SERIES G CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
This Series G Convertible Preferred Purchase Agreement (the "Agreement"),
dated as of September 5, 2001, is made by and between The Right Start, Inc., a
California corporation (the "Issuer") and ▇▇▇▇ ▇▇▇▇▇, an individual, ARBCO
Associates, L.P., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Diversified Capital Partners, L.P., ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Non-Traditional Investments, L.P., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Offshore Limited and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Capital Partners, L.P. (collectively "Purchasers"), with
reference to the following facts:
A. Issuer has filed a Certificate of Determinations with respect to its
Series G Convertible Preferred Stock, par value $.01 per share ("Series G
Preferred Stock"), with the California Secretary of State.
B. Issuer desires to sell and Purchasers desire to purchase an aggregate
of 2,200 shares of Series G Preferred Stock (in the amounts per Purchaser set
forth on Exhibit B hereto) convertible, upon approval of Issuer's shareholders,
into 2.2 million shares of Issuer's common stock, no par value ("Common Stock"),
as herein provided.
It is therefore agreed as follows:
1. Purchase and Sale. Subject to and upon the terms and conditions of this
Agreement, at the Closing (as hereinafter defined), Issuer shall sell, and
Purchasers shall purchase 2,200 shares of the Series G Preferred Stock in
exchange for $5.5 million paid by Purchasers.
2. Authorization; Closing.
Issuer has, prior to the date of this Agreement, caused the Certificate
of Determination setting forth the rights, preferences and privileges of the
Series G Convertible Preferred Stock ("Series G Preferred"), in the form
attached as Exhibit A (the "Certificate"), to be filed with the California
Secretary of State. Subject to and upon the terms and conditions of this
Agreement, at the Closing, Issuer shall sell to Purchasers 2,200 shares of
Series G Preferred (the "Shares"). At the Closing, Issuer shall deliver to
Purchaser the Shares by delivery to Purchaser of stock certificate(s)
representing the Shares.
The consummation of the purchase and sale of the Series G
Preferred (the "Closing") shall take place at the Purchaser's offices located at
1800 Avenue of the Stars, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on
September 5, 2001, or such other date or at such other time as the parties may
mutually agree. At the Closing, (i) Purchasers shall deliver $5.5 million and
(ii) Issuer shall deliver the stock certificate(s) representing the Shares.
3. Representations and Warranties of Purchasers. Each Purchaser represents and
warrants to Issuer as follows:
3.1 Organization and Authority. Such Purchaser (other than ▇▇▇▇ ▇▇▇▇▇) is a
limited partnership or, in the case of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Offshore Limited, a
British Virgin Islands corporation, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.
3.2 Authorization. The execution and delivery of this Agreement, and the
consummation of the transactions called for hereunder, has been duly authorized
by all necessary action on the part of such Purchaser. This Agreement
constitutes a valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms except as limited by
bankruptcy and insolvency laws and other laws affecting the rights of creditors
generally.
3.3 Investment. Such Purchaser is acquiring the Shares in good faith for
his or its own account and for the purpose of investment in Issuer and not with
a view to or for sale in connection with any distribution of such Shares or any
interest therein. Such Purchaser has a preexisting business or personal
relationship with Issuer or its officer, directors or controlling persons and,
by reason of such Purchaser's business and financial experience, has the
capacity to protect its own interest in connection with the acquisition of the
Shares. Such Purchaser represents and warrants that it is an "accredited
investor" within the meaning of paragraph (1), (2), (3), (7) or (8) of Rule
501(a) of the Act. Such Purchaser acknowledges that it has reviewed the publicly
filed information about Issuer, that it has received such other information
(from sources other than Issuer) as it has deemed necessary and appropriate to
make its own investment analysis and decision to acquire securities of Issuer
and that it has independently and without reliance on Issuer or any oral or
written representation or warranty from Issuer, its officers, shareholders,
directors or other representatives (other than representations or warranties
made by Issuer in this Agreement), made its own decision to acquire such
securities and enter into this Agreement. Such Purchaser shall have no recourse
against Issuer, its officers, shareholders, directors or other representatives,
nor shall any such person incur any liability, for any misstatement (whether
material or immaterial) or omission.
