or other similar corporate transaction or event, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem necessary to prevent dilution or enlargement of the benefits or potential benefits intended to be made under the Plan, adjust any or all of (x) the number and type of Shares subject to the unexercised portion of the Option, and (y) the exercise price with respect to the unexercised portion of the Option, or if deemed appropriate, make provision for a cash payment with respect to the unexercised portion of the Option. In computing any adjustment under this paragraph, any fractional share shall be eliminated. (b) In the event of (i) a merger or consolidation to which the Corporation is a party of (ii) a sale by the Company of all or substantially all of its assets, the Option shall, after such merger, consolidation or sale, be exercisable into the kind and number of shares of stock and/or securities, cash or other property which Optionee would have been entitled to receive if Optionee had held the Common Stock issuable upon the exercise of the Option immediately prior to such consolidation, merger or sale. 5. The Option shall be exercised when written notice of such exercise, signed by the person entitled to exercise the Option, has been delivered or transmitted by registered or certified mail, to the Secretary of the Company at its principal office. Said written notice shall specify the number of Shares purchasable under the Option which such person then wishes to purchase and shall be accompanied by such documentation, if any, as may be required by the Company as provided in Paragraph 7 below and be accompanied by payment of the aggregate Option price. Such payment shall be, without limitation, in the form of (i) cash, shares of Common Stock, outstanding options or other consideration, or any combination thereof, having a Fair Market Value (as defined in the Plan) on the exercise date equal to the exercise price of the Option or portion thereof being exercised or (ii) a broker-assisted cashless exercise program established by the Committee. Delivery of said notice and such documentation shall constitute an irrevocable election to purchase the Shares specified in said notice and the date on which the Company receives said notice and documentation shall, subject to the provisions of Paragraphs 6 and 7, be the date as of which the Shares so purchased shall be deemed to have been issued. The person entitled to exercise the Option shall not have the right or status as a holder of the Shares to which such exercise relates prior to receipt by the Company of such payment, notice and documentation. 6. Anything in this Agreement to the contrary notwithstanding, in no event may the Option be exercisable if the Company shall, at any time and in its sole discretion, determine that (i) the listing, registration or qualification of any shares otherwise deliverable upon such exercise, upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any regulatory body or the satisfaction of withholding tax or other withholding liabilities is necessary or desirable in connection with such exercise. In such event, such exercise shall be held in abeyance and shall not be effective unless and until such withholding, listing, registration, qualification, or approval shall have been affected or obtained free of any conditions not acceptable to the Company. 7. The Committee may require as a condition to the right to exercise the Option hereunder that the Company receive from the person exercising the Option, representations, warranties and agreements, at the time of any such exercise, to the effect that the Shares are being purchased for investment only and without any present intention to sell or otherwise distribute such Shares and that the Shares will not be disposed of in transactions which, in the opinion of counsel to the Company, would violate the registration provisions of the Securities Act of 1933, as then amended, and the rules and regulations thereunder. The certificate issued to evidence such Shares shall bear appropriate legends summarizing such restrictions on the disposition thereof. 8. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware and applicable Federal law. Subject to subparagraph 1(c) hereof, this Agreement shall be binding upon and shall insure to the benefit of the parties hereto and their respective heirs, personal representatives, successors or assigns, as the case may be. IN WITNESS WHEREOF, the parties have witnessed this Agreement to be duly executed and delivered as of the date first above written. SAFETY COMPONENTS INTERNATIONAL, INC. By: Optionee EX-10 6 STOCK PURCHASE AGREEMENT MAY 22, 1997 STOCK PURCHASE AGREEMENT dated as of May 22, 1997, by and among ROBERT A. ZUMMO, FRANCIS X. SUOZZI, VALENTEC INTERNATIONAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN and SAFETY COMPONENTS INTERNATIONAL, INC. TABLE OF CONTENTS Page 1. Definitions..........................................................1 1.1 Defined Terms...............................................1 1.2 Use of Defined Terms........................................6 1.3 Accounting Terms............................................6 1.4 Sections, Exhibits and Schedules............................6 1.5 Miscellaneous Terms.........................................6 2. Purchase and Sale....................................................6 2.1 Purchase and Sale of Stock..................................6 2.2 The Closing.................................................6 3. Representations and Warranties of Zummo and Suozzi...................8 3.1 Organization and Qualification..............................8 3.2 Capitalization..............................................9 3.3 Authority Relative to this Agreement........................9 3.4 Compliance..................................................9 3.5 Consents...................................................10 3.6 Company Financial Statements...............................10 3.7 Absence of Undisclosed Liabilities.........................10 3.8 Absence of Specified Changes...............................10 3.9 Taxes......................................................11 3.10 Insurance..................................................12 3.11 Contracts..................................................13 3.12 Real Property..............................................14 3.13 Environmental Matters......................................14 3.14 Intellectual Property......................................15 3.15 Tangible Property..........................................15 3.16 Employee Benefit Plans.....................................15 3.17 Labor Matters..............................................17 3.18 Compliance with Laws.......................................17 3.19 Licenses and Permits.......................................17 3.20 Legal Proceedings..........................................17 3.21 No Brokers.................................................17 3.22 Investment Representations.................................17 3.23 Insilco Obligations........................................18 4. Representations and Warranties of the Trustee.......................18 4.1 Status.....................................................18 4.2 Authority Relative to this Agreement.......................18 4.3 Compliance.................................................18 4.4 Ownership of the Stock.....................................18 4.5 Consents...................................................19 4.6 Compliance with Laws.......................................19 4.7 Legal Proceedings..........................................19 4.8 Investment Representations.................................19 4.9 Acknowledgment as to Information...........................19 4.10 Experience of Trustee......................................20 4.11 No Brokers.................................................20 5. Representations and Warranties of the Purchaser.....................20 5.1 Organization and Qualification.............................20 5.2 Capitalization.............................................20 5.3 Authority Relative to this Agreement.......................21 5.4 Compliance.................................................21 5.5 Consents...................................................21 5.6 No Brokers.................................................21 5.7 Fairness...................................................21 6. Covenants and Other Agreements......................................22 6.1 Consents...................................................22 6.2 Director and Officer Indemnification.......................22 6.3 Additional Agreements......................................22 7. Conditions Precedent to the Purchaser's Obligations.................22 7.1 Accuracy of Zummo's and Suozzi's Representations and Warranties..............................................22 7.2 Accuracy of the ESOP's Representations and Warranties......22 7.3 Performance by Zummo and Suozzi............................23 7.4 Deliveries by the ESOP at Closing..........................23 7.5 Deliveries by Zummo and Suozzi at Closing..................23 7.6 Consents of Zummo and Suozzi...............................23 7.7 Consents of the ESOP.......................................23 7.8 Changes in the Business....................................23 7.9 Opinion of the Sellers' Counsel............................23 7.10 Absence of Litigation......................................23 7.11 Proceedings and Documents..................................23 7.12 Sale of VIL................................................24 7.13 Pledge Agreement...........................................24 7.14 Resignations...............................................24 7.15 Tax-Free Transaction.......................................24 8. Conditions Precedent to the Sellers' Obligations....................24 8.1 Accuracy of the Purchaser's Representations and Warranties.24 8.2 Performance by the Purchaser...............................24 8.3 Deliveries by the Purchaser at Closing.....................24 8.4 Consents...................................................24 8.5 Opinion Regarding Adequacy of Consideration to ESOP........24 8.6 Changes in the Business....................................25 8.7 Absence of Litigation......................................25 8.8 Proceedings and Documents..................................25 8.9 Intercompany Notes.........................................25 8.10 Registration Rights Agreement..............................25 8.11 Insilco Obligations........................................25 8.12 Tax-Free Transaction.......................................25 9. Survival of Representations and Warranties; Indemnification.........25 9.1 Survival of Representations and Warranties.................25 9.2 Indemnification............................................26 10. Miscellaneous.......................................................28 10.1 Publicity..................................................28 10.2 Headings...................................................28 10.3 Notices....................................................28 10.4 Successors and Assigns.....................................30 10.5 Governing Law..............................................30 10.6 Entire Agreement...........................................30 10.7 Counterparts...............................................30 10.8 Severability...............................................30 10.9 No Prejudice...............................................30 10.10 No Third Party Beneficiaries...............................30 10.11 Amendment and Modification.................................30 Exhibits Exhibit A Forms of Opinions of the Sellers' Counsel Exhibit B Form of Pledge Agreement Exhibit C Form of Assumption Exhibit D Form of Registration Rights Agreement STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of May 22, 1997, by and among Robert A. Zummo ("Zummo"), Francis X. Suozzi ("Suozzi"), Valentec International Corporation Employee Stock Ownership Plan (the "ESOP," and together with Zummo and Suozzi, the "Sellers") and Safety Components International, Inc., a Delaware corporation (the "Purchaser"). WHEREAS, Zummo, Suozzi and the ESOP collectively own 2,160,000 shares (the "Stock") of common stock, $.01 par value per share, of Valentec International Corporation, a Delaware corporation (the "Company"), which Stock constitutes all of the issued and outstanding capital stock of the Company; WHEREAS, Valentec International Limited., a United Kingdom corporation ("VIL") is an 88.8% owned subsidiary of the Company; WHEREAS, the capital stock of VIL owned by the Company will be acquired by Zummo prior to the Closing (as hereinafter defined) (the "VIL Transaction"); WHEREAS, the Sellers wish to sell the Stock to the Purchaser, and the Purchaser desires to purchase the Stock from the Sellers, on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, this Agreement is intended to constitute an "Agreement and Plan of Reorganization" within the meaning of Treasury Regulation Section 1.368-2(g), and qualify as a tax-free "reorganization" within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder (the "Code"). NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, each intending to be legally bound, hereby agree as follows: 1.0 Definitions 1.1 As used herein, the following terms shall have the following meanings (such definitions to be equally applicable to both the singular and plural forms of the terms defined): Affiliate: Any director or officer of a Person and any member of the immediate family of any such director or officer and any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such Person. Agreement: Defined in the prologue of this Agreement. Benefit Plan or Benefit Plans: Defined in Section 3.16. Business Day: Any day of the year on which banks are not required or authorized to be closed in the State of New York. Citicorp Option: The option of Citicorp USA, Inc. to purchase an aggregate of 10,000 shares of the common stock, $.01 par value per share, of the Purchaser from the Company , which was issued to Citicorp USA, Inc. in connection with a Credit Facility between Citicorp USA, Inc. and the Company, dated as of January 6, 1995. Closing: Defined in Section 2.2. Closing Date: Defined in Section 2.2. Code: Defined in the prologue of this Agreement. Company: Defined in the prologue of this Agreement. Company Financial Statements: Defined in Section 3.6. Congress Indebtedness: (i) all of the obligations and indebtedness of the Company under or with respect to the Accounts Financing Agreement [Security Agreement] dated April 27, 1993 between the Company and Congress Financial Corporation (Western) and the other Financing Agreements (as defined therein) together with (ii) the Term Note in the original principal amount of $1,200,000, the Limited Continuing Guaranty and Waiver by Zummo and other agreements and documents entered into in connection with such credit facility, each as amended from time to time. Consents: All governmental and third party consents, permits, approvals, orders, authorizations, qualifications, and waivers necessary to be received by a Person for the consummation of the transactions contemplated by this Agreement. Contract: Any contract, agreement, mortgage, deed of trust, bond, indenture, lease, license, note, franchise, certificate, option, warrant, right, instrument or other similar document or agreement, whether written or oral. ERISA: The Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. ERISA Affiliate: Any trade or business (whether incorporated or unincorporated) which is a member of a group described in Section 414(b), (c), (m) or (o) of the Code, of which the Company also is a member. - 2 - ERISA Affiliate Title IV Plan: Defined in Section 3.16. ESOP: Defined in the prologue of this Agreement. Financial Advisor: Defined in Section 5.6. GAAP: Generally accepted accounting principles set forth in the opinions and pronouncements of the Financial Accounting Standards Board, applied on a consistent basis and consistent with past practices. Governmental Authority: Any United States or foreign governmental authority, including all agencies, bureaus, commissions, authorities or bodies of the federal government or any state, county, municipal or local government, including any court, judge, justice or magistrate. Insilco: Insilco Corporation, a Delaware corporation. Insilco Purchase Agreement: Defined in Section 8.11. Intellectual Property: All registered patents, trademarks, product designations, service marks, copyrights, and applications for any of the foregoing, used, licensed, leased or owned, by a Person which is material to the operations of such Person. Intercompany Notes: The promissory notes of the Company, in the principal amounts of $2,000,000 and $800,000, each payable to VIL. Judgment: Any judgment, writ, order, injunction, determination, award