EXHIBIT 2
THE RIGHT START, INC.
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SECURITIES PURCHASE AGREEMENT
Dated as of May 6, 1997
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11.5% Senior Subordinated Notes due May 6, 2000
Warrants to Purchase Common Stock
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. Representations of the Purchaser..........................................................2
Section 2. REPRESENTATIONS OF THE COMPANY........................................................................2
Section 2.1. Organization and Authority of the Company.................................................2
Section 2.2. Business, Properties and Other Information Regarding the Company..........................2
Section 2.3. Capital Stock.............................................................................3
Section 2.4. Litigation; Observance of Statutes, Regulations and Orders................................3
Section 2.5. Title to Property.........................................................................3
Section 2.6. Taxes.....................................................................................4
Section 2.7. Compliance with Laws and Other Instruments of the Company.................................4
Section 2.8. Governmental Authorizations...............................................................4
Section 2.9. Licenses and Permits......................................................................4
Section 2.10. Compliance with ERISA.....................................................................4
Section 2.11. Investment Company Act....................................................................5
Section 2.12. Environmental Compliance..................................................................5
Section 2.13. Maintenance of Insurance..................................................................5
Section 2.14. Labor Relations...........................................................................5
Section 2.15. Assumptions or Guaranties of Indebtedness of Other Persons................................6
Section 2.16. Disclosure................................................................................6
Section 3. CONDITIONS OF CLOSING.................................................................................6
Section 3.1. Proceedings Satisfactory..................................................................6
Section 3.2. Representations True; Officer's Certificate...............................................6
Section 3.3. Purchase Permitted by Applicable Laws.....................................................6
Section 3.4. Securities................................................................................6
Section 3.5. Registration Rights Agreement.............................................................6
Section 4. PREPAYMENT OF THE NOTES...............................................................................7
Section 4.1. Optional Prepayment of the Notes..........................................................7
Section 4.2. Mandatory Prepayment......................................................................7
Section 4.3. Allocation of Prepayments.................................................................7
Section 4.4. Surrender of Notes; Notation Thereon......................................................7
Section 4.5. Purchase of Notes.........................................................................7
Section 5. COVENANTS.............................................................................................7
Section 5.1. Payment of Notes..........................................................................7
Section 5.2. Observance of Statutes, Regulations and Orders............................................7
Section 5.3. Corporate Existence.......................................................................7
Section 5.4. Taxes.....................................................................................7
Section 5.5. Maintenance of Properties.................................................................8
Section 5.6. Books and Records.........................................................................8
Section 5.7. Maintenance of Insurance..................................................................8
Section 5.8. Change of Control.........................................................................8
Section 5.9. Limitations on Transactions with Affiliates...............................................8
Section 5.10. Investment Company Act....................................................................8
Section 5.11. Compliance with ERISA.....................................................................8
Section 5.12. Access to Information.....................................................................8
Section 6. SEC REPORTS...........................................................................................8
Section 7. DEFINITIONS...........................................................................................9
Section 7.1. Definitions...............................................................................9
Section 7.2. Accounting Terms.........................................................................12
Section 8. EVENTS OF DEFAULT; REMEDIES..........................................................................12
Section 8.1. Events of Default Defined; Acceleration of Maturity......................................12
Section 8.2. Annulment of Defaults....................................................................13
Section 8.3. Suits for Enforcement....................................................................13
Section 8.4. Remedies Cumulative......................................................................14
Section 8.5. Remedies Not Waived......................................................................14
Section 9. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.............................................14
Section 10. HOME OFFICE PAYMENT.................................................................................14
Section 11. TAXES...............................................................................................15
Section 12. MISCELLANEOUS.......................................................................................15
Section 12.1. Indemnification..........................................................................15
Section 12.2. Expenses.................................................................................15
Section 12.3. Amendments, Waiver and Consents..........................................................15
Section 12.4. Reliance on and Survival of Representations..............................................15
Section 12.5. Successors and Assigns...................................................................15
Section 12.6. Notices..................................................................................15
Section 12.7. Counterparts.............................................................................16
Section 12.8. Governing Law............................................................................16
Section 12.9. Waiver of Jury Trial.....................................................................16
Schedules
SCHEDULE I - Purchasers
SCHEDULE 2.13 - Insurance
Exhibits
EXHIBIT A - Form of Note
EXHIBIT B - Form of Warrant
EXHIBIT C - Form of Registration Rights Agreement
THE RIGHT START, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of May 6, 1997
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 (a) an issue of its 11.5%
Senior Subordinated Notes due May 6, 2000 (the "Notes") in the aggregate
principal amount of $3,000,000 and (b) an issue of warrants (the "Warrants") to
purchase an aggregate of 475,000 Stock Units, initially covering 475,000 shares
of the Company's common stock and exercisable at $3.00 per Stock Unit (as
defined in the Warrants). Each Note shall be in the form of Exhibit A and shall
mature, bear interest and be payable and shall be otherwise as provided herein
and therein. Each Warrant shall be in the form of Exhibit B and shall be
exercisable, transferable and subject to adjustment and shall be otherwise as
provided herein and therein.
