EXHIBIT 10.36
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is made as of July 9,
1999, by and between XxxxxXxxxx.xxx Inc., a Delaware corporation (the
"Company"), and Xxxxxxxx Xxxxxxxx (the "Investor").
The parties hereto agree as follows:
1. Purchase and Sale of Securities.
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(a) Authorization of Issuance. The Company's Board of Directors (the
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"Board") has authorized the issuance and sale to the Investors (as defined
below) of warrants, substantially in the form attached hereto as Exhibit A (the
"Warrants"), to purchase an aggregate of 182,000 shares of common stock, par
value $.01 per share of the Company (the "Common Stock"). The Warrants are to be
issued to each of Xxxxx X. Xxxxxxxxxx, Xxx Enterprises, L.L.C., Xxxxxxxx
Xxxxxxxx, Xxxxxxx Xxxxxx, Xxxxx X. Xxxxxxxx, and Xxxxx X. Xxxxx (the
"Investors"). Each Investor shall enter into a separate Agreement substantially
in this form that will provide the number of Warrant shares to be granted to
such Investor. Such Warrants are being issued pursuant to the Financing
Representation Agreement, dated February 4, 1999, by and between CEA Xxxxxxxxxx
Media, L.L.C. ("CEAM") and The Right Start, Inc. ("Parent") , a copy of which
has been attached hereto as Exhibit B (the "Engagement Letter"), in
consideration for the services provided by CEAM to the Company and its Parent
set forth in the Engagement Letter.
(b) Purchase and Sale. Subject to the terms and conditions set forth
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in this Agreement, including the covenants contained in this paragraph, the
Investor agrees to purchase, and the Company agrees to issue and sell to the
Investor, a Warrant to purchase that number of shares of Common Stock set forth
opposite the Investor's name on the signature pages hereof.
(c) Investor Representation and Warranties. In connection with the
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purchase and sale of the Common Stock, the Investor represents and warrants to
the Company that:
(i) the Common Stock to be acquired by the Investor pursuant to
this Agreement will be acquired for the Investor's own accounts and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act of 1933, as amended (the "Securities Act"), or any
applicable state securities laws, and the Common Stock will not be disposed
of in contravention of the Securities Act or any applicable state
securities laws;
(ii) the Investor is familiar with the term "accredited
investor" as defined in Rule 501 under the Securities Act and the Investor
is an "accredited investor" within the meaning of such term in Rule 501
under the Securities Act;
(iii) the Investor is sophisticated in financial matters and is
able to evaluate the risks and benefits of the investment in the Common
Stock;
(iv) the Investor is able to bear the economic risk of his or
her investment in the Common Stock for an indefinite period of time because
the Common Stock (A) has not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available and (B)
is subject to additional restrictions as provided herein;
(v) the Investor has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of the
Common Stock and has had full access to such other information concerning
the Company as he or she has requested; and
(vi) this Agreement constitutes the legal, valid and binding
obligation of the Investor, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by the Investor
does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which the Investor is party or any
judgment, order or decree to which the Investor is subject which would have
a material adverse effect on the Investor or the Company.
2. Registration Rights.
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(a) Demand Registration. If the Company shall receive at any
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time after its initial firm-commitment public offering (so long as such request
is not within 180 days after the effective date of a registration statement
filed by the Company covering an underwritten offering of an of its securities
to the public) a written request from Sellers holding at least 100,000 shares of
Common Stock issued or to be issued upon exercise of any Warrants ("Warrant
Stock") that the Company file a registration statement for its Common Stock,
then the Company shall use its best efforts to effect such registration, on Form
S-3 or successor form replacing Form S-3, if practicable, as would permit or
facilitate the sale and distribution of all or such portion of such Warrant
Stock as is specified in such request. For purposes of this Agreement, the term
"Seller" or "Sellers" shall mean a holder of Restricted Securities of the
Company for which the Company shall be required to file a registration statement
or which shall be registered under the Securities Act at the request of such
holder pursuant to the provisions of this Section 2. Neither the Company nor any
of its Affiliates (as defined in the Warrants) shall be deemed a "Seller" for
any purposes of this Agreement.