or decree of or by any Governmental Authority. Law: Any statute, ordinance, code, rule, regulation, order or other law enacted, adopted, promulgated, applied or followed by any Governmental Authority. Licenses and Permits: All licenses, permits, certificates, approvals, franchises, registrations, accreditations or authorizations (i) required by Law or (ii) issued to a Person or its Subsidiaries by a Governmental Authority and used in their respective businesses. Lien: Any security agreement, financing statement (whether or not filed), security or other like interest, conditional sale or other title retention agreement, lease or consignment or bailment given for security purposes, lien, mortgage, deed of trust, indenture, pledge, constructive or other trust or attachment. Losses: Defined in Section 9.2(a)(i). - 3 - Material Adverse Effect: With respect to any Person and its Subsidiaries, any change or effect that is or is reasonable likely (i) to be materially adverse to the business, operations, properties (including intangible properties), condition (financial or otherwise), assets or liabilities of such Person and its Subsidiaries, taken as a whole or (ii) to materially adversely affect the ability of such Person to consummate the transactions contemplated hereby. For purposes of Articles 3, 4 and 7, the term "Material Adverse Effect" shall be deemed to refer solely to the Company. For purposes of Articles 5 and 8, the term "Material Adverse Effect" shall be deemed to refer solely to the Purchaser and its Subsidiaries. Permitted Liens: Any (a) Liens of warehousemen, mechanics, common carriers and landlords arising by operation of law or otherwise, for amounts that are not yet due and payable or which are being diligently contested in good faith by the Company by appropriate proceedings; (b) Liens for taxes, fees, assessments or other governmental charges not yet due and payable or which are being diligently contested in good faith by the Company by appropriate proceedings promptly instituted, provided that in any such case an adequate reserve is being maintained on the books of the Company in accordance with GAAP; (c) Liens (other than Liens imposed by environmental Laws or by ERISA) on the property of the Company imposed by law, or pledges or deposits required by law pursuant to worker's compensation, unemployment insurance and other social security legislation; (d) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business if, in the aggregate, such items are not substantial in amount and do not constitute and cannot reasonably be expected to result in a Material Adverse Effect; and (e) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a similar nature incurred in the ordinary course of the Company's business. Person: Any individual, trustee, corporation, general or limited partnership, limited liability partnership, limited liability company, joint venture, joint stock company, bank, firm, Governmental Authority, trust, association, organization or unincorporated entity of any kind or nature whatsoever. Plan Administrator: The Plan Administrator appointed pursuant to Section 12.4 of the ESOP. Pledge Agreement: The Pledge Agreement dated as of the Closing Date by and among the Purchaser and Zummo. Purchaser: Defined in the prologue of this Agreement. Purchaser Common Stock: Defined in Section 2.1. Real Property: All realty, fixtures, easements, rights-of-way and other interests (excluding Tangible Property) in real property, buildings, improvements and construction-in-progress. - 4 - Registration Rights Agreement: The Registration Rights Agreement dated as of the Closing Date by and among, the Purchaser, Zummo, Suozzi and the ESOP. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. Sellers: Defined in the prologue of this Agreement. Stock: Defined in the prologue of this Agreement. Subsidiary: With respect to any Person, any corporation, association or other business entity of which more than fifty percent (50%) of the issued and outstanding stock or equivalent thereof having ordinary voting power is owned or controlled by such Person, by one or more Subsidiaries or by such Person and one or more Subsidiaries or which a Person otherwise has the power to control the management thereof. Suozzi: Defined in the prologue of this Agreement. Tangible Property: All material cash, furnishings, machinery, equipment, computer systems and software, supplies, inventories, vehicles, books and records and other material tangible personal property and facilities of any nature owned, leased, used or held for use, directly or indirectly, by or on behalf of a Person. Taxes: All foreign, federal, state, county, local, municipal and other taxes, levies, impositions, deductions, charges and withholdings, including income, sales and use taxes, and shall include any interest, penalties or additions thereto. Tax Returns: All returns, declarations and reports filed with a taxing authority and all information returns and statements of any kind or nature whatsoever filed with a taxing authority. To the knowledge of Zummo and Suozzi: Defined in Section 3.1. Trust: The trust established by the Trust Agreement. Trustee: W. Hardy Myers, as trustee under the Trust Agreement for the ESOP. Trust Agreement: Agreement entitled Valentec International Corporation Employee Stock Ownership Trust, which was entered into effective as of January 1, 1996 between the Company and the Trustee, and all amendments and extensions to or renewals thereof. VIL: Defined in the prologue of this Agreement. - 5 - VIL Transaction: Defined in the prologue of this Agreement. Zummo: Defined in the prologue of this Agreement. 1.2 Use of Defined Terms. Any defined term used in the plural shall refer to all members of the relevant class, and any defined term used in the singular shall refer to any one or more of the members of the relevant class. The use of any gender shall be applicable to all genders. 1.3 Accounting Terms. All accounting terms not otherwise defined in this Agreement shall be construed in conformity with GAAP. 1.4 Sections, Exhibits and Schedules. References in this Agreement to Sections, Exhibits and Schedules are to Sections, Exhibits and Schedules of and to this Agreement. The Exhibits and Schedules to this Agreement are hereby incorporated herein by this reference as if fully set forth herein. 1.5 Miscellaneous Terms. The term "or" shall not be exclusive. The terms "herein," "hereof," "hereto," "hereunder" and other terms similar to such terms shall refer to this Agreement as a whole and not merely to the specific article, section, paragraph or clause where such terms may appear. The term "including" shall mean "including, but not limited to." 2.0 Purchase and Sale. 2.1 Purchase and Sale of Stock. At the Closing and subject to the terms and conditions of this Agreement, each Seller, severally and not jointly, agrees to sell, transfer, convey, assign and deliver to the Purchaser, and the Purchaser agrees to purchase from such Seller, the number of shares of Stock set forth opposite the name of such Seller in Schedule 2.1 annexed hereto, in exchange for the number of shares of common stock, $.01 par value per share ("Purchaser Common Stock"), set forth opposite the name of such Seller in Schedule 2.1 annexed hereto. 2.2 The Closing. (a) Subject to the terms and conditions of this Agreement, the closing (the "Closing") of this Agreement and the transactions contemplated hereunder shall take place at the offices of Shereff, Friedman, Hoffman & Goodman, LLP, New York, New York, simultaneously with the execution of this Agreement and after the satisfaction or waiver of all conditions to consummation of the transactions contemplated hereby (the day on which the Closing takes place is referred to herein as the "Closing Date"). - 6 - (b) At the Closing, the Sellers shall deliver to the Purchaser, against receipt of the shares of Purchaser Common Stock specified in Schedule 2.1 annexed hereto, the following: (1) certificates representing the Stock, duly endorsed for transfer in blank or accompanied by a stock power duly endorsed in blank by each Seller with any requisite documentary or stock transfer taxes affixed thereto; (2) the certificates required by Sections 7.4 and 7.5 hereof; (3) the legal opinion required by Section 7.9 hereof; (4) certificates issued by appropriate Governmental Authorities evidencing, as of a recent date, the good standing and tax status of the Company in the State of Delaware; (5) a copy of the Certificate of Incorporation and all amendments thereto of the Company, certified by the Secretary of State of the State of Delaware; (6) a copy of the By-laws, including all amendments thereto, of the Company; (7) the Consent of any third party required for the consummation by the Sellers of the transactions contemplated hereby; (8) all books and records relating to the business of the Company which are not maintained at the offices of the Company, including without limitation, the minute books, stock books, stock ledger and corporate seals, corporate operation manuals, policy manual, bank and checking account records, checks, deposit slips and signature cards, copies of the Company's financial statements and balance sheets and copies of the Tax Returns for the Company required to be filed with all the appropriate taxing bodies for the last three (3) years; (9) a copy of resolutions adopted by the Board of Directors of the Company authorizing the transactions contemplated hereby; and (10) documentation evidencing consummation of the VIL Transaction. (c) At the Closing, the Purchaser shall deliver to each of the Sellers the following: (1) certificates representing the number of shares of Purchaser Common Stock set forth next to such Seller's name in Schedule 2.1 annexed hereto; (2) the certificates required by Section 8.3 hereof; (3) a copy of resolutions adopted by the Board of Directors of the Purchaser authorizing the transactions contemplated hereby, certified by the Secretary of the Purchaser; - 7 - (4) certificates issued by appropriate Governmental Authorities evidencing, as of a recent date, the good standing and tax status of the Purchaser in the State of Delaware; (5) a copy of the Certificate of Incorporation, and all amendments thereto, of the Purchaser, certified by the Secretary of State of the State of Delaware; (6) certificate of the Secretary of the Purchaser to the effect that there have been no amendments to the charter documents referred to in Section 2.2(c)(5) hereof since the date of the certification referred to in such subsection; (7) a copy of the By-laws, including all amendments thereto, of the Purchaser, certified by the Secretary of the Purchaser; and (8) the Consent of any third party required for the consummation by the Purchaser of the transactions contemplated hereby. (d) Each of the parties hereto shall deliver all other documents and instruments required to be delivered by any of them at or prior to the Closing Date pursuant to this Agreement or as otherwise required herein. 3.0 Representations and Warranties of Zummo and Suozzi Each of Zummo and Suozzi, severally (as to themselves) and not jointly, represents and warrants to the Purchaser as follows: 3.1 Organization and Qualification. The Company is a corporation duly incorporated, organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation, and the Company has the requisite corporate power to own its properties and carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business, and is in good standing, in each other jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except to the extent that any such failure to so qualify would not, individually or in the aggregate, have a Material Adverse Effect. As of the date hereof, the Company has no Subsidiaries other than VIL, and at the Closing Date, will have no Subsidiaries, other than inactive corporations having no liabilities and assets of less than $1,000. Other than VIL, except as set forth on Schedule 3.1 annexed hereto, to the knowledge of Zummo and Suozzi, the Company does not control, directly or indirectly, or have any direct or indirect equity participation in, any Person. As used in this Agreement, the term "to the knowledge of Zummo and Suozzi" shall mean the actual knowledge of any of Zummo, Suozzi, W. Hardy Myers, Kathy S. Krumwiede, Paul Betz, Paul Sullivan and Victor Guadagno after due inquiry, and does not include matters as to which such persons could be deemed to have constructive knowledge. - 8 - 3.2 Capitalization. (a) The authorized, issued and outstanding capital stock of the Company are set forth on Schedule 3.2 annexed hereto. All issued and outstanding shares of the Stock are duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights. There are no options, warrants, subscriptions, calls or other rights, agreements or commitments obligating the Company to issue any shares of its capital stock or securities convertible into its capital stock. After the Closing, the Company will continue to be obligated to issue 10,000 shares of the common stock, $.01 par value per share, of the Purchaser owned by the Company under the terms of the Citicorp Option. (b) Each of Zummo and Suozzi owns on the Closing Date the number of shares of Stock set forth next to such Seller's name on Schedule 3.2 annexed hereto, free and clear of all Liens other than Liens arising out of, under or in connection with this Agreement. At the Closing, each of Zummo and Suozzi shall convey to the Purchaser good title to the Stock, free and clear of all Liens. 3.3 Authority Relative to this Agreement. Each of Zummo and Suozzi has all requisite power and authority to enter into this Agreement and to perform all of his obligations under this Agreement. This Agreement has been duly executed and delivered by Zummo and Suozzi, and assuming due authorization, execution and delivery by the ESOP and the Purchaser, and subject to the satisfaction of the conditions applicable to Zummo and Suozzi as set forth herein, this Agreement constitutes the valid and binding agreement of each of Zummo and Suozzi, enforceable in accordance with its terms, except as may be limited by bankruptcy, moratorium and insolvency Laws and other Laws affecting the rights of creditors' generally and except as may be limited by the availability of equitable remedies. 3.4 Compliance. Neither the execution and delivery of this Agreement by Zummo or Suozzi, nor the consummation by Zummo or Suozzi of the transactions contemplated hereby, nor compliance by Zummo or Suozzi with any of the provisions hereof, will (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or cancellation of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Lien upon any of the properties or assets of Zummo or Suozzi or, to the knowledge of Zummo and Suozzi, of the Company, under, any of the terms, conditions or provisions of (x) the organizational documents of the Company or (y) any material Contracts to which the Company, Zummo or Suozzi is a party or to which any of their assets may be subject or (z) any other Contracts to which the Company, Zummo or Suozzi is a party or to which any of their assets may be subject; or (ii) violate any Judgment or Law applicable (x) to Zummo or Suozzi or any of their assets, or (y) to the knowledge of Zummo and Suozzi, to the Company or any of its assets, except for termination of the Congress Indebtedness which is contemplated to be discharged at the Closing, and except for in the case of clause (i)(z) above, such violations, conflicts, breaches, defaults, terminations, accelerations or Liens as would not, individually or in the aggregate, have a Material Adverse Effect or except as set forth on Schedule 3.4 annexed hereto. - 9 - 3.5 Consents. Other than as set forth on Schedule 3.5 annexed hereto, no filing or registration with, or Consent of, any Person is required by or with respect to Zummo, Suozzi, or, to knowledge of Zummo and Suozzi, the Company, in connection with the execution and delivery of this Agreement by Zummo and Suozzi or is necessary for the consummation by Zummo or Suozzi of the transactions contemplated by this Agreement. 3.6 Company Financial Statements. The Company has delivered or made available to the Purchaser true and complete copies of (i) the audited balance sheets of the Company as at March 31, 1996 and 1995, and the related statements of operations and retained earnings and cash flows for the years then ended, and (ii) the unaudited balance sheet of the Company as at February 28, 1997 and the related unaudited statements of operations and retained earnings and cash flows of the Company for the 11-month period ended February 28, 1997 (collectively, the "Company Financial Statements"). To the knowledge of Zummo and Suozzi, the Company Financial Statements (including the accompanying notes), as of their respective dates, were complete and correct in all material respects and present fairly the financial condition of the Company as of such dates and the results of its operations for periods then ended, and were prepared in accordance with GAAP applied on a consistent basis during the periods indicated (except, in each case, as may be indicated therein or in the notes thereto), subject, in the case of unaudited financial statements, to the absence of footnotes and to normal year-end adjustments, and subject further to any liabilities or contingent obligations identified on a Schedule to this Agreement. 