ETOYS INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
DECEMBER 23, 1997
ETOYS INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (the "AGREEMENT") is made
as of the 23rd day of December, 1997, by and between eToys Inc., a Delaware
corporation (the "COMPANY") and the investors listed on EXHIBIT A attached
hereto (each a "PURCHASER" and together the "PURCHASERS").
The parties hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of
State of the State of Delaware on or before the Closing (as defined below) the
First Amended and Restated Certificate of Incorporation in the form attached
hereto as EXHIBIT B (the "RESTATED CERTIFICATE").
(b) Subject to the terms and conditions of this Agreement,
each Purchaser agrees to purchase at the Closing and the Company agrees to sell
and issue to each Purchaser at the Closing that number of shares of Series A
Preferred Stock set forth opposite each such Purchaser's name on EXHIBIT A
attached hereto at a purchase price of $0.62 per share. The shares of Series A
Preferred Stock issued to the Purchaser pursuant to this Agreement shall be
hereinafter referred to as the "STOCK."
1.2 CLOSING; DELIVERY.
(a) The purchase and sale of the Stock shall take place at
the offices of Venture Law Group, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx,
at 12:00 p.m., on December 23, 1997, or at such other time and place as the
Company and the Purchasers purchasing a majority of the shares of Stock mutually
agree upon, orally or in writing (which time and place are designated as the
"CLOSING").
(b) At the Closing, the Company shall deliver to each
Purchaser a certificate representing the Stock being purchased thereby against
payment of the purchase price therefor by check payable to the Company, wire
transfer to the Company's bank account, cancellation of indebtedness, or any
combination thereof. In the event that payment by a Purchaser is made, in whole
or in part, by cancellation of indebtedness, then such Investor shall surrender
to the Company for cancellation at the Closing any evidence of such indebtedness
or shall executed an instrument of cancellation in form and substance acceptable
to the Company.
(c) If the full number of the authorized shares of Series A
Preferred Stock of the Company is not sold at the Closing, the Company shall
have the right, at any time prior to January 15, 1998, to sell the remaining
authorized but unissued shares of Series A Preferred Stock to one or more
additional purchasers as determined by the Company, or to any
Purchaser hereunder who wishes to acquire additional shares of Series A
Preferred Stock at the price and on the terms set forth herein, provided that
any such additional purchaser shall be required to execute an Addendum Agreement
substantially in the form attached hereto as EXHIBIT H. Any additional
purchaser so acquiring shares of Series A Preferred Stock shall be considered a
"Purchaser" for purposes of this Agreement, and any Series A Preferred Stock so
acquired by such additional purchaser shall be considered "Stock" for purposes
of this Agreement and all other agreements contemplated hereby.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as EXHIBIT C, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify would have a material adverse effect on its business or properties.
2.2 CAPITALIZATION. The authorized capital of the Company
consists, or will consist, immediately prior to the Closing, of:
(a) Seven Million Thirty-Six Thousand Three Hundred
(7,036,300) shares of Preferred Stock, all of which have been designated
Series A Preferred Stock, none of which are issued and outstanding immediately
prior to the Closing. The rights, privileges and preferences of the Preferred
Stock are as stated in the Restated Certificate.
(b) Fifty Million (50,000,000) shares of Common Stock, Ten
Million Fifty Thousand (10,050,000) shares of which are issued and outstanding
immediately prior to the Closing. All of the outstanding shares of Common
Stock have been duly authorized, fully paid and are nonassessable and issued in
compliance with all applicable federal and state securities laws. The Company
has reserved Seven Million Thirty-Six Thousand Three Hundred (7,036,300) shares
of Common Stock for issuance upon conversion of the Series A Preferred Stock.
(c) The Company has reserved Two Million Nine Hundred Fifty
Thousand (2,950,000) shares of Common Stock for issuance to officers, directors,
employees and consultants of the Company pursuant to its 1997 Stock Option Plan
duly adopted by the Board of Directors and approved by the Company stockholders
(the "STOCK PLAN"). Of such reserved shares of Common Stock, options to
purchase 1,276,093 shares have been granted and are currently outstanding, and
1,573,907 shares of Common Stock remain available for issuance to officers,
directors, employees and consultants pursuant to the Stock Plan.
(d) Except for currently outstanding options issued pursuant
to the Stock Plan and warrants to purchase 50,000 shares of Common Stock, there
are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal or
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similar rights) or agreements, orally or in writing, for the purchase or
acquisition from the Company of any shares of its capital stock. The Company is
not a party or subject to any agreement or understanding, and, to the best of
the Company's knowledge, there is no agreement or understanding between any
persons and/or entities, which effects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.
2.3 SUBSIDIARIES. The Company does not currently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Investors' Rights
Agreement, in the form attached hereto as EXHIBIT D (the "INVESTORS' RIGHTS
AGREEMENT"), the Right of First Refusal and Co-Sale Agreement in the form
attached hereto as EXHIBIT E (the "CO-SALE AGREEMENT"), the Voting Agreement in
the form attached hereto as EXHIBIT F (the "VOTING AGREEMENT" and the Letter
Agreement between Intel Corporation and the other parties thereto in the form
attached hereto as EXHIBIT I (the "INTEL LETTER AGREEMENT") and collectively
with this Agreement, the Investors' Rights Agreement, the Co-Sale Agreement and
the Voting Agreement (the "AGREEMENTS"), the performance of all obligations of
the Company hereunder and thereunder and the authorization, issuance and
delivery of the Stock and the Common Stock issuable upon conversion of the Stock
(together, the "SECURITIES") has been taken or will be taken prior to the
Closing, and the Agreements, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws of general application affecting enforcement of
creditors' rights generally, as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies, or (ii) to
the extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
2.5 VALID ISSUANCE OF SECURITIES. The Stock that is being issued
to the Purchasers hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and free of restrictions on
transfer other than restrictions on transfer under this Agreement, the
Investors' Rights Agreement and applicable state and federal securities laws.
