THE RIGHT START, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of October 6, 2000
80,000 shares
SERIES D CONVERTIBLE PAY-IN-KIND PREFERRED STOCK
iii
TABLE OF CONTENTS
Page
Section 1. ISSUANCE OF SECURITIES.............................................1
Section 1.1. Authorization..............................................1
Section 1.2. Purchase and Sale of Securities; the Closing...............1
Section 1.3. Subsequent Sale of Securities..............................2
Section 1.4. Representations of the Purchasers..........................2
Section 2. REPRESENTATIONS OF THE COMPANY.....................................5
Section 2.1. Organization and Authority of the Company..................5
Section 2.2. Business, Properties and Other
Information Regarding the Company.......................5
Section 2.3. Capital Stock..............................................6
Section 2.4. Litigation; Observance of Statutes,
Regulations and Orders..................................7
Section 2.5. Title to Property..........................................7
Section 2.6. Taxes......................................................8
Section 2.7. Compliance with Laws and Other
Instruments of the Company..............................8
Section 2.8. Governmental Authorizations................................8
Section 2.9. Licenses and Permits.......................................8
Section 2.10. Compliance with ERISA......................................8
Section 2.11. Investment Company Act....................................10
Section 2.12. Environmental Compliance..................................10
Section 2.13. Maintenance of Insurance..................................10
Section 2.14. Labor Relations...........................................10
Section 2.15. Assumptions or Guaranties of
Indebtedness of Other Persons..........................10
Section 2.16. Disclosure................................................10
Section 2.17. Valid Issuance of Preferred and Common Stock..............10
Section 3. CONDITIONS OF CLOSING.............................................11
Section 3.1. Proceedings Satisfactory..................................11
Section 3.2. Representations True; Officer's Certificate...............11
Section 3.3. Purchase Permitted by Applicable Laws.....................11
Section 3.4. Securities................................................11
Section 3.5. Registration Rights Agreement.............................11
Section 3.6. Third-Party Consents......................................11
Section 4. DEFINITIONS.......................................................12
Section 4.1. Definitions.............................................. 12
Section 4.2. Accounting Terms..........................................15
Section 5. REGISTRATION, TRANSFER AND EXCHANGE OF SECURITIES;
LOST SECURITIES..................................................15
Section 6. TAXES..............................................................16
Section 7. MISCELLANEOUS......................................................16
Section 7.1. Indemnification............................................16
Section 7.2. Expenses...................................................16
Section 7.3. Amendments, Waiver and Consents........................... 17
Section 7.4. Reliance on and Survival of Representations................17
Section 7.5. Successors and Assigns.....................................17
Section 7.6. Notices....................................................17
Section 7.7. Counterparts...............................................18
Section 7.8. Governing Law..............................................18
Section 7.9. Waiver of Jury Trial.......................................18
Section 7.10. Effect of Amendment or Waiver.............................18
Section 7.11. Entire Agreement..........................................18
Section 7.12. Exculpation Among Purchasers..............................19
Schedules
SCHEDULE I - Purchasers
SCHEDULE 2.13 - Insurance
Exhibits
EXHIBIT A - Certificate of Determinations
EXHIBIT B - Form of Warrant
EXHIBIT C - Form of Registration Rights Agreement
EXHIBIT D - Form of Stock Certificate
THE RIGHT START, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of October 6, 2000
To each of the Purchasers
Listed on Schedule I hereto
Ladies and Gentlemen:
The Right Start, Inc., a California corporation (the "Company"),
hereby agrees with the Purchasers as follows:
Section 1. ISSUANCE OF SECURITIES.
Section 1.1. Authorization.
The Company has duly authorized the issuance of (i) 80,000 shares of
its Series D Convertible Pay-in-Kind Preferred Stock (the "Series D Preferred
Stock") plus such shares as are issued by the Company in lieu of the payment of
dividends thereon in cash and (ii) warrants to purchase 800,000 shares (or 10
shares per share of Series D Preferred Stock sold on the Initial Closing Date)
of its common stock, no par value ("Common Stock") (the "Warrants"). The Series
D Preferred Stock shall have the rights, privileges and preferences set forth in
a certificate of determinations substantially in the form of Exhibit A.
As used herein, the term "Series D Preferred Stock" shall include all
stock certificates originally issued pursuant to this Securities Purchase
Agreement (the "Agreement") and all certificates delivered in substitution or
exchange for any of such stock certificates or in lieu of the payment of
dividends in cash and, where applicable, shall include the singular number as
well as the plural. The Series D Preferred Stock and Warrants issued to the
Purchasers pursuant to this Agreement, and the certificates and other
instruments from time to time evidencing the same, are herein sometimes
collectively called the "Securities."
Section 1.2. Purchase and Sale of Securities; the Closing. The Company
shall sell to the Purchasers and, subject to the terms and conditions hereof,
the Purchasers shall purchase from the Company the Series D Preferred Stock and
the Warrants, at an aggregate purchase price equal to the aggregate liquidation
preference on the Series D Preferred Stock.
The closing (the "Initial Closing") of such purchase of the Securities
shall be held at 10:00 a.m., Los Angeles time, on October 6, 2000 (the "Initial
Closing Date"), at the office of Milbank, Tweed, Xxxxxx & XxXxxx, Los Angeles,
or at such other time or place as the parties hereto may mutually agree.
On the Initial Closing Date, the Company shall deliver to each
Purchaser one or more certificates representing the Series D Preferred Stock set
forth as being purchased by such Purchaser on Schedule I and the proportionate
number of Warrants, registered in such Purchaser's name or in the name of such
Purchaser's nominee in any denominations, all as such Purchaser may specify by
notice delivered to the Company at least two days prior to the Initial Closing
Date (or, in the absence of such notice, one certificate representing the Series
D Preferred Stock and one Warrant agreement, registered in such Purchaser's
name), duly executed and dated the Initial Closing Date, against each
Purchaser's delivery to the Company of immediately available funds in the amount
of the purchase price.
Section 1.3 Subsequent Sale of Securities. If less than 80,000 shares
of Series D Preferred Stock and the proportionate number of Warrants are sold at
the Initial Closing, then, subject to the terms and conditions of this
Agreement, the Company may sell the unsold remainder up to an aggregate of
80,000 shares of Series D Preferred Stock and a proportionate number of Warrants
(as such, the "Remainder Shares and Warrants") to such Persons as the Board of
Directors may determine, on the same terms and conditions as those contained in
this Agreement (the date of any such sale, a "Subsequent Closing Date" and such
closing a "Subsequent Closing"). The purchasers of any Remainder Shares and
Warrants shall become, by their purchase thereof, parties to this Agreement and
the Registration Rights Agreement and shall acknowledge their obligations under
this Agreement and the Registration Rights Agreement in a writing delivered to
the Company.
On any Subsequent Closing Date, the Company shall deliver to each
purchaser on such Subsequent Closing Date (a "Subsequent Purchaser") one or more
certificates representing the Series D Preferred Stock purchased by such
Subsequent Purchaser on such Subsequent Closing Date and a proportionate number
of Warrants, registered in such Subsequent Purchaser's name or in the name of
such Subsequent Purchaser's nominee in any denominations, all as such Subsequent
Purchaser may specify by notice delivered to the Company at least two days prior
to the Subsequent Closing Date (or, in the absence of such notice, one
certificate representing the Series D Preferred Stock and one Warrant agreement,
registered in such Subsequent Purchaser's name), duly executed and dated the
Subsequent Closing Date, against each Subsequent Purchaser's delivery to the
Company of immediately available funds in the amount of the purchase price.
Section 1.4. Representations of the Purchasers. Each Purchaser
represents and warrants to the Company that:
(a) Authorization.
Such Purchaser has full power and authority to enter
into this Agreement, and that this Agreement, when
executed and delivered, will constitute a valid and legally binding obligation
of the Purchaser.
(b) Purchase Entirely for Own Account.
This Agreement is made with such Purchaser in reliance upon
the Purchaser's representation to the Company, which by its execution of this
Agreement such Purchaser hereby confirms, that the Securities to be purchased by
such Purchaser will be acquired for investment for such Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, such Purchaser further represents that such Purchaser does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
(c) Reliance Upon Purchasers' Representations.
Such Purchaser understands that the Securities are not
registered under the Securities Act on grounds that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and that
the Company's reliance on such exemption is predicated on such Purchasers'
representations set forth herein. Such Purchaser realizes that the basis for the
exemption may not be present if, notwithstanding such representations, such
Purchaser has in mind merely acquiring the Securities for a fixed or
determinable period in the future, or for a market rise, or for sale if the
market does not rise. Such Purchaser has no such intention.
(d) Investment Experience.
Such Purchaser represents that it is experienced in evaluating
and investing in private placement transactions and acknowledges that it is able
to fend for itself, can bear the economic risk of such Purchaser's investment,
and has such knowledge and experience in financial and business matters that
such Purchaser is capable of evaluating the merits and risks of the investment
in the Securities. Such Purchaser also represents that it has not been organized
for the purpose of acquiring the Securities.
(e) Accredited Investor.
(1) The term "Accredited Investor" as used herein refers to:
(i) A person or entity who is a director or executive officer of the
Company;
(ii) Any bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities
Act whether acting in its individual or fiduciary capacity;
any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934 as amended; any insurance
company as defined in Section 2(13) of the Securities Act; any
investment company registered under the Investment Company Act
of 1940 as amended or a business development company as
defined in Section 2(a)(48) of that act; any Small Business
Investment Company licensed by the United States Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958 as amended; any plan
established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees,
if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 as amended, if
the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, which is either a bank,
savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total
assets in excess of $5,000,000 or, if a self-directed plan,
with investment decisions made solely by persons that are
Accredited Investors;
(iii) Any private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act
of 1940 as amended;
(iv) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets
in excess of $5,000,000;
(v) Any natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of the
purchase exceeds $1,000,000;
(vi) Any natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint
income with that person's spouse in excess of $300,000 in each
of those years and has a reasonable expectation of reaching
the same income level in the current year;
(vii) Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a person who
has such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and
risks of the prospective investment; or
(viii) Any entity in which all of the equity owners are
Accredited Investors.
As used in this Paragraph 3.6(a), the term "net worth" means
the excess of total assets over total liabilities. For the purpose of
determining a person's net worth, the principal residence owned by an individual
should be valued at fair market value, including the cost of improvements, net
of current encumbrances. As used in this Section 1.4 (e)(1), "income" means
actual economic income, which may differ from adjusted gross income for income
tax purposes. Accordingly, the Purchaser should consider whether it should add
any or all of the following items to the Purchaser's gross income for income tax
purposes in order to reflect more accurately the Purchaser's actual economic
income: any amounts attributable to tax-exempt income received, losses claimed
as a limited partner in any limited partnership, deductions claimed for
depletion, contributions to an XXX or Xxxxx retirement plan, and alimony
payments.
(2) Such Purchaser further represents to the Company that,
except as otherwise disclosed to the Company in writing prior to such
Purchaser's execution hereof, it is an Accredited Investor.
(f) Restricted Securities.
The Purchaser understands that the Securities may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Securities or an available exemption from
registration under the Securities Act, the Securities must be held indefinitely.
(g) Legends.
To the extent applicable, each certificate or other document
evidencing any of the Securities shall be endorsed with the legends
substantially in the form set forth below:
(1) The following legend under the Securities Act:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE
REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE
SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
(2) Any legend imposed or required by the
Company's Bylaws or applicable state securities laws.
Section 2. REPRESENTATIONS OF THE COMPANY. The Company represents
and warrants to each of the Purchasers as of the date hereof and as of the
Closing Date that:
Section 2.1. Organization and Authority of the Company.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, and has all
requisite power and authority to own or hold under lease the property it
purports to own or hold under lease and to transact the business it transacts
and proposes to transact. The Company has all requisite power and authority to
execute and deliver this Agreement, the Securities, and any other documents or
agreements contemplated hereby and thereby, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereunder and
thereunder. The Company is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which the character of the properties
owned or held under lease by it or the nature of the business transacted by it
requires such qualification except such jurisdictions, if any, in which the
failure to be so qualified or in good standing will not have a Material Adverse
Effect on the Company.