3.7 Absence of Undisclosed Liabilities. To the knowledge of Zummo and Suozzi, except as and to the extent reflected or reserved against in the most recent financial statements contained in the Company Financial Statements and since February 28, 1997, the Company has not incurred any liabilities of any kind whatsoever, whether absolute, accrued, contingent, determined, determinable or otherwise, other than: (a) liabilities incurred in the ordinary course of business in accordance with past practice since December 31, 1996; (b) liabilities that have been repaid, discharged or otherwise extinguished; (c) liabilities under or contemplated by this Agreement, including transaction expenses; (d) liabilities of a type not required to be recorded or disclosed in accordance with GAAP; (e) other liabilities in an amount not to exceed $100,000; and (f) liabilities described on any Schedule to this Agreement. 3.8 Absence of Specified Changes. Except as set forth on Schedule 3.8 annexed hereto, or with respect to the VIL Transaction, and except as would not have a Material Adverse Effect, since February 28, 1997, to the knowledge of Zummo and Suozzi, there has not been with respect to the Company any: (a) transactions not in the ordinary course of business consistent with past practice, which transactions have a value individually in excess of $100,000 or in excess of $250,000 in the aggregate; - 10 - (b) sale or transfer of any assets or properties, except in the ordinary course of business consistent with past practice; (c) damage, destruction or loss, whether or not insured, adversely affecting its properties, assets, business or prospects; (d) failure to maintain in full force and effect adequate insurance coverage for destruction, damage to, or loss of any of its assets; (e) change in accounting principles, methods or practices or investment practices; (f) declaration, setting aside, or payment of a dividend or other distribution in respect of its capital stock, or any direct or indirect redemption, purchase or other acquisition of any shares of its capital stock; (g) issuance or sale of any shares of its capital stock or of any other equity security or of any security convertible into or exchangeable for its equity securities, except as described in Section 3.2; (h) amendment to its organizational documents; (i) granting or filing of any material Lien against any of its shares of capital stock or any of its properties or assets, real, personal or mixed, tangible or intangible; (j) sale, transfer or lease of any properties or assets (real, personal or mixed, tangible or intangible) to, or execution of any agreement with, its officers or directors; (k) personal injury on any of its premises or in connection with its business that may give rise to a material claim in excess of the applicable insurance coverage; (l) increase in the compensation payable to or to become payable by it to any of its officers, employees or agents, except for normal compensation adjustments to salaries or wages to its non-officers, and to its officers as required by an applicable employment agreement, in each case made in the ordinary course of business consistent with past practice; or (m) agreement or understanding legally obligating it to take any of the actions described above in this Section 3.8. 3.9 Taxes. To the knowledge of Zummo and Suozzi, since April 27, 1993, except as set forth on Schedule 3.9 annexed hereto: - 11 - (a) The Company has filed or obtained timely extensions to file all Tax Returns which are required to be filed prior to the date of this Agreement, and such filed returns were true, complete and correct in all material respects. The Company has paid all Taxes and other charges due or claimed to be due (whether or not requiring the filing of a return) to the extent that such Taxes are due prior to the date of this Agreement. The Tax Returns filed reflected all Taxes due and payable by the Company with respect to the periods covered thereby and not one of the Company or any Subsidiary has any liabilities for Taxes with respect to such periods. (b) The Company has not obtained an extension of time within which to file any Tax Return which has not yet been filed. The Company has not received written notice from any Governmental Authority in a jurisdiction in which it does not file a Tax Return stating that it is subject to taxation by that jurisdiction. (c) The amounts accrued as liabilities for Taxes on the books of the Company and reflected on financial statements included in the Company Financial Statements are adequate to satisfy all material unpaid liabilities for Taxes of the Company through the date of such financial statements. There is no agreement, waiver or other document extending, or having the effect of extending, the period for assessment or collection of any Taxes of the Company, which extension or waiver is still in effect. The Company has delivered or made available to the Purchaser correct and complete copies of all examination reports, statements or deficiencies and similar documents prepared by any Tax authority that relate to the income, operations or business of the Company with respect to any period ending on or after April 27, 1993. The Company is not a party to any tax sharing arrangement with any entity. The Company: (i) is not a member of an affiliated group filing a consolidated federal Tax Return other than the affiliated group of which the Company is the common parent; and (ii) has no liability for Taxes of any Person other than the Company under Treasury Regulation Section 1.1502-6 or any similar provision of state law, or as a transferee or successor, by contract or otherwise. 3.10 Insurance. To the knowledge of Zummo and Suozzi, except as set forth on Schedule 3.10 annexed hereto, all insurance maintained by the Company is of such types and in such amounts and for such risks, casualties and contingencies as are customarily insured against by enterprises in operations similar to the business of the Company, as currently conducted or as proposed by the Company to be conducted. To the knowledge of Zummo and Suozzi, the Company has provided or made available a list of all material claims (including but not necessarily limited to workers' compensation, automobile and general liability and products liability) filed by or on behalf of the Company for insured losses prior to the date hereof which are pending and have not been disposed of and that are for amounts in excess of the applicable policy limits. To the knowledge of Zummo and Suozzi, the Company is not in default with respect to any material provisions or requirements of any insurance policy, nor has it failed to give any material notice or present any material claim thereunder in a due and timely fashion. To the knowledge of Zummo and Suozzi, the Company has not received any notice of cancellation or termination in respect of any of its insurance policies that currently are in force. To the knowledge of Zummo and Suozzi, no material litigation is presently pending against the Company which is being defended by any insurance carrier under reservation of rights. - 12 - 3.11 Contracts. Except: (i) with respect to contracts or agreements with the Purchaser or the Purchaser's Subsidiaries, or (ii) as set forth on Schedule 3.11 annexed hereto, to the knowledge of Zummo and Suozzi, the Company is not a party to or bound by any: (a) contract or agreement involving amounts payable to the Company during any 12-month period that will aggregate $100,000 or more; (b) management, consultant or employment contract under which there are amounts payable by the Company during any 12-month period that will aggregate $75,000 or more; (c) contract obligating the Company to make severance or similar payments to any employee or officer of the Company upon termination of employment or to make payments to any officer or employee of the Company in excess of the officer's or employee's regular salary and reimbursement of ordinary business expenses; (d) contract or agreement with any distributor, dealer or sales representative that is not cancelable without liability to the Company on a maximum of thirty (30) days notice and under which there are amounts payable by the Company during any 12-month period that will aggregate $100,000 or more; (e) contract or agreement of any nature whatsoever between the Company, on the one hand, and any past or present director or officer of the Company or any of its Affiliates, on the other hand; (f) contract or agreement relating to any loan, factoring or credit line; (g) lease of Real Property other than those described on Schedule 3.12 annexed hereto; (h) lease of Tangible Property under which the Company is a lessor or lessee involving payments by or to the Company in excess of $100,000 in any 12-month period; (i) purchase commitments, requirements or similar contracts (or series of related purchase commitments, requirements or similar contracts) involving amounts payable by the Company during any 12-month period that will aggregate $100,000 or more; (j) outstanding guaranty, subordination or other similar type of agreement, whether or not entered into in the ordinary course of business; - 13 - (k) material contract concerning non-competition; (l) material contract concerning confidentiality, except in the ordinary course of business; (m) joint venture, partnership, cooperative arrangement or any other contract involving a sharing of profits; (n) material contract with any Governmental Authority (including any conciliation agreement, consent decree or letter of commitment); or (o) proposed arrangement or contract which the Company reasonably believes to be near consummation and of a type that if entered into would be a contract described in subsections (a) through (n) above. Accurate and complete copies of each such documents have been delivered by the Company and/or Zummo or Suozzi to the Purchaser or made available to the Purchaser at the Company's offices. To the knowledge of Zummo and Suozzi, each material contract to which the Company is a party is in full force and effect and is enforceable by the Company in accordance with its terms against all other parties thereto, subject as to enforceability to bankruptcy, insolvency and similar laws affecting creditors' rights generally. To the knowledge of Zummo and Suozzi, the Company has not received any notice of a default under any such contract listed on Schedule 3.11 or Schedule 3.12 annexed hereto and, to the knowledge of Zummo and Suozzi, no event or condition has happened or presently exists which constitutes a default or, after notice or lapse of time or both, would constitute a default under any such contract listed on Schedule 3.11 annexed hereto. 3.12 Real Property. The Company does not own any Real Property. To the knowledge of Zummo and Suozzi, Schedule 3.12 annexed hereto sets forth an accurate and complete list (including the name of the landlord, term and annual rental) of all Real Property leased or subleased by the Company. To the knowledge of Zummo and Suozzi, the Company has been in all material respects in peaceable possession of the premises covered by each Real Property lease or sublease since the commencement of the original term of such lease or sublease. 3.13 Environmental Matters. To the knowledge of Zummo and Suozzi, except as disclosed on Schedule 3.13 annexed hereto: (i) the operations of the Company comply in all material respects with all applicable federal, state or local environmental, health and safety statutes and regulations; (ii) none of the operations of the Company is the subject of any judicial or administrative proceeding alleging the violation of any federal, state or local environmental, health or safety statute or regulation; (iii) none of the operations of the Company is the subject of a federal or state investigation evaluating whether any remedial action is needed to respond to a release of any hazardous or toxic waste, substance or constituent, or other substance into the environment; (iv) the Company has not filed any notice under any federal or - 14 - state law indicating past or present treatment, storage or disposal of a hazardous waste or reporting a spill or release of a hazardous or toxic waste, substance or constituent, or other substance into the environment; and (v) the Company has no contingent liability in connection with any release of any hazardous or toxic waste, substance or constituent, or other substance into the environment. 3.14 Intellectual Property. To the knowledge of Zummo and Suozzi, Schedule 3.14 annexed hereto sets forth an accurate and complete list of all Intellectual Property. To the knowledge of Zummo and Suozzi, the Company owns, is licensed or otherwise has the right to use, all Intellectual Property used in the business of the Company, as presently conducted or as proposed by the Company to be conducted. To the knowledge of Zummo and Suozzi, the use of the Intellectual Property by the Company does not infringe upon or otherwise violate the rights of any third party in or to such Intellectual Property, and no claim has been asserted with respect thereto. To the knowledge of Zummo and Suozzi, no employee of the Company has a right to receive a royalty or similar payment, or has any other monetary rights, in respect of any item of Intellectual Property of the Company. 3.15 Tangible Property. To the knowledge of Zummo and Suozzi, the Company owns all of the Tangible Property, free and clear of all Liens other than Permitted Liens and except as set forth on Schedule 3.15 annexed hereto. 3.16 Employee Benefit Plans. (a) To the knowledge of Zummo and Suozzi, except as disclosed on Schedule 3.16 annexed hereto, the Company does not provide, nor has an obligation to provide, or make, contributions to provide compensation or benefits of any kind or description whatsoever (whether current or deferred and whether paid in cash or in kind) to, or on behalf of, one, or more than one, current or former employees or directors of the Company or any of its current or former Affiliates or any of their dependents, other than any plans, programs or other arrangements which only provide for the payment of cash compensation currently from the general assets of the Company on a payday by payday basis as base salary or hourly wages for current services and other than policies for vacation and sick days (individually, a "Benefit Plan," and collectively, the "Benefit Plans"). To the knowledge of Zummo and Suozzi, each of the Benefit Plans is listed on Schedule 3.16 annexed hereto. (b) To the knowledge of Zummo and Suozzi, except as disclosed on Schedule 3.16 annexed hereto: (1) No ERISA Affiliate (other than the Company) provides, or has an obligation to provide, contributions, compensation or benefits of or under any plan, program or arrangement which is subject to Title IV of ERISA ("ERISA Affiliate Title IV Plan"). - 15 - (2) The Company has furnished or made available to the Purchaser a true, complete and current copy of each written Benefit Plan and any amendments thereto, a summary of each other Benefit Plan, and all Internal Revenue Service, Department of Labor or Pension Benefit Guaranty Corporation rulings or determinations, annual reports, summary plan descriptions, actuarial and other financial reports and such other documentation with respect to any Benefit Plan as was reasonably requested by the Purchaser. (3) No assets have been set aside in a trust or other separate account to pay directly or indirectly any benefits under any Benefit Plan or to the extent assets have been set aside, all assets are shown on the books and records of such trust or separate account at their fair market value as of the date of any report last provided with respect to such trust. (4) Since April 27, 1993, each Benefit Plan and each ERISA Affiliate Title IV Plan has been established, maintained and administered in compliance in all material respects with all applicable laws. The Company has no duty or obligation to indemnify or hold any other person or entity harmless for any liability attributable to any acts or omissions by such person or entity with respect to any Benefit Plan or ERISA Affiliate Title IV Plan, other than indemnification obligations to (i) Insilco and (ii) Benefit Plan fiduciaries under the terms of the Benefit Plan documents and corporate charters, bylaws and state corporate law. (5) Since April 27, 1993, the Company has not incurred any material liability for any tax or penalty with respect to any Benefit Plan, ERISA Affiliate Title IV Plan or any group health plan (as described in Section 5000 of the Code) of an ERISA Affiliate including, without limitation, any tax or penalty under ERISA or under the Code. (6) Since April 27, 1993, the Company has not terminated or withdrawn from, or sought a funding waiver with respect to, any Benefit Plan which is subject to Title IV of ERISA. (7) There is no proposed or actual audit or investigation by any Governmental Authority with respect to any Benefit Plan or ERISA Affiliate Title IV Plan. (8) The Company has no obligation to make, or reimburse, another employer, directly or indirectly, for making, contributions to a multi employer plan as described in Title IV of ERISA. (9) Section 280G of the Code shall not apply to any payments made by the Company as a result of the transactions contemplated by this Agreement, and there are no additional payments to or increase in vesting for any current or former employee or director or their dependents under any Benefit Plan which will be triggered as a result of the change in the control of the Company contemplated by this Agreement. - 16 - 3.17 Labor Matters. The Company is not a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union organization. To the knowledge of Zummo and Suozzi, there is no unfair labor practice or material labor arbitration proceeding pending or threatened against the Company. To the knowledge of Zummo and Suozzi, there are no organizational efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving employees of the Company. To the knowledge of Zummo and Suozzi, there is no material labor controversy in existence with respect to the Company's business and operations. 