Except for the foregoing representations and warranties, there are not
representations or warranties of any kind being given by any Purchaser to Issuer
in connection with this Agreement or the transactions contemplated by this
Agreement.
4. Representations and Warranties of Issuer. Issuer represents and warrants to
Purchasers as follows:
4.1 Organization and Authority. Issuer is a corporation duly organized,
validly existing and in good standing under the laws of California, and has all
necessary power to enter into and perform this Agreement.
4.2 Authorization. The execution and delivery of this Agreement, and the
consummation of the transactions called for hereunder, has been duly authorized
by all necessary corporate and, subject to Section 5.1 hereof, shareholder
action on the part of Issuer, will not conflict with or result in a breach of
the articles of incorporation or bylaws of Issuer. This Agreement constitutes a
valid and binding obligation of Issuer, enforceable against Issuer in accordance
with its terms except as limited by bankruptcy and insolvency laws and other
laws affecting the rights of creditors generally.
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4.3 Offering. Subject in part to the truth and accuracy of the
representations of Purchasers set forth in this Agreement, the offer, sale and
issuance of the Shares and the shares of Common Stock issuable upon conversion
of the Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act of 1933, as amended, and applicable state
securities laws.
4.4 Validity of Shares. Upon issuance, the Shares will be duly and
validly issued, fully paid, non-assessable and free and clear of all Liens.
Subject to Section 5.1 hereof, the shares of Common Stock issuable upon
conversion of the Shares will be duly and validly reserved and, upon issuance in
accordance with the conversion provisions of the Shares, will be duly and
validly issued, fully paid, non-assessable and free and clear of all Liens.
5. Covenants of Issuer. Following the Closing, Issuer hereby covenants with each
Purchaser as follows:
5.1 Shareholder Approval. As promptly as practicable after the Closing
and in any event prior to the earlier of January 15, 2001 and such date as
Issuer clears its proxy statement (filed prior to November 15, 2001) with the
Securities and Exchange Commission (the "SEC"), Issuer shall convene a meeting
of its shareholders at which such shareholders will be asked to approve, among
other matters: (a) an amendment to Issuer's Articles of Incorporation to
increase the authorized number of shares of Common Stock to allow for the
issuance of shares of Common Stock upon conversion of the Shares pursuant to the
Certificate; (b) the conversion feature of the Series G Preferred set forth in
Article IV of the Certificate; and (c) the issuance of shares of Common Stock to
Purchaser upon conversion of the Shares pursuant to the Certificate. Issuer
shall promptly prepare and file with the SEC pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and as promptly as practicable
after receipt of comments from the SEC staff with respect thereto and any
required or appropriate amendments thereto shall mail to stockholders of Issuer,
a proxy statement (as amended or supplemented from time to time the "Proxy
Statement") in connection with such special meeting of shareholders
("Shareholders' Meeting"). Issuer shall notify Purchaser promptly of the receipt
by it of any comments from the SEC or its staff and of any request by the SEC
for amendments or supplements to the Proxy Statement or for additional
information, and will supply Purchaser with copies of all correspondence between
it and its representatives, on the one hand, and the SEC or the members of its
staff or any other governmental officials, on the other hand, with respect to
the Proxy Statement.
5.2 Registration Rights Agreement. As promptly as practicable after the
Closing and in any event prior to filing the preliminary Proxy Statement with
the SEC, Issuer will enter into a written registration rights agreement with
each Purchaser (the "Registration Rights Agreement") (i) granting demand and
piggyback rights to cause the registration for resale of the Common Stock
issuable upon conversion of the Shares and (ii) confirming such rights with
respect to all other Common Stock now held, or available upon exercise or
conversion of other securities now held, by the Purchasers or their affiliates.