(b) The execution, delivery and performance of this Agreement, the
Securities, and any other documents or agreements to which the Company is a
party contemplated hereby and thereby, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized and approved by the
Board of Directors. Each of this Agreement, the Securities, and any other
document or agreement to which the Company is a party contemplated hereby or
thereby has been (or on the Closing Date will have been) duly authorized,
executed and delivered by, and each is (or, when duly executed and delivered on
the Closing Date, will be) the valid and binding obligation of, the Company,
enforceable in accordance with its terms, except as may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws or by
legal or equitable principles relating to or limiting creditors' rights
generally.
Section 2.2. Business, Properties and Other Information Regarding the
Company.
(a) The Company has delivered to each of the Purchasers copies of the
(i) audited report of the Company's independent accountants for the fiscal year
ended January 29, 2000 containing balance sheets of the Company as of the last
day of the fiscal year ended January 29, 2000, and the related statements of
operations, shareholders' equity and cash flows of the Company for the fiscal
year ended January 29, 2000 and (ii) the unaudited balance sheets and the
related statements of operations, shareholders' equity and cash flows of the
Company for the periods ended April 29, 2000 and June 29, 2000 (such financial
statements being referred to collectively herein as the "Financial Statements").
The Financial Statements fairly present the financial position of the Company as
of the respective dates of such balance sheets and the results of the Company's
operations for the respective periods covered by such statements of operations,
shareholders' equity and cash flows. The Financial Statements are true, accurate
and complete in all material respects and have been prepared in accordance with
GAAP consistently applied throughout the periods involved. There are no material
liabilities, contingent or otherwise, of the Company as of the date hereof and
as of the Closing Date required to be reflected in a balance sheet prepared in
accordance with GAAP which are not reflected in such balance sheets. Since June
29, 2000, the Company has continued to experience operating losses. However,
there have been no changes in the assets, liabilities or financial position of
the Company from that set forth in such balance sheet as of such date, other
than such continued operating losses and changes in the ordinary course of
business or are otherwise disclosed in the reports filed by the Company pursuant
to the Exchange Act.
(b) As of their respective dates, neither the Financial Statements nor
any certificate executed by the Company in connection with the transactions
contemplated hereby and thereby, contained any untrue statement of a material
fact or omitted to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Since June 29, 2000, there has been no change in the business,
prospects, properties, condition (financial or otherwise) or operations which
has had a Material Adverse Effect on the Company other than its potential
delisting from Nasdaq for which it has a hearing with Nasdaq scheduled on
October 12, 2000. To the best of the Company's knowledge, no fact that has not
been disclosed in the Company's Exchange Act reports or otherwise in writing to
the Purchasers has had a Material Adverse Affect or, so far as the Company can
reasonably foresee, will have a Material Adverse Effect on the Company, or will
materially adversely affect the ability of the Company to perform its respective
obligations under this Agreement, the Securities, the Registration Rights
Agreement or any other documents or agreements contemplated hereby and thereby.
Section 2.3. Capital Stock.
(a) The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock and 250,000 shares of preferred stock ("Preferred
Stock"). On the date hereof and on the Closing Date, approximately 5,617,275
shares of Common Stock and 83,833 shares of Preferred Stock (other than the
Series D Preferred Stock) are and will be issued and outstanding, all of which
shares have been duly and validly issued and are fully paid and nonassessable.
(b) The Company does not have outstanding any capital stock or other
securities convertible into or exchangeable for any of its capital stock or any
rights to subscribe for or to purchase, or any options for the purchase of, or
any agreements (contingent or otherwise) providing for the issuance of, or any
calls, commitments or claims of any character relating to, any of its capital
stock or any securities convertible into or exchangeable for any of its capital
stock, other than (i) stock options issued under the Company's stock option
plans, (ii) Warrants dated January 18, 2000 and August 8, 2000, to purchase an
aggregate of 30,000 shares of Common Stock issued to Xxxxxx Financial, Inc.,
(iii) the Company's Senior Subordinated Convertible Pay-In-Kind Notes due 2005
(the "Convertible Notes"), (iv) the Series D Preferred Stock and (v) the
Warrants.
(c) The Company does not have any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any of its capital stock or
obligation evidencing the right of the holder thereof to purchase any of its
capital stock, other than the Company's obligation to repurchase stock owned by
an employee under The Right Start, Inc. Employee Stock Purchase Plan after such
employee elects to withdraw from such plan. There is not in effect any agreement
by the Company pursuant to which any holders of securities of the Company have a
right to cause the Company to register such securities under the Securities Act,
other than (i) the shelf registration on file with the Commission for Xxxxx
Xxxxxxxx to register shares of common stock owned by Xxxxx Xxxxxxxx, (ii)
registration rights set forth in the Securities Purchase Agreements dated
January 18, 2000 and August 8, 2000, between the Company and Xxxxxx Financial,
Inc., (iii) registration rights set forth in the Registration Rights Agreement
dated as of September 1, 2000 with respect to Common Stock issuable upon
conversion of the Convertible Notes and (iv) registration rights set forth in
the Registration Rights Agreement dated as of the date hereof with respect to
Common Stock issuable upon conversion of the Series D Preferred Stock and the
Warrants.
Section 2.4. Litigation; Observance of Statutes, Regulations and
Orders.
(a) There are no actions, suits or proceedings pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any of
its properties in any court or before any arbitrator of any kind or before or by
any Governmental Body except actions, suits or proceedings arising in the
ordinary course of business which individually or in the aggregate, if adversely
determined, would not have a Material Adverse Effect on the Company or
materially adversely affect its ability to perform its obligations under this
Agreement, the Securities, and any other document or agreement contemplated
hereby or thereby.
(b) The Company is not in default under any order of any court,
arbitrator or Governmental Body, or subject to or a party to any Order of any
court or Governmental Body arising out of any action, suit or proceeding under
any statute or other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters. The Company is not in violation of any
statute or other rule or regulation of any Governmental Body the violation of
which would have a Material Adverse Effect on the Company or materially
adversely affect its ability to perform its obligations under this Agreement,
the Securities, and any other document or agreement contemplated hereby or
thereby.
Section 2.5. Title to Property.
(a) The Company has good and marketable title to its real properties
and good and merchantable title to each of its other properties as are reflected
on the Financial Statements, except for personal property sold or otherwise
disposed of in the ordinary course of business. All properties of the Company
are free and clear of all Liens, other than Permitted Liens.
(b) The Company enjoys full and undisturbed possession under all
leases necessary in any material respect for the operation of its business (the
"Leases"). None of the Company's Leases contain any unusual or burdensome
provisions which, individually or in the aggregate, are likely to materially
impair the operation of the business of the Company. The Company's Leases are
valid and subsisting and are in full force and effect, and there are no existing
material defaults by the Company or events that with notice or lapse of time or
both would constitute material defaults by the Company under any of the Leases.
Section 2.6. Taxes. The Company has filed all tax returns which are
required to have been filed in any jurisdiction, and has paid all taxes shown to
be due and payable on such returns and all other taxes and assessments payable
by the Company to the extent the same have become due and payable and before
they have become delinquent, except for any taxes and assessments the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company has set aside on
its books reserves (segregated to the extent required by GAAP) deemed by it to
be adequate. The Company knows of no proposed material tax assessment against
the Company and in the opinion of the Company all tax liabilities are adequately
provided for on the books of the Company.
Section 2.7. Compliance with Laws and Other Instruments of the
Company. The consummation of the transactions contemplated by this Agreement and
the execution, delivery and performance of the terms and provisions of this
Agreement, the Securities, or any other document or agreement contemplated
hereby or thereby will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company under, any material indenture, mortgage, deed of
trust, bank loan or credit agreement, corporate charter, by-laws or other
material agreement or instrument to which the Company is a party or by which the
Company or any of its properties may be bound or affected, (ii) conflict with or
result in a breach of any of the terms, conditions or provisions of any Order of
any court, arbitrator or Governmental Body applicable to the Company, or (iii)
violate any provision of any statute or other rule or regulation of any
Governmental Body applicable to the Company.
Section 2.8. Governmental Authorizations. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Body is required for the issuance of the Securities or the valid execution and
delivery of the Securities or for the performance by the Company of this
Agreement, the Securities, and any other documents or agreements contemplated
hereby and thereby other than filings of Securities Act Form D, California Form
25102(f) and similar filings.
Section 2.9. Licenses and Permits. The Company possesses all licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names, or rights thereto, required to conduct its business substantially as now
conducted and as currently proposed to be conducted, without known conflict with
the rights of others.
Section 2.10. Compliance with ERISA.
(a) Neither the Company nor any Related Person (as defined below) has
breached the fiduciary rules of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or engaged in any transaction in connection with
which the Company or any Related Person could be subjected to a suit for
damages, a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), in any such case which would be materially adverse to the Company.
For purposes of this Section 2.10, a "Related Person" shall mean any trade or
business, whether or not incorporated, which, together with the Company, would
be treated as a single employer under Section 414 of the Code.
(b) Neither any employee pension benefit plan (as defined in Section
3(2) of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any Related Person or
with respect to which the Company or any Related Person is or has been obligated
to contribute (a "Plan") nor any trust created under any Plan has been
terminated within the meaning of Title IV of ERISA since September 2, 1974 under
circumstances that could result in liability which could be materially adverse
to the Company. Other than premiums due and owing in the normal course, no
liability to the Pension Benefit Guaranty Corporation (the "PBGC") has been
incurred and remains unsatisfied or is expected by the Company to be incurred
with respect to any Plan by the Company or any Related Person which is or would
be materially adverse to the Company. There has been no reportable event (within
the meaning of Section 4043(b) of ERISA) or any other event or condition with
respect to any Plan which presents a risk of termination of any such Plan by the
PBGC under circumstances which in any case could result in liability which would
be materially adverse to the Company.
(c) Neither the Company nor any Related Person has within the past six
years contributed, or had any obligation to contribute, to a single employer
plan that has at least two contributing sponsors not under common control or has
ceased operations at a facility under circumstances which could result in
liability under Section 4068(f) of ERISA.
(d) There is no multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA) to which the Company or any Related Person is or has ever
been obligated to contribute under Title IV of ERISA.
(e) No accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, exists with respect
to any Plan. Full payment has been made within the time required under Section
412 of the Code of all amounts that the Company or any of its Related Persons is
required under the terms of each Plan and applicable law to have paid as
contributions to such Plan as of the date hereof. Each Plan satisfies the
minimum funding standard of Section 412 of the Code.
(f) The present value of the benefit liabilities (within the meaning
of Title IV of ERISA) under all Plans determined as of May 31, 1996 and on the
basis of PBGC assumptions required under Title IV of ERISA did not exceed the
current value of the assets of all such Plans determined as of such date.
(g) Neither the Company nor any Related Person has engaged in any
transaction that could result in the incurrence of any liabilities under Section
4069 or Section 4212 of ERISA.
(h) The Company is not a party in interest with respect to any
employee benefit plan, except for The Right Start, Inc. Employee Stock Ownership
Plan and The Right Start, Inc. 401(k) Plan and securities of the Company are not
employer securities with respect to any employee benefit plan other than the
above listed plans. For such purpose, the term "employee benefit plan" shall
have the meaning assigned to such term in Section 3 of ERISA and the term
"employer security" shall have the meaning assigned to such term in Section
407(d)(1) of ERISA. The execution and delivery of this Agreement, the Securities
and any other agreements or instruments executed in connection herewith and
therewith will not involve any transaction which is subject to the prohibitions
of Section 406 of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Code.
Section 2.11. Investment Company Act. The Company is not an investment
company or a person directly or indirectly controlled by or acting on behalf of
an investment company within the meaning of the Investment Company Act of 1940,
as amended.