Based in part upon the representations of the Purchasers in this Agreement and
subject to the provisions of Section 2.7 below, the Stock will be issued in
compliance with all applicable federal and state securities laws. The Common
Stock issuable upon conversion of the Stock has been duly and validly reserved
for issuance, and upon issuance in accordance with the terms of the Restated
Certificate, shall be duly and validly issued, fully paid and nonassessable and
free of restrictions on transfer other than restrictions on transfer under this
Agreement, the Investors' Rights Agreement and applicable federal and state
securities laws and will be issued in compliance with all applicable federal and
state securities laws.
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2.6 OFFERING. Subject in part to the truth and accuracy of each
Purchaser's representations set forth in Section 3 of the Agreement, the offer,
sale and issuance of the Series A Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of any applicable stock
and federal securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
2.7 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for filings pursuant to Section 25102(f)
of the California Corporate Securities Law of 1968, as amended, and the rules
thereunder, other applicable state securities laws and Regulation D of the
Securities Act of 1933, as amended (the "SECURITIES ACT").
2.8 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its subsidiaries that questions the validity of
the Agreements or the right of the Company to enter into them, or to consummate
the transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition or affairs of the Company, financially or otherwise, or any change in
the current equity ownership of the Company, nor is the Company aware that there
is any basis for the foregoing. Neither the Company nor any of its subsidiaries
is a party or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by the Company or any of its
subsidiaries currently pending or which the Company or any of its subsidiaries
intends to initiate.
2.9 PATENTS AND TRADEMARKS. To its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, information and proprietary
rights and processes and, to its knowledge, all patent rights necessary for its
business without any conflict with, or infringement of, the rights of others.
There are no outstanding options, licenses or agreements of any kind relating to
the foregoing, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, servicemarks,
tradenames, copyrights, trade secrets, licenses, information, proprietary rights
and processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed to be conducted in the Business Plan, would violate any of
the patents, trademarks, service marks, tradenames, copyrights, trade secrets or
other proprietary rights or processes of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of such employee's best efforts to
promote the interest of the Company or that would conflict with the Company's
business as proposed to be conducted in the Business Plan. Neither the
execution or delivery of this Agreement or the agreements, nor the carrying on
of the Company's business by the employees
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of the Company, nor the conduct of the Company's business as proposed in the
Business Plan, will, to the Company's knowledge, conflict with or result in a
breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant or instrument under which any such employee is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions of (i) idealab! and (ii) any of the Company's employees or people
it currently intends to hire made prior to or outside the scope of their
employment by the Company. No employee of idealab! has developed any technology
which constitutes a material portion of any of the Company's products.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS. As of the date of the
Closing, the Company is not in violation or default of any provisions of its
Restated Certificate or Bylaws or of any instrument, judgment, order, writ,
decree or contract to which it is a party or by which it is bound or, to its
knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company. The execution, delivery and performance of the
Agreements and the consummation of the transactions contemplated hereby or
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization applicable to the Company, its business or operations or any of
its assets or properties, which suspension, revocation, impairment, forfeiture
or nonrenewal will have a material adverse effect on the Company's business and
operations.
2.11 AGREEMENTS; ACTION.
(a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) Except for agreements explicitly contemplated by the
Agreements, there are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company or any of its subsidiaries is a party
or by which it is bound that involve (i) obligations (contingent or otherwise)
of, or payments to, the Company or any of its subsidiaries in excess of,
$10,000, (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or any of its subsidiaries, (iii) the
grant of rights to manufacture, produce, assemble, license, market, or sell its
products to any other person or affect the Company's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products, or
(iv) indemnification by the Company with respect to infringements of proprietary
rights.
(c) Neither the Company nor any of its subsidiaries has
(i) declared or paid any dividends, or authorized or made any distribution upon
or with respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities individually
in excess of $10,000 or in excess of $25,000 in the aggregate, (iii) made any
loans or advances to any person, other than ordinary advances for travel
expenses,
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or (iv) sold, exchanged or otherwise disposed of any of its assets or rights,
other than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, the
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity shall be
aggregated for the purpose of meeting the individual minimum dollar amounts with
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or, at the time of Closing, subject to any
restriction under its Restated Certificate or Bylaws, that adversely affects its
business, its properties or its financial condition.
2.12 DISCLOSURE. The Company has fully provided the Purchasers
with all the information that the Purchasers have requested for deciding whether
to acquire the Stock and all information that the Company believes is reasonably
necessary to enable the Purchasers to make such a decision, including certain of
the Company's projections describing its proposed business (collectively, the
"BUSINESS PLAN"). To the Company's knowledge, no representation or warranty of
the Company contained in this Agreement and the exhibits attached hereto, any
certificate furnished or to be furnished to Purchasers at the Closing, or the
Business Plan (when read together) 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 in light of the circumstances under
which they were made. To the extent the Business Plan was prepared by
management of the Company, the Business Plan and the financial and other
projections contained in the Business Plan were prepared in good faith; however,
the Company does not warrant that it will achieve such projections.
