LLC PURCHASE AGREEMENT
This LLC Purchase Agreement (the "Agreement"), effective as of August
17, 2001, is made by and between The Right Start, Inc., a California corporation
("Buyer") and Xxxxxxx Xxxxxxx ("Seller"), with reference to the following facts:
A. Pursuant to the Purchase Agreement (the "August Agreement") dated August
3, 2001 among Xxxx Xxxxx, Xxxxxxx Xxxxx, Palomar Ventures I, L.P., Marina
Corporate LLC and Xxxxxxx-RS, LLC, a New York limited liability company (the
"LLC"), the LLC acquired assets of Xxxxxxxxxx.xxx Inc., a Delaware corporation
("Xxxxxxxxxx.xxx"), in a private sale under Section 9610 of the California
Commercial Code.
B. In connection with the purchase of the assets of XxxxxXxxxx.xxx and
related matters, LLC issued Notes to Xxxx Xxxxx, Xxxxxxx Xxxxx, Palomar Ventures
I, L.P., Marina Corporate LLC, Arbco Associates, L.P., Xxxxx Xxxxxxxx
Diversified Capital Partners, L.P., Xxxxx Xxxxxxxx Non-Traditional Investments,
L.P., Xxxxx Xxxxxxxx Offshore Limited and Xxxxx Xxxxxxxx Capital Partners, L.P.
(the "Lenders").
C. Seller is the owner of all membership interests in the LLC.
D. Buyer desires to purchase and Seller desires to sell the LLC as herein
provided.
E. On August 17, 2001, Buyer and Seller reached agreement on the terms of
the agreements set forth herein and the parties intend for this Agreement to be
the definitive agreement as to all matters covered herein.
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), Seller shall sell, transfer,
deliver and assign to Buyer, and Buyer shall purchase from Seller, all of
Seller's right, title and interest in and to the LLC.
2. Authorization; Closing.
2.1 Buyer has, prior to the date of this Agreement, caused the Certificate of
Determination of Preferences of Series F Convertible Preferred Stock ("Series F
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, Buyer shall pay to Seller as the
aggregate purchase price for the LLC 190.553 shares of Series F Preferred (the
"Shares"). At the Closing, Buyer shall deliver to Seller the Shares by delivery
to Seller of stock certificate(s) representing the Shares.
2.2 The consummation of the purchase and sale of the LLC (the "Closing") shall
take place on September 5, 2001 or such other date or at such other time as the
parties may mutually agree. At the Closing, (i) Seller shall execute and deliver
to Buyer an instrument of conveyance in substantially the form attached hereto
as Exhibit B and (ii) Buyer shall deliver the stock certificate(s) representing
the Shares.
3. Representations and Warranties of Seller. Seller represents and warrants to
Buyer as follows:
3.1 Organization and Authority. The LLC is a limited liability company duly
organized, validly existing and in good standing under the laws of New York.
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 Seller. This Agreement constitutes a
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms except as limited by bankruptcy and insolvency laws and other
laws affecting the rights of creditors generally.
3.3 Capitalization. Seller is the beneficial owner of 100% of the outstanding
membership interests in the LLC and there are no outstanding options, warrants,
or other securities convertible into membership interests of the LLC.
3.4 Investment. Seller is acquiring the Shares in good faith for his own account
and for the purpose of investment in Buyer and not with a view to or for sale in
connection with any distribution of such Shares or any interest therein. Seller
has a preexisting business or personal relationship with Buyer or its officers,
directors or controlling persons and, by reason of Seller's business and
financial experience, has the capacity to protect his own interest in connection
with the acquisition of the Shares. Seller represents and warrants that he is an
"accredited investor" within the meaning of paragraph (1), (2), (3), (7) or (8)
of Rule 501(a) of the Act. Seller acknowledges that he has reviewed the publicly
filed information about Buyer, that he has received such other information (from
sources other than Buyer) as he has deemed necessary and appropriate to make his
own investment analysis and decision to acquire securities of Buyer and that he
has independently and without reliance on Buyer or any oral or written
representation or warranty from Buyer, its officers, shareholders, directors or
other representatives (other than representations or warranties made by Buyer in
this Agreement), made its own decision to acquire such securities and enter into
this Agreement. Seller shall have no recourse against Buyer, its officers,
shareholders, directors or other representatives, nor shall any such person
incur any liability, for any misstatement (whether material or immaterial) or
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omission under applicable securities laws with respect to the purchase of the
securities from Buyer.