Section 2.12. Environmental Compliance. The Company has obtained and
is in compliance with all permits, licenses, and other authorizations that are
required under all Environmental Laws (as hereinafter defined), including laws
relating to emissions, discharges, releases or threatened releases of
contaminants into the environment (including, without limitation, ambient air,
surface water, ground water or land) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of contaminants, except to the extent that failure to have any such
permit, license or other authorization does not have a Material Adverse Effect
on the Company.
Section 2.13. Maintenance of Insurance. The Company carries insurance
covering its properties and business adequate and customary for the type and
scope of the properties and business. The Company's present insurance coverage
is as set forth in Schedule 2.13 hereto.
Section 2.14. Labor Relations. To the best knowledge of the Company,
no material unfair labor practice complaint or sex, age, race or other
discrimination claim has been brought during the last five years against the
Company before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other Governmental Body. During that period, the
Company has complied in all material respects with all applicable laws relating
to the employment of labor, including, without limitation, those relating to
immigration, wages, hours and collective bargaining.
Section 2.15. Assumptions or Guaranties of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable (including, without limitation, liability by way
of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) on any Indebtedness of any other Person.
Section 2.16. Disclosure. The Company has provided to Purchaser copies
of its Annual Report on Form 10-K for the fiscal year ended January 29, 2000,
and its quarterly reports on Form 10-Q for the periods ended April 29, 2000 and
June 29, 2000, which include the Financial Statements (the "Exchange Act
Documents"). Such documents are true, accurate and complete in all material
respects. Neither this Agreement, the Financial Statements, the Exchange Act
Documents nor any other agreement, document, certificate or written statement
furnished to Purchaser by or on behalf of the Company in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact. There is no fact within the knowledge of the Company or any of its
executive officers which has not been disclosed herein or in the Exchange Act
Documents or in writing by them to Purchaser and that now, or in the future in
their opinion may, insofar as they can now reasonably foresee, have a Materially
Adverse Effect on the Company.
Section 2.17. Valid Issuance of Preferred and Common Stock. The Series
D Preferred Stock that is being purchased by the Purchasers hereunder, when
issued, sold, and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
federal securities laws. The Common Stock issuable upon conversion of the Series
D Preferred Stock and the Warrants being purchased under this Agreement has been
duly and validly reserved for issuance and, upon issuance in accordance with the
terms of the Series D Preferred Stock, as set forth in the Certificate of
Determinations, will be duly and validly issued, fully paid, and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and under applicable state and federal securities laws.
Section 3. CONDITIONS OF CLOSING. Each Purchaser's obligation to
purchase and pay for the Securities to be purchased by such Purchaser on the
Closing Date shall be subject to the satisfaction on or before the Closing Date
of the conditions hereinafter set forth.
Section 3.1. Proceedings Satisfactory. All proceedings taken on or
prior to the Closing Date in connection with the issuance of the Securities and
the consummation of the transactions contemplated hereby and all documents and
papers relating thereto shall be reasonably satisfactory in form and substance
to the Purchasers and their special counsel, and they shall have received copies
of such documents, papers, and certificates of officers of the Company, all in
form and substance reasonably satisfactory to the Purchasers and their special
counsel, as they may reasonably request in connection therewith.
Section 3.2. Representations True; Officer's Certificate. All
representations and warranties of the Company contained in Section 2 shall be
true in all material respects, in each case on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of the Closing Date; the Company shall have performed all agreements on
its part required to be performed under this Agreement on or prior to the
Closing Date; the Company shall not have consolidated with, merged into, or
sold, leased or otherwise disposed of its properties as an entirety or
substantially as an entirety to any Person; all conditions specified in Section
3 shall have been satisfied; and the Purchasers shall have received a
certificate signed by the Chairman of the Board of Directors, the President or
the principal financial officer of the Company, dated the Closing Date,
certifying to the effect specified in this Section.
Section 3.3. Purchase Permitted by Applicable Laws. The sale by the
Company and the payment for the Securities to be purchased by the Purchasers (i)
shall not be prohibited by any applicable law or governmental regulation,
release, interpretation or opinion, (ii) shall not subject any Purchaser to any
penalty under or pursuant to any applicable law or governmental regulation, and
(iii) shall be permitted by the laws and regulations of the jurisdictions to
which any Purchaser is subject.
Section 3.4. Securities. The Securities shall have been duly executed
and delivered by the parties thereto in the respective forms attached as
Exhibits B and D, with only such changes or additions as the Purchasers or their
special counsel shall, in their sole judgment, require and all governmental
charges payable in connection therewith shall have been paid (or payment shall
have been provided for) in full, and shall be in full force and effect and no
term or condition thereof shall have been amended, modified or waived without
each Purchaser's prior written consent. A Certificate of Determinations in
substantially the form of Exhibit A shall have been filed with the Secretary of
State of the State of California.
Section 3.5. Registration Rights Agreement. The Company shall have
entered into the Registration Rights Agreement substantially in the form set
forth as Exhibit C hereto.
Section 3.6. Third-Party Consents. The Company shall have received all
third party and governmental consents and waivers necessary to permit
consummation of the transactions contemplated hereunder.
Section 4. DEFINITIONS.
Section 4.1. Definitions. Except as otherwise specified or as the
context may otherwise require, the following terms shall have the respective
meanings set forth below whenever used in this Agreement:
"Affiliate" means a Person (i) that directly or indirectly controls,
or is controlled by, or is under common control with, the Company, (ii) that
beneficially owns ten percent (10%) or more of the Voting Stock of the Company,
or (iii) ten percent (10%) or more of the Voting Stock (or in the case of a
Person which is not a corporation, ten percent (10%) or more of the equity
interest) of which is owned by the Company. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning ascribed thereto in Section 1.1.
"Board of Directors" means either the Board of Directors of the
Company or any duly authorized committee of that board.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks in the State of California are required or permitted to close.
"Capital Lease" means any lease of property that, in accordance with
GAAP, should be capitalized on the lessee's balance sheet or for which the
amount of the asset and liability thereunder, if so capitalized, should be
disclosed in a note to such balance sheet; and "Capital Lease Obligation" means
the amount of the liability with respect to a Capital Lease that should be so
capitalized or disclosed.
"Closing" has the meaning ascribed thereto in Section 1.2.
"Closing Date" has the meaning ascribed thereto in Section 1.2.
"Code" has the meaning ascribed thereto in Section 2.10.
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act and the Exchange Act.
"Common Stock" has the meaning ascribed thereto in Section 1.1.
"Company" means The Right Start, Inc., a California corporation.
"Environmental Law" or "Environmental Laws" mean any law or Order
relating to the regulation or protection of human health, safety or the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes.
"ERISA" has the meaning ascribed thereto in Section 2.10.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
any applicable time.
"Exchange Act Documents" has the meaning ascribed thereto in Section
2.16.
"Financial Statements" has the meaning ascribed thereto in Section
2.2.
"GAAP" means generally accepted accounting principles as in effect at
the time of application to the provisions hereof.
"Governmental Body" means any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
foreign or domestic, or any financial or other rating agency.
"Guarantee" means any guarantee or other contingent liability, direct
or indirect, with respect to any Indebtedness of another person, through an
agreement or otherwise, including, without limitation, (i) any endorsement
(otherwise than for collection or deposit in the ordinary course of business) or
discount with recourse or undertaking substantially equivalent to or having
similar economic effect of a guarantee with respect to any such Indebtedness,
and (ii) any agreement (A) to purchase, or to advance or supply funds for the
payment or purchase of, any such Indebtedness of another, (B) to purchase, sell
or lease property, products, materials or supplies, or transportation or
services, primarily for the purpose of enabling such other person to pay such
Indebtedness or to assure the owner thereof against loss regardless of the
delivery or non-delivery of the property, products, materials or supplies or
transportation or services, or (C) to make any loan, advance, capital
contribution or other investment in such other person to assure a minimum
equity, working capital or other balance sheet condition for any date, or to
provide funds for the payment of any liability, dividend or stock liquidation
payment, or otherwise to supply funds to or in any manner invest in such other
person. The amount of any Guarantee shall be equal to the outstanding principal
amount of the Indebtedness guaranteed, unless some lesser limitation is
specifically stated in such Guarantee.
"Holder" means each of the Purchasers and any other Person that
becomes a registered holder of any of the Series D Preferred Stock as registered
on the books of the Company.
"Indebtedness" means any obligation for borrowed money or for which
interest is customarily paid, but in any event shall include without limitation
(i) any obligation owed for all or any part of the purchase price of property,
services or other assets or for the cost of property or other assets constructed
or of improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased or services rendered
in the ordinary course of business, (ii) any obligations secured by any Lien in
respect of property even though the person owning the property has not assumed
or become liable for the payment of such obligation, (iii) any Capital Lease
Obligation, (iv) any Guarantee with respect to Indebtedness (of the kind
otherwise described in this definition) of another person, and (v) obligations
in respect of letters of credit, surety bonds and completion bonds.
"Xxxxx Xxxxxxxx" means Xxxxx Xxxxxxxx Investment Management, Inc.,
Xxxxx Xxxxxxxx Capital Advisors, L.P., Xxxxx Xxxxxxxx Non-Traditional
Investments, L.P., Xxxxx Xxxxxxxx Offshore Limited, ARBCO Associates, L.P.,
Xxxxx Xxxxxxxx Diversified Capital Partners, L.P., and Xxxxx Xxxxxxxx Capital
Partners, L.P. and each of their Affiliates.
"Leases" has the meaning ascribed thereto in Section 2.5.
"Lien" means, as to any person, any mortgage, lien, pledge, charge,
security interest or other encumbrance in or on, or any interest or title of any
vendor, lessor, lender or other secured party to or of the person under any
Indebtedness, conditional sale or other title retention agreement or Capital
Lease with respect to, any property or asset of the person, or the signing or
filing of a financing statement which names the person as debtor, or the signing
of any security agreement authorizing any other party as the secured party
thereunder to file any financing statement.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the business, prospects, properties, condition
(financial or otherwise) or operations of such Person.
"Order" means any order, writ, injunction, decree, judgment, award,
determination, direction or demand.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means:
(a) Liens for taxes, assessments, or governmental charges or
claims the payment of which is not yet past due or that are being contested
in good faith by appropriate proceedings and for which adequate reserves
have been established;
(b) statutory Liens of landlords, carriers, warehousemen,
mechanics, or materialmen, and other Liens imposed by law and incurred in
the ordinary course of business, that are for sums not yet delinquent for a
period of more than thirty (30) days or are being contested in good faith,
if reserves or other appropriate provisions, if any, as shall be required
by GAAP, shall have been made therefor;
(c) Liens incurred or deposits or pledges made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, and other types of social security laws;
(d) any attachment or judgment Lien; provided that (i) the time
for the appeal or petition for rehearing of such judgment lien shall not
have expired; (ii) the Company in good faith shall be prosecuting an appeal
or proceeding for review with respect to which execution has been stayed
pending such appeal or which is vacated or discharged within thirty (30)
days of the termination of such stay; or (iii) with respect to which
payment in full above any applicable deductible is covered by insurance (so
long as no reservation of rights has been made by the insurer in connection
with such coverage), and Liens incurred to secure any surety bonds, appeal
bonds, supersedeas bonds, or other instruments serving a similar purpose in
connection with the appeal of any such judgment or any proceeding to which
the Company is a party;
(e) minor survey exceptions, easements and licenses, reservations
of, or rights of others for, rights-of-way, highway and railroad crossings,
sewers, electric lines, telegraph and telephone lines, and other similar
purposes, or zoning or other restrictions or similar charges with respect
to the use of real properties not incurred in connection with Indebtedness
of the Company or materially detracting from the value of such properties;
and
(f) any Lien on the Company's assets or properties to secure
payment to a lender to the Company.
"Person" shall include an individual, a corporation, an association, a
partnership, a limited liability company, a limited liability partnership, a
trust or estate, a government, foreign or domestic, and any agency or political
subdivision thereof, or any other entity.
"Purchasers" means the Purchasers listed on Schedule I hereto and
their successors and assigns.