2.13 NO CONFLICT OF INTEREST. The Company is not indebted,
directly or indirectly, to any (i) of its officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees and (ii) affiliate of the
Company. To the Company's knowledge, none of the Company's officers or
directors, or any members of their immediate families, or any affiliate of the
Company, are, directly or indirectly, indebted to the Company (other than in
connection with purchases of the Company's stock) or have any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company except that officers, directors
and/or stockholders of the Company may own stock in (but not exceeding two
percent of the outstanding capital stock of) any publicly traded companies that
may compete with the Company. To the Company's knowledge, none of the Company's
officers or directors or any members of their immediate families, or any
affiliate of the Company, are, directly or indirectly, interested in any
material contract with the Company. The Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
2.14 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as
contemplated in the Investors' Rights Agreement, the Company has not granted or
agreed to grant any
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registration rights, including piggyback rights, to any person or entity. To
the Company's knowledge, except as contemplated in the Voting Agreement, no
stockholder of the Company has entered into any agreements with respect to the
voting of capital shares of the Company.
2.15 PRIVATE PLACEMENT. Subject in part to the truth and accuracy
of the Purchasers' representations set forth in this Agreement, the offer, sale
and issuance of the Securities as contemplated by this Agreement is exempt from
the registration requirements of the Securities Act.
2.16 TITLE TO PROPERTY AND ASSETS. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
2.17 FINANCIAL STATEMENTS. The Company has made available to each
Purchaser its unaudited financial statements (including balance sheet and profit
and loss statement) as of September 30, 1997 (collectively, the "FINANCIAL
STATEMENTS"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except that the unaudited Financial Statements
may not contain all footnotes required by generally accepted accounting
principles. The Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments. Except as set forth in
the Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to September 30, 1997 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate are not
material to the financial condition or operating results of the Company. Except
as disclosed in the Financial Statements, the Company is not a guarantor or
indemnity of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.18 CHANGES. Since September 30, 1997, there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted in the Business Plan);
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(c) any waiver or compromise by the Company of a valuable
right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) any material change to a material contract or agreement
by which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(g) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any
officer or key employee of the Company; and the Company does not know of any
impending resignation or termination of employment of any such officer or key
employee;
(i) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest
in, or lien, created by the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for
the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) any declaration, setting aside or payment or other
distribution in respect to any of the Company's capital stock, or any direct or
indirect redemption, purchase, or other acquisition of any of such stock by the
Company;
(m) to the best of the Company's knowledge, any other event
or condition of any character that might materially and adversely affect the
business, properties, prospects or financial condition of the Company (as such
business is presently conducted and as it is proposed to be conducted in the
Business Plan); or
(n) any arrangement or commitment by the Company to do any
of the things described in this Section 2.18.
2.19 EMPLOYEE BENEFIT PLANS. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974.
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2.20 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed
all tax returns and reports (including information returns and reports) as
required by law. These returns and reports are true and correct in all material
respects. The Company has paid all taxes and other assessments due, except
those contested by it in good faith that are listed in the Schedule of
Exceptions. The provision for taxes of the Company as shown in the Financial
Statements is adequate for taxes due or accrued as of the date thereof. The
Company has not elected pursuant to the Internal Revenue Code of 1986, as
amended (the "CODE"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) that would have a material effect on the Company, its financial
condition, its business as presently conducted or proposed to be conducted or
any of its properties or material assets. The Company has never had any tax
deficiency proposed or assessed against it and has not executed any waiver of
any statute of limitations on the assessment or collection of any tax or
governmental charge. None of the Company's federal income tax returns and none
of its state income or franchise tax or sales or use tax returns have ever been
audited by governmental authorities. Since the date of the Financial
Statements, the Company has not incurred any taxes, assessments or governmental
charges other than in the ordinary course of business and the Company has made
adequate provisions on its books or accounts for all taxes, assessments and
governmental charges with respect to its business, properties and operations for
such period. The Company has withheld or collected from each payment made to
each of its employees, the amount of all taxes (including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes) required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or authorized
depositories.
2.21 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed; and the Company has insurance against other
hazards, risks and liabilities to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated.
2.22 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The Company is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have any
present intention to terminate the employment of any of the foregoing. The
employment of each officer and employee of the Company is terminable at the will
of the Company. To its knowledge, the Company has complied in all material
respects with all applicable state and federal equal employment opportunity laws
and with other laws related to
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employment. The Company is not a party to or bound to any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
agreement.
2.23 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS.
Each former and current employee, consultant and officer of the Company has
executed an agreement with the Company regarding confidentiality and proprietary
information substantially in the form or forms delivered to the counsel for the
Purchasers. The Company is not aware that any of its former and current
employees or consultants is in violation thereof, and the Company will use its
best efforts to prevent any such violation. All consultants to or vendors of
the Company with access to confidential information of the Company are parties
to a written agreement substantially in the form or forms provided to counsel
for the Purchasers under which, among other things, each such consultant or
vendor is obligated to maintain the confidentiality of confidential information
of the Company. The Company is not aware that any of its consultants or vendors
are in violation thereof, and the Company will use its best efforts to prevent
any such violation.