As used herein, the term "Notes" and "Warrants" shall include
all notes or warrants, as the case may be, originally issued pursuant to this
Securities Purchase Agreement (the "Agreement") and all notes or warrants
delivered in substitution or exchange for any of such notes or warrants and,
where applicable, shall include the singular number as well as the plural. The
term "Note" shall mean one of the Notes and the terms "Warrant" shall mean one
of the Warrants. The Notes 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 (a) Notes in an aggregate
principal amount of $3,000,000 and (b) Warrants to purchase an aggregate of
475,000 Stock Units, at a combined purchase price equal to 100% of the aggregate
principal amount of the Notes. The Purchasers and the Company agree and
acknowledge that the value of the Warrants is equal to $0.74 per Stock Unit
covered thereby on the Closing Date. The Purchasers and the Company agree and
acknowledge that for purposes of determining whether there is any original issue
discount on the Notes, the proper rate of discount for determining the Notes'
value is 11.5% and the Purchasers and each subsequent Holder and the Company
agree to report payments of interest on the Notes consistent with this
determination of value.
The closing (the "Closing") of such purchase of the Securities
shall be held at 7:00 a.m., Los Angeles time, on May 6, 1997 (the "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; provided,
however, that if the Closing Date shall not have occurred within ten (10)
Business Days after the date hereof, the Purchasers' obligation to purchase and
pay for the Notes hereunder shall be terminated and the Purchasers shall have no
liability or further obligations hereunder.
On the Closing Date, the Company shall deliver to each
Purchaser one or more certificates representing the Notes and 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 Closing Date (or, in the absence of
such notice, one certificate representing the Notes and one certificate
representing the Warrants, registered in such Purchaser's name), duly executed
and dated the Closing Date, against each Purchaser's delivery to the Company of
immediately available funds in the amount of the purchase price.
Section 1.3. Representations of the Purchaser. Each Purchaser
represents and warrants to the Company that:
(a) Purchaser is an "accredited investor" within the meaning
of Rule 501 under the Securities Act and was not organized for the specific
purpose of acquiring the Securities.
(b) Purchaser has sufficient knowledge and experience so as to
be able to evaluate the risks of merits of investment in the Company, and it is
able financially to bear the risks thereof.
(c) On the Closing Date, Purchaser is acquiring the Securities
for such Purchaser's own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof in violation of
the Securities Act.
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, 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 audited report of the Company's independent accountants for the
transition period ended February 1, 1997 containing balance sheets of the
Company as of the last day of the eight month period ended February 1, 1997 and
the fiscal year ended June 1, 1996, and the related statements of operations,
stockholders' equity and cash flows of the Company for the eight month period
ended February 1, 1997 and the fiscal year ended June 1, 1996 (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,
stockholders' 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
February 1, 1997, 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.
(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 February 1, 1997, 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. To the best
of the Company's knowledge, no fact 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 materially adversely affect the ability of the Company to
perform its respective obligations under this Agreement, the Securities, 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, no par value per share (the "Common Stock").
On the date hereof and on the Closing Date, 8,593,639 shares of Common Stock are
and will be issued and outstanding, all of which shares have been duly and
validly issued and are fully paid and nonassessable. On the date hereof and on
the Closing Date, no shares of Preferred Stock have or will have been issued.
(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) the Convertible Debenture dated October 11, 1996 issued to
Strategic Associates, L.P., and (ii) the Convertible Debenture dated October 11,
1996 issued to Xxxxxx, Xxxxxxx Strategic Partners, L.P.