"Remainder Shares and Warrants" has the meaning ascribed thereto in
Section 1.3.
"Securities" has the meaning ascribed thereto in Section 1.1.
"Securities Act" means the Securities Act of 1933, as amended, and any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at any applicable
time.
"Voting Stock" means any equity security entitling the holder of such
security to vote at meetings of shareholders except an equity security which
entitles the holder of such security to vote only upon the occurrence of some
contingency, unless that contingency shall have occurred and be continuing.
Section 4.2. Accounting Terms. All accounting terms used herein which
are not expressly defined in this Agreement have the meanings respectively given
to them in accordance with GAAP, all computations made pursuant to this
Agreement shall be made in accordance with GAAP, and all balance sheets and
other financial statements shall be prepared in accordance with GAAP, except in
the case of unaudited financial statements which are subject to year-end audit
adjustments and the absence of footnotes.
Section 5. REGISTRATION, TRANSFER AND EXCHANGE OF SECURITIES; LOST
SECURITIES. The Company shall keep at its principal executive office a register
in which, subject to such reasonable regulations as it may prescribe, but at its
expense (other than transfer taxes, if any), it shall provide for the
registration and transfer of the Securities.
The Securities may not be sold, transferred, pledged or hypothecated
unless the proposed transaction does not require registration or qualification
under federal or state securities laws or unless the proposed transaction is
registered or qualified as required.
The Holder of any of the Securities may, at such Holder's option,
surrender the same for transfer or exchange at the principal executive office of
the Company, accompanied in the case of a transfer or assignment by a written
instrument of transfer or assignment in form satisfactory to the Company duly
executed by the registered Holder thereof or by such Holder's attorney duly
authorized in writing. In case any Holder shall so request the transfer,
assignment or exchange of any Security, the Company at its expense shall execute
and deliver in exchange therefor one or more new Securities, as may be requested
by such Holder, in the same denomination or denominations as the Securities or
Securities so surrendered.
The Company and any agent of the Company may treat the Person in whose
name any Security is registered as the owner of such Security for the purpose of
receiving payment of dividends and for all other purposes whatsoever.
Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of any Security, and (in case of loss,
theft or destruction) of indemnity reasonably satisfactory to it, upon surrender
and cancellation of such Security or receipt of such indemnity, the Company
shall make and deliver in lieu of such Security a new Security in the same
denomination.
Notwithstanding the foregoing provisions of this Section, if any
Security of which any Purchaser or any other institutional Holder is the owner
is lost, stolen or destroyed, then the affidavit of such Purchaser or such
Holder's Treasurer or Assistant Treasurer (or other responsible official),
setting forth the name of the owner of such Security and the circumstances with
respect to such loss, theft or destruction, shall be accepted as satisfactory
evidence thereof, and no indemnity shall be required as a condition to the
execution and delivery by the Company of a new Security in lieu of such Security
(or as a condition to the payment thereof, if due and payable) other than a
Purchaser's or such Holder's written agreement to indemnify the Company.
Section 6. TAXES. The Company shall pay all taxes (including interest
and penalties), other than taxes imposed on the income of the Purchasers, which
may be payable in respect of the execution and delivery of this Agreement or of
the execution and delivery of any of the Common Shares or of any amendment of,
or waiver or consent under or with respect to, this Agreement or any of the
Common Shares and shall save each Purchaser harmless against any loss or
liability resulting from nonpayment or delay in payment of any such tax.
Section 7. MISCELLANEOUS.
Section 7.1. Indemnification. The Company hereby agrees to indemnify,
exonerate and hold each Purchaser and each of their respective partners and
affiliates, and their shareholders, officers, directors, employees and agents,
free and harmless from and against any and all actions, causes of action, suits,
litigation, losses, liabilities and damages, investigations or proceedings
instituted by any governmental agency or any other Person, and expenses in
connection therewith, including without limitation reasonable attorneys' fees
and disbursements, incurred by the indemnitee or any of them as a result of, or
arising out of, or relating to (a) any transaction financed or to be financed in
whole or in part directly or indirectly with proceeds from the sale by the
Company of any securities hereunder, or (b) the execution, delivery, performance
or enforcement of this Agreement or any instrument contemplated hereby by any of
the indemnitees, except in each such case to the extent any such indemnified
liabilities arise on account of such indemnitee's gross negligence, willful
misconduct or bad faith.
Section 7.2. Expenses. The Company and Purchasers each agree to pay
all their own costs and expenses in connection with the preparation, execution
and delivery of this Agreement, the Securities and other instruments and
documents to be delivered hereunder.
Section 7.3. Amendments, Waiver and Consents. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
more than fifty percent (50%) of the Common Stock not previously sold to the
public that is issued or issuable upon conversion of the Series D Preferred
Stock. Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each holder of any securities purchased under this Agreement at
the time outstanding (including securities into which such securities have been
converted), each future holder of all such securities, and the Company.
Section 7.4. Reliance on and Survival of Representations. All
agreements, representations and warranties of the Company contained in this
Agreement and in any certificates or other instruments delivered pursuant to
this Agreement shall (i) be deemed to be material and to have been relied upon
by the Purchasers, notwithstanding any investigation heretofore or hereafter
made by any Purchaser or on such Purchaser's behalf, and (ii) survive the
execution and delivery of this Agreement and the Securities, and shall continue
in effect so long as any Security is outstanding.
Section 7.5. Successors and Assigns. This Agreement shall bind and
inure to the benefit of and be enforceable by the Company, each of the
Purchasers, and the Purchasers' respective successors and assigns, and, in
addition, shall inure to the benefit of and be enforceable by each Person who
shall from time to time be a Holder of any of the Securities. The Company may
not assign its rights under this Agreement.
Section 7.6. Notices. All notices and other communications provided
for in this Agreement shall be in writing and delivered, telecopied or mailed,
first class postage prepaid, addressed:
(a) If to the Company:
The Right Start, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxx Xxxx X
Xxxxxxxx Xxxxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
000 X. Xxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Holders, at the addresses set forth on the signature
page (in the case of the Purchaser) and as may be designated by notice to the
Company.
Any such notice or communication shall be deemed to have been duly
given when delivered, telecopied or mailed as aforesaid. Each party may
designate by notice in writing a new address to which any notice, demand,
request or communication may thereafter be so given, served or sent. Each
notice, demand, request, or communication which shall be mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a telecopy) the confirmation being deemed
conclusive (but not exclusive) evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
Section 7.7. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 7.8. Governing Law. This Agreement and the Securities and
(unless otherwise provided) all amendments, supplements, waivers and consents
relating hereto or thereto shall be governed by and construed in accordance with
the laws of the State of California without regard to conflicts of laws
principles thereof.
Section 7.9. Waiver of Jury Trial. EACH PURCHASER, EACH HOLDER, BY
ITS ACCEPTANCE OF ANY OF THE SECURITIES, AND THE COMPANY, EACH HEREBY AGREES TO
WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE SECURITIES, OR ANY OTHER
AGREEMENTS RELATING TO THE SECURITIES OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT
IS BEING ESTABLISHED. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation,
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. The Purchasers and the Company each acknowledge that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on the waiver in entering into this Agreement, and that each
shall continue to rely on the waiver in their related future dealings. The
Purchasers and the Company further represent and warrant that each has reviewed
this waiver with its legal counsel, and that each knowingly and voluntarily
waives its jury trial rights following consultation with legal counsel.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT, THE SECURITIES, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE SECURITIES. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the Court.
Section 7.10 Effect of Amendment or Waiver. Each Purchaser
acknowledges that by operation of Section 9.3 the Holders of more than fifty
percent (50%) of the Common Stock not previously sold to the public that is
issued or issuable upon conversion of the Series D Preferred Stock will have the
right and power to diminish or eliminate all rights of such Purchaser under this
Agreement.
Section 7.11 Entire Agreement. This Agreement, including the other
writings referred to herein or delivered pursuant hereto, constitutes the entire
agreement among the parties hereto with respect to the transactions contemplated
herein, and it supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein.
Section 7.12 Exculpation Among Purchasers. Each Purchaser
acknowledges that such Purchaser is not relying upon any Person other than the
Company in making its investment or decision to invest in the Company. Each
Purchaser agrees that no Purchaser nor the respective controlling persons,
officers, directors, partners, agents or employees of any Purchaser shall be
liable for any action taken or omitted to be taken at any time by any of them in
connection with the Series D Preferred Stock (and the Common Stock issued upon
conversion of the Series D Preferred Stock).
[Remainder of page intentionally left blank]
Each Purchaser is requested to sign the form of acceptance in the
space provided below whereupon this Agreement shall become a binding agreement
between such Purchaser and the Company.
Very truly yours,
THE RIGHT START, INC.
By: /s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
Chief Executive Officer
S-7
Securities Purchase Agreement
The foregoing Agreement is hereby accepted as of the date first above written:
KAYNE FAMILY PARTNERSHIP, L.P.
By: Jemasa, Inc.
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
President
Address for Notices:
0000 Xxxxxx xx xxx Xxxxx
0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Facsimile: 310.284.6490
FORTUNE TWENTY-FIFTH, INC.
/s/ Xxxx Xxxxx
Xxxx Xxxxx
Address:
x/x Xxxx Xxxxx
X.X. Xxx 000,
Xxxxxxxxx, Xxxxxx 00000
Copy to:
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx
Facsimile: 310.551.3077
/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx, Trustee
Address:
c/o Fortune Financial
1800 Avenue of the Stars
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 310.551.3077
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
Address:
c/o Fortune Financial
1800 Avenue of the Stars
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 323.277.9025
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
Address:
0000 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Facsimile: 941.262.8025
XXXXXXX FAMILY TRUST dated 12-18-90
/s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx, Trustee
Address:
000 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 310.914.9242
O.S. II, Inc.
By:
/s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
its President
Address:
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 818.559.5617
HSMC PARTNERS, L.P.
By:/s/ Xxxxxxx X. Fine
Xxxxxxx X. Fine
its managing partner
Address:
00 Xxxxxx Xxxxxx
Xxxxxxxx X-0
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile: 203.226.7596
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Address: c/x Xxxxxx Brothers
0000 Xxxxxxx Xxxxxx 00xx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: 310.481.4102
/s/ Xxxxxx X. Xxxx Xxxxxxxx Xxxx
Xxxxxx X. Xxxx & Xxxxxxxx Xxxx,
as community property
Address: 000 Xxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile: 310.285.0892
/s/ Xxxxxx X. Muh
Xxxxxx X. Muh
Address: c/o Sutter Securities, Inc.
0 Xxxxxxx Xxxxxx Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile: 415.288.2355
/s/ Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx
Xxxxxxx and Xxxxxx Xxxxxxxx
Address: 000 Xxxxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Facsimile:
/s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
Address: 00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 310.966.1448
/s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Address: c/o Sutter Securities, Inc.
0 Xxxxxxx Xxxxxx Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile: 415.288.2355
/s/ Xxxxx Xxxxxxxxxx
Xxxxx Xxxxxxxxxx
Address:
c/o PIMCO/XXXXXXXXXXX
00 Xxxxxx Xx
Xxx Xxxxx
Xxxxxx XXX 0000
XXXXXXXXX
Copy to:
0 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Facsimile: 011 612 9241 6955
215.230.9018
/s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx SEP/XXX
Xxxx Xxxxxxxx Custodian
Address:
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxx Xxxxxxx, Xxxxx 00000
Facsimile: 361.888.8613
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Address:
1330 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212.842.1540
HACKING FAMILY TRUST
/s/ Xxxxxx X. Hacking
Xxxxxx X. Hacking, Trustee
Address :
0000 Xxxxxx xx xxx Xxxxx
0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile: 310.284.6444
X.X. XXXX & COMPANY MONEY PURCHASE PLAN
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx, Trustee
Address :
X.X. Xxx 0000
or 0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxx 00000
Facsimile: 775.782.4787
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx, XXX
Address :
000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: 213.624.1224
EXHIBIT B
No. of Stock Units: _______ Warrant No. __
WARRANT
to Purchase Common Stock of
The Right Start, Inc.