3.5 Title; Absence of Liens. Seller is in possession of and has good
title to, or valid rights under contract to use, all of the tangible personal
property acquired pursuant to the August Agreement, solely to the extent
acquired pursuant to the August Agreement. Since the date of the closing of the
August Agreement, Seller has not granted or suffered any liens, mortgages,
encumbrances, charges or security interests of any kind with respect to the LLC,
its membership interests, or any of its assets or properties and has not
received any written claims or demands against the LLC with respect to any of
its assets or properties.
3.6 Sale As Is, Where Is. THE LLC IS BEING SOLD AND PURCHASED AS IS,
WHERE IS, AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF
ANY KIND OR NATURE WHATSOEVER (INCLUDING WITHOUT LIMITATION WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE), EXCEPT AS HEREIN
EXPRESSLY SET FORTH. Without limiting the generality of the foregoing, Buyer
acknowledges that Buyer is not relying on any representation or warranty of
Seller, express or implied, except as herein expressly set forth.
Except for the foregoing representations and warranties, there are not
representations or warranties of any kind being given by Seller to Buyer in
connection with this Agreement or the transactions contemplated by this
Agreement.
4. Representations and Warranties of Buyer. Buyer represents and warrants to
Seller as follows:
4.1 Organization and Authority. Buyer 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 6.1 hereof, shareholder
action on the part of Buyer, will not conflict with or result in a breach of the
articles of incorporation or bylaws of Buyer. This Agreement constitutes a valid
and binding obligation of Buyer, enforceable against Buyer 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 Seller 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 6.1 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.
4.5 Investment. Buyer is acquiring the membership interests of the LLC
in good faith for its own account and for the purpose of investment and not with
a view to or for sale in connection with any distribution of such membership
interests or any interest therein.
5. Further Assurances. From time to time, at Buyer's request and without further
consideration, Seller shall execute and deliver or cause to be executed and
delivered such further instruments of conveyance and transfer and take such
other action as Buyer reasonably may require to more effectively convey and
transfer the LLC to Buyer.
6. Covenants of Buyer. Following the Closing, Buyer hereby covenants with Seller
as follows:
6.1 Shareholder Approval. As promptly as practicable after the Closing and in
any event prior to the earlier of January 15, 2002 and such date as Buyer clears
its proxy (to be filed prior to November 15, 2001) with the Securities and
Exchange Commission ("SEC"), Buyer shall convene a meeting of its shareholders
at which such shareholders will be asked to approve, among other matters: (a) an
amendment to Buyer'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 F Preferred set forth in Article IV of the Certificate;
and (c) the issuance of shares of Common Stock to Seller upon conversion of the
Shares pursuant to the Certificate. Buyer 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 Buyer, a proxy statement (as amended or
supplemented from time to time the "Proxy Statement") in connection with such
special meeting of shareholders ("Shareholders' Meeting"). Buyer shall notify
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Seller 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 Seller 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.