3.18 Compliance with Laws. To the knowledge of Zummo and Suozzi, the Company is in compliance in all material respects with all Laws applicable to it, its business and its assets. 3.19 Licenses and Permits. To the knowledge of Zummo and Suozzi, the Company holds all Licenses and Permits which are material to the operation of its business as currently conducted. To the knowledge of Zummo and Suozzi, all such Licenses and Permits are valid and in full force and effect and there are no pending or threatened proceedings which could result in the termination, revocation, limitation or impairment of any of such Licenses and Permits. 3.20 Legal Proceedings. To the knowledge of Zummo and Suozzi, except as set forth on Schedule 3.20 annexed hereto, no Judgments are outstanding against the Company and there is no material litigation, claim, action, suit, proceeding, complaint, charge, Tax or other audit, investigation or arbitration (whether or not from a Governmental Authority) pending or threatened against the Company or its property or assets. 3.21 No Brokers. Except as set forth on Schedule 3.21 annexed hereto, neither Zummo, Suozzi nor the Company has entered into any contract, arrangement or understanding with any Person or incurred any liability which could result in the obligation of any Person to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with this Agreement or the consummation of the transactions contemplated hereby. 3.22 Investment Representations. Each of Zummo and Suozzi is acquiring the Purchaser Common Stock for his own account, for investment, and not with a view to, or for sale in connection with, the distribution thereof or of any interest therein, in violation of state or federal law. Each of Zummo and Suozzi are "accredited investors" within the meaning of Regulation D under the Securities Act and are intimately familiar with the business and operations of the Purchaser as members of the board of directors and in Mr. Zummo's case, as chief executive officer. Each of Zummo and Suozzi understands that the Purchaser Common Stock has not been registered under the Securities Act by reason of its issuance in a transaction exempt from the registration requirements of the Securities Act, that the Purchaser Common Stock has not been registered under applicable state securities laws by reason of its issuance in a transaction exempt from such registration requirements, and that the Purchaser Common Stock may not be sold or otherwise disposed of unless registered under the Securities Act and applicable state securities laws (the Purchaser being under no obligation so to register such Purchaser Common Stock except as set forth in the Registration Rights Agreement) or exempted from registration. - 17 - 3.23 Insilco Obligations. To the knowledge of Zummo and Suozzi, there is no litigation or claim for indemnification by the Company pending or threatened in connection with the Insilco Purchase Agreement. 4.0 Representations and Warranties of the Trustee. The Trustee represents and warrants to the Purchaser as follows: 4.1 Status. The Trust is a duly established and existing trust under the laws of the State of California. Accurate and complete copies of the organizational documents of the ESOP have been delivered by the Trustee to the Purchaser or made available to the Purchaser at the Company's offices. 4.2 Authority Relative to this Agreement. The Trustee's execution and delivery of, and the performance by the Trustee of the Trustee's and the Trust's obligations under, this Agreement have been duly authorized by the Plan Administrator. Assuming due authorization, execution and delivery by Zummo, Suozzi and the Purchaser, and subject to the satisfaction of the conditions applicable to the ESOP as set forth herein, this Agreement constitutes the valid and binding agreement of the ESOP, the Trust and the Trustee, enforceable in accordance with its terms, except as may be limited by bankruptcy, moratorium and insolvency Laws and other Laws affecting the rights of creditors' generally and except as may be limited by the availability of equitable remedies. 4.3 Compliance. Neither the execution and delivery of this Agreement by the Trustee, nor the consummation by the ESOP of the transactions contemplated hereby, nor compliance by the ESOP with any of the provisions hereof will (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or cancellation of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Lien upon any of the properties or assets of the ESOP under, any of the terms, conditions or provisions of any Contracts to which the ESOP is a party or to which its assets may be subject; or (ii) violate any Judgment or Law applicable to the ESOP or any of its assets, except, in the case of each of clauses (i) and (ii) above, such violations, conflicts, breaches, defaults, terminations, accelerations or Liens as would not, individually or in the aggregate, have a Material Adverse Effect. 4.4 Ownership of the Stock. The ESOP owns on the Closing Date the number of shares of Stock set forth next to the ESOP's name on Schedule 3.2 annexed hereto, free and clear of all Liens other than Liens arising out of, under or in connection with this Agreement. At the Closing, the ESOP shall convey to the Purchaser good title to the Stock, free and clear of all Liens. - 18 - 4.5 Consents. Other than as set forth on Schedule 4.5 annexed hereto, no filing or registration with, or Consent of, any Person is required by or with respect to the ESOP or the Trustee in connection with the execution and delivery of this Agreement by the Trustee or is necessary for the consummation by the ESOP of the transactions contemplated by this Agreement. 4.6 Compliance with Laws. The ESOP is in compliance in all respects with all Laws applicable to it, its business and its assets. 4.7 Legal Proceedings. Except as set forth on Schedule 4.7 annexed hereto, no Judgments are outstanding against the ESOP and there is no material litigation, claim, action, suit, proceeding, complaint, charge, Tax or other audit, investigation or arbitration (whether or not from a Governmental Authority) pending or, to the knowledge of the Trustee, threatened against the ESOP or its property or assets. 4.8 Investment Representations. The ESOP is acquiring the Purchaser Common Stock for its own account, for investment, and not with a view to, or for sale in connection with, the distribution thereof or of any interest therein, in violation of state or federal law. The Trustee understands that the Purchaser Common Stock has not been registered under the Securities Act by reason of its issuance in a transaction exempt from the registration requirements of the Securities Act, that the Purchaser Common Stock has not been registered under applicable state securities laws by reason of its issuance in a transaction exempt from such registration requirements, and that the Purchaser Common Stock may not be sold or otherwise disposed of unless registered under the Securities Act and applicable state securities laws (the Purchaser being under no obligation so to register such Purchaser Common Stock except as set forth in the Registration Rights Agreement) or exempted from registration. 4.9 Acknowledgment as to Information. (a) The ESOP and its representatives have received from the Purchaser such information including the Schedules and Exhibits to this Agreement and such documents referred to herein and therein as they have requested, with respect to the Purchaser as the ESOP has deemed necessary and relevant in connection with the transactions contemplated hereby, and the ESOP has had the opportunity, directly or through such representatives, to ask questions of and receive answers from persons acting on behalf of the Purchaser necessary to verify the information so obtained. (b) The Trustee is an executive officer, and until February 11, 1997 was a director, of the Purchaser, and in such capacity, has received and is intimately familiar with (i) the financial statements of the Purchaser, including proforma financial statements which give effect to the transactions contemplated hereby and (ii) any and all reports and documents required to be filed by the Purchaser under sections 13(a), 14(a), 14(c) or 15(d) of the Exchange Act since the Purchaser's initial public offering. - 19 - 4.10 Experience of Trustee. The Trustee is an "accredited investor" within the meaning of Regulation D under the Securities Act and has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the Purchaser Common Stock. 4.11 No Brokers. Except as set forth on Schedule 4.11 annexed hereto, the ESOP has not entered into any contract, arrangement or understanding with any Person or incurred any liability which could result in the obligation of any Person to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with this Agreement or the consummation of the transactions contemplated hereby. 5. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to Zummo, Suozzi and the ESOP as follows: 5.1 Organization and Qualification. Each of the Purchaser and its Subsidiaries is a corporation duly incorporated, organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation, and each of the Purchaser and its Subsidiaries has the requisite corporate power to own its properties and carry on its business as now being conducted. Each of the Purchaser and its Subsidiaries is duly qualified as a foreign corporation to do business, and is in good standing, in each other jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except to the extent that any such failure so to qualify would not, individually or in the aggregate, have a Material Adverse Effect. 5.2 Capitalization. The authorized capital stock of the Purchaser consists of (i) 10,000,000 shares of Purchaser Common Stock, $.01 par value, and (ii) 2,000,000 shares of preferred stock, $.10 par value. As of the date hereof, 5,025,383 shares of Purchaser Common Stock and no shares of preferred stock of the Purchaser are issued and outstanding. As of the date hereof, 550,000 shares of Purchaser Common Stock are reserved for issuance upon exercise of outstanding stock options and 104,400 shares of Purchaser Common Stock are reserved for issuance upon exercise of outstanding warrants. Except as set forth in the prior sentence, there are no options, calls, subscriptions, warrants or other rights, agreements or commitments obligating the Purchaser to issue any shares of its capital stock or securities convertible into its capital stock. All outstanding shares of Purchaser Common Stock are validly issued, fully paid and nonassessable and such shares are not subject to preemptive rights. All of the shares of Purchaser Common Stock issuable hereunder, when issued, will be duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights. All the outstanding capital stock of each of the Subsidiaries of the Purchaser is duly authorized, validly issued, fully paid and non-assessable and is owned by the Purchaser, free and clear of any Lien and not subject to preemptive rights. Except as disclosed in filings of the Purchaser with the Securities and Exchange Commission, there are no existing options, warrants, calls or other rights, agreements or commitments of any character relating to the issued or unissued capital stock or other securities of any Subsidiary of the Purchaser. - 20 - 5.3 Authority Relative to this Agreement. The Purchaser has all requisite corporate power and authority to enter into this Agreement and to perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and, subject to the satisfaction of the conditions applicable to it as set forth herein and assuming due authorization, execution and delivery by Zummo, Suozzi and the ESOP, this Agreement constitutes the valid and binding agreement of the Purchaser, enforceable in accordance with its terms, except as may be limited by bankruptcy, moratorium and insolvency Laws and other Laws affecting the rights of creditors' generally and except as may be limited by the availability of equitable remedies. 5.4 Compliance. Neither the execution and delivery of this Agreement by the Purchaser, the consummation by the Purchaser of the transactions contemplated hereby, nor compliance by the Purchaser with any of the provisions hereof will (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or cancellation of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Lien upon any of the properties or assets of the Purchaser or any of its Subsidiaries under, any of the terms, conditions or provisions of (x) the organizational documents of the Purchaser or any of its Subsidiaries, or (y) any contracts to which the Purchaser or any of its Subsidiaries is a party or to which the Purchaser or any of its Subsidiaries or their respective assets may be subject; or (ii) violate any Judgment or Law applicable to the Purchaser or any of its Subsidiaries or their respective assets, except for, in the case of each of clauses (i)(y) and (ii) above, such violations, conflicts, breaches, defaults, terminations, accelerations or Liens as are set forth on Schedule 5.4 annexed hereto or as would not, individually or in the aggregate, have a Material Adverse Effect. 5.5 Consents. Other than as set forth on Schedule 5.5 annexed hereto, no material filing with, or Consent of, any Person is required by or with respect to the Purchaser or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Purchaser or is necessary for the consummation by the Purchaser of the transactions contemplated by this Agreement. 5.6 No Brokers. Except for Friedman, Billings, Ramsey & Co. (the "Financial Advisor"), none of the Purchaser or its Subsidiaries has entered into any Contract, arrangement or understanding with any Person which could result in the obligation of any Person to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with this Agreement or consummation of the transactions contemplated hereby. 5.7 Fairness. The Board of Directors of the Purchaser has received an opinion of the Financial Advisor to the effect that the consideration to be received by the Purchaser hereunder is fair to the stockholders of the Purchaser (other than the Company) from a financial point of view. - 21 - 6. Covenants and Other Agreements. The parties hereto covenant and agree as follows: 6.1 Consents. Zummo and Suozzi shall use reasonable diligence to cause the Company to give any notices, make any filings, and obtain any Consents set forth on Schedule 3.5 annexed hereto. The Purchaser shall use reasonable diligence to give any notices, make any filings and obtain any Consents set forth on Schedule 5.5 annexed hereto. 6.2 Director and Officer Indemnification. It is understood and agreed that the Purchaser shall cause the Company to indemnify and hold harmless each present and former director and officer of the Company, and any present and former trustees and fiduciaries of any Benefit Plan or any other plan for the benefit of the employees of the Company against all losses, claims, damages or liabilities arising out of actions or omissions occurring at or prior to the Closing Date, whether or not with respect to the transactions contemplated by this Agreement, to the same extent as such Person is currently indemnified under the Company's Certificate of Incorporation or By-laws in effect on the date hereof. 