THIS IS TO CERTIFY THAT _______________, a ___________, or its registered
assigns, is entitled to purchase from The Right Start, Inc., a California
corporation (the "Company"), at any time on and after the date hereof (the
"Closing Date"), but not later than 5:00 p.m., Pacific Standard time, on October
6, 2005 (the "Expiration Date"), _____ (_____) Stock Units, in whole or in part,
at a purchase price per Stock Unit of $2.00 all on the terms and conditions
hereinbelow provided.
This Warrant has been issued in accordance with that certain Securities Purchase
Agreement dated as of the date hereof between the Company and the investors
named therein (the "Purchase Agreement").
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR
QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS, OR UNLESS THE PROPOSED
TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED.
Section 1. Certain Definitions. As used in this Warrant, unless the context
otherwise requires:
"Affiliate" of any Person means a Person (1) that directly or indirectly
controls, or is controlled by, or is under common control with, such other
Person, (2) that beneficially owns ten percent (10%) or more of the Voting Stock
of such other Person, or (3) ten percent (10%) or more of the Voting Stock (or
in the case of a Person which is not a corporation, ten percent (10%) or more of
the equity interest) of which is owned by such other Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Appraised Value" shall mean the fair market value of all outstanding
shares of Common Stock (on a fully diluted basis including any fractional shares
and assuming the exercise in full of all then-outstanding options, warrants or
other rights to purchase shares of Common Stock that are then currently
exercisable at exercise prices less than the Current Market Price), as
1
determined by a written appraisal prepared by an appraiser acceptable to the
Company and the holders of Warrants evidencing a majority in number of the total
number of Stock Units at the time purchasable upon the exercise of all then
outstanding Warrants. "Fair market value" is defined for this purpose as the
price in a single transaction determined on a going-concern basis that would be
agreed upon by the most likely hypothetical buyer for a 100% controlling
interest in the equity capital of the Company (on a fully diluted basis
including any fractional shares and assuming the exercise in full of all
then-outstanding options, warrants or other rights to purchase shares of Common
Stock that are then currently exercisable at exercise prices less than the
Current Market Price), with consideration given to the effect of all noncompete
covenants signed by the seller and employment agreements signed by key
management personnel of the Company (and of its subsidiaries), each extending
for a period of time considered sufficient by all parties to effect the transfer
of goodwill from the seller to the buyer and disregarding any discounts for
nonmarketability of Common Stock of the Company. In the event that the Company
and said holders cannot, in good faith, agree upon an appraiser, then the
Company, on the one hand, and said holders, on the other hand, shall each select
an appraiser, the two appraisers so selected shall select a third appraiser who
shall be directed to prepare such a written appraisal (the "Appraisal") and the
term Appraised Value shall mean the appraised value set forth in the Appraisal
prepared in accordance with this definition. The fees and expenses of any
appraisers shall be paid by the Company, except in the case in which the
valuation of any appraiser who renders an Appraisal is within ten percent (10%)
of the value originally determined by the Board of Directors, in which case the
holders shall pay the fees and expenses of any appraisers. In the event that the
Company bears the cost of the appraisal process, such cost shall be deemed an
account payable of the Company and shall be considered in the determination of
the Appraised Value.
"Board of Directors" shall mean either the board of directors of the
Company or any duly authorized committee of that board.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banks in the State of California are required or permitted to close.
"Commission" shall mean the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act and the Exchange Act.
"Common Stock" shall mean the Company's authorized Common Stock, no par
value per share, irrespective of class unless otherwise specified, as
constituted on the date of original issuance of this Warrant, and any stock into
which such Common Stock may thereafter be changed, and shall also include stock
of the Company of any other class, which is not preferred as to dividends or
assets over any other class of stock of the Company issued to the holders of
shares of stock upon any reclassification thereof.
"Company" shall mean The Right Start, Inc., a California corporation.
"Current Market Price" per share of Common Stock for the purposes of any
provision of this Warrant at the date herein specified, shall be deemed to be
the price determined pursuant to the first applicable of the following methods:
(i) If the Common Stock is traded on a national securities exchange or
is traded in the over-the-counter market, the Current Market Price per
share of Common Stock shall be deemed to be the average of the daily market
prices for 20 consecutive Business Days commencing 20 Business Days before
such date. The market price for each such Business Day shall be (a) if the
Common Stock is traded on a national securities exchange or in the
over-the-counter market, its last sale price on the preceding Business Day
2
on such national securities exchange or over-the-counter market or, if
there was no sale on that day, the last sale price on the next preceding
Business Day on which there was a sale, all as made available over the
Consolidated Last Sale Reporting System of the CTA Plan (the "CLSRS") or,
if the Common Stock is not then eligible for reporting over the CLSRS, its
last reported sale price on the preceding Business Day on such national
securities exchange or, if there was no sale on that day, on the next
preceding Business Day on which there was a sale reported on such exchange
or (b) if the principal market for the Common Stock is the over-the-counter
market, but the Common Stock is not then eligible for reporting over the
CLSRS, but the Common Stock is quoted on The Nasdaq Stock Market, Inc.
("Nasdaq"), the last sale price reported on Nasdaq on the preceding
Business Day or, if the Common Stock is an issue for which last sale prices
are not reported on Nasdaq, the closing bid quotation on such day, but, in
each of the next preceding two cases, if the relevant Nasdaq price or
quotation did not exist on such day, then the price or quotation on the
next preceding Business Day in which there was such a price or quotation.
(ii) If the Current Market Price per share of Common Stock cannot be
ascertained by any of the methods set forth in paragraph (i) immediately
above, the Current Market Price per share of Common Stock shall be deemed
to be the price equal to the quotient determined by dividing the Appraised
Value by the number of outstanding shares of Common Stock (on a fully
diluted basis including any fractional shares and assuming the exercise in
full of all then-outstanding options, warrants or other rights to purchase
shares of Common Stock that are then currently exercisable at exercise
prices equal to or less than the Current Market Price).
"Current Warrant Price" per share of Common Stock, for the purpose of any
provision of this Warrant at the date herein specified, shall mean the amount
equal to the quotient resulting from dividing the Exercise Price in effect on
such date by the number of shares (including any fractional share) of Common
Stock comprising a Stock Unit on such date.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
any applicable time.
"Exercise Price" shall mean the purchase price per Stock Unit as set forth
on the first page of this Warrant on the Closing Date and thereafter shall mean
such dollar amount as shall result from the adjustments specified in Section 4.
"Holder" means, initially, _______________, a ___________, and thereafter
any Person that is or Persons that are the registered holder(s) of the Warrant
or Warrant Stock as registered on the books of the Company.
"Liquidity Event" shall mean (i) the sale of all or substantially all the
assets of the Company for cash, (ii) a merger, acquisition, sale or
recapitalization of the Company whereby the Holder of this Warrant is entitled
by the terms of such transaction to receive cash in lieu of this Warrant or its
exercise or (iii) the initial firm-commitment public offering by the Company of
its Common Stock.
"Nonpreferred Stock" shall mean the Common Stock and shall also include
stock of the Company of any other class which is not preferred as to dividends
or assets over any other class of stock of the Company and which is not subject
to redemption.
3
"Person" shall include an individual, a corporation, an association, a
partnership, a limited liability company, a trust or estate, a government,
foreign or domestic, and any agency or political subdivision thereof, or any
other entity.
"Restricted Certificate" shall mean a certificate for Common Stock or a
Warrant bearing the restrictive legend set forth in the preamble.
"Restricted Securities" shall mean Restricted Stock and the Restricted
Warrant.
"Restricted Stock" shall mean Common Stock evidenced by a Restricted
Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a Restricted
Certificate.
"Securities" shall mean the Warrant issued to the Holder, and the
certificates and other instruments from time to time evidencing the same.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at any applicable
time.
"Stock Unit" shall constitute one share of Common Stock, as such Common
Stock was constituted on the date hereof and thereafter shall constitute such
number of shares (including any fractional shares) of Common Stock as shall
result from the adjustments specified in Section 4.
"Purchase Agreement" has the meaning assigned to such term in the second
paragraph of this Warrant.
"Voting Stock" shall mean any equity security entitling the holder of such
security to vote at meetings of shareholders except an equity security which
entitles the holder of such security to vote only upon the occurrence of some
contingency, unless that contingency shall have occurred and be continuing.
"Warrant" shall mean this Warrant to purchase up to an aggregate of ______
Stock Units initially issued to ________, a _______, and all Warrants issued
upon transfer, division or combination of, or in substitution therefor.
"Warrant Stock" shall mean the shares of Common Stock purchasable by the
holder of any Warrants upon the exercise thereof.
Section 2. Exercise of Warrant. The holder of this Warrant may, at any time
on and after the date hereof, but not later than the Expiration Date, exercise
this Warrant in whole at any time or in part from time to time for the number of
Stock Units which such holder is then entitled to purchase hereunder. The Holder
may exercise this Warrant, in whole or in part, by either of the following
methods (or a combination thereof or as otherwise determined by the Company's
Board of Directors):
(a) the Holder may deliver to the Company at its office maintained
pursuant to Section 13 for such purpose (i) a written notice of such
Holder's election to exercise this Warrant, which notice shall specify
the number of Stock Units to be purchased, (ii) this Warrant and (iii)
a sum equal to the aggregate Exercise Price therefor in immediately
available funds; or
4
(b) on or after the occurrence of a Liquidity Event, the Holder may also
exercise this Warrant, in whole or in part, in a "cashless" or "net
issue" exercise by delivering to the Company at its office maintained
pursuant to Section 13 for such purpose (i) a written notice of such
Holder's election to exercise this Warrant, which notice shall specify
the number of Stock Units to be delivered to such Holder and the
number of Stock Units with respect to which this Warrant is being
surrendered in payment of the aggregate Exercise Price for the Stock
Units to be delivered to the Holder, and (ii) this Warrant. For
purposes of this subparagraph (b), each Stock Unit as to which this
Warrant is surrendered will be attributed a value equal to the product
of (x) the Current Market Price per share of Common Stock minus the
Current Warrant Price per share of Common Stock, multiplied by (y) the
number of shares of Common Stock then comprising a Stock Unit.
Any notice required under this Section 2 may be in the form of a
subscription set out at the end of this Warrant. Upon delivery thereof, the
Company shall as promptly as practicable cause to be executed and delivered to
such holder a certificate or certificates representing the aggregate number of
fully-paid and nonassessable shares of Common Stock issuable upon such exercise.
The stock certificate or certificates for Warrant Stock so delivered shall
be in such denominations as may be specified in said notice and shall be
registered in the name of such Holder or, subject to Section 9, such other name
or names as shall be designated in said notice. Such certificate or certificates
shall be deemed to have been issued and such Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record
of such shares, including, to the extent permitted by law, the right to vote
such shares or to consent or to receive notice as a stockholder, as of the time
said notice is delivered to the Company as aforesaid. If this Warrant shall have
been exercised only in part, the Company shall, at the time of delivery of said
certificate or certificates, deliver to such Holder a new Warrant dated the date
it is issued, evidencing the rights of such Holder to purchase the remaining
Stock Units called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
The Company shall pay all expenses, taxes (other than federal, state, local
or foreign income taxes) and other charges payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2.
All shares of Common Stock issuable upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable, and free from all liens and
other encumbrances thereon. The Company will from time to time take all such
action as may be necessary to assure that the par value per share of the
unissued Common Stock acquirable upon exercise of this Warrant is at all times
equal to or less than the Exercise Price then in effect.
The Company shall not issue certificates for fractional shares of stock
upon any exercise of this Warrant whenever, in order to implement the provisions
of this Warrant, the issuance of such fractional shares is required. Instead,
the Company shall pay cash in lieu of such fractional shares upon such exercise.