2.24 PERMITS. The Company and each of its subsidiaries has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business, the lack of which could materially and adversely affect
the business, properties, prospects, or financial condition of the Company. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.25 CORPORATE DOCUMENTS. The Restated Certificate and Bylaws of
the Company are in the form provided to counsel for the Purchasers. The copy of
the minute books of the Company provided to the Purchasers' counsel contains
minutes of all meetings of directors and stockholders and all actions by written
consent without a meeting by the directors and stockholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.26 SECTION 83(b) ELECTIONS. To the best of the Company's
knowledge, all individuals who have purchased unvested shares of the Company's
Common Stock have timely filed elections under Section 83(b) of the Code.
2.27 SIGNIFICANT CUSTOMERS AND SUPPLIERS. No major customer or
supplier as of the date the Financial Statements has materially reduced or
threatened to terminate or materially reduce its purchases from or provision of
products or services to the Company, as the case may be.
2.28 QUALIFIED SMALL BUSINESS STOCK. As of the Closing, (i) the
Company will be an eligible corporation as defined in Section 1202(e)(4) of the
Code, (ii) the Company will not have made any purchases of its own stock during
the one-year period proceeding the Closing having an aggregate value exceeding
five percent (5%) of the aggregate value of all its stock as of the beginning of
such period and (iii) the Company's aggregate gross assets, as defined by Code
Section 1202(d)(2), at no time since incorporation and through the Closing have
exceeded
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or will exceed $50 million, taking into account the assets of any corporations
required to be aggregated with the Company in accordance with the Code
Section 1202(d)(3).
2.29 REAL PROPERTY HOLDING COMPANY. The Company is not a real
property holding company within the meaning of Section 897 of the Code.
2.30 MANUFACTURING AND MARKETING RIGHTS. The Company has not
granted rights to manufacture, produce, assemble, lease, market or sell its
products to any other person and is not bound by any agreement that affects the
Company's exclusive right to develop, manufacture, assemble, distribute market
or sell its products.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby represents and warrants to the Company that:
3.1 AUTHORIZATION. The Agreements, when executed and delivered by
the Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies, or
(b) to the extent the indemnification provisions contained in the Investors'
Rights Agreement may be limited by applicable federal or state securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with the Purchaser in reliance upon the Purchaser's representation to the
Company, which by the Purchaser's execution of this Agreement, the Purchaser
hereby confirms, that the Securities to be acquired by the Purchaser will be
acquired for investment for the Purchaser's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Securities. The Purchaser represents that it
has full power and authority to enter into this Agreement. The Purchaser has
not been formed for the specific purpose of acquiring the Securities.
3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an
opportunity to discuss the Company's business, management, financial affairs and
the terms and conditions of the offering of the Stock with the Company's
management and has had an opportunity to review the Company's facilities. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Purchasers to
rely thereon.
3.4 RESTRICTED SECURITIES. The Purchaser understands that the
Securities have not been registered under the Securities Act, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona
-11-
fide nature of the investment intent and the accuracy of the Purchaser's
representations as expressed herein. The Purchaser understands that the
Securities are "restricted securities" under applicable U.S. federal and state
securities laws and that, pursuant to these laws, the Purchaser must hold the
Securities indefinitely unless they are registered with the Securities and
Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Purchaser
acknowledges that the Company has no obligation to register or qualify the
Securities for resale except as set forth in the Investors' Rights Agreement.
The Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Securities, and on requirements relating to the Company which are
outside of the Purchaser's control, and which the Company is under no obligation
and may not be able to satisfy.
3.5 NO PUBLIC MARKET. The Purchaser understands that no public
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.
3.6 LEGENDS. The Purchaser understands that the Securities and
any securities issued in respect of or exchange for the Securities, may bear one
or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend set forth in the other Agreements.
(c) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented by the certificate
so legended.
3.7 ACCREDITED INVESTOR. The Purchaser is an accredited investor
as defined in Rule 501(a) of Regulation D promulgated under the Act.
3.8 FOREIGN INVESTORS. If the Purchaser is not a United States
person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended), such Purchaser hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Stock or any use of this Agreement, including
(i) the legal requirements within its jurisdiction for the purchase of the
Stock, (ii) any foreign exchange restrictions applicable to such purchase,
(iii) any governmental or other consents that may need to be obtained, and
(iv) the income tax and other tax consequences, if any, that may be relevant to
the purchase, holding, redemption, sale, or transfer of the Stock. Such
Purchaser's subscription and payment for and continued beneficial ownership
-12-
of the Stock, will not violate any applicable securities or other laws of the
Purchaser's jurisdiction.
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The
obligations of each Purchaser to the Company under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since the
date of the Financial Statements.
4.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Purchasers' special counsel, and they shall have received all such
counterpart and certified or other copies of such documents as they may
reasonably request.
4.6 OPINION OF COMPANY COUNSEL. The Purchasers shall have
received from Venture Law Group, A Professional Corporation, counsel for the
Company, an opinion, dated as of the Closing, in substantially the form of
EXHIBIT G.