Any registration rights so granted shall, with respect to registrations on Form
S-3, also provide that if Form S-3 is not available at the time, Issuer will use
Form S-1 and agree to file post-effective amendments to such registration
statement until all shares covered by the registration statement have been
distributed.
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6. Agreements of the Parties.
6.1 Conditions to Closing.
(a) The obligation of Purchaser to sell and of Issuer to acquire the
Shares at the Closing pursuant to this Agreement shall be subject to there being
no order of any court or administrative agency in effect which restrains or
prohibits the transactions contemplated hereby, and no suit, action,
investigation, inquiry or other legal or administrative proceeding having been
instituted and remaining pending on the date of the Closing, or threatened on
that date, which challenges the validity or legality of the transactions
contemplated hereby and which (i) has a reasonable likelihood of success on the
merits and (ii) if adversely determined, would render it unlawful, as of such
date, to effect the transactions contemplated by this Agreement substantially in
accordance with its terms.
(b) The obligations of Purchaser to purchase the Shares at the Closing
pursuant to the terms of this Agreement shall be subject to the performance by
Issuer in all material respects of its covenants and obligations hereunder to be
performed at or prior to the Closing and to all of Issuer's representations and
warranties hereunder being true and correct in all material respects as if made
on and, except if some other date is specifically set forth therein, as of the
date of the Closing.
(c) The obligations of Issuer to sell the Shares at the Closing pursuant
to the terms of this Agreement shall be subject to the performance by Purchaser
in all material respects of its covenants and obligations hereunder to be
performed at or prior to the Closing and to all of Purchaser's representations
and warranties hereunder being true and correct in all material respects as if
made on and, except if some other date is specifically set forth therein, as of
the date of the Closing.
6.2 Amendment to Certificate of Determinations. The Note Sellers hereby
agree that Issuer may, to the file an amendment to the Certificate of
Determinations which sets forth the rights, privileges and preferences of the
Shares to correct errors therein; provided such amendment does not materially
adversely affect the rights, privileges or preferences pertaining to the Shares.
7. Termination of Agreement. This Agreement may be terminated:
(a) at any time by mutual agreement of the parties;
(b) by either party, without prejudice to any other rights or remedies
it may have, if the Closing does not occur on or before October 15, 2001;
provided that the terminating party shall not be entitled to terminate this
Agreement if it is then in breach of this Agreement;
(c)Purchasers may terminate this Agreement at any time prior to the
Closing, without prejudice to any other rights or remedies it may have, if
Issuer shall have failed to comply with any of Issuer's covenants or obligations
contained in or contemplated by this Agreement or failed to deliver in a timely
manner any of the items to be delivered by Issuer pursuant to this Agreement in
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form and substance reasonably satisfactory to Purchasers and their counsel or if
any of the conditions to Closing to be satisfied by Issuer has not been
satisfied; or
(d) Issuer may terminate this Agreement at any time prior to the
Closing, without prejudice to any other rights or remedies it may have, if
Purchasers shall have failed to comply with any of Purchasers' covenants or
obligations contained in or contemplated by this Agreement or failed to deliver
in a timely manner any of the items to be delivered by Purchasers pursuant to
this Agreement in form and substance reasonably satisfactory to Issuer and its
counsel or if any of the conditions to Closing to be satisfied by Purchasers has
not been satisfied.
8. Miscellaneous.
8.1 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, or by fax (and if by fax, sent concurrently by one of the other
methods provided herein), addressed to the parties at the addresses shown below,
or at any other address designated in writing by one party to the other party.
All notices shall be deemed to have been given upon delivery in the case of
notices personally delivered, or at the expiration of one business day following
delivery to the private delivery service, or two business days following the
deposit thereof in the United States mail, with postage prepaid or on the first
business day of receipt in the case of notices sent by fax.
If to Purchaser: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Investment Management, Inc.