Section 3. Transfer, Division and Combination. Subject to Section 9, this
Warrant and all rights hereunder are transferable, in whole or in part, on the
books of the Company to be maintained for such purpose, upon surrender of this
Warrant at the office of the Company maintained for such purpose pursuant to
5
Section 13, together with (a) a written assignment in the form set out at the
end of this Warrant duly executed by the Holder hereof or its agent or attorney,
(b) a copy of the Purchase Agreement duly executed by an authorized
representative of the transferee (substantially in the form executed by the
Holder or in such other form as reasonably acceptable to counsel to the Company)
and (c) payment of funds sufficient to pay any stock transfer taxes payable upon
the making of such transfer. Upon such surrender, execution and payment, the
Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and this Warrant shall promptly be
canceled. If and when this Warrant is assigned in blank (in case the
restrictions on transferability in Section 9 shall have been terminated), the
Company may (but shall not be obliged to) treat the bearer hereof as the
absolute owner of this Warrant for all purposes and the Company shall not be
affected by any notice to the contrary. This Warrant, if properly assigned in
compliance with this Section 3 and Section 9, may be exercised by an assignee
for the purchase of shares of Common Stock without having a new Warrant issued.
This Warrant may, subject to Section 9, be divided upon presentation at the
aforesaid office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
holder hereof or its agent or attorney. Subject to compliance with the preceding
paragraph and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant to be divided or combined in accordance
with such notice.
The Company shall pay all expenses, taxes (other than federal, state, local
or foreign income taxes) and other charges incurred by the Company in the
performance of its obligations in connection with the preparation, issue and
delivery of Warrants under this Section 3.
The Company agrees to maintain at its aforesaid office books for the
registration and transfer of the Warrants.
Section 4. Adjustment of Stock Unit or Exercise Price. The number of shares
of Common Stock comprising a Stock Unit, and the Exercise Price per Stock Unit,
shall be subject to adjustment from time to time as set forth in this Section 4
and in Section 5. The Company will not take any action with respect to its
Nonpreferred Stock of any class requiring an adjustment pursuant to any of the
following Subsections 4.1 or 4.3 without at the same time taking like action
with respect to its Nonpreferred Stock of each other class.
4.1. Stock Dividends, Subdivisions and Combinations. In case at any time or
from time to time the Company shall:
(a) take a record of the holders of its Nonpreferred Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution of,
Nonpreferred Stock, or
(b) subdivide its outstanding shares of Nonpreferred Stock into a larger
number of shares of Nonpreferred Stock, or
(c) combine its outstanding shares of Nonpreferred Stock into a smaller
number of shares of Nonpreferred Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Common Stock which a record holder of the number of shares
of Common Stock comprising a Stock Unit immediately prior to the happening of
6
such event would own or be entitled to receive after the happening of such
event; provided, however, that no such event may take place with respect to any
shares of Nonpreferred Stock unless it shall also take place for all shares of
Nonpreferred Stock.
4.2. Other Provisions Applicable to Adjustments. The following provisions
shall be applicable to the making of adjustments of the number of shares of
Common Stock comprising a Stock Unit hereinbefore provided for in this Section
4:
(a) When Adjustments to Be Made. The adjustments required by Section 4.1
shall be made whenever and as often as any specified event requiring an
adjustment shall occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(b) Fractional Interests. In computing adjustments under this Section 4,
fractional interests in Nonpreferred Stock shall be taken into account to the
nearest one-thousandth of a share.
(c) When Adjustment Not Required. If the Company shall take a record of the
holders of its Nonpreferred Stock for the purpose of entitling them to receive a
dividend or distribution and shall, thereafter and before the distribution
thereof to shareholders, abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
4.3. Merger, Consolidation or Disposition of Assets. In case the Company
shall merge or consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation and pursuant to the terms of such merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation are to be received by or distributed to the holders of
Nonpreferred Stock of the Company, then each holder of a Warrant shall have the
right thereafter to receive, upon exercise of such Warrant, Stock Units each
comprising the number of shares of common stock of the successor or acquiring
corporation receivable upon or as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Nonpreferred Stock
comprising a Stock Unit immediately prior to such event. If, pursuant to the
terms of such merger, consolidation or disposition of assets, any cash, shares
of stock, other securities or property or warrants or other subscription or
purchase rights or property of any nature whatsoever are to be received by or
distributed to the holders of Nonpreferred Stock of the Company, there shall be
either, at the Holder's option, (i) a reduction of the Exercise Price equal to
the amount applicable to the number of shares of Common Stock then comprising a
Stock Unit of any such cash and of the fair value of any and all such shares of
stock or of other securities or property to be received by or distributed to the
holders of Nonpreferred Stock of the Company, or (ii) such Holder shall have the
right to receive, upon exercise of its Warrant, such cash, shares of stock or
other securities or property of any nature as a holder of the number of shares
of Nonpreferred Stock underlying a Stock Unit would have been entitled to
receive upon the occurrence of such event. Such fair value shall be determined
in good faith by the Board of Directors of the Company, provided that if such
determination is objected to by the holders of Warrants evidencing a majority in
number of the total number of Stock Units at the time purchasable upon the
exercise of all then outstanding Warrants, such determination shall be made by
an independent appraiser selected by the Company and said holders. In the event
that the Company and said holders cannot, in good faith, agree upon an
appraiser, then the Company, on the one hand, and said holders, on the other
hand, shall each select an appraiser, the two appraisers so selected shall
select a third appraiser who shall be directed to prepare such a written
appraisal which shall be conclusive and binding on the parties. The fees and
expenses of any appraisers shall be paid by the Company, except in the case
where the valuation of any appraiser who renders an Appraisal is within ten
percent (10%) of the value originally determined by the Board of Directors, in
7
which case the holders shall pay the fees and expenses of any appraisers. In
case of any such merger, consolidation or disposition of assets, the successor
acquiring corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide for
adjustments of Stock Units which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 4. For the purposes of this Section
4 "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class, that is not preferred as to dividends or
assets over any other class of stock of such corporation and that is not subject
to redemption, and shall also include any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event, and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Subsection 4.3
shall similarly apply to successive mergers, consolidations or dispositions of
assets.
Section 5. Notice to Warrant Holders.
5.1. Notice of Adjustment of Stock Unit or Exercise Price. Whenever the
number of shares of Common Stock comprising a Stock Unit, or the price at which
a Stock Unit may be purchased upon exercise of the Warrants, shall be adjusted
pursuant to Section 4, the Company shall forthwith obtain a certificate signed
by independent accountants, of recognized national standing, selected by the
Company and reasonably acceptable to the Holder(s) of the Warrants, setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a statement of the fair
value, as determined by the Board of Directors of the Company or by appraisal
(if applicable), of any evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights or
property of any nature whatsoever referred to in Section 4.3) and specifying the
number of shares of Common Stock comprising a Stock Unit and (if such adjustment
was made pursuant to Section 4.3) describing the number and kind of any other
shares of stock comprising a Stock Unit, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly, and in any case within three days after the making of such
adjustment, cause a signed copy of such certificate to be delivered to each
holder of a Warrant in accordance with Section 14. The Company shall keep at its
office or agency, maintained for the purpose pursuant to Section 13, copies of
all such certificates and cause the same to be available for inspection at said
office during normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by a holder thereof.
5.2. Notice of Certain Corporate Action. In case the Company shall propose
(a) to pay any dividend payable in stock of any class to the holders of its
Nonpreferred Stock or to make any other distribution to the holders of its
Nonpreferred Stock (other than a cash dividend) or (b) to effect any
consolidation, merger or sale, organic change, transfer or other disposition of
all or substantially all of its property, assets or business, then in each such
case, the Company shall deliver to each holder of a Warrant, in accordance with
Section 14, a notice of such proposed action, which shall specify the date on
which a record is to be taken for the purposes of such stock dividend,
distribution or rights, consolidation, merger, sale, organic change or transfer
is to take place and the date of participation therein by the holders of
Nonpreferred Stock, if any such date is to be fixed, and shall also set forth
such facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Nonpreferred Stock and the number and kind of any
other shares of stock which will comprise a Stock Unit, and the purchase price
8
or prices thereof, after giving effect to any adjustment which will be required
as a result of such action. Such notice shall be so delivered as promptly as
reasonably possible.
Section 6. Reservation and Authorization of Common Stock. The Company shall
at all times reserve and keep available for issue upon the exercise of Warrants
such number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant or upon such exercise, as the case may be, shall be duly and validly
issued, fully-paid and nonassessable.
Section 7. Taking of Record; Stock and Warrant Transfer Books. In the case
of all dividends or other distributions by the Company to the holders of its
Nonpreferred Stock with respect to which any provision of Section 4 refers to
the taking of a record of such holders, the Company will in each such case take
such record as of the close of business on a Business Day. The Company will not
at any time, except upon dissolution, liquidation or winding up or as otherwise
may be required by law, close its stock transfer books or Warrant transfer books
so as to result in preventing or delaying the exercise or transfer of any
Warrant.
Section 8. Taxes. The Company will pay all taxes (other than federal,
state, local or foreign income taxes) which may be payable in connection with
the execution and delivery of this Warrant or the issuance and sale of the
Restricted Securities hereunder or in connection with any modification of the
Restricted Securities and will save the Holder harmless without limitation as to
time against any and all liabilities with respect to or resulting from any delay
in paying, or omission to pay, such taxes. The obligations of the Company under
this Section 8 shall survive any redemption, repurchase or acquisition of
Restricted Securities by the Company.
Section 9. Restrictions on Transferability. The Restricted Securities shall
not be transferable except upon the conditions specified in this Section 9.
9.1 Transfer to an Affiliate. The Holder shall have the right to transfer
any Restricted Securities to any Affiliate of the Holder, in each case free of
the restrictions imposed by this Section 9 other than the requirement as to the
legending of the certificates for such Restricted Securities specified in
Section 9.3. No opinion of counsel shall be required for a transfer of
Restricted Securities to an Affiliate of the Holder.
9.2 Transfer to a Non-Affiliate. The Holder and his or her or her
subsequent transferees shall have the right to transfer any Restricted
Securities to a non-Affiliate of the Holder as follows:
(a) Prior to any transfer or attempted transfer of any Restricted
Securities to a non-Affiliate of the Holder, the holder of such Restricted
Certificate shall give written notice to the Company of such Holder's intention
to effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in reasonable detail.
(b) Upon receipt of such notice, the Company may request an opinion of
counsel of the transferring Holder to the effect that such proposed transfer may
be effected without registration under the Securities Act. Upon receipt of such
opinion, or if the Company does not request such an opinion, within five (5)
Business Days after receiving notice of the proposed transfer, the Company
shall, as promptly as practicable, so notify the Holder of such Restricted
Certificate and the Holder shall thereupon be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
9
the Holder to the Company. Each certificate evidencing the Restricted Securities
thus to be transferred (and each certificate evidencing any untransferred
balance of the Restricted Securities evidenced by such Restricted Certificate)
shall bear the restrictive legend set forth in Section 9.3, unless in the
opinion of the Company or the opinion of such counsel, if requested, pursuant to
Rule 144(k) of the Securities Act or otherwise, such legend is not required in
order to ensure compliance with the Securities Act. The fees and expenses of
counsel for any such opinion shall be paid by the Company.
9.3 Restrictive Legend. Unless and until the Restricted Securities have
been registered under the Securities Act, this Warrant, each Warrant issued to
any transferee of the Holder, each certificate for any Warrant Stock issued upon
exercise of any Warrant and each certificate for any Warrant Stock issued to any
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
" THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES
NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES
LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS
REQUIRED."
Section 10. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the purchase price of the Warrant Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Section 11. Loss or Destruction of Warrant Certificates. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company
(the original Holder's or any other institutional Holder's indemnity being
satisfactory indemnity in the event of loss, theft or destruction of any Warrant
owned by such institutional Holder), or, in the case of any such mutilation,
upon surrender and cancellation of such Warrant, the Company will make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new
Warrant of like tenor and representing the right to purchase the same aggregate
number of shares of Common Stock.