4.7 BOARD OF DIRECTORS. As of the Closing, the holders of a
majority of the outstanding Series A Preferred Stock will have the right to
designate one (1) board seat, which designee shall initially be a representative
of DynaFund, increasing the current size of the Board to four members which
includes Xxxxxx X. Xxxx, Xxxxxxx Xxxxx, Xxxx Xxxx and Xxxxx Xxxx.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company, each Purchaser and
each Founder shall have executed and delivered the Investors' Rights Agreement
in substantially the form attached as EXHIBIT D.
-13-
4.9 CO-SALE AGREEMENT. The Company, each Purchaser, and each
Founder shall have executed and delivered the Co-Sale Agreement in substantially
the form attached as EXHIBIT E.
4.10 VOTING AGREEMENT. The Company and each Purchaser shall have
executed and delivered the Voting Agreement in substantially the form attached
as EXHIBIT F.
4.11 RESTATED CERTIFICATE. The Company shall have filed the
Restated Certificate with the Secretary of State of Delaware on or prior to the
Closing Date, which shall continue to be in full force and effect as of the
Closing Date.
4.12 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT.
The Company and each of its employees shall have entered into the Company's
standard form Confidential Information and Invention Assignment Agreement, in
substantially the form provided to the Purchasers.
4.13 INTEL LETTER AGREEMENT. The Company, Xxxxxx X. Xxxx, Xxxxx X.
Xxx and each Purchaser shall have executed and delivered the Intel Letter
Agreement in substantially the form attached as EXHIBIT I.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 3 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
5.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchasers on or prior to the
Closing shall have been performed or complied with in all material respects.
5.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
6. MISCELLANEOUS.
6.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of the Purchasers or the Company.
-14-
6.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
6.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
6.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
6.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed to the party to be notified at such
party's address as set forth below or on EXHIBIT A hereto, or as subsequently
modified by written notice, and (a) if to the Company, with a copy to Venture
Law Group, A Professional Corporation, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx,
Xxxxxxxxxx 00000, Attention: Xxxx X. Xxx Xxxxxx or (b) if to DynaFund L.P. and
DynaFund International L.P., with a copy to Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000,
Attention: Xxxxxxx X. Xxx.
6.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation
in the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.8 FEES AND EXPENSES. The Company shall pay at Closing the
reasonable fees and expenses of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx &
Xxxxxxxxx, LLP, the counsel for DynaFund L.P. and DynaFund International L.P.,
incurred with respect to this Agreement, the documents referred to herein and
the transactions contemplated hereby and thereby, provided such fees and
expenses do not exceed $12,500.
-15-
6.9 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended with the written consent of the Company and the holders of at least 66
2/3% of the Common Stock issued or issuable upon conversion of the Stock. Any
amendment or waiver effected in accordance with this Section 6.10 shall be
binding upon the Purchasers and each transferee of the Stock (or the Common
Stock issuable upon conversion thereof), each future holder of all such
securities, and the Company.
6.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
6.12 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
6.13 ENTIRE AGREEMENT. This Agreement, the documents referred to
herein and certain side letter agreements between the Company and Intel
Corporation and the Company and the DynaFund entities concerning Board
visitation rights constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof, and any and all other written or oral
agreements relating to the subject matter hereof existing between the parties
hereto are expressly canceled.
6.14 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY
-16-
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS
OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE
QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
6.15 CONFIDENTIALITY. Each party hereto agrees that, except with
the prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder. Without granting any right or license,
each party agrees that the foregoing clauses shall not apply with respect to any
information after five (5) years following the disclosure thereof or any
information that the other party can document (i) is or becomes (through no
improper action or inaction by such party or any affiliate, agent, consultant or
employee) generally available to the public, (ii) was in its possession known by
it prior to receipt from the other party, or (iii) was rightfully disclosed to
it by a third party without restriction. The provisions of this Section 6.15
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby, including, without limitation, the Intel
Letter Agreement.
6.16 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges
that it is not relying upon any person, firm or corporation, other than the
Company and its officers and directors, in making its investment or decision to
invest in the Company. Each Purchaser agrees that no Purchaser nor the
respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable to any other Purchaser for any action
heretofore or hereafter taken or omitted to be taken by any of them in
connection with the purchase of the Securities.
6.17 WAIVER OF CONFLICTS. Each party to this Agreement
acknowledges that Venture Law Group, counsel for the Company, has in the past
performed and may continue to perform legal services for certain of the
Purchasers in matters unrelated to the transactions described in this Agreement,
including the representation of such Purchasers in venture capital financings
and other matters. Accordingly, each party to this Agreement hereby (a)
acknowledges that they have had an opportunity to ask for information relevant
to this disclosure; and (b) gives its informed consent to Venture Law Group's
representation of certain of the Purchasers in such unrelated matters and to
Venture Law Group's representation of the Company in connection with this
Agreement and the transactions contemplated hereby.
[Signature Pages Follow]
-17-
The parties have executed this Series A Preferred Stock Purchase Agreement
as of the date first written above.
COMPANY:
eTOYS INC.