1800 Avenue of the Stars, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ ▇▇▇▇▇
Fortune Fashions
1800 Avenue of the Stars, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Issuer: The Right Start, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax: ▇▇▇.▇▇▇.▇▇▇▇
8.2 Integration: Amendment. This Agreement and the Registration Rights
Agreement sets forth in full the terms of the agreement between Purchasers and
Issuer with respect to the subject matter hereof and is intended as the full,
complete and exclusive contract governing the agreement between Purchasers and
Issuer regarding the subject hereof. This Agreement supersedes all prior
discussions, promises, representations, warranties, agreements and
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understandings between Purchasers and Issuer regarding the subject hereof. This
Agreement may not be modified or amended, nor may any rights hereunder be
waived, except in a writing signed by the party against whom enforcement of the
modification, amendment or waiver is sought. No course of dealing between the
parties, no usage of trade, and no parol or extrinsic evidence of any nature
shall be used or be relevant to supplement, explain or modify any term or
provision of this Agreement or any supplement or amendment thereto.
8.3 General. Any waiver of any breach of this Agreement in a particular
instance shall not operate as a waiver of subsequent breaches of the same or a
different kind. Any party's exercise or failure to exercise any rights under
this Agreement in a particular instance shall not operate as a waiver of the
party's right to exercise the same or different rights in subsequent instances.
Nothing herein constitutes a waiver of any of Purchasers' rights and remedies
against ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Inc. or any other person, firm or corporation. In the
event of any litigation between the parties based upon or arising out of this
Agreement, the prevailing party shall be entitled to recover all of its
reasonable costs and expenses (including without limitation reasonable attorneys
fees) from the non-prevailing party. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person other than Purchasers and Issuer.
There are no third party beneficiaries of this Agreement. If any provision of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect. The headings in this Agreement are
solely for convenience and shall be given no effect in the construction or
interpretation of this Agreement. This Agreement may be executed in any number
of counterparts, which together shall constitute one and the same agreement.
Time is of the essence in the performance of the obligations of the parties
hereunder. The Recitals at the beginning of this Agreement are hereby
incorporated herein and are part of this Agreement.
8.4 WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
8.5 Governing Law. This Agreement is being entered into in the State of
California. This Agreement shall be governed by the internal laws (and not the
conflict of laws rules) of the State of California.
8.6 Expenses. Each of the parties shall bear its own legal and other
expenses in connection with this Agreement and the transactions contemplated
hereby.
8.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
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Purchasers:
/s/ ▇▇▇▇ ▇▇▇▇▇
------------------------
▇▇▇▇ ▇▇▇▇▇
ARBCO ASSOCIATIONS, L.P.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: General Counsel
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ DIVERSIFIED CAPITAL PARTNERS, L.P.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: General Counsel
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ NON-TRADITIONAL INVESTMENTS, L.P.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: General Counsel
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ OFFSHORE LIMITED
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: General Counsel
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, L.P.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: General Counsel
Issuer:
THE RIGHT START, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman and Chief Executive Officer
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EXHIBIT A
Form of Series G Preferred Stock Certificate of Determination
Intentionally omitted
EXHIBIT B
Amounts of Series G Preferred Stock per Purchaser
------------------------------------------------------- ------------------- ---------------------
Name No. Underlying Amount
Common Shares
------------------------------------------------------- ------------------- ---------------------
▇▇▇▇ ▇▇▇▇▇ 200,000 $500,000
------------------------------------------------------- ------------------- ---------------------
ARBCO Associates, L.P. 1,100,000 $2,750,000
------------------------------------------------------- ------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Diversified Capital Partners, L.P. 600,000 $1,500,000
------------------------------------------------------- ------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Non-Traditional Investments, L.P. 100,000 $250,000
------------------------------------------------------- ------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Offshore Limited 40,000 $100,000
------------------------------------------------------- ------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Capital Partners, L.P. 160,000 $400,000
------------------------------------------------------- ------------------- ---------------------