Section 12. Amendments. The terms of this Warrant may be amended, and the
observance of any term therein may be waived, but only with the written consent
of the holders of Warrants evidencing a majority in number of the total number
of Stock Units at the time purchasable upon the exercise of all then outstanding
Warrants; provided that no such action may change the number of shares of stock
comprising a Stock Unit or the Exercise Price, without the written consent of
the holders of Warrants subject to such amendment.
Section 13. Office of the Company. So long as any Warrant remains
outstanding, the Company shall maintain an office where the Warrants may be
presented for exercise, transfer, division or combination as in this Warrant
provided. Such office shall be at 0000 Xxxxxxxx Xxxxxx Xxxxx, Xxxx X, Xxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000, FAX: (000) 000-0000, unless and until the Company
shall designate and maintain some other office for such purposes and deliver
written notice thereof to the holders of all outstanding Warrants.
10
Section 14. Notices Generally.
14.1. All communications (including all required or permitted notices)
pursuant to the provisions hereof shall be in writing and shall be sent, to any
registered Holder of any Warrants or Warrant Stock, to the address of such
Holder as it appears in the stock or warrant ledger of the Company or at such
other address as such Holder may have furnished in writing to the Company.
14.2. Any notice shall be deemed to have been duly delivered when delivered
by hand, if personally delivered, and if sent by mail to a party whose address
is in the same country as the sender, two Business Days after being deposited in
the mail, postage prepaid, and if sent by recognized international courier,
freight prepaid, with a copy sent by telecopier, to a party whose address is not
in the same country as the sender, three Business Days after the later of (a)
being telecopied and (b) delivery to such courier.
Section 15. Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of California (without regard to
conflicts of law provisions thereof).
11
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name by its President or a Vice President and attested by its Secretary or an
Assistant Secretary.
Dated: October 6, 2000
THE RIGHT START, INC.
---------------------
By: Xxxxx X. Xxxxx
Its: President
ATTEST:
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Secretary
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for and purchases Stock Units of The Right Start, Inc., a
California corporation, purchasable with this Warrant, and herewith makes
payment therefor (by check in the amount of $_____), or hereby tenders
_______________ Stock Units as payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________________ whose address is and, if such Stock Units shall not
include all of the Stock Units issuable as provided in this Warrant that a new
Warrant of like tenor and date for the balance of the Stock Units issuable
thereunder be delivered to the undersigned.
Dated: _____________, _____
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
Stock Units set forth below:
Number of Stock Units Name and Address of Assignee
--------------------- ----------------------------
and does hereby irrevocably constitute and appoint ___________________Attorney
to make sure transfer occurs on the books of The Right Start, Inc., a California
corporation, maintained for the purpose, with full power of substitution in the
premises.
Dated:
---------------------------
Signature
---------------------------
Witness
NOTICE: The signature to the assignment must correspond with the name
as written upon the face of the Warrant in every particular
instance, without alteration or enlargement or any change
whatsoever.
The signature to this assignment must be guaranteed by a bank
or trust company having an office or correspondent in New York, New York or Los
Angeles, California or by a firm having membership on the New York Stock
Exchange.
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of
October 6, 2000 between The Right Start, Inc., a California corporation (the
"Company"), and the undersigned and those who may purchase the Companies Series
D Preferred Stock (as defined) in the future (each individually a "Purchaser,"
and collectively the "Purchasers").
WHEREAS, the Company and Purchasers have entered into a Securities
Purchase Agreement dated as of the date hereof (the "Purchase Agreement").
WHEREAS, pursuant to the Purchase Agreement, the Company and
Purchasers desire to enter into this Agreement to provide Purchasers with
certain registration rights and to address related matters;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties agree as follows:
1. Registration Rights.
1.1 Demand Registration Rights.
(a) Subject to the provisions of this Section 1.1, at any time
after the date hereof, Purchasers holding, or entitled to hold
upon conversion or exercise, not less than 50% of the Company's
Common Stock, no par value ("Common Stock"), issued or issuable
upon conversion of the Series D Convertible Pay-in-Kind Preferred
Stock (the "Series D Preferred Stock") and exercise of the
warrants issued in connection therewith (the "Warrants", and,
collectively with the Series D Preferred Stock, the "Securities"),
issued by the Company to Purchasers pursuant to the Purchase
Agreement may request registration for sale under the Securities
Act of 1933 as amended (the "Act") of all or part of such Common
Stock. The Company shall thereafter, as expeditiously as
practicable, use its best efforts (i) to file with the Securities
and Exchange Commission (the "SEC") under the Act, a registration
statement on the appropriate form (using Form S-3 or other "short
form," if available) covering all the shares of Common Stock
specified in the demand request and (ii) to cause such
registration statement to be declared effective. The Company shall
use its best efforts to cause each offering pursuant to this
Section 1.1 to be managed, on a firm commitment basis, by a
recognized regional or national underwriter. The Company shall not
be required to comply with more than two (2) requests by
Purchasers for demand registration pursuant to this Section
1.1(a). The Company shall not be required to effect a demand
registration under the Act pursuant to Section 1.1(a) above if (i)
the Company receives such request for registration within 120 days
preceding the anticipated effective date of a proposed
underwritten public offering of securities of the Company approved
by the Company's Board of Directors prior to the Company's receipt
of such request; (ii) within 180 days prior to any such request
for registration, a registration of securities of the Company has
been effected in which Purchasers had the right to participate
pursuant to Section 1.2 hereof; or (iii) the Board of Directors of
the Company reasonably determines in good faith that effecting
such a demand registration at such time would have a material
adverse effect upon a proposed sale of all (or substantially all)
1
the assets of the Company, or a merger, reorganization,
recapitalization, or similar transaction materially affecting the
capital structure or equity ownership of the Company; provided,
however, that the Company may only delay a demand registration
pursuant to this Section 1.1(a)(iii) for a period not exceeding 90
days (or until such earlier time as such transaction is
consummated or no longer proposed). The Company shall promptly
notify Purchasers in writing of any decision not to effect any
such request for registration pursuant to this Section 1.1(a),
which notice shall set forth in reasonable detail the reason for
such decision and shall include an undertaking by the Company
promptly to notify Purchasers as soon as a demand registration may
be effected.
(b) Purchasers may withdraw a request for demand registration at
any time before a registration statement is declared effective, in
which event the Company shall withdraw such registration
statement. If the Company withdraws a registration statement under
this Section 1.1(b) in respect of a registration for which the
Company would otherwise be required to pay expenses under Section
1.4 hereof, Purchasers shall be liable to the Company for all
expenses of such registration specified in Section 1.4 hereof in
proportion to the number of shares each of the Purchasers shall
have requested to be registered, and Purchasers shall not be
deemed to have requested a demand registration for purposes of
Section 1.1(a) hereof.
1.2 Piggyback Registration Rights.
(a) If at any time or times after the date hereof, the Company
proposes to make a registered public offering of any of its
securities under the Act, whether to be sold by it or by one or
more third parties (other than an offering pursuant to a demand
registration under Section 1.1(a) hereof or an offering registered
on Form X-0, Xxxx X-0, or comparable forms), the Company shall,
not less than 45 days prior to the proposed filing date of the
registration form, give written notice of the proposed
registration to Purchasers, and at the written request of
Purchasers delivered to the
Company within 20 days after the receipt of such notice,
shall include in such registration and offering, and in any
underwriting of such offering, all shares of Common Stock that may
have been designated in Purchasers' request.
(b) If a registration in which Purchasers have the right to
participate pursuant to this Section 1.2 is an underwritten
offering for the account of the Company or for the account of a
security holder (other than Purchaser) pursuant to the exercise of
a demand registration right, and the managing underwriters advise
the Company or such security holder, as the case may be, in
writing that in their opinion the number of securities requested
to be included in such registration, together with the securities
being offered by the Company or such security holder, as the case
may be, exceeds the number which can be effectively sold in such
offering, the Company shall include in such registration (i)
first, the securities of the Company or such security holder
proposed to be sold, and (ii) second, to the extent possible, the
Common Stock proposed to be sold by each of the Purchasers and any
other selling shareholders, in proportion to the number of shares
of Common Stock with respect to which they have requested
registration.
1.3 Registration Procedures. The Company shall have no obligation
to file a registration statement pursuant to Section 1.1 hereof, or to include
2
shares of Common Stock owned by or issuable to any Purchaser in a registration
statement pursuant to Section 1.2 hereof, unless and until such Purchaser shall
have furnished the Company with all information and statements about or
pertaining to such Purchaser in such reasonable detail and on such timely basis
as is reasonably required by the Company in connection with the preparation of
the registration statement. Whenever Purchasers have requested that any shares
of Common Stock be registered pursuant to Section 1.1 or 1.2 hereof, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such
registration statement to become effective as soon as reasonably
practicable thereafter (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto,
the Company shall furnish counsel for Purchasers with copies of
all such documents proposed to be filed);
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than nine months (or two years,
if the provisions of Rule 415 under the Act are available with
respect thereto) or until Purchasers have completed the
distribution described in such registration statement, whichever
occurs first;
(c) furnish to Purchasers such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus), and such other document as Purchasers may
reasonably request;
(d) use its best efforts to register or qualify such shares under
such other securities or blue sky laws of such jurisdictions as
Purchasers request (and to maintain such registrations and
qualifications effective for a period of nine months or until
Purchasers have completed the distribution of such shares,
whichever occurs first), and to do any and all other acts and
things which may be necessary or advisable to enable Purchasers to
consummate the disposition in such jurisdictions of such shares;
provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not be
required but for this Section 1.3(d), (ii) subject itself to
taxation in any such jurisdiction, or (iii) file any general
consent to service of process in any such jurisdiction;
(e) notify Purchasers, at any time during which a prospectus
relating thereto is required to be delivered under the Act within
the period that the Company is required to keep a registration
statement effective, of the happening of any event as a result of
which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such shares, such
prospectus will not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statements therein
not misleading;
(f) use its best efforts to cause all such shares to be listed on
securities exchanges or interdealer quotation systems (including
NASDAQ National Market), if any, on which similar securities
issued by the Company are then listed;
3
(g) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
actions as Purchasers reasonably request (and subject to
Purchasers' reasonable approval) in order to expedite or
facilitate the disposition of such shares; and
(h) make reasonably available for inspection by Purchasers, by
any underwriter participating in any distribution pursuant to such
registration statement, and by any attorney, accountant or other
agent retained by Purchasers or by any such underwriter, all
relevant financial and other records, pertinent corporate
documents, and properties (other than confidential intellectual
property) of the Company; provided, however, that any information
that is designated in writing by the Company, in good faith, as
confidential at the time of delivery of such information shall be
kept confidential by Purchasers or any such underwriter, attorney,
accountant or agent, unless such disclosure is made in connection
with a court proceeding or required by law, or such information
becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality.
1.4 Registration Expenses.
The Company will pay all Registration Expenses of all registrations
under this Agreement, provided, however, that if a registration under Section
1.1 is withdrawn at the request of Purchasers (other than as a result of
information concerning the business or financial condition of the Company that
is made known to the Purchasers after the date on which such registration was
requested) and if the requesting Purchasers elect not to have such registration
counted as a registration requested under Section 1.1, Purchasers shall pay the
Registration Expenses of such registration. For purposes of this Section, the
term "Registration Expenses" means all expenses incurred by the Company in
complying with this Section, including, without limitation, all registration and
filing fees (other than National Association of Securities Dealers, Inc. filing
fees pursuant to an underwritten offering), exchange listing fees, printing
expenses, fees, and expenses of counsel for the Company and the reasonable fees
and expenses of one firm or counsel selected by Purchasers to represent it,
state Blue Sky fees and expenses, and the expense of any special audits incident
to or required by any such registration, but excluding underwriting discounts
and selling commissions.