(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 (other than the Warrants) 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) the Registration Rights Agreement dated October
11, 1996 between the Company and Strategic Associates, L.P., and (iii) the
Registration Rights Agreement dated October 11, 1996 issued to Xxxxxx, Xxxxxxx
Strategic Partners, L.P.
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 is 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.
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 securities of the Company are not employer securities
with respect to any employee benefit plan other than the above listed plan. 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 business, condition (financial or other), assets,
properties, operations or prospects of 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 transition period
ended February 1, 1997, which includes the Financial Statements (the "Form 10-K
Documents"). Such documents are true, accurate and complete in all material
respects. Neither this Agreement, the Financial Statements, the Form 10-K
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 or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading. 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 Form 10-K Documents or in writing by them to
Purchaser and which materially adversely affects, or in the future in their
opinion may, insofar as they can now reasonably foresee, materially adversely
affect, the business, properties, assets, operations, prospects or condition,
financial or otherwise, of the Company.
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 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; no Default or
Event of Default shall have occurred and be continuing; 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 hereto, 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.
Section 3.5. Registration Rights Agreement. The Company and
the Purchasers shall have entered into the Registration Rights Agreement
substantially in the form set forth as Exhibit 3.5 hereto.
Section 4. PREPAYMENT OF THE NOTES.
Section 4.1. Optional Prepayment of the Notes. The Notes shall
be subject to prepayment at the option of the Company only as set forth in this
Section 4.1. Upon notice given as provided below, the Company, at its option,
may prepay the Notes in whole or in part at any time at par plus accrued
interest thereon to the date of such prepayment, without premium. The Company
shall give written notice of prepayment of the Notes pursuant to this Section
4.1 to each holder of any outstanding Notes not less than ten (10) Business Days
prior to the date fixed for such prepayment in such notice, which notice shall
specify the amount so to be prepaid and the date fixed for such prepayment. Upon
the giving of notice of any prepayment as provided in this Section, the Company
shall prepay on the date therein fixed for prepayment the principal amount of
the Notes so to be prepaid as specified in such notice, together with interest
accrued thereon to such date fixed for prepayment.
Section 4.2. Mandatory Prepayment. The Notes shall be subject
to mandatory prepayment by the Company only as set forth in Section 5.8 below.
Section 4.3. Allocation of Prepayments. In the event of any
prepayment pursuant to this Section 4 of less than all of the outstanding Notes,
the Company shall allocate the principal amount so to be prepaid pro rata among
all outstanding Notes.
Section 4.4. Surrender of Notes; Notation Thereon. Upon any
prepayment of a portion of the principal amount of any Note pursuant to Section
4.1 above, the Holder of such Note at its option may require the Company to make
and deliver, at the expense of the Company (other than for transfer taxes, if
any), upon surrender of such Note, a new Note payable to such person or persons
as may be designated by such Holder in the principal amount then remaining
unpaid of the surrendered Note, dated as of the date to which interest has been
paid on the unpaid principal amount of the surrendered Note (or, if no such
interest has been paid, dated as of the date of the surrendered Note), or may
present such Note to the Company for notation thereon of the payment of the
portion of the principal amount of such Note so prepaid.
Section 4.5. Purchase of Notes. The Company shall not, and
shall not permit any Affiliate of the Company to, acquire directly or indirectly
by purchase or prepayment or otherwise any of the outstanding Notes except by
way of payment or prepayment in accordance with the provisions of the Notes and
of this Agreement. Any Notes so acquired shall not be deemed to be outstanding.
Section 5. COVENANTS. The Company covenants and agrees that on
and after the date hereof, so long as any Note shall be outstanding, that it
will perform and observe the following covenants and provisions and will cause
each Subsidiary to perform and observe such of the following covenants and
provisions as are applicable to such Subsidiary:
Section 5.2. Payment of Notes; Issuance of Additional
Warrants. The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and this Agreement.
Section 5.3. Observance of Statutes, Regulations and Orders.
The Company shall remain at all times in compliance with all statutes or other
rules or regulations of any Governmental Body, including any Environmental Law,
the violation of which might have a Material Adverse Effect on the Company or
materially adversely affect the ability of the Company to perform its
obligations under this Agreement and the Securities.