If the managing underwriter for the respective offering, if any,
advises the Company in writing that the inclusion in such registration of some
or all of the Warrant Stock sought to be registered by the Seller or Sellers in
its opinion will cause the proceeds or the price per unit the Company or the
requesting or demanding holder of securities will derive from such registration
to be reduced or that the number of securities to be registered at the instance
of the Company or such requesting or demanding holder plus the number of
securities sought to be registered by the Sellers is too large a number to be
reasonably sold, the number of securities sought to be registered for each
Seller shall be reduced pro rata, in proportion to the number of securities
sought to be registered by all Sellers, to the extent necessary to reduce the
number of securities to be registered to the number recommended by the managing
underwriter (the
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"Recommended Number"), subject at all times to those registration rights granted
to certain holders of the Company's securities set forth in the Investors'
Rights Agreement dated July 9, 1999 between the Company and the investors listed
therein.
(b) Incidental Registration. If the Company at any time proposes to
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register any of its securities under the Securities Act on Form X-0, X-0 or S-3
or the equivalent (otherwise than to register debt securities under Form S-3, or
any comparable successor form), whether of its own accord or at the request of
any holder or holders of such securities, it will each such time give written
notice to all holders of outstanding Restricted Securities of its intention so
to do. For purposes of this Agreement, the term "Restricted Securities" shall
mean all Warrants and Warrant Stock that bear the restrictive legend set forth
in Section 9.3 of the Warrants.
Upon the written request of a holder or holders of any such Restricted
Securities given within 30 days after receipt of any such notice, the Company
will use its best efforts to cause all Restricted Securities, the holder or
holders of which shall have so requested registration thereof, to be registered
under the Securities Act pursuant to such registration statement, all to the
extent requisite to permit the sale or other disposition (in accordance with the
intended methods thereof as aforesaid) by the prospective Seller or Sellers of
the Restricted Securities so registered.
If the managing underwriter for the respective offering, if any,
advises the Company in writing that the inclusion in such registration of some
or all of the Restricted Securities sought to be registered by the Seller or
Sellers in its opinion will cause the proceeds or the price per unit the Company
or the requesting or demanding holder of securities will derive from such
registration to be reduced or that the number of securities to be registered at
the instance of the Company or such requesting or demanding holder plus the
number of securities sought to be registered by the Sellers is too large a
number to be reasonably sold, the number of securities sought to be registered
for each Seller shall be reduced pro rata, in proportion to the number of
securities sought to be registered by all Sellers, to the extent necessary to
reduce the number of securities to be registered to the Recommended Number,
subject at all times to those registration rights granted to certain holders of
the Company's securities set forth in the Investors' Rights Agreement dated July
9, 1999 between the Company and the investors listed therein.
(c) Registration Procedures.
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(i) If and whenever the Company is required by the provisions of
this Section 2 to use its best efforts to effect the registration of
any of the Restricted Securities under the Securities Act, the Company
will (except as otherwise provided in this Agreement), as
expeditiously as possible,
(A) cooperate with any underwriters for, and the Sellers
of, such Restricted Securities, and will enter into a usual and
customary underwriting agreement with respect thereto (provided that
the Company shall not be required to enter into more than two such
underwriting agreements (one for a domestic
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offering and one for an international offering) in connection with any
such registration) and take all such other reasonable actions as are
necessary or advisable to permit, expedite and facilitate the
disposition of such Restricted Securities in the manner contemplated
by the related registration statement, in each case to the same extent
as if all the securities then being offered were for the account of
the Company, and the Company will provide to any Seller of Restricted
Securities, any underwriter participating in any distribution thereof
pursuant to a registration statement, and any attorney, accountant or
other agent retained by any Seller or underwriter, reasonable access
to appropriate Company officers and employees to answer questions and
to supply information reasonably requested by any such Seller,
underwriter, attorney, accountant or agent in connection with such
registration statement;
(B) furnish or cause to be furnished to each Seller of
Restricted Securities covered by such registration statement,
addressed to such Sellers, a copy of the opinion of counsel for the