1.5 Indemnity.
(a) In the event that any shares of Common Stock owned by
Purchasers are sold by means of a registration statement pursuant
to Section 1.1 or 1.2 hereof, the Company agrees to indemnify and
hold harmless such Purchasers, each of its partners and their
officers and directors, and each person, if any, who controls such
Purchasers within the meaning of the Act (each such Purchaser, its
partners and their officers and directors, and any such other
persons individually an "Indemnified Person" and collectively
"Indemnified Persons") from and against all demands, claims,
actions or causes of action, assessments, losses, damages,
liabilities, costs, and expenses, including, without limitation,
interest, penalties, and reasonable attorneys' fees and
disbursements, asserted against, resulting to, imposed upon or
incurred by such Indemnified Person, directly or indirectly (in
this Section 1.5 in the singular a "claim" and in the plural
"claims"), based upon, arising out of or resulting from any untrue
statement of a material fact contained in the registration
statement or any omission to state therein a material fact
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, except
4
insofar as such claim is based upon, arises out of or results from
information furnished to the Company in writing by such Purchaser
for use in connection with the registration statement.
(b) Each Purchaser agrees to indemnify and hold harmless the
Company, its officers and directors, and each person, if any, who
controls the Company within the meaning of the Act (each of the
Company, its officers and directors, and any such other persons
individually as an "Indemnified Person" and collectively
"Indemnified Persons") from and against all claims based upon,
arising out of or resulting from any untrue statement of a
material fact contained in the registration statement or any
omission to state therein a material fact necessary in order to
make the statements made therein, in the light of the
circumstances under which they were made, not misleading, to the
extent that such claim is based upon, arises out of or results
from information furnished to the Company in writing by Purchaser
for use in connection with the registration statement.
(c) The indemnification set forth herein shall be in addition to
any liability the Company or a Purchaser may otherwise have to the
Indemnified Persons. Promptly after actually receiving definitive
notice of any claim in respect of which an Indemnified Person may
seek indemnification under this Section 1.5, such Indemnified
Person shall submit written notice thereof to either the Company
or Purchaser, as the case may be (an "Indemnifying Person"). The
failure of the Indemnified Person so to notify the Indemnifying
Person of any such claim shall not relieve the Indemnifying Person
from any liability it may have hereunder except to the extent that
(a) such liability was caused or materially increased by such
failure, or (b) the ability of the Indemnifying Person to reduce
such liability was materially adversely affected by such failure.
In addition, the failure of the Indemnified Person so to notify
the Indemnifying Person of any such claim shall not relieve the
Indemnifying Person from any liability it may have otherwise than
hereunder.
The Indemnifying Person shall have the right to undertake,
by counsel or representatives of its own choosing, the defense,
compromise or settlement (without admitting liability of the
Indemnified Person) of any such claim asserted, such defense,
compromise or settlement to be undertaken at the expense and risk
of the Indemnifying Person, and the Indemnified Person shall have
the right to engage separate counsel, at such Indemnified Person's
own expense, whom counsel for the Indemnifying Person shall keep
informed and consult with in a reasonable manner. In the event the
Indemnifying Person shall elect not to undertake such defense by
its own representatives, the Indemnifying Person shall give prompt
written notice of such election to the Indemnified Person, and the
Indemnified Person may undertake the defense, compromise or
settlement (without admitting liability of the Indemnified Person)
thereof on behalf of and for the account and risk of the
Indemnifying Person by counsel or other representatives designated
by the Indemnified Person. Notwithstanding the foregoing, no
Indemnifying Person shall be obligated hereunder with respect to
amounts paid in settlement of any claim if such settlement is
effected without the consent of such Indemnifying Person, which
consent shall not be unreasonably withheld.
(d) If for any reason the foregoing indemnity is unavailable to,
or is insufficient to hold harmless, an Indemnified Person, then
the Indemnifying Person shall contribute to the amount paid or
payable by the Indemnified Person as a result of such claims, in
such proportion as is appropriate to reflect the relative fault of
the Indemnifying Person and the Indemnified Person as well as any
5
other relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
1.6 Subsequent Registration Statements. The Company shall not
cause or permit any new registration statements (except registration statements
on Form X-0, X-0, or comparable forms) to become effective during the 90 days
after the effective date of a registration statement covering shares of Common
Stock owned by Purchasers.
2. Miscellaneous.
2.1 Additional Actions and Documents. Each of the parties hereto
hereby agrees to use its good faith best efforts to take or cause to be taken
such further actions, to execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments, and to obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Agreement.
2.2 Assignment. Any Purchaser may assign its rights under this
Agreement to any assignee of the Securities or the shares of Common Stock
issuable upon exercise thereof.
2.3 Entire Agreement; Amendment. This Agreement, including the
other writings referred to herein or delivered pursuant hereto, constitutes the
entire agreement among the parties hereto with respect to the transactions
contemplated herein, and it supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein.
No amendment, modification or discharge of this Agreement shall be valid or
binding unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, or discharge is sought.
2.4 Limitation on Benefits. It is the explicit intention of the
parties hereto that no person or entity other than the parties hereto (and their
respective successors and assigns) is or shall be entitled to bring any action
to enforce any provision of this Agreement against any of the parties hereto,
and the covenants, undertakings and agreements set forth in this Agreement shall
be solely for the benefit of, and shall be enforceable only by, the parties
hereto or their respective successors and assigns.
2.5 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
2.6 Governing Law. This Agreement, the rights and obligations of
the parties hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of California (without
regard to conflicts of laws principles).
2.7 Notices. All notices, demands, requests, or other
communications which may be or are required to be given, served, or sent by any
party to any other party pursuant to this Agreement shall be in writing and
shall be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery, including delivery
by courier, telegram, telex, or facsimile transmission, addressed as follows:
6
(a) If to the Company:
The Right Start, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxx Xxxx X
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Milbank, Tweed, Xxxxxx & XxXxxx
000 X. Xxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to Purchaser, to the address set forth in the Securities
Purchase Agreement for such Purchaser.
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be mailed, delivered
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a telex) the answer back being deemed conclusive
(but not exclusive) evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
2.8 Headings. Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
2.9 Execution in Counterparts. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required; and it
shall not be necessary that the signatures of each party appear on each
counterpart; but it shall be sufficient that the signature of each party appear
on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of all of the parties hereto.
7
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first above written.
THE RIGHT START, INC.
By: ___________________________
Xxxxx X. Xxxxx
Chief Executive Officer
8
KAYNE FAMILY PARTNERSHIP, L.P.
By: Jemasa, Inc.
-----------------
Xxxxxxx Xxxxx
President
Address for Notices:
0000 Xxxxxx xx xxx Xxxxx
0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Facsimile: 310.284.6490
FORTUNE TWENTY-FIFTH, INC.
-----------------
Xxxx Xxxxx
Address:
x/x Xxxx Xxxxx
X.X. Xxx 000,
Xxxxxxxxx, Xxxxxx 00000
Copy to:
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx
Facsimile: 310.551.3077
-----------------
Xxxxx X. Xxxxx, Trustee
Address:
c/o Fortune Financial
1800 Avenue of the Stars
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 310.551.3077
-----------------
Xxxxxxx Xxxxx
Address:
c/o Fortune Financial
1800 Avenue of the Stars
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 323.277.9025
-----------------
Xxxxx Xxxxxx
Address:
0000 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Facsimile: 941.262.8025
XXXXXXX FAMILY TRUST dated 12-18-90
-----------------
Xxxxx Xxxxxxx, Trustee
Address:
000 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 310.914.9242
O.S. II, Inc.
By:
-----------------
Xxxx Xxxxxxx
its President
Address:
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 818.559.5617
HSMC PARTNERS, L.P.
By:
-----------------
Xxxxxxx X. Fine
its managing partner
Address:
00 Xxxxxx Xxxxxx
Xxxxxxxx X-0
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile: 203.226.7596
-----------------
Xxxxxxx Xxxxxxx
Address: c/x Xxxxxx Brothers
0000 Xxxxxxx Xxxxxx 00xx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: 310.481.4102
-----------------
Xxxxxx X. Xxxx & Xxxxxxxx Xxxx,
as community property
Address: 000 Xxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile: 310.285.0892
-----------------
Xxxxxx X. Muh
Address: c/o Sutter Securities, Inc.
0 Xxxxxxx Xxxxxx Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile: 415.288.2355
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Xxxxxxx and Xxxxxx Xxxxxxxx
Address: 000 Xxxxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Facsimile:
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Xxxxxx Xxxxx
Address: 00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 310.966.1448
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Xxxxxxx X. Xxxxxxxx
Address: c/o Sutter Securities, Inc.
0 Xxxxxxx Xxxxxx Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile: 415.288.2355
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Xxxxx Xxxxxxxxxx
Address:
c/o PIMCO/XXXXXXXXXXX
00 Xxxxxx Xx
Xxx Xxxxx
Xxxxxx XXX 0000
XXXXXXXXX
Copy to:
0 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Facsimile: 011 612 9241 6955
215.230.9018
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Xxxx X. Xxxxxx SEP/XXX
Xxxx Xxxxxxxx Custodian
Address:
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxx Xxxxxxx, Xxxxx 00000
Facsimile: 361.888.8613
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Xxxxxxx Xxxxxxx
Address:
1330 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212.842.1540
HACKING FAMILY TRUST
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Xxxxxx X. Hacking, Trustee
Address :
0000 Xxxxxx xx xxx Xxxxx
0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile: 310.284.6444
X.X. XXXX & COMPANY MONEY PURCHASE PLAN
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Xxxxxx X. Xxxx, Trustee
Address :
X.X. Xxx 0000
or 0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxx 00000
Facsimile: 775.782.4787
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Xxxxxx Xxxxxxx, XXX
Address :
000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: 213.624.1224
EXHIBIT D
(face of security)
Number Shares
THE RIGHT START, INC., a California Corporation
Series D Convertible Pay-in-Kind Preferred Stock
Authorized: 80,000 shares of Series D Convertible Pay-in-Kind Stock
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR
QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS, OR UNLESS THE PROPOSED
TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED.
This Certifies that ______________________________________________________ is
the holder of _____________________________________________________________
shares of the Capital Stock transferable only on the books of the Corporation by
the holder hereof in person or by attorney for such holder upon surrender of
this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed This _____ day of ______________A.D. 2000
---------------------- ------------------------
Secretary President
(reverse of security)
FOR VALUE RECEIVED ______________________HEREBY SELL, ASSIGN AND TRANSFER UNTO:
--------------------------------------------------------------------------------
(Insert Social Security or other
identifying number of assignee)
_________________________________________ SHARES REPRESENTED BY THE WITHIN
CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
________________________________________________________________________________
ATTORNEY TO TRANSFER THE SAID SHARES ON THE SHARE REGISTER OF THE WITHIN
NAMED CORPORATION, WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ___________________________, 20_____
IN PRESENCE OF ________________________
Notice: The signature on this Assignment must correspond with the name as
written upon the face of the Certificate in every particular without alteration
or enlargement or any change whatever.
Conversion Notice
To convert all of the shares represented by this Certificate check the box: ___
To convert only a part of the shares represented by this Certificate state the
number of shares to be converted: ____
The undersigned hereby irrevocably elects to convert the number of shares
indicated above of the Series D Convertible Pay-in-Kind Preferred Stock
represented by this Certificate into shares of the Common Stock of the
Corporation (as such shares may be constituted on the conversion date) in
accordance with the provisions of the Articles of Incorporation of the
Corporation, and amendments thereto, and directs that the shares deliverable
upon the conversion be registered in the names(s) of the undersigned and
delivered together with a check as to payment for any fractional shares and a
certificate representing any shares of Series D Convertible Pay-in-Kind
Preferred Stock not converted to the undersigned unless a different name(s) has
been indicated in the assignment form on this Certificate or in an assignment on
any other permitted form which accompanies this Conversion Notice.
Dated: ______ _______________________________
Fill in for the Registration of Shares _______________________________
(Signatures)
____________________________ Notice: The signature on this Conversion
Name Notice must correspond with the name
as written upon the face of the
Certificate in every particular
without alteration or enlargement
____________________________ or any change whatever.
Address (including Zip)