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Xxxxxx X. Xxxx
President and Chief Executive officer
Address: 0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
SIGNATURE PAGE TO PURCHASE AGREEMENT
PURCHASERS:
DYNAFUND LP
By: /s/ Xxxxx X.X. Ko
------------------------------------------
Name: Xxxxx Xx
----------------------------------------
(print)
Title: General Partner
---------------------------------------
Address: 00000 Xxxxxxxxx Xxxx, Xxxxx 00
-------------------------------------
Xxxxxxxx, XX 00000
-------------------------------------
DYNAFUND INTERNATIONAL LP
By: /s/ Xxxxx X.X. Ko
------------------------------------------
Name: Xxxxx Xx
----------------------------------------
(print)
Title: General Partner
---------------------------------------
Address: 00000 Xxxxxxxxx Xxxx, Xxxxx 00
-------------------------------------
Xxxxxxxx, XX 00000
-------------------------------------
SIGNATURE PAGE TO PURCHASE AGREEMENT
PURCHASER:
INTEL CORPORATION
By: /s/ illedgible
------------------------------------------
Name:
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Attn: Treasurer
Fax: (000) 000-0000
SIGNATURE PAGE TO eTOYS INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
PURCHASERS:
/s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx
Address: 000 Xxxx Xxxx Xxxxx
Xxxxxxx Xxxxxxxxx, XX 00000
XXXXX GLOBAL INVESTMENTS, LTD.
A BVI Corporation
By: Xxxxx Capital Management, Inc.
By: /s/ Xxxxxx Xxxxxxxxxx
------------------------------------------
Name: Xxxxxx Xxxxxxxxxx
----------------------------------------
(print)
Title: Director of Operations
---------------------------------------
Address: 1251 Avenue of the Americas
-------------------------------------
XX XX 00000
-------------------------------------
REMINGTON INVESTMENT STRATEGIES, L.P.
A Delaware Partnership
By: Xxxxx Capital Advisors L.L.C.
By: /s/ Xxxxxx Xxxxxxxxxx
------------------------------------------
Name: Xxxxxx Xxxxxxxxxx
----------------------------------------
(print)
Title: Director of Operations
---------------------------------------
Address: 0000 Xxxxxx xx xxx Xxxxxxxx
-------------------------------------
XX 00000
-------------------------------------
SIGNATURE PAGE TO PURCHASE AGREEMENT
PURCHASERS:
MULTI STRATEGIES FUND, L.P.
A Delaware Partnership
By: Xxxxx Capital Management, Inc.
By: /s/ Xxxxxx Xxxxxxxxxx
------------------------------------------
Name: Xxxxxx Xxxxxxxxxx
----------------------------------------
(print)
Title: Director of Operations
---------------------------------------
Address: 1251 Avenue of the Americas
-------------------------------------
XX XX 00000
-------------------------------------
MULTI STRATEGIES FUND, LTD.
A Bahamian IBC
By: Xxxxx Capital Management, Inc.
By: /s/ Xxxxxx Xxxxxxxxxx
------------------------------------------
Name: Xxxxxx Xxxxxxxxxx
----------------------------------------
(print)
Title: Director of Operations
---------------------------------------
Address: 1251 Avenue of the Americas
-------------------------------------
XX XX 00000
-------------------------------------
SIGNATURE PAGE TO PURCHASE AGREEMENT
PURCHASERS:
/s/ Xxxx X. Xxx Xxxxxx
---------------------------------------------
Xxxx X. Xxx Xxxxxx
Address: c/o Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
/s/ Xxxxx X. Xxxxx
---------------------------------------------
Xxxxx X. Xxxxx
Address: c/o Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
SIGNATURE PAGE TO PURCHASE AGREEMENT
PURCHASER:
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxx Xxx
-------------------------------------
Manhattan Beach, CA 902
-------------------------------------
PURCHASER:
By: /s/ Xxxxxx Xxxxx
------------------------------------------
Name: Xxxxxx Xxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: c/o Grosverner Capital Management
-------------------------------------
000 X. Xxxxxx Xxxxx, Xxxxx 0000
-------------------------------------
Xxxxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxx Xxxxxx
------------------------------------------
Name: Xxxxx Xxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxxx Xxxx Xx #00
-------------------------------------
Xxxxx Xxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: CD Radio Inc.
-------------------------------------
000 Xxxxx Xxxxxx, 0xx Floor
-------------------------------------
Xxx Xxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxx X.X. Xxxx
------------------------------------------
Name: Xxxxx X.X. Xxxx
----------------------------------------
(print)
Title: illeible
---------------------------------------
Address: illeible
-------------------------------------
-------------------------------------
PURCHASER:
By: /s/ Xxxxx Xxxxxx
------------------------------------------
Name: Xxxxx Xxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxxx Xx
-------------------------------------
illeible
-------------------------------------
PURCHASER:
By: /s/ Xxxx Xxxxx
------------------------------------------
Name: Xxxx Xxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: illeible
-------------------------------------
-------------------------------------
PURCHASER:
By: /s/ Xxxxxx X. Xxxx
------------------------------------------
Name: Xxxxxx X. Xxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 00 Xxxxxxx Xxxx
-------------------------------------
illegible
-------------------------------------
PURCHASER:
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxxxxxx Xx
-------------------------------------
Xxxxxxx Xxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxx Xxxxxxx
------------------------------------------
Name: Xxxxxx Xxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 000 Xxxx 00xx Xxxxxx
-------------------------------------
Xxx Xxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxx X. Sheriff/Xxxxx X. Sheriff
------------------------------------------
Name: Xxxxx X. Sheriff/Xxxxx X. Sheriff
----------------------------------------
(print)
Title:
---------------------------------------
Address: 00 Xxxxxxxxxxxx Xx.