Company, and a copy of the "comfort" letter signed by the independent
public accountants who have certified the Company's financial
statements included in the registration statement, delivered on the
closing date to the underwriters of such Restricted Securities;
(C) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to
cause such registration statement to become and remain effective; and
prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities covered by
such registration statement whenever the Seller or Sellers of such
securities shall desire to sell or otherwise dispose of the same;
provided that no such registration statement will be filed by the
Company until counsel for the Sellers of securities included therein
shall have had a reasonable opportunity to review the same and to
exercise their rights under clause (A) above with respect thereto and
no amendment to any such registration statement naming such Sellers as
selling shareholders shall be filed with the Commission until such
Sellers shall have had at least seven days to review such registration
statement as originally filed and theretofore amended and to exercise
their rights under clause (A) above;
(D) furnish to each Seller such numbers of
copies of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such Seller may
reasonably request in order to facilitate the public sale or other
disposition of the securities owned by such Seller;
(E) use its best efforts to register or
qualify the securities covered by such registration statement under
such other securities or blue sky laws of such
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jurisdictions as each Seller shall request, and do any and all other
acts and things which may be necessary or advisable to enable such
Seller to consummate the public sale or other disposition in such
jurisdictions of the securities owned by such Seller, except that the
Company shall not for any such purpose be required to qualify to do
business as a foreign corporation in any jurisdiction wherein it is
not so qualified or to file therein any general consent to service;
(F) in the event of the issuance of any stop order
suspending the effectiveness of any registration statement or of any
order suspending or preventing the use of any prospectus or suspending
the qualification of any Restricted Securities for sale in any
jurisdiction, use its best efforts promptly to obtain its withdrawal;
(G) in the event any prospectus used in connection with
the distribution of Restricted Securities registered under the
Securities Act pursuant to the provisions of this Section 2 is
discovered to contain any untrue statement of any material fact or any
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
promptly provide each Holder that shall have requested registration of
Restricted Securities with amended prospectuses correcting such
statements;
(H) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission; and
(I) list such securities on any securities exchange on
which any stock of the Company is then listed, if the listing of such
securities is then permitted under the rules of such exchange;
provided, however, that notwithstanding any other provision of this
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Section 2, the Company shall not be required to maintain the
effectiveness of any registration statement for a period in excess of
one year (plus any period during which the effectiveness of such
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registration has been suspended). From time to time after a transfer
of Warrants or Warrant Stock pursuant to a registration statement the
Company will file all reports required to be filed by it under the
Securities Act, the Exchange Act and the rules and regulations adopted
by the Securities and Exchange Commission thereunder, and will take
such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such
holders to sell Restricted Securities pursuant to such laws and
regulations thereunder. Upon written request, the Company will deliver
to such holders a written statement as to whether it has complied with
such requirements.
(ii) In connection with the registration of Restricted
Securities under the Securities Act pursuant to the provisions of this
Section 2, each holder of Restricted Securities requesting such
registration will (except as otherwise provided in this Agreement), as
expeditiously as possible,
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(A) in the event of the issuance of any stop order
suspending the effectiveness of any registration statement or of any
order suspending or preventing the use of any prospectus or suspending
the qualification of any Restricted Securities for sale in any
jurisdiction, use its best efforts promptly to discontinue the
disposition of such Restricted Securities owned by such holder in such
jurisdiction until such order has been withdrawn; and
(B) in the event any prospectus used in connection with
the distribution of Restricted Securities registered under the
Securities Act pursuant to the provisions of this Section 2 is
discovered to contain any untrue statement of any material fact or any
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
use its best efforts promptly to discontinue the disposition of such
Restricted Securities owned by such holder until amended prospectuses
correcting such statements have been provided to such holder.