Section 5.4. Corporate Existence. The Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect, and shall cause each Subsidiary to preserve and keep in full force and
effect, its corporate existence in accordance with the rights (charter and
statutory), licenses and franchises of the Company; provided, however, that the
Company shall not be required to preserve any such right, license or franchise
if the Board of Directors shall determine in good faith in accordance with the
Company's charter that the preservation thereof is no longer desirable in the
conduct of the business of the Company, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders.
Section 5.4. Taxes. The Company shall pay, and shall cause
each Subsidiary to pay, prior to delinquency, all material taxes, assessments
and governmental levies that may be imposed upon the Company, except as
contested in good faith and by appropriate proceedings.
Section 5.5. Maintenance of Properties. The Company shall, and
shall cause each of its Subsidiaries to, maintain, preserve, protect and keep
its properties in good repair, working order and condition (ordinary wear and
tear excepted), and make necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times consistent with past practices of the Company.
Section 5.6. Books and Records. The Company shall keep books
and records which accurately reflect all of its material business affairs and
transactions.
Section 5.7. Maintenance of Insurance. The Company shall
maintain, and cause each Subsidiary to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Company
operates.
Section 5.8. Change of Control. If at any time there is a
Change of Control of the Company then the Company shall, immediately following
the occurrence of any such event, send a notice to each Holder offering to
repurchase the Notes (or at each Holder's option, any portion thereof) at the
par amount thereof, plus interest accrued and unpaid on the Notes to the date of
such repurchase. If any Holder desires to accept such offer in whole or in part,
such Holder must advise the Company of such acceptance within 30 days of the
date of receiving such notice. The Company shall then repurchase the Notes or
portion thereof so tendered for repurchase by such Holder by paying the purchase
price to the Holder (or any person or persons designated by such Holder in such
acceptance notice), in immediately available funds, within five days of the
Company's receipt of such Holder's acceptance notice. If Holder tenders only a
portion of such Holder's Note, the Holder shall deliver such Note to the Company
and the Company then shall issue to the Holder a new subordinated note with the
same interest rate, maturity date and other terms as Holder's Note, representing
the portion of the Note not repurchased by the Company.
Section 5.9. Limitations on Transactions with Affiliates. The
Company shall not make, and shall cause its Subsidiaries not to make, any
payment to or investment in, or enter into any transaction with, any Affiliate,
including without limitation the purchase, sale or exchange of property or the
rendering of any service, except pursuant to the reasonable requirements of the
Company's existing or proposed business; provided that such transaction is on
terms comparable to those generally available on an arm's-length basis.
Section 5.10. Investment Company Act. The Company shall not
become an investment company subject to registration under the Investment
Company Act of 1940, as amended.
Section 5.11. Compliance with ERISA. The Company shall comply,
and cause each Subsidiary to comply, with the provisions of ERISA and the Code,
and the rules and regulations thereunder, which are applicable to any Plan. The
Company shall permit any event or condition to exist which could permit any such
plan to be terminated under circumstances which would cause the lien provided
for in Section 4068 of ERISA to attach to the assets of the Company.
Section 5.12. Access to Information. At the request of any
Purchaser (a "Requesting Purchaser"), the Company shall provide such Requesting
Purchaser with the monthly unaudited balance sheet of the Company as of the last
day of the month then ended and the related unaudited statements of operations,
stockholders' equity and cash flows of the Company for the month then ended. A
Requesting Purchaser under this Section 5.12 hereby acknowledges that it is
aware of the restrictions imposed by federal and state securities laws on a
person possessing material nonpublic information about a company. In this
regard, a Requesting Purchaser hereby agrees that while it is in possession of
material nonpublic information with respect to the Company and its subsidiaries,
such Requesting Purchaser will not purchase or sell any securities of the
Company, or communicate such information to any third party, in violation of any
such laws. Such Requesting Purchaser also agrees that, if requested by the
Company, such Requesting Purchaser will cause any of its representatives,
consultants or advisors who have been or may become apprised of any material
nonpublic information about the Company to give a written undertaking to the
same effect to the Company.
Section 6. SEC REPORTS. The Company shall file all reports and
other information and documents which it is required to file with the Securities
and Exchange Commission ("SEC") pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). The
Company will cause any quarterly and annual reports, proxy statements and any
other documents which it mails to its stockholders to be mailed each Holder.