-------------------------------------
Xxxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address:
-------------------------------------
-------------------------------------
PURCHASER:
By: /s/ Xxxxxx Xxxxxxx
------------------------------------------
Name: Xxxxxx Xxxxxxx
----------------------------------------
(print)
Title: President Chief
---------------------------------------
Address: 0 Xxxxxxx Xx. Xxxxx 0000
-------------------------------------
Xxxxxxx XX. 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxxx Xxxx
------------------------------------------
Name: Xxxxxxx Xxxx
----------------------------------------
(print)
Title: an individual
---------------------------------------
Address: 0000 Xxxxxx Xxxxx
-------------------------------------
Xxx Xxxxxx XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxxx Xxxx
------------------------------------------
Name: Xxxxxxx Xxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 000 00xx Xxxxx
-------------------------------------
Xxx Xxxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 000 Xxxxx Xxx
-------------------------------------
Xxxxxxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxx Xxxxx
------------------------------------------
Name: Xxxx Xxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 00 Xxxxxxxx Xxxx
-------------------------------------
Xxx Xxxxx, XX 00000
-------------------------------------
Fax: 000 000-0000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxxx xx Xxxxxx
------------------------------------------
Name: Xxxxxxx xx Xxxxxx
----------------------------------------
(print)
Title: President Latin America
---------------------------------------
Address: 1 Albambra Plaza
-------------------------------------
Xxxxx Xxxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxxxx Xxxxxxxxx-Xxxxx
------------------------------------------
Name: Xxxxxxxx Xxxxxxxxx-Xxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxxxx Xx.
-------------------------------------
Xxxxx Xxxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxxxx P.M. Xxxxxxx
------------------------------------------
Name: Xxxxxxxx P.M. Xxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: X.X. Xxx 000000
-------------------------------------
Xxxxxx Xxxxx Xx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxx Xxxx
------------------------------------------
Name: Xxxxxx Xxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 000 Xxxxxxx Xxxx
-------------------------------------
Xxxxx Xxxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxxx
----------------------------------------
(print)
Title: Principal
---------------------------------------
Address: 00000 Xxxxxxx Xxxxx
-------------------------------------
Xxxxxxx, Xxxxxxxx, 00000
-------------------------------------
Fax: (000) 000-0000
-------------------------------------
PURCHASER:
By: /s/ Xxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: illegible
-------------------------------------
-------------------------------------
PURCHASER:
By: /s/ Xxxxxxx Xxx
------------------------------------------
Name: Xxxxxxx Xxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 000 Xxxxxxx Xxxxxx
-------------------------------------
Xxxxxxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Hydra Global Investments, Inc.
------------------------------------------
Name: Xxxx Xxxx
----------------------------------------
(print)
Title: Investment Officer
---------------------------------------
Address: Abott Building, 2nd Floor
-------------------------------------
Roadwill, Tortaor, RVL
-------------------------------------
PURCHASER:
By: /s/ Xxxxx Kitani
------------------------------------------
Name: Xxxxx Kitani
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxx Xxxx
-------------------------------------
Xxx Xxxx, XX 00000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxxx Xxxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxxx Xx
-------------------------------------
Xxxxxxx Xx 00000-0000
-------------------------------------
PURCHASER:
By: /s/ Xxxxxxxxxxx X. Xxx
------------------------------------------
Name: Xxxxxxxxxxx X. Xxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: illegible
-------------------------------------
illegible
-------------------------------------
PURCHASER:
By: /s/ Xxxxx Xxx Xxxxxxx
------------------------------------------
Name: Xxxxx Xxx Xxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxxx Xx. X.X.
-------------------------------------
Xxxxxxx Xxxxxxx, Xxxxxx
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PURCHASER:
By: /s/ Xxxxxx Xxxxx
------------------------------------------
Name: Xxxxxx Xxxxx
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(print)
Title:
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Address: 000 X. 0xx Xxx
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Xxxxxxx XX 00000
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PURCHASER:
By: /s/ Xxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xx. Xxxxxx Xx.
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San. Xxxxxxx, XX 00000
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PURCHASER:
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 00 Xxxxx Xxx, 00X
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Xxx Xxxx, XX 00000
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PURCHASER:
/s/ Xxxx Xxxxxxxxx
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxxxx and Xxxx Xxxxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxx Xxxxx Xx.
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Xxxxxxxx, Xx 00000
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PURCHASER:
By: /s/ Xxxx X. Xxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address: 0000 Xxxxxxx Xxxx Xx.
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Xxx Xxxxxxx, XX 00000
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PURCHASER:
By: /s/ Xxxxxxx Sheen
------------------------------------------
Name: Xxxxxxx Sheen
----------------------------------------
(print)
Title:
---------------------------------------
Address: 000 Xxxxxx Xxxxx Xx
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Xxxxxxx XX 00000
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PURCHASER:
By: /s/ Xxxxx Xxxxx
------------------------------------------
Name: Xxxxx Xxxxx
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(print)
Title:
---------------------------------------
Address: 000 Xxxxxxx Xx.