(d) Expenses; Limitations on Registration. All expenses incident to
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the Company's performance of its obligations in connection with any registration
of the Sellers' Restricted Securities under this Agreement including, without
limitation, printing expenses, fees and disbursements of counsel for the
Company, fees of the National Association of Securities Dealers, Inc. in
connection with its review of any offering contemplated in any registration
statement and expenses of any special audits to which the Company shall agree or
which shall be necessary to comply with governmental requirements in connection
with any such registration shall be paid by the Company. In addition, the
Company shall pay (i) all registration and filing fees for the Sellers'
Restricted Securities under federal and state securities laws, and (ii) expenses
of registering or qualifying under or complying with the securities or blue sky
laws of any jurisdictions. Notwithstanding the foregoing, in the event a Seller
withdraws its request for registration of Restricted Securities other than by
reason of (1) the Company's failure to perform its obligations in connection
with such registration, (2) the failure to be timely satisfied of any closing
condition contained in any underwriting agreement entered into in connection
with such registration and not within the exclusive control of such Seller, (3)
the termination of such underwriting agreement by the underwriters party thereto
other than by reason of the failure on the part of such Seller to perform its
obligations thereunder, or (4) the occurrence of any change that, in the sole
judgment of such Seller, may materially adversely affect the selling price or
marketability of the Restricted Securities for which registration was requested,
including, without limitation, (A) any material adverse change in the business,
business prospects, properties, condition (financial or otherwise) or operations
of the Company, (B) the suspension of trading in the Common Stock by the
Commission or any national securities exchange or automated quotation system or
trading in securities generally on the New York Stock Exchange or the
establishment of limited or minimum prices on any such national exchange or
quotation system, (C) the declaration of any banking moratorium by Federal, New
York or California State authorities, or (D) the occurrence of any outbreak or
escalation of hostilities, the declaration by the United States of any national
emergency or war or the occurrence of any other calamity or crisis the effect of
which on financial markets is such, in the sole judgment of the managing
underwriter for such Seller, as to make it impracticable or inadvisable to
proceed with the
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offering of the Restricted Securities, then such Seller shall bear such
expenses. In addition, under all circumstances, each Seller shall pay one
hundred percent (100%) of the gross underwriting spread or fees with respect to
such Seller's Restricted Securities covered by any registration pursuant to this
Section 2.
It shall be a condition precedent to the obligation of the Company to
take any action pursuant to this Section 2 in respect of the securities which
are to be registered at the request of any prospective Seller that such
prospective Seller shall furnish to the Company such information regarding such
Seller and the securities held by such Seller and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
The holders of Warrants and Warrant Stock shall be entitled to an
aggregate of two effective demand registrations pursuant to Section 2(a) and an
unlimited number of registrations pursuant to requests made under this Section
2(b); provided that any such registration request made by the requisite number
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of holders which request shall be withdrawn (other than by reason of the
Company's failure to perform its obligations hereunder or a material adverse
change in its financial position or business) by the holders of a majority in
number of shares evidenced or covered by the Restricted Securities sought to be
so registered, after the respective registration statement shall have become
effective, shall be treated as an "effective" registration for purposes of this
Agreement.
(e) Indemnification.
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(i) In the event of any registration of any Restricted Securities
under the Securities Act pursuant to this Section 2, the Company shall
indemnify and hold harmless the Seller of such Restricted Securities and
any underwriter thereof, and their respective directors and officers, and
each other Person, if any, who controls such Seller or any such underwriter
within the meaning of the Securities Act ("Controlling Person"), against
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any losses, claims, damages or liabilities, joint or several, to which such
Seller or underwriter or any such director or officer or Controlling Person
may become subject under the Securities Act or any other statute or at
common law, insofar as such losses, claims, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(A) any alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such
securities were registered under the Securities Act, or in any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or (B) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse such Seller or such director,
officer or Controlling Person for any legal or any other expenses
reasonably incurred by such Seller or such director, officer or Controlling
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not
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be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any alleged untrue statement or
alleged omission made in such registration statement, preliminary
prospectus, prospectus, or
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amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such Seller specifically for use therein. The indemnity provided in this
subsection shall remain in full force and effect regardless of any
investigation made by or on behalf of such Seller or such director, officer
or Controlling Person, and shall survive the transfer of such securities by
such Seller.
(ii) Each holder of any Restricted Securities shall, by acceptance
thereof, severally and not jointly, indemnify and hold harmless the Company
and any underwriter of such Restricted Securities and their respective
directors and officers and each other Person, if any, who controls the
Company or such underwriter (within the meaning of the Securities Act)
against any losses, claims, expenses, damages or liabilities, joint or
several, to which the Company or such underwriter or any such director or
officer or any such Person may become subject under the Securities Act or
any other statute or at common law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based
upon (A) any alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which
Restricted Securities were registered under the Securities Act, or in any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or (B) any alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such alleged untrue statement or alleged omission was
contained in written information furnished to the Company through an
instrument duly executed by such holder specifically for use therein, and
shall reimburse the Company or such director, officer or other Person for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such loss, claim, damage, liability or
action.