If the Company is not subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company will prepare, for the first
three quarters of each fiscal year, quarterly financial statements substantially
equivalent to the financial statements required to be included in a report on
Form 10-Q under the Exchange Act. The Company will also prepare, on an annual
basis, complete audited consolidated financial statements, including, but not
limited to, a balance sheet, a statement of income and retained earnings, a
statement of changes in financial position and all appropriate notes. All such
financial statements will be prepared in accordance with generally accepted
accounting principles consistently applied, except for changes with which the
Company's independent accountants concur, and except that quarterly statements
may be subject to year-end adjustments. The Company will cause a copy of such
financial statements to be mailed to each Holder of a Note as soon as available
within forty-five (45) days after the close of each of the first three quarters
of each fiscal year and within ninety (90) days after the close of each fiscal
year.
Each Holder of a Note and prospective purchasers designated by
such holder will have the right to obtain from the Company upon request by such
holder or prospective purchasers, during any period in which the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the information required by
paragraph d(4)(i) of Rule 144A under the Securities Act.
Section 7. DEFINITIONS.
Section 7.1. 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. Notwithstanding the
foregoing, the holders of the Securities shall be deemed not to be Affiliates of
the Company for purposes of this Agreement.
"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 which, in
accordance with GAAP, should be capitalized on the lessee's balance sheet or for
which the amount of the asset and liability thereunder as 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
which should be so capitalized or disclosed.
"Change of Control" means an event or series of events by
which (1) Xxxxx Xxxxxxxx ceases to beneficially own (as beneficial ownership is
defined in Rule 13d-3 of the Exchange Act) and control, directly or indirectly,
at least twenty-five percent (25%) of the issued and outstanding shares of each
class of capital stock of the Company entitled (without regard to the occurrence
of any contingency) to vote for the election of a majority of the members of the
board of directors of the Company; (2) any person or group (as defined in Rule
13d-1 of the Exchange Act), other than a group which includes Xxxxx Xxxxxxxx,
who obtains beneficial ownership (as defined in Rule 13d-3 of the Exchange Act)
or control of a majority of the securities of the Company ordinarily having the
right to vote in the election of directors; (3) during any two year period
commencing on the Closing Date, individuals who at the beginning of such period
constituted the Board of Directors cease for any reason to constitute a majority
of the Board of Directors; (4) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, the assets of the Company; (5) the merger or consolidation of the Company
with another company with the effect that immediately after such transaction any
beneficial owner of the Company shall have become the beneficial owner of
securities of the company surviving such merger or consolidation representing a
majority of the combined
voting power of the outstanding securities of the surviving company ordinarily
having the right to vote in the election of directors; or (6) the adoption of a
plan leading to the liquidation or dissolution of the Company.
"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 2.11.
"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
2.3.
"Company" means The Right Start, Inc., a California
corporation.
"Convertible Debenture" means the Xxxxxx, Xxxxxxx Convertible
Debentures issued by the Company on October 11, 1996.
"Default" means any default or other event which, with notice
or the lapse of time or both, would constitute an Event of Default.
"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 2.11.
"ERISA Affiliate" means any corporation that is a member of
the same controlled group of corporations (within the meaning of Section 414(b)
of the Code) as the Company or any corporation or trade or business that is
under common control (within the meaning of Section 414(c) of the Code) with the
Company.
"Events of Default" has the meaning ascribed thereto in
Section 9.1.
"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.
"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
lessor 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 Notes (or any note or notes
issued by the Company in exchange therefor in accordance with this Agreement) 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., KAIM Non-Traditional, L.P., Xxxxx Xxxxxxxx Non-Traditional Investments,
L.P., Xxxxx Xxxxxxxx Offshore Limited, ARBCO Associates, L.P., Offense Group
Associates, L.P., and Opportunity Associates, 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.
"Notes" has the meaning ascribed thereto in Section 1.1.
"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 that is senior in right of payment to a
Holder of the Notes.
"Person" shall include an individual, a corporation, an
association, a 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.
"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.
"Stock Unit" shall constitute one share of Common Stock, as
such Common Stock was constituted on the Closing Date 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 of the
Warrants.
"Subsidiary" means any corporation or other entity of which
the Company and/or one or more of its Subsidiaries own more than 50% of the
outstanding stock or other interest having by its terms ordinary voting power to
elect a majority of the board of directors of such corporation, entity or
otherwise control such corporation or entity, and, except as otherwise expressly
indicated herein, references to Subsidiaries shall refer to Subsidiaries of the
Company.