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Xxxx Xxxx, XX 00000
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PURCHASER:
By: /s/ Xxxx X. Xxxxxxxx
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Name: Xxxx X. Xxxxxxxx
----------------------------------------
(print)
Title: Trustee
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Address: X.X. Xxx 000
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Xxxx Xxxxxx, XX 00000
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PURCHASER:
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address:
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-------------------------------------
PURCHASER:
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------------
Name: Xxxxxxx Xxxxxxx
----------------------------------------
(print)
Title:
---------------------------------------
Address:
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-------------------------------------
PURCHASER:
By: /s/ Xxxxxx Xxxxx
------------------------------------------
Name: Xxxxxx Xxxxx
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(print)
Title:
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Address: 00 Xxxxxx Xx.
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Xxxxxxxxx XX 00000
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SIGNATURE PAGE TO PURCHASE AGREEMENT
EXHIBITS
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Amended and Restated Certificate of Incorporation
Exhibit C - Schedule of Exceptions to Representations and Warranties
Exhibit D - Form of Investors' Rights Agreement
Exhibit E - Form of Right of First Refusal and Co-Sale Agreement
Exhibit F - Form of Voting Agreement
Exhibit G - Form of Legal Opinion of Venture Law Group
Exhibit H - Form of Addendum Agreement
Exhibit I - Form of Intel Letter Agreement
EXHIBIT A
SCHEDULE OF PURCHASERS
EXHIBIT A
SCHEDULE OF PURCHASERS
SERIES A PREFERRED
NAME STOCK PURCHASE PRICE
(SHARES) (CASH/WIRE TRANSFER)
DynaFund L.P. 691,661 $ 428,829.82
DynaFund International L.P. 921,242 $ 571,170.04
Intel Corporation 1,612,903 $ 999,999.86
Xxxxxxx X. Xxxxx 80,645 $ 49,999.90
Xxxxx Global Investments, Ltd. 824,866 $ 511,416.92
Remington Investment Strategies, L.P. 68,952 $ 42,750.24
Multi Strategies Fund, L.P. 114,919 $ 71,249.78
Multi Strategies Fund Ltd. 523,521 $ 324,583.02
Xxxxx X. Xxxxx 8,064 $ 4,999.68
Xxxx X. Xxx Xxxxxx 3,226 $ 2,000.12
------------------ ------------------- --------------------
Subtotal: 4,849,999 $ 3,006,999.38
SERIES A PREFERRED
NAME STOCK PURCHASE PRICE
(SHARES) (CANCELLATION OF DEBT)
Xxx Xxxxxx 82,348 $ 51,055.76
Xxxxxx Xxxxx 24,704 $ 15,316.48
Xxxxx Xxxxxx 16,469 $ 10,210.78
Xxxxxx Xxxxxxxxxx 41,174 $ 25,527.88
Xxxxx Xxxx 32,939 $ 20,422.18
Xxxxx Xxxxxx 57,643 $ 35,738.66
Xxxx Xxxxx 32,939 $ 20,422.18
Xxxxxx Xxxx 32,939 $ 20,422.18
Xxxxxxx Xxxxxx 41,174 $ 25,527.88
Xxxxxx Xxxxxxx 41,174 $ 25,527.88
Xxxx and Xxxxx Xxxxxxx 41,174 $ 25,527.88
Xxx Xxxxxx 49,409 $ 30,633.58
Xxxxxx Xxxxxxx 41,174 $ 25,527.88
Xxx Xxxx 82,348 $ 51,055.76
Xxxxxxx Xxxx and Xxxxxx Xxxxxxxxxx 40,885 $ 25,348.70
Xxxx Xxxxxx 16,354 $ 10,139.48
Xxxx Xxxxx 40,885 $ 25,348.70
Xxxxxxx Xx Xxxxxx 40,885 $ 25,348.70
Xxxxxxxx Xxxxxxxxx 16,354 $ 10,139.48
Xxxxx Xxxxxxx 40,885 $ 25,348.70
Xxxxxx Xxxx 40,885 $ 25,348.70
Xxxxx Xxxxxxxxx 81,771 $ 50,698.02
Xxxxx Xxxxxxxx 24,531 $ 15,209.22
Xxxxxxx Xxx 24,531 $ 15,209.22
Xxxx Xxx/Hydra Global Investments 40,885 $ 25,348.70
Xxxxx Kitani 16,354 $ 10,139.48
Xxxxxx Xxxxxxxx 57,240 $ 35,488.80
Xxxxx Xxx 16,354 $ 10,139.48
Xxxxx XxxXxxxxxx 32,708 $ 20,278.96
Xxxxx Xxxxx 40,885 $ 25,348.70
Xxx Xxxxx 40,885 $ 25,348.70
Xxxx Xxxxxx 24,531 $ 15,209.22
EXHIBIT A
SCHEDULE OF PURCHASERS
SERIES A PREFERRED
NAME STOCK PURCHASE PRICE
(SHARES) (CANCELLATION OF DEBT)
Xxxxxx and Xxxxxx Xxxxxxxxx 16,354 $ 10,139.48
Xxxx Xxxxxxx 40,885 $ 25,348.70
Ray Sheen 16,354 $ 10,139.48
Xxxxx Xxxxx 16,354 $ 10,139.48
Xxxx Xxxxxxxx 40,885 $ 25,348.70
Xxxxx Xxxxxxx 40,885 $ 25,348.70
Xxxx Xxxxxxx 24,531 $ 15,209.22