6.2 Registration Rights Agreement. As promptly as practicable after the Closing
and in any event prior to filing the preliminary Proxy Statement with the SEC,
Buyer will enter into a registration rights agreement with Seller (the
"Registration Rights Agreement") relating to the registration of the resale of
the Common Stock issuable upon conversion of the Shares. The Registration Rights
Agreement shall grant to Seller registration rights allowing Seller to sell all
the Shares at any time following the first anniversary of the Closing or, if
requested by Seller, earlier than the first anniversary if such registration
would not, in Buyer's sole discretion, interfere or conflict with registration
rights of other holders of Buyer's securities. With respect to the registration
rights to be so granted, the Registration Rights Agreement shall be on terms no
less favorable than the most favorable of those rights previously granted to
Xxxx Xxxxx or Xxxxxxx Xxxxx or granted or to be granted to the holders of
Buyer's Series G Preferred Stock. 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, Buyer 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.
7. Covenants of the Parties.
7.1 Conditions to Closing.
(a) The obligation of Seller to sell and of Buyer to acquire the LLC 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 Seller to sell the LLC at the Closing pursuant to the
terms of this Agreement shall be subject to the performance by Buyer in all
material respects of its covenants and obligations hereunder to be performed at
or prior to the Closing and to all of Buyer's representations and warranties
hereunder being true and correct in all material respects as if made on and,
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except if some other date is specifically set forth therein, as of the date of
the Closing.
(c) The obligations of Buyer to acquire the LLC at the Closing pursuant to the
terms of this Agreement shall be subject to the performance by Seller in all
material respects of its covenants and obligations hereunder to be performed at
or prior to the Closing and to all of Seller'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. The obligations of Buyer to acquire the LLC at the Closing pursuant
to the terms of this Agreement shall further be subject to the concurrent sale
by Lenders to Buyer of the Term Notes, dated August 3, 2001, by Seller to the
Lenders in exchange for not more than 1,690.447 shares of its Series F
Convertible Preferred Stock.
7.2 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) Seller may terminate this Agreement at any time prior to the Closing,
without prejudice to any other rights or remedies it may have, if Buyer shall
have failed to comply with any of Buyer'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 Buyer pursuant to this Agreement in form and
substance reasonably satisfactory to Seller and its counsel or if any of the
conditions to Closing to be satisfied by Buyer has not been satisfied; or
(d) Buyer may terminate this Agreement at any time prior to the Closing, without
prejudice to any other rights or remedies it may have, if Seller shall have
failed to comply with any of Seller'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 Seller pursuant to this Agreement in form and
substance reasonably satisfactory to Buyer and its counsel or if any of the
conditions to Closing to be satisfied by Seller 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
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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 Seller: Xxxxxxx Xxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
with a copy to: Xxxx X. Xxxx, Esq.
Crosby, Heafey, Xxxxx & May 1901 Avenue of
the Stars, Xxxxx 000 Xxx Xxxxxxx, Xxxxxxxxxx
00000 Fax: 000-000-0000
If to Buyer: The Right Start, Inc.
00000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Fax: 000.000.0000
8.2 Integration: Amendment. This Agreement and the Registration Rights Agreement
sets forth in full the terms of the agreement between Seller and Buyer with
respect to the subject matter hereof and is intended as the full, complete and
exclusive contract governing the agreement between Seller and Buyer regarding
the subject hereof. This Agreement supersedes all prior discussions, promises,
representations, warranties, agreements and understandings between Seller and
Buyer 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
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herein constitutes a waiver of any of Seller's rights and remedies against
Xxxxxxxxxx.xxx 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 Seller and Buyer. 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.
Seller: /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
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Buyer:
THE RIGHT START, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------
Its: Chief Executive Officer
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EXHIBIT A
Form of Series F Preferred Stock Certificate of Determination
EXHIBIT B
INSTRUMENT OF CONVEYANCE
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
to The Right Start, Inc. (the "Buyer") all right, title and interest in and to
the membership interests in Xxxxxxx-RS, LLC, pursuant to the LLC Purchase
Agreement of even date between the undersigned and Buyer.
Nothing herein modifies any of the terms or provisions of the LLC
Purchase Agreement, and the same are hereby incorporated herein by this
reference.
Dated: Effective as of September 5, 2001
/s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