"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.
"Warrants" has the meaning ascribed thereto in Section 1.1.
Section 7.2. 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 8. EVENTS OF DEFAULT; REMEDIES.
Section 8.1. Events of Default Defined; Acceleration of
Maturity. If any of the following events ("Events of Default") shall occur and
be continuing (for any reason whatsoever and whether it shall be voluntary or
involuntary or by operation of law or otherwise):
(a) The Company shall fail to pay any installment of principal
of or interest on the Notes when due and any such failure shall not be
cured by full performance thereof within ten (10) days after written
notice thereof shall have been given to the Company by any registered
Holder; or
(b) The Company shall default in the performance of any
covenant contained in Article 5 and any such failure shall not be cured
by full performance thereof within ten (10) days after written notice
thereof shall have been given to the Company by any Holder; or
(c) Any representation or warranty made by the Company in this
Agreement or by the Company (or any officers of the Company) in any
certificate, instrument or written statement contemplated by or made or
delivered pursuant to or in connection with this Agreement, shall prove
to have been incorrect when made in any material respect; or
(d) The Company shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement, or a Note on
its part to be performed or observed and any such failure shall not be
cured by full performance thereof within ten (20) days after written
notice thereof shall have been given to the Company by any Holder; or
(e) The Company shall (i) admit in writing its inability to
pay its debts generally as they become due; (ii) commence a voluntary
case under Title 11 of the United States Code as from time to time in
effect, or authorize, by appropriate proceedings of its Board of
Directors or other governing body, the commencement of such a voluntary
case; (iii) file an answer or other pleading omitting or failing to
deny the material allegations of a petition filed against it commencing
an involuntary case under such Title 11, or seek, consent to or
acquiesce in the relief therein provided, or fail to controvert timely
the material allegations of any such petition; (iv) suffer the entry an
order for relief in any involuntary case commenced under said Title 11;
(v) seek relief as a debtor under any applicable law, other than said
Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief; (vi)
suffer the entry of an order by a court of competent jurisdiction (A)
finding it to be bankrupt or insolvent, (B) ordering or approving its
liquidation, reorganization or any modification or alteration of the
rights of its creditors, or (C) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial part of its
property; or (D) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint or consent to the
appointment of a receiver or other custodian or all or a substantial
part of its property; or
(f) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against the property of the
Company in an aggregate amount which exceeds $2,500,000 and such
judgment, writ, or similar process shall not be released, vacated or
fully bonded or stayed pending appeal within sixty (60) days after its
issue or levy.
Upon the occurrence of any Event of Default, and in any such event, Purchaser or
any other Holder of any Note may, by notice to the Company, declare the entire
unpaid principal amount of such Note, all interest accrued and unpaid thereon
and all other amounts payable to such holder under such Note or this Agreement
to be forthwith due and payable, whereupon such Note, all such accrued interest
and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company with respect to itself and its
Subsidiaries.
Section 8.2. Annulment of Defaults. If at any time after the
principal of any Note shall have become due and payable, and before any judgment
or decree for the payment of the moneys so due shall have been entered, all
arrears of interest upon such Note and all other sums payable to the Holder of
such Note under this Agreement (except the principal amount which by such
declaration shall have become payable) shall have been duly paid, and every
other default and Event of Default shall have been made good or cured, then and
in every such case the Holder of such Note, by written instrument filed with the
Company, may rescind and annul such declaration and its consequences; but no
such rescission or annulment shall extend to or affect any other or subsequent
default or Event of Default or impair any right of the Holders of any other Note
consequent thereon.
Section 8.3. Suits for Enforcement. If any Event of Default
shall have occurred and be continuing, any Holder may proceed to protect and
enforce its rights, either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the exercise of any power granted in this Agreement,
or such Holder may proceed to enforce the payment of all sums due upon such Note
or to enforce any other legal or equitable right of such Holder.
The Company covenants that, if it shall default in the making
of any payment due under any Note or in the performance or observance of any
agreement contained in this Agreement, it shall pay to any Holder such further
amounts, to the extent lawful, as shall be sufficient to pay the costs and
expenses of collection or of otherwise enforcing such Holder's rights, including
reasonable counsel fees and costs and expenses incurred in connection with any
restructuring, refinancing, workout, bankruptcy or other similar transaction or
proceeding. The obligations set forth in this paragraph shall survive the
payment in full of the Notes.