6.3 Additional Agreements. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, and to cooperate with each other in connection with the foregoing. 7. Conditions Precedent to the Purchaser's Obligations. The obligations of the Purchaser are subject to the satisfaction, at or before the Closing, of the conditions set forth below. The benefit of these conditions is for the Purchaser only and may be waived in writing by the Purchaser at any time in its sole discretion. 7.1 Accuracy of Zummo's and Suozzi's Representations and Warranties. The representations and warranties of Zummo and Suozzi set forth herein shall be true and correct as of the date hereof, except where the failure of any such representation or warranty to be true and correct does not have a Material Adverse Effect. Any matter which would otherwise constitute a breach of a representation or warranty by Zummo or Suozzi hereunder shall not be deemed to be such a breach if the Purchaser has consented to the same in writing. 7.2 Accuracy of the ESOP's Representations and Warranties. The representations and warranties of the ESOP set forth herein shall be true and correct as of the date hereof, except where the failure of any such representation or warranty to be true and correct does not have a Material Adverse Effect. Any matter which would otherwise constitute a breach of a representation or warranty by the ESOP hereunder shall not be deemed to be such a breach if the Purchaser has consented to the same in writing. - 22 - 7.3 Performance by Zummo and Suozzi. Zummo and Suozzi shall have performed, satisfied and complied in all material respects with all covenants, agreements, and conditions required to be performed by them. 7.4 Deliveries by the ESOP at Closing. At the Closing, in accordance with Section 2.2(b)(2) hereof, the ESOP shall have delivered to the Purchaser a certificate to the effect that the conditions specified in Section 7.2 have been satisfied. 7.5 Deliveries by Zummo and Suozzi at Closing. At the Closing, in accordance with Section 2.2(b)(2) hereof, each of Zummo and Suozzi shall have delivered to the Purchaser certificates to the effect that the conditions specified in Sections 7.1, 7.3, 7.6, 7.8 and 7.10 have been satisfied. 7.6 Consents of Zummo and Suozzi. Zummo and Suozzi shall have obtained and delivered to the Purchaser all Consents set forth in Schedule 3.5 annexed hereto. 7.7 Consents of the ESOP. The ESOP shall have obtained and delivered to the Purchaser all Consents set forth in Schedule 4.5 annexed hereto. 7.8 Changes in the Business. There shall have occurred no event relative to the business of the Company which would, individually or in the aggregate, have a Material Adverse Effect. 7.9 Opinion of the Sellers' Counsel. The Purchaser shall have received the opinion, dated the Closing Date, of Shereff, Friedman, Hoffman & Goodman LLP, counsel to the Company and Zummo, substantially in the form annexed hereto as Exhibit A-1. The Purchaser shall have received the opinion, dated the Closing Date, of Jeffer, Mangel, Butler & Marmaro LLP, counsel to the ESOP, substantially in the form annexed hereto as Exhibit A-2. 7.10 Absence of Litigation. There shall not be pending before any Governmental Authority any action, suit or proceeding which, is reasonably likely to (i) make the purchase by the Purchaser of the Stock, or the purchase by the Sellers of the Purchaser Common Stock, illegal or (ii) would impose limitations on the ability of the Purchaser to effectively exercise full rights of ownership of the Stock or business of the Company as a result of the transactions contemplated hereby. 7.11 Proceedings and Documents. All legal and corporate proceedings in connection with the transactions contemplated by this Agreement shall be in form and substance reasonably satisfactory to the Purchaser and its counsel, and the Purchaser shall have received all such counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions as the Purchaser shall reasonably request. - 23 - 7.12 Sale of VIL. Zummo and/or Suozzi shall deliver to the Purchaser documentation evidencing the VIL Transaction. 7.13 Pledge Agreement. Zummo shall have executed and delivered the Pledge Agreement, substantially in the form attached hereto as Exhibit B. 7.14 Resignations. The Sellers shall deliver to the Purchaser resignations of any directors and officers of the Company requested by the Purchaser, effective as of the Closing Date. 7.15 Tax-Free Transaction. The Purchaser shall have received an opinion of Price Waterhouse, LLP, reasonably satisfactory to it, that the transactions contemplated by this Agreement constitute a tax-free "reorganization" within the meaning of Section 368 of the Code. 8. Conditions Precedent to the Sellers' Obligations. The obligations of the Sellers are subject to the satisfaction, at or before the Closing, of the conditions set forth below. The benefit of these conditions is for the Sellers only and may be waived by the Sellers in writing at any time in their sole discretion. 8.1 Accuracy of the Purchaser's Representations and Warranties. The representations and warranties of the Purchaser set forth herein shall be true and correct as of the date hereof, except, in either case, where the failure of any such representation or warranty to be true and correct does not have a Material Adverse Effect. Any matter which would otherwise constitute a breach of a representation or warranty by the Purchaser hereunder shall not be deemed to be such a breach if the Sellers have consented to the same in writing. 8.2 Performance by the Purchaser. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required to be performed by it. 8.3 Deliveries by the Purchaser at Closing. At the Closing, in accordance with Section 2.2(c)(2), the Purchaser shall have delivered to the Sellers certificates to the effect that the conditions specified in Sections 8.1, 8.2, 8.4, 8.6, 8.7, and 8.9 have been satisfied. 8.4 Consents. The Purchaser shall have obtained and delivered to the Sellers all Consents set forth in Schedule 5.5 annexed hereto. 8.5 Opinion Regarding Adequacy of Consideration to ESOP. The ESOP shall have received an opinion from its financial advisor that the consideration to be received by the ESOP hereunder constitutes "adequate consideration" within the meaning of ERISA. - 24 - 8.6 Changes in the Business. There shall have occurred no event relative to the business of the Purchaser which would, individually or in the aggregate, have a Material Adverse Effect. 8.7 Absence of Litigation. There shall not be pending before any Governmental Authority any action, suit or proceeding which is reasonably likely to (i) make the purchase by the Purchaser of the Stock, or the purchase by the Sellers of the Purchaser Common Stock, illegal or (ii) would impose limitations on the ability of the Purchaser to effectively exercise full rights of ownership of the Stock or business of Company as a result of the transactions contemplated hereby. 8.8 Proceedings and Documents. All legal and corporate proceedings in connection with the transactions contemplated by this Agreement shall be in form and substance reasonably satisfactory to the Sellers and their counsel, and the Sellers shall have received all such counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions as the Sellers shall reasonably request. 8.9 Intercompany Notes. VIL shall have received the assumption by the Purchaser of the five year Intercompany Note in the principal amount of $2,000,000 in the form of Exhibit C annexed hereto, together with a wire transfer in the amount of $800,000 U.S. in satisfaction of the Intercompany Note in the principal amount of $800,000. 8.10 Registration Rights Agreement. The Purchaser shall have executed and delivered the Registration Rights Agreement, substantially in the form attached hereto as Exhibit D. 8.11 Insilco Obligations. The Sellers shall have received documentation evidencing (i) the assumption by the Purchaser of the indemnity obligations of the Company to Insilco under the Stock Purchase Agreement dated as of April 27, 1993 (the "Insilco Purchase Agreement") by and among Insilco, Zummo and RAZ Acquisition Corporation, and (ii) the consent by Insilco to such assumption and the transactions contemplated hereby. 8.12 Tax-Free Transaction. The Sellers shall have received an opinion of Price Waterhouse LLP, reasonably satisfactory to them, that the transactions contemplated by this Agreement constitute a tax-free "reorganization" within the meaning of Section 368 of the Code. 9. Survival of Representations and Warranties; Indemnification. 9.1 Survival of Representations and Warranties. All representations and warranties contained in this Agreement (other than in Section 3.2) or in any other document provided to any party hereto in connection with the transactions contemplated hereby shall terminate on the later to occur of (a) June 30, 1998 or (b) the date the Purchaser's accountants have completed their audit of the Purchaser's consolidated financial statements for fiscal year ending March 31, 1998, and shall thereafter be of no further force or effect. - 25 - 9.2 Indemnification. (a) Agreement to Indemnify. (i) From and after the Closing Date, each of Zummo and Suozzi hereby severally covenant and agree to indemnify, on a pro rata basis, up to the limits set forth in Section 9.2(b)(ii), the Purchaser and its successors and assigns and hold them harmless from and against any and all losses, claims, liabilities, obligations, fines, penalties, damages and expenses, including reasonable attorneys fees (collectively, "Losses") incurred by any of them resulting from or arising out of any breach of any of the representations or warranties made by Zummo or Suozzi in this Agreement. For purposes of this Section 9.2(a), such representations and warranties shall be considered as though made without any "material" or "Material Adverse Effect" qualification, notwithstanding the presence thereof. The pro rata indemnification by Zummo and Suozzi referred to above shall be made in proportion to their relative ownership of the Company (i.e., Zummo shall be responsible for 77.78% of the indemnification obligations and Suozzi shall be responsible for 22.22% of the indemnification obligations); provided, however, that Zummo and Suozzi shall each be solely responsible, up to the limits set forth above, for the breach of a representation or warranty contained in Article 3 hereof to the extent that such breach relates solely to Zummo or Suozzi, as the case may be. (ii) From and after the Closing Date, the ESOP hereby covenants and agrees to indemnify, up to the limit set forth in Section 9.2(b)(ii), the Purchaser and its successors and assigns and to hold them harmless from and against any Losses incurred by any of them resulting from or arising out of any breach by the Trustee of the representations or warranties made by the Trustee in Section 4.4. (iii) From and after the Closing Date, the Purchaser hereby covenants and agrees to indemnify, up to the limits set forth in Section 9.2(b)(iii), each of Zummo, Suozzi and the ESOP and each of their respective successors, assigns, heirs and personal representatives and to hold them harmless from and against any Losses incurred by any of them resulting from or arising out of (x) any breach by the Purchaser of any of the representations or warranties made by the Purchaser in this Agreement and (y) any liability or obligation of the Company to Insilco which is assumed by the Purchaser as contemplated by Section 8.11 of this Agreement. (b) Limitation on Indemnity. (i) No breach of any individual representation or warranty (other than in Section 3.2) shall be deemed to have occurred within the meaning of Section 9.2(a)(i) or (iii) unless and until the dollar amount of all Losses resulting from such breach exceeds one hundred thousand dollars ($100,000). No claim for indemnification (except as a result of a breach of any representation or warranty contained in Section 3.2) may be brought under Section 9.2(a)(i) or (iii)(x) unless the claims sought to be indemnified exceed $500,000 in the aggregate, and then the claim for indemnification may be brought only for the amount of such Losses above $500,000. - 26 - (ii) The maximum indemnification obligations of Zummo and Suozzi under Section 9.2(a)(i) shall be $1,555,600 and $444,400, respectively. The indemnification obligation of Zummo under Section 9.2 shall be secured by a pledge of all of the capital stock of VIL owned by Zummo pursuant to the Pledge Agreement. The Purchaser and its successors and assigns agree not to seek to enforce such indemnity obligations with respect to any claim against Zummo personally for a period of 90 days after such claim can first be asserted, during which time the Purchaser or its successors or assigns, as the case may be, shall take reasonable steps to satisfy such claim through exercise of remedies available under the Pledge Agreement. If, after such 90 day period has elapsed, the Purchaser or its successors or assigns, as the case may be, has been unable to satisfy its claim in spite of such efforts, it may enforce the claim personally against Zummo. The maximum indemnification obligations of the ESOP under Section 9.2(a)(ii) shall be $100,000. (iii) The maximum indemnification obligations of the Purchaser under Section 9.2(a)(iii) shall be $2,000,000. To the extent that a claim for indemnification is brought by more than one stockholder of the Company, indemnification payments by the Purchaser to such stockholders shall be in proportion to their current ownership interests in the Company (i.e., 74.18% for Zummo; 21.19% for Suozzi and 4.63% for the ESOP). (c) Indemnification Procedure. (i) An indemnified party shall provide written notice to each indemnifying party of any claim of such indemnified party for indemnification under this Agreement promptly after the date on which such indemnified party has actual knowledge of the existence of such claim. Such notice shall specify the nature of such claim in reasonable detail and the indemnifying parties shall be given reasonable access to any documents or properties within the control of the indemnified party as may be useful in the investigation of the basis for such claim. The failure to so notify the indemnifying parties shall not constitute a waiver of such claim but an indemnified party shall not be entitled to receive any indemnification with respect to any Losses that occurred directly as a result of the failure of such indemnified party to give such notice. (ii) In the event any indemnified party seeks indemnification hereunder based upon a claim asserted by a third party, the indemnifying parties shall have the right (without prejudice to the right of any indemnified party to participate at its expense through counsel of its own choosing) to defend or prosecute such claim at its expense and through counsel of its own choosing if it gives written notice of its intention to do so no later than twenty (20) days following notice thereof by an indemnified party or such shorter time period as required so that the interests of the indemnified party would not be materially prejudiced as a result of its failure to have received such notice; provided, however, that, if the indemnified party shall have reasonably concluded that separate counsel is required because a conflict of interest would otherwise exist, the indemnified party shall have the right to select separate counsel (but not more than one law firm together with local counsel, if necessary) to participate in the defense of such action on its behalf, at the expense of the indemnifying party. If the indemnifying party does not so choose to defend or prosecute any such claim asserted by a third party for which any indemnified party would be entitled to indemnification hereunder, - 27 - then the indemnified party shall be entitled to recover from the indemnifying party (subject to the limitations set forth in Section 9.2(b)), all of the reasonable attorney's fees and other costs and expenses of litigation of any nature whatsoever incurred in the defense of such claim. Notwithstanding the assumption of the defense of any claim by an indemnifying party pursuant to this paragraph, the indemnified party shall have the right to approve the terms of any settlement of a claim (which approval shall not be unreasonably delayed or withheld). (iii) The indemnifying party and the indemnified party shall cooperate in furnishing evidence and testimony and in any other manner which the other may reasonably request, and shall in all other respects have an obligation of good faith dealing, one to the other, so as not to unreasonably expose the other to undue risk of loss. 10. Miscellaneous. 