(iii) Indemnification similar to that specified in clauses (i) and
(ii) of this Section 2(e) shall be given by the Company and each holder of
any Restricted Security (with such modifications as shall be to each other
and to any underwriter with respect to any required registration or other
qualification of any Restricted Securities under any federal or state law
or regulation of governmental authority other than the Securities Act. The
indemnity and expense reimbursements obligations of the Company under
clauses (i) and (ii) of this Section 2(e) shall be in addition to any
liability the Company may otherwise have.
(iv) Each Person (an "Indemnitor") who under the preceding provisions
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of this Section 2(e) agrees to indemnify another Person (the "Indemnitee")
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shall have the right, subject to the provisions hereto, to designate
counsel (acceptable to the Indemnitee) to defend any case or proceeding
against the Indemnitee arising in respect of any claim of liability for
which such indemnification may be claimed, to the end that duplication of
legal expense may be minimized; provided that, if the Indemnitee notifies
the Indemnitor that the former has been advised by its counsel that any
single counsel in such case or proceeding would have a conflict of interest
in representing both the Indemnitor and the
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Indemnitee, the Indemnitee may designate its own counsel in such case or
proceeding and, to the extent so provided above in this Section 2(e), shall
be entitled to be reimbursed by Indemnitor for its legal expenses
reasonably incurred in connection with defending itself in such case or
proceeding.
3. Legends. The Investor agrees that a legend in substantially the form
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set forth below shall be placed on all certificates evidencing the Warrants or
Warrant Stock (in addition to any legend required under applicable state
securities laws). Such legend shall read as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
4. Notices. Any notice delivered in connection with this Agreement must
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be in writing and must be either personally delivered, mailed by first class
mail (postage prepaid and return receipt requested), sent by reputable overnight
courier service (charges prepaid) or sent by facsimile (with follow-up telephone
confirmation of receipt) to the recipient at the address and facsimile number
below indicated (unless such information is subsequently modified in writing by
such recipient and delivered pursuant to this notice provision):
If to the Company, addressed to:
XxxxxXxxxx.xxx Inc.
0000 Xxxxxxxx Xxxxxx Xxxxx, Xxxx X
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Secretary
Facsimile: (000) 000-0000
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Investor, addressed to the address set forth under the Investor's
name on the signature pages hereof.
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5. General Provisions.
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(a) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective, permitted successors and
assigns. The Company may assign any of its rights or obligations hereunder
without the prior written consent of the other parties hereto, to a successor to
substantially all of the Company's business or assets, provided that such
successor agrees to be bound by this Agreement.
(b) So long as the Warrants and Warrant Stock have not been
registered under the Securities Act, prior to transfer of a Warrant or Warrant
Stock by an Investor, such transferring Investor agrees that his or her
transferee will execute and deliver a copy of this Agreement to the Company and
the transferring Investor.
(c) This Agreement shall be governed by and construed in accordance
with the law of the State of Delaware (excluding the law of conflicts thereof).
(d) No course of dealing or any delay or failure to exercise any
right, power or remedy hereunder on the party of any party hereto shall operate
as a waiver of or otherwise prejudice such party's rights, powers or remedies.
(e) Notwithstanding anything in this Agreement, the Company shall not
be obligated to issue or sell any of the Common Stock if, in the judgment of the
Board, such issuance or sale may violate Federal or applicable state securities
laws or regulations or may require the Company to register or qualify any such
Common Stock under any Federal or state securities laws, or require the Company
or any of its agents or representatives to register or qualify with any
governmental agency or organization, pursuant to such laws or regulations.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
XXXXXXXXXX.XXX INC.,
a Delaware corporation
/s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
Attest:
/s/ Xxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Secretary and Chief Financial Officer
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The Investor:
/s/ Xxxxxxxx Xxxxxxxx Warrant to purchase 54,600 shares of
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Xxxxxxxx Xxxxxxxx Common Stock of XxxxxXxxxx.xxx Inc.
Address:
c/o CEA Xxxxxxxxxx Media, L.L.C.
000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
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