Section 8.4. Remedies Cumulative. No remedy herein conferred
upon any Holder is intended to be exclusive of any other remedy and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
Section 8.5. Remedies Not Waived. No course of dealing between
the Company and the Holders and no delay or failure in exercising any rights
hereunder or under any Note in respect thereof shall operate as a waiver of any
rights of any Holder.
Section 9. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. 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 Notes.
The Notes 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 Notes may, at such holder's option,
surrender the same for transfer or exchange either at the principal executive
office of the Company or at the place of payment named in such Note, 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 Note,
the Company at its expense shall execute and deliver in exchange therefor one or
more new Notes, as may be requested by such holder, in the same denomination or
denominations as the Notes or Notes so surrendered. Any Note issued in exchange
for any other Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, and neither gain nor loss of interest shall result from any such
transfer or exchange.
The Company and any agent of the Company may treat the Person
in whose name any Note is registered as the owner of such Note for the purpose
of receiving payment of the principal of and premium (if any) and interest on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue.
Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of any Note, and (in case of loss,
theft or destruction) of indemnity reasonably satisfactory to it, upon surrender
and cancellation of such Note or receipt of such indemnity, the Company shall
make and deliver in lieu of such Note a new Note in the same denomination and,
in the case of a Note, dated as of the date to which interest has been paid
thereon.
Notwithstanding the foregoing provisions of this Section, if
any Note 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 Note 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 Note in lieu of such Note (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 10. HOME OFFICE PAYMENT. Notwithstanding anything to
the contrary in this Agreement or the Notes, so long as any Purchaser or any
nominee designated by such Purchaser shall be a Holder of any Notes, the Company
shall punctually pay all amounts which become due and payable on such Note to
such Purchaser at such Purchaser's address set forth on its signature page
hereto, and in the manner set forth in the Notes, or at such other
place and in such other manner as such Purchaser may designate by notice to the
Company, without presentation or surrender of such Note. Each Purchaser agrees
that prior to the sale, assignment, transfer or other disposition of any such
Note, such Purchaser shall make notation thereon of the portion of the principal
amount paid or prepaid and the date to which interest has been paid thereon, or
surrender the same in exchange for a Note or Notes aggregating the same
principal amount as the unpaid principal amount of the Note so surrendered. The
Company agrees to enter into an agreement similar to that contained in this
Section with any other institutional investor (or nominee thereof) who shall
hold any of the Notes.
Section 11. TAXES. The Company shall pay all taxes (including
interest and penalties), other than taxes imposed on the income of the Holders,
which may be payable in respect of the execution and delivery of this Agreement
or of the execution and delivery of any of the Notes or of any amendment of, or
waiver or consent under or with respect to, this Agreement or any of the Notes
and shall save each Purchaser and all subsequent Holders of the Notes harmless
against any loss or liability resulting from nonpayment or delay in payment of
any such tax. The obligations of the Company under this Section shall survive
the payment of the Notes and the exercise of the Warrants.
Section 12. MISCELLANEOUS.
Section 12.1. Indemnification. The Company hereby agrees to
indemnify, exonerate and hold Purchaser and each of its partners and affiliates,
and their stockholders, 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 12.2. Expenses. The Company and Purchaser each agree
to pay all their own costs and expenses in connection with the preparation,
execution and delivery of this Agreement, the Note and other instruments and
documents to be delivered hereunder.
Section 12.3. Amendments, Waiver and Consents. No amendment,
modification or addition to this Agreement, and no waiver of or consent to
noncompliance with any covenant or other provision of this Agreement, or the
Note shall be effective unless in writing and duly executed by the party against
whom enforcement of such amendment, modification, addition, waiver or consent is
sought. Any waiver or consent may be given subject to satisfaction of conditions
stated therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
Section 12.4. 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 Notes, and shall continue in
effect so long as any Note is outstanding and thereafter as provided in Sections
8.3, 11 and 12.2.
Section 12.5. 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 Notes. The Company may not
assign its rights under this Agreement.
Section 12.6. 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
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 original Holder) 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.
Section 12.7. 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 12.8. Governing Law. This Agreement and the Notes 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 Delaware.