10.1 Publicity. The parties shall agree with each other as to timing and content prior to issuing any announcement, press release, public statement or other information to the press or any third party with respect to this Agreement or the transactions contemplated hereby; provided, however, that nothing herein shall prohibit any party to this Agreement from making any public disclosure regarding this Agreement and the transactions contemplated hereby if, in the opinion of counsel to such party, such disclosure is required by Law or by valid judicial process. 10.2 Headings. Section headings contained in this Agreement are included for convenience only and shall not affect the interpretation of any provisions of this Agreement. 10.3 Notices. Any notice, demand, request, waiver, or other communication under this Agreement shall be in writing (including facsimile or similar writing) and shall be deemed to have been duly given (i) on the date of service if personally served or on the date after transmission if sent via overnight mail, (ii) 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 or (iii) on the date sent if sent by facsimile, to the parties at the following addresses or facsimile numbers with a copy sent by mail as aforesaid on the same date (or at such other address or facsimile number for a party as shall be specified by like notice): If to Zummo, to: Robert A. Zummo 9963 N. 79th Place Scottsdale, Arizona 85258 Fax No.: (602) 483-3468 with a copy to: - 28 - Shereff, Friedman, Hoffman & Goodman, LLP 919 Third Avenue New York, New York 10022 Attention: Richard A. Goldberg, Esq. Fax No.: (212) 758-9526 If to Suozzi, to: Francis X. Suozzi 112 Brown Avenue Spring Lake, NJ 07662 If to the ESOP, to: Valentec International Corporation Employee Stock Ownership Plan 3190 Pullman Street Costa Mesa, California 92626 Attention: Robert J. Torok Fax No.: (714) 662-7649 with a copy to: Jeffer Mangel Butler & Marmaro LLP 2121 Avenue of the Stars Los Angeles, CA 90067 Attention: Robin Schachter, Esq. Fax No.: (310) 203-0567 If to the Purchaser, to: Safety Components International, Inc. 3190 Pullman Street Costa Mesa, California 92626 Attention: Robert J. Torok Fax No.: (714) 662-7649 - - 29 - with a copy to: Skadden Arps Slate Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Thomas H. Kennedy, Esq. Fax No.: (212) 735-2000 10.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. None of the parties hereto shall assign any rights or delegate any duties hereunder without the prior written consent of the other parties hereto, and any assignment made without such consent shall be void and constitute a default hereunder. 10.5 Governing Law. This Agreement shall be construed in accordance with, and governed by, the internal laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof. 10.6 Entire Agreement. This Agreement, including the Exhibits and Schedules, sets forth the entire understanding and agreement of the parties with respect to their subject matter and supersedes any and all prior understandings, negotiations or agreements among the parties hereto, both written and oral, with respect to such subject matter. 10.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute a single agreement. 10.8 Severability. In the event that any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, in whole or in part, the validity of the remaining provisions shall not be affected and the remaining portion of any provision held to be invalid, illegal or unenforceable shall in no way be affected, prejudiced or disturbed thereby. 10.9 No Prejudice. This Agreement has been jointly prepared and negotiated by the parties hereto and the terms hereof shall not be construed in favor of or against any party on account of its participation in such preparation. 10.10 No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns. 10.11 Amendment and Modification. This Agreement may be amended or modified only by written agreement executed by all parties hereto. - 30 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above. - ------------------------- Robert A. Zummo - ------------------------- Francis X. Suozzi VALENTEC INTERNATIONAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN By: ----------------------- Name: W. Hardy Myers Title: Trustee SAFETY COMPONENTS INTERNATIONAL, INC. By: ------------------------- Name: Jeffrey J. Kaplan Title: Executive Vice President and Chief Financial Officer EX-10 7 REGISTRATION RIGHTS AGREEMENT 5/22/97 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 22, 1997, by and among Safety Components International, Inc., a Delaware corporation (the "Company"), Robert A. Zummo ("Zummo"), Francis X. Suozzi ("Suozzi") and Valentec International Corporation Employee Stock Ownership Plan (the "ESOP"). W I T N E S S E T H: WHEREAS, Zummo, Suozzi, the ESOP and the Company have entered into that certain Stock Purchase Agreement, dated as of the date hereof (the "Stock Purchase Agreement"), pursuant to which, among other things, Zummo, Suozzi and the ESOP have agreed to receive as consideration under the Stock Purchase Agreement an aggregate of 1,369,200 shares of common stock, par value $.01 per share, of the Company; WHEREAS, the Company desires to grant Zummo, Suozzi and the ESOP registration rights with respect to such shares of common stock of the Company; and WHEREAS, it is a condition precedent to the consummation of the transactions contemplated under the Stock Purchase Agreement that the parties enter into this Agreement. NOW, THEREFORE, in consideration of the premises and mutual covenants and conditions contained herein, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS SECTION 1.1 Definitions. All terms not defined herein or below shall have the meaning set forth in the Stock Purchase Agreement. "Advice" shall have the meaning set forth in Section 3.1 hereof. "Beneficiary" shall have the meaning set forth in the ESOP. "Commission" means the United States Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. "Common Stock" means the shares of common stock, par value $.01 per share, of the Company, acquired by Zummo, Suozzi and the ESOP pursuant to the terms of the Stock Purchase Agreement. "Company" shall have the meaning set forth in the preamble of this Agreement. "Controlling Persons" shall have the meaning set forth in Section 4.1 hereof. "Damages" shall have the meaning set forth in Section 4.1 hereof. "Deferral Date" shall have the meaning set forth in Section 2.4 hereof. "Demand Registration" shall have the meaning set forth in Section 2.1(a) hereof. "ESOP" shall have the meaning set forth in the preamble of this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Holder" means each Initial Holder and any person who shall hereafter acquire and hold Registrable Securities; provided, however, that a Person who hereafter acquires Registrable Securities representing less than 5% of the outstanding common stock of the Company (based on the number of Shares outstanding on the date hereof) shall not be considered a Holder and shall not be entitled to exercise any registration rights hereunder; provided, further, however that Participants and their Beneficiaries under the ESOP shall have the rights as Holders hereunder to the extent that they receive a distribution from the ESOP which falls within the definition of Registrable Securities at the time of the exercise of any such rights. "Indemnified Party" shall have the meaning set forth in Section 4.3 hereof. "Indemnifying Party" shall have the meaning set forth in Section 4.3 hereof. "Initial Holder" means each of Zummo, Suozzi and the ESOP. "Inspectors" shall have the meaning set forth in Section 3.1(h) hereof. "NASD" means the National Association of Securities Dealers, Inc. "Participant" shall have the meaning set forth in the ESOP. "Person" means any natural person, corporation, general partnership, limited partnership, proprietorship, other business organization, trust, union or association. "Piggy-Back Registration" shall have the meaning set forth in Section 2.2 hereof. "Records" shall have the meaning set forth in Section 3.1(h) hereof. "Registrable Securities" means the shares of Common Stock and any additional shares of common stock of the Company acquired by the Holder in respect of the Registrable Securities by way of a dividend, stock split, recapitalization, reclassification or other distribution. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (i) a registration statement with respect to such securities has been declared effective by the Commission (which may be on a Form S-8 to the extent available) and such securities have thereafter been disposed of, (ii) written opinion(s) to the effect that such Registrable Securities may be sold under Rule 144 of the rules and regulations adopted under the Securities Act without restriction as to the volume and timing of such sale shall have been received from counsel to the Company, (iii) with respect to Persons holding Registrable Securities representing less than 1% of the outstanding common stock of the Company, written opinion(s) shall have been received from counsel to the Company to the effect that (A) the exemption from the Securities Act registration under Rule 144(d) of the rules and regulations adopted under the Securities Act is available for sale of such Registrable Securities, or (B) such Registrable Securities are not deemed to be "restricted securities" within the meaning of Rule 144(a) of the rules and regulations adopted under the Securities Act or (iv) they shall have ceased to be outstanding. "Registration Expenses" shall have the meaning set forth in Section 3.2 hereof. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Holder" means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act. "Stock Purchase Agreement" shall have the meaning set forth in the preamble of this Agreement. "Suozzi" shall have the meaning set forth in the preamble of this Agreement. "Suspension Notice" shall have the meaning set forth in Section 3.1(f) hereof. "Trustee" shall have the meaning set forth in the ESOP. "Underwriter" means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer's market-making activities. "Withdrawal Election" shall have the meaning set forth in Section 2.3(b) hereof. "Zummo" shall have the meaning set forth in the preamble of this Agreement. ARTICLE 2. REGISTRATION RIGHTS SECTION 2.1 Demand Registration. (a) Request for Registration by Holders of Registrable Securities. Each Initial Holder may make up to one written request on the Company for the registration of the Common Stock under the Securities Act, such requests hereinafter referred to as a Demand Registration ("Demand Registration"). Any such request shall specify the number of shares of Registrable Securities proposed to be sold and shall also specify the intended method of disposition thereof. The Company shall give written notice of such registration request within 10 days after the receipt thereof to all other Holders of Registrable Securities and shall use its best efforts to effect the Demand Registration within 45 days after the giving of such written notice. Within 20 days after receipt of such notice by any such Holder, such Holder may request in writing that Registrable Securities be included in such registration and the Company shall include in the registration statement for such Demand Registration the Registrable Securities of all Holders requested to be so included. Each such request by such other Holders shall specify the number of shares of Registrable Securities proposed to be sold and the intended method of disposition thereof. Unless the intended method of distribution is through an underwritten offering, the Company shall have the right to elect to include all Registrable Securities covered by this Agreement in such registration statement. Any holder who declines after receipt of notice from the Company of such election to have all of the Registrable Securities owned by him in such registration statement shall forfeit his or its Demand Registration hereunder. Whenever the Company shall effect a Demand Registration pursuant to Section 2.1(a) in connection with an underwritten offering of Registrable Securities, no securities other than the Registrable Securities requested to be included shall be included among the securities covered by such registration unless (i) the managing Underwriter or Underwriters of such offering shall have advised the Holder of Registrable Securities to be covered by such registration in writing that the inclusion of other securities would not adversely affect such offering, in which case, securities to be issued by the Company and any Persons who currently have registration rights under another agreement with the Company may be included or (ii) all Holders of Registrable Securities to be covered by such registration shall have consented in writing to the inclusion of securities to be issued by the Company or securities held by other stockholders of the Company. Whenever the Company shall effect a Demand Registration pursuant to Section 2.1(a) other than in connection with an underwritten offering of Registrable Securities, no securities held by stockholders of the Company other than Holders of Registrable Securities may be covered by such registration unless all Holders of Registrable Securities to be covered by such registration shall have consented thereto in writing. (b) Effective Registration. A registration will not be deemed to have been effected as a Demand Registration unless it has been declared effective by the Commission and the Company has complied in all material respects with its obligations under this Agreement with respect thereto; provided that if, after it has become effective, the offering of shares of Common Stock pursuant to such registration is or becomes the subject of any stop order, injunction or other order or requirement of the Commission or any other governmental or administrative agency, or if any court prevents or otherwise limits the sale of the shares of Common Stock pursuant to the registration at any time after the effective date of the registration statement, such registration will be deemed not to have been effected. If a registration requested pursuant to this Section 2.1 is deemed not to have been effected, then the Company shall continue to be obligated to effect such registration pursuant to this Section 2.1. The Holders of Registrable Securities shall be permitted to withdraw all or any part of the Registrable Securities from a Demand Registration at any time prior to the effective date of such Demand Registration, but shall forfeit any future right to a Demand Registration hereunder. (c) Selection of Underwriter. If the Selling Holders so elect, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The Selling Holders owning a majority-in-interest of Common Stock to be sold shall select one or more recognized firms of investment bankers reasonably acceptable to the Company to act as Underwriter or Underwriters in connection with such offering. (d) Deferral of Registration. Notwithstanding any other provision of this Section 2, the Company shall not be obligated to effect the filing of a registration statement pursuant to Section 2(a) hereof (i) during any period when there exists an effective registration statement covering the Registrable Securities, or (ii) if the Company shall furnish to the holders of Registrable Securities requesting a registration statement under Section 2(a) hereof a certificate, signed by the Company, stating that in the good faith judgment of the board of directors of the Company it would be detrimental to the best interests of the Company and its stockholders generally for such registration statement to be filed at that time. The Company shall have the right to defer the filing of a registration statement as provided in clause (ii) of this Section 2(d) only twice in any 12-month period and only for a period not later than the Deferral Date; provided that in such event, the Selling Holders initiating the request for registration will be entitled to withdraw such request. SECTION 2.2 Piggy-Back Registration. If at any time the Company proposes to file a registration statement under the Securities Act with respect to an offering by the Company for its own account or for the account of any of its respective security holders (other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) or a Demand Registration pursuant to Section 2.1), then the Company shall give prompt written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event less than 20 days before the anticipated filing date), and such notice shall offer such Holders the opportunity to register such number of Registrable Securities as each such Holder may request (which request shall specify the Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof) (a "Piggy-Back Registration"). The Company shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company or any other security holder included therein and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 2.2 by giving written notice to the Company of its request to withdraw, provided that in the event of such withdrawal, such Holder shall be responsible for all fees and expenses (including fees and expenses of Holder's own counsel) incurred by such Holder prior to such withdrawal unless such withdrawal has been made in accordance with Section 2.3(b). The Company may withdraw a Piggy-Back Registration at any time prior to the time it becomes effective. No registration effected under this Section 2.2, and no failure to effect a registration under this Section 2.2, shall relieve the Company of its obligation to effect a registration upon the request of Holders pursuant to Section 2.1, and no failure to effect a registration under this Section 2.2 and to complete the sale of Registrable Securities in connection therewith shall relieve the Company of any other obligation under this Agreement (including, without limitation, the Company's obligations under Sections 3.2 and 4.1). SECTION 2.3 Reduction of Offering. (a) Piggy-Back Registration. Notwithstanding anything to the contrary contained herein, if the managing Underwriter or Underwriters of any underwritten offering described in Section 2.2 have informed, in writing, the Holders of the Registrable Securities requesting inclusion in such offering that it is their opinion that the total number of shares which the Company, Holders of Registrable Securities and any other Persons desiring to participate in such registration intend to include in such offering is such as to materially and adversely affect the success of such offering, then the number of shares to be offered shall be reduced or limited in the following order of priority: (x) first, the securities proposed by the Company to be sold for its own account; and (y) second, to the extent necessary to reduce the total number of shares as recommended by such managing Underwriters, the number of shares to be offered for the account of the Holders and any other persons who currently have registration rights under any other agreement to which the Company is a party shall be reduced or limited on a pro rata basis in proportion to the relative number of Registrable Securities of the Holders or securities of such persons participating in such registration. (b) Withdrawal Election. If, as a result of the proration provisions of this Section 2.3, any Holder shall not be entitled to include at least 50% of the Registrable Securities in a Piggy-Back Registration that such Holder has requested to be included, such Holder may elect to withdraw his request to include Registrable Securities in such registration (a "Withdrawal Election"); provided, however, that a Withdrawal Election shall be irrevocable and, after making a Withdrawal Election, a Holder shall no longer have any right to include Registrable Securities in the Piggy Back Registration as to which such Withdrawal Election was made. SECTION 2.4 Conflicting Company Activity. If after the filing but prior to the effectiveness of a registration statement filed by the Company pursuant to Section 2(a) hereof, (i) the Company shall become a party to an agreement or filed materials with the Commission contemplating a material business acquisition by the Company, and if in the good faith judgment of the Company it is impracticable for the Company to have become effective a registration statement prior to the consummation of the acquisition and, if such proposed acquisition were consummated, the Company would be required to include in such registration statement financial statements and/or other information concerning the business of any other party to such proposed acquisition prior to the time that such financial statements are otherwise required to be filed with the Commission in accordance with the current Report on Form 8-K and the subsequent Form 8 (75 days after the closing of any such acquisition); (ii) the Company shall have become a party to an agreement or letter of intent contemplating a merger or consolidation of the Company into or with, or a sale or transfer of all or substantially all of the business and assets of the Company to, any other corporation or entity, and if in the good faith judgment of the Company it is impracticable for the Company to file and have become effective a registration statement prior to the consummation of such merger, consolidation or sale; or (iii) the Company shall have determined in good faith based on written advice of counsel that such registration statement is required to contain information with respect to the Company or its business and plans which has not been publicly disclosed, and the disclosure of which, in the Company's good faith judgment, would not be in the best interest of the Company, then the Company shall not be deemed to have breached its agreement to use its best efforts to cause such registration statement to become effective if it does not use its best efforts to cause such registration statement to become effective for a period of not more than sixty (60) days from the date on which the Company was required to use its best efforts to cause such registration statement to become effective (or as soon as practicable after the filing of such Form 8 referred to in (i) above, if any) (the "Deferral Date"), or, in the case of (ii) above the transaction contemplated by such agreement or letter of intent (x) becomes effective, in which case the Company shall have no obligation to cause such registration statement to become effective or (y) is abandoned, in which case the Company shall recommence the use of its best efforts to cause such registration statement to become effective as soon as practicable but in no event later than the Deferral Date. ARTICLE 3. REGISTRATION PROCEDURES SECTION 3.1 Filings; Information. Whenever the Company is required to effect or cause the registration of Registrable Securities pursuant to Section 2.1, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and in connection with any such request: (a) Registration Statements. The Company will prepare and file with the Commission a registration statement with respect to such securities and use best efforts to cause such registration statement to become and remain effective until the completion of the distribution or until all Registrable Securities covered thereby cease to be Registrable Securities. (b) Amendments and Supplements. The Company will prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in Section 3.1(a) and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement in accordance with the intended method of disposition set forth in such registration statement for such period. (c) Copies for Review. The Company will, as far in advance as practical, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish copies of such registration statement as proposed to be filed, together with exhibits thereto, to (i) each Selling Holder, (ii) not more than one counsel representing all Selling Holders, to be selected by a majority-in-interest of such Selling Holders, and (iii) each Underwriter, if any, of the Registrable Securities covered by such registration statement, which documents will be subject to review and approval by the foregoing, and thereafter as far in advance as practical, furnish to such Selling Holders, counsel and Underwriters, if any, for their review and comment such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (inducing each preliminary prospectus) and such other documents or information as such Selling Holders, counsel or Underwriters may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holders. (d) Stop Orders. After the filing of the registration statement, the Company will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and use its best efforts to prevent the entry of such stop order or to remove it if entered. (e) Blue Sky. The Company will use its best efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States as any Selling Holder reasonably (in light of such Selling Holder's intended plan of distribution) requests, and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided, that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (e), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction. (f) Certain Events. The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the Holders of such Registrable Securities, such prospectus will not contain an 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 promptly make available to each Selling Holder any such supplement or amendment. Upon receipt of any such notice (a "Suspension Notice") from the Company of the happening of any event of the kind described in this Section 3.1, each Holder shall forthwith discontinue disposition of the Registrable Securities pursuant to the registration statement covering such Registrable Securities until Holder is advised in writing (the "Advice") by the Company that the use of the prospectus covering such Registrable Securities may be resumed, and has received copies of any supplements or amendments to the prospectus or a notice that the prospectus has been supplemented by a filing which is incorporated by reference thereby, and, if so directed by the Company, such Holder will, or will request the underwriters, if any, to, deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the stale prospectus covering such Registrable Securities current at the time of receipt of such notice; provided, however, that the Company shall use its best efforts to limit the period from the date on which any Holder receives a Suspension Notice to the date on which any Holder receives the Advice not to exceed 60 days. (g) Agreements. The Company and the Selling Holders will enter into customary agreements including, if applicable, an underwriting agreement in customary form and which is reasonably satisfactory to the Company (which shall not require the Selling Holder to indemnify the underwriter with respect to misstatements or omissions in the registration statement other than such misstatements or omissions in written material supplied by such Selling Holder expressly for inclusion in the registration statement) and, if requested by the underwriter(s), an agreement appointing one Person approved by a majority-in-interest of the Holders whose Registrable Securities are to be included in the registration, to act as attorney-in-fact for the Holder and as escrow agent for the Registrable Securities to be included in the offering in customary form. The Company and the Selling Holders will also take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and the Selling Holders may, at their option, require that any or all of the representations, warranties and covenants of the Company to or for the benefit of such Underwriters also be made to and for the benefit of such Selling Holders. (h) Due Diligence. The Company will make available to each Selling Holder (and his counsel) and each Underwriter, if any, subject to restrictions imposed by the United States federal government or any agency or instrumentality thereof, copies of all correspondence between the Commission and the Company, its counsel or auditors and will also make available for inspection by any Selling Holder, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the disclosure or release of such Records is requested or required pursuant to oral questions, interrogatories, requests for information or documents or a subpoena or other order from a court of competent jurisdiction or other process; provided, that prior to any disclosure or release pursuant to clause (ii), the Inspectors shall provide the Company with prompt notice of any such request or requirement so that the Company may seek an appropriate protective order or waive such Inspectors' obligation not to disclose such Records; and, provided further, that if failing the entry of a protective order or the waiver by the Company permitting the disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled to disclose such Records, the Inspectors may disclose that portion of the Records which counsel has advised the Inspectors that the Inspectors are compelled to disclose. Each Selling Holder of such Registrable Securities agrees that information obtained by it solely as a result of such inspections (not including any information obtained from a third party who, insofar as is known to the Selling Holder after reasonable inquiry, is not prohibited from providing such information by a contractual, legal or fiduciary obligation to the Company) shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company or its affiliates unless and until such information is made generally available to the public. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. (i) Sales Efforts. In connection with an underwritten offering, the Company will participate, to the extent reasonably requested by the managing Underwriter for the offering or the Selling Holders, in customary efforts to sell the securities under the offering, including, without limitation, participating in "road shows." The Company may require each Selling Holder to promptly furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration including, without limitation, all such information as may be requested by the Commission or the NASD. The Company may exclude from such registration any Holder who fails to provide such information. SECTION 3.2 Registration Expenses. In connection with any Demand Registration pursuant to Section 2.1 hereof and any Piggy-Back Registration under Section 2.2 hereof, the Company shall pay the following registration expenses incurred in connection with the registration thereunder (the "Registration Expenses"): (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) processing, duplicating and printing expenses, (iv) the Company's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested but not the cost of any audit other than a year end audit), (vii) the reasonable fees and expenses of any special experts retained by the Company in connection with such registration and (viii) any fees and disbursements of underwriters customarily paid by issuers or sellers of securities. The Company shall have no obligation to pay any other underwriting fees, discounts or commissions attributable to the sale of Registrable Securities, the costs of counsel to the Holder or Holders or the cost of any special audit required, such costs to be borne by the Holder or Holders making the request. ARTICLE 4. INDEMNIFICATION AND CONTRIBUTION SECTION 4.1 Indemnification by the Company. The Company shall, to the full extent permitted by law, indemnify and hold harmless each Selling Holder, its partners, officers, directors, employees and agents, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, together with the partners, officers, directors, employees and agents of such controlling Person (collectively, the "Controlling Persons"), from and against any loss, claim, damage, liability, reasonable attorneys' fees, cost or expense and costs and expenses of investigating and defending any such claim, joint or several, and any action in respect thereof (collectively, the "Damages") to which such Selling Holder, its partners, officers, directors, employees and agents, and any such Controlling Person may become subject under the Securities Act or otherwise, insofar as such Damages (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities or any amendment or supplement thereto, or arises out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation by the Company of any federal or state securities laws or any rule or regulation thereof, except insofar as the same are based upon information furnished in writing to the Company by a Selling Holder expressly for use therein, and shall reimburse each Selling Holder, its partners, officers, directors, employees and agents, and each such Controlling Person for any legal and other expenses reasonably incurred by that Selling Holder, its partners, officers, directors, employees and agents, or any such Controlling Person in investigating or defending or preparing to defend against any such Damages or proceedings; provided, however, that the Company shall not be liable to any Selling Holder to the extent that any such Damages (or action or proceeding in respect thereof) arise out of or are based upon an untrue statement or omission made in any preliminary prospectus if (i) such Selling Holder failed to send or deliver a copy of the final prospectus with or prior to the delivery of written confirmation of the sale by such Selling Holder to the Person asserting the claim from which such Damages arise, and (ii) the final prospectus would have corrected such untrue statement or such omission; provided further, that the Company shall not be liable to any Selling Holder in any such case to the extent that any such Damages arise out of or are based upon an untrue statement or omission in any prospectus if (x) such untrue statement or omission is corrected in an amendment or supplement to such prospectus, and (y) having previously been furnished by or on behalf of the Company with copies of such prospectus as so amended or supplemented, such Selling Holder thereafter fails to deliver such prospectus as so amended or supplemented prior to or concurrently with the sale of a Registrable Security to the Person asserting the claim from which such Damages arise. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 4.1. SECTION 4.2 Indemnification by Selling Holders. Each Selling Holder shall, to the full extent permitted by law, severally but not jointly, indemnify and hold harmless the Company, its officers, directors, employees and agents and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, together with the partners, officers, directors, employees and agents of such controlling Person, to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with reference to information related to such Selling Holder, or its plan of distribution, furnished in writing by such Selling Holder or on such Selling Holder's behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus and the aggregate amount which may be recovered from any Selling Holder of Registrable Securities pursuant to the indemnification provided for in this Section 4.2 in connection with any registration and sale of Registrable Securities shall be limited to the total proceeds received by such Holder from the sale of such Registrable Securities. In case any action or proceeding shall be brought against the Company or its officers, directors, employees or agents or any such controlling Person or its officers, directors, employees or agents, in respect of which indemnity may be sought against such Selling Holder, such Selling Holder shall have the rights and duties given to the Company, and the Company or its officers, directors, employees or agents, or such controlling Person, or its officers, directors, employees or agents, shall have the rights and duties given to such Selling Holder, by the preceding paragraph. Each Selling Holder also agrees to indemnify and hold harmless any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Company provided in this Section 4.2. The Company shall be entitled to receive indemnities from Underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above, with respect to information so furnished in writing by such Persons specifically for inclusion in any prospectus or registration statement. SECTION 4.3 Conduct of Indemnification Proceedings. Promptly after receipt by any person in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim or the commencement of any action, the Indemnified Party shall, if a claim in respect thereof is to be made against the Person against whom such indemnity may be sought (an "Indemnifying Party"), notify the Indemnifying Party in writing of the claim or the commencement of such action; provided, that the failure to notify the Indemnifying Party shall not relieve it from any liability which it may have to an Indemnified Party otherwise than under Section 4.1 or 4.2 and except to the extent of any actual prejudice resulting therefrom. If any such claim or action shall be brought against an Indemnified Party, and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified Indemnifying Party, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, that the Indemnified Party shall have the right to employ separate counsel to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, but the fees and expenses of such counsel shall be for the account of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of the Company and such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest between them, it being understood, however, that the Indemnifying Party shall not, in connection with any one such claim or action or separate but substantially similar or related claims or actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all Indemnified Parties, or for fees and expenses that are not reasonable. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding. Whether or not the defense of any claim or action is assumed by the Indemnifying Party, such Indemnifying Party will not be subject to any liability for any settlement made without its consent, which consent will not be unreasonably withheld. SECTION 4.4 Contribution. If the indemnification provided for in this Article 4 is unavailable to the Indemnified Parties in respect of any Damages referred to herein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages (i) as between the Company and the Selling Holders on the one hand and the Underwriters on the other (subject to the terms of a customary underwriting agreement), in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Damages, as well as any other relevant equitable considerations, and (ii) as between the Company on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other (subject to the terms of a customary underwriting agreement) shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Selling Holders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other (subject to the terms of a customary underwriting agreement) shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Holders or by the Underwriters. The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Damages referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, the maximum obligation of each Selling Holder for contribution relating to a registration hereunder shall be limited to the proceeds received by it from the sale of Registrable Securities pursuant to such registration. 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. Each Selling Holder's obligations to contribute pursuant to this Section 4.4 is several in the proportion that the proceeds of the offering received by such Selling Holder bears to the total proceeds of the offering received by all the Selling Holders and not joint. ARTICLE 5. MISCELLANEOUS SECTION 5.1 Participation in Underwritten Registrations. No Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights. SECTION 5.2 Lock-up Agreement. For so long as the Holder has the right to have Registrable Securities included in any registration pursuant to this Agreement, the Holder agrees in connection with any registration of the Company's securities, upon the request of the underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, pledge, grant any option for the purchase of or otherwise dispose of any Registrable Securities without the prior written consent of the Company or such underwriters, as the case may be, during a lock-up period as the underwriters may reasonably specify. This provision shall apply only if any Registrable Securities of the Holder are included in the offering. SECTION 5.3 Rule 144 and 144A. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the Securities Act, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION 5.4 Amendment and Modification. This Agreement may not be amended, modified or supplemented, except by written agreement among the parties. SECTION 5.5 Binding Effect; Entire Agreement. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and executors, administrators and heirs. This Agreement sets forth the entire agreement and understanding among the parties as to the subject matter hereof and supersedes all prior discussions, agreements and understandings of any and every nature among them. SECTION 5.6 Severability. In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected except to the extent necessary to delete such illegal, invalid or unenforceable provision unless that provision held invalid shall substantially impair the benefits of the remaining portions of this Agreement. SECTION 5.7 Notices. Any notice, demand, request, waiver, or other communication under this Agreement shall be in writing (including facsimile or similar writing) and shall be deemed to have been duly given (i) on the date of service if personally served or on the date after transmission if sent via overnight mail, (ii) 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 or (iii) on the date sent if sent by facsimile, to the parties at the following addresses or facsimile numbers with a copy sent by mail as aforesaid on the same date (or at such other address or facsimile number for a party as shall be specified by like notice): (1) If to the Company, to: Safety Components International, Inc. 3190 Pullman Street Costa Mesa, California 92626 Attention: Jeffrey J. Kaplan Telephone: (714) 662-7756 Telecopy: (714) 662-7649 (2) If to the Holder, at the most current address, and with a copy to be sent to each additional address, given by such Holder to the Company in writing, with copies (which shall not constitute notice) to: Shereff, Friedman, Hoffman & Goodman, LLP 919 Third Avenue New York, NY 10022 Attention: Richard A. Goldberg, Esq. Telephone: (212) 891-9221 Telecopy: (212) 758-9526 Jeffer Mangels Butler & Marmaro LLP 2121 Avenue of the Stars Los Angeles, CA 90067 Attention: Robin Schachter, Esq. Telephone: (310) 201-3592 Telecopy: (310) 203-0567 SECTION 5.8 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. SECTION 5.9 Headings. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement, nor shall they affect their meaning, construction or effect. SECTION 5.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute one and the same instrument. SECTION 5.11 Further Assurances. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. SECTION 5.12 Remedies. In the event of a breach or a threatened breach by any party to this Agreement of its obligations under this Agreement, any party injured or to be injured by such breach will be entitled to specific performance of its rights under this Agreement or to injunctive relief, in addition to being entitled to exercise all rights provided in this Agreement and granted by law. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, inducing monetary damages, for breach of any such provision will be inadequate compensation for any loss and that any defense or objection in any action for specific performance or injunctive relief that a remedy at law would be adequate is waived. SECTION 5.13 Pronouns. Whenever the context may require, any pronouns used herein shall be deemed also to include the corresponding neuter, masculine or feminine forms. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. SAFETY COMPONENTS INTERNATIONAL, INC. By: ------------------------------------- Name: Jeffrey J. Kaplan Title: Executive Vice President and Chief Financial Officer ------------------------------------- Robert A. Zummo ------------------------------------- Francis X. Suozzi VALENTEC INTERNATIONAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN By: ------------------------------------- Name: W. Hardy Myers Title: Trustee EX-10 8 REALLOCATION AGREEMENT 5/22/97 REALLOCATION AGREEMENT THIS AGREEMENT (this "Agreement") is entered into as of the 22nd day of May, 1997, by and between Robert A. Zummo ("Zummo") and Francis X. Suozzi ("Suozzi"). WHEREAS, all of the issued and outstanding common stock, $.01 par value per share (the "Valentec Shares"), of Valentec International Corporation, a Delaware corporation ("Valentec"), is owned by Zummo, Suozzi and the Valentec International Corporation Employee Stock Ownership Plan (the "ESOP"); WHEREAS, simultaneously with the execution of this Agreement, Zummo and Suozzi are entering into a Stock Purchase Agreement (the "Stock Purchase Agreement") with the ESOP and Safety Components International, Inc., a Delaware corporation ("SCI"), which provides for the sale by Zummo, Suozzi and the ESOP of the Valentec Shares in exchange for approximately 1,369,200 shares of common stock, $.01 par value per share, of SCI (the "SCI Stock"); WHEREAS, immediately prior to the closing of the Stock Purchase Agreement, Valentec sold its 88.8% equity interest in Valentec International Limited, a company formed under the laws of the United Kingdom ("VIL"), to Zummo for $75,000; WHEREAS, Suozzi is willing to release (the "Release") each of Valentec and Zummo from any and all obligations under any consulting agreements, except for the Consulting Agreement dated as of the date hereof between VIL and Suozzi (the "New Consulting Agreement"), or similar arrangements or obligations and all other obligations and liabilities of whatsoever nature between Suozzi and Valentec and/or Zummo (collectively, the "Consulting Arrangements"); and WHEREAS, in consideration of the Release, the number of shares of SCI Stock to be received by Zummo under the terms of the Stock Purchase Agreement is being reduced by such number of such shares as have an aggregate value of $400,000, based on the closing sales price of the NASDAQ National Market on the day immediately preceding the closing of the Stock Purchase Agreement (the "Reallocated Shares") and the number of shares of SCI Stock to be received by Suozzi under the terms of the Stock Purchase Agreement is being increased by the number of Reallocated Shares. NOW THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 1 1. Payment Terms. Zummo agrees that the number of shares of SCI Stock to be received by Zummo under the terms of the Stock Purchase Agreement shall be reduced by 36,430 shares, consistent with the formula set forth in the preamble to this Agreement and that the number of shares of SCI Stock to be received by Suozzi under the terms of the Stock Purchase Agreement shall be correspondingly increased. 2. Release. Suozzi hereby releases and discharges Valentec and Zummo, and each of their respective successors and assigns, affiliates and agents and any subsidiaries, officers, directors or heirs, executors and administrators, as the case may be, from all actions, claims, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, controversies, agreements, contracts, promises, trespasses, damages, judgments, extents, and demands whatsoever, in law, admiralty or equity (collectively, the "Claims"), including without limitation, any and all Claims arising from the Consulting Arrangements (other than the New Consulting Agreement). 3. Sale of VIL. Suozzi hereby acknowledges and agrees that the $75,000 in consideration paid by Zummo for the purchase of 88.8% of the capital stock of VIL represents fair and adequate consideration and that he shall have no claim or ownership interest whatsoever in any of the capital stock or assets of VIL. 4. Voting and Sale Restrictions. Suozzi hereby agrees so long as he is not voted off the board of directors of SCI, for a period of three years from the date hereof, to vote all shares of SCI Stock beneficially owned by him on any manner put to a vote of the shareholders of SCI in the same manner as recommended by a majority of the board of directors of SCI or if no such recommendation of the board of directors has been made, as directed by Zummo. The restrictions contained in this paragraph shall not apply to any transferee of the shares of SCI Stock. 5. Miscellaneous. (1) Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties hereto shall be governed by, the laws of the State of Delaware, without giving effect to the principles of conflicts of laws thereof. (2) Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered personally or sent by facsimile transmission, overnight courier or certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally or sent by facsimile transmission (provided that a confirmation copy is sent by overnight courier), one day after deposit with an overnight courier, or if mailed, five (5) days after the date of deposit in the United States mails, as follows: 2 If to Zummo, to: 9963 North 79th Place Scottsdale, AZ 85258 Telecopy: (602) 483-3468 If to Suozzi, to: 112 Brown Avenue Spring Lake, NJ 07662 (3) Severability, Binding Effect. Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or unenforceability of any of the terms and provisions of this Agreement in any other jurisdiction. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. (4) Amendment; Waiver. No provision of this Agreement may be waived, altered or amended, except by written agreement between the parties hereto. Any waiver by any party hereto of a breach by the other party hereto of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or any other provision hereof. No failure to exercise and no delay in exercising, on the part of any party hereto, any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other power, right or privilege. (5) Entire Agreement. This Agreement and the Stock Purchase Agreement contain the entire agreement between the parties hereto with respect to the matters contemplated herein and supersede all prior agreements or understandings between the parties hereto related to such matters. 3 IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be duly executed as of the date first above written. ----------------------------- Robert A. Zummo ----------------------------- Francis X. Suozzi 4 -----END PRIVACY-ENHANCED MESSAGE-----