Section 12.9. Waiver of Jury Trial. EACH PURCHASER, EACH
HOLDER, BY ITS ACCEPTANCE OF ANY OF THE NOTES, AND THE COMPANY, EACH HEREBY
AGREE 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 NOTES, OR ANY OTHER
AGREEMENTS RELATING TO THE NOTES 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 NOTES, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE NOTES. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the Court.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 15.3 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No persons guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
[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
The foregoing Agreement is hereby accepted as of the date first above written:
XXXXXX X. XXXX, as Trustee for the X. X. Xxxx &
Company Money Purchase Plan
By: /s/ Xxxxxx X. Xxxx
----------------------------------
Xxxxxx X. Xxxx
Address for Notices and Payments:
----------------------------------
-----------------------------------
Attention: Xxxxxx X. Xxxx
Telephone: ( ) _________________
Telecopy: ( ) _________________
With a copy to:
-----------------------------------
-----------------------------------
Attention:
Telephone: ( ) _________________
Telecopy: ( ) _________________
The foregoing Agreement is hereby accepted as of the date first above written:
XXXXXX, XXXXXXX STRATEGIC PARTNERS FUND, L.P.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------
Name:
Title:
Address for Notices and Payments:
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
The foregoing Agreement is hereby accepted as of the date first above written:
ARBCO Associates, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------
Address for Notices and Payments:
0000 Xxxxxx xx xxx Xxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (310) _________________
The foregoing Agreement is hereby accepted as of the date first above written:
XXXX XXXXX, an individual
/s/ Xxxx Xxxxx
---------------------------------
Address for Notices and Payments:
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
------------------------------------
-----------------------------------
Attention:
Telephone: ( ) _________________
Telecopy: ( ) _________________
the foregoing Agreement is hereby accepted as of the date first above written:
XXXXX XXXXXXXX NON-TRADITIONAL INVESTMENTS, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Address for Notices and Payments:
0000 Xxxxxx xx xxx Xxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (310) _________________
The foregoing Agreement is hereby accepted as of the date first above written:
XXXXX XXXXXXXX OFFSHORE LIMITED
By: /s/ CFS Company Ltd
Address for Notices and Payments:
0000 Xxxxxx xx xxx Xxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (310) _________________
The foregoing Agreement is hereby accepted as of the date first above written:
OFFENSE GROUP ASSOCIATES, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Address for Notices and Payments:
0000 Xxxxxx xx xxx Xxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (310) _________________
The foregoing Agreement is hereby accepted as of the date first above written:
OPPORTUNITY ASSOCIATES, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Address for Notices and Payments:
0000 Xxxxxx xx xxx Xxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (310) _________________
The foregoing Agreement is hereby accepted as of the date first above written:
STRATEGIC ASSOCIATES, L.P.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Address for Notices and Payments:
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
The foregoing Agreement is hereby accepted as of the date first above written:
XXXXXXX X. XXXXXXX
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Address for Notices and Payments:
----------------------------------
-----------------------------------
Attention: Xxxxxxx Xxxxxxx
Telephone: (212) _________________
Telecopy: (212) _________________
With a copy to:
-----------------------------------
-----------------------------------
Attention:
Telephone: ( ) _________________
Telecopy: ( ) _________________
The foregoing Agreement is hereby accepted as of the date first above written:
THE TRAVELERS INDEMNITY COMPANY
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Address for Notices and Payments:
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone: (212) _________________
Telecopy: (212) _________________
With a copy to:
-----------------------------------
-----------------------------------
Attention:
Telephone: ( ) _________________
Telecopy: ( ) _________________
SCHEDULE I
Amount of
Purchasers Notes Purchased
ARBCO Associates, L.P. $150,000.00
Xxxxxx X. Xxxx, as Trustee for the X.X. Xxxx &
Company Money Purchase Plan 200,000.00
Xxxxxx, Xxxxxxx Strategic Partners Fund, L.P. 948,000.00
Xxxx Xxxxx 250,000.00
Xxxxx Xxxxxxxx Non-Traditional Investments, L.P. 150,000.00
Xxxxx Xxxxxxxx Offshore Limited 225,000.00
Offense Group Associates, L.P. 400,000.00
Opportunity Associates, L.P. 275,000.00
Strategic Associates, L.P. 52,000.00
Xxxxxxx Xxxxxxx 150,000.00
The Travelers Indemnity Company 200,000.00
-------------
TOTAL: $3,000,000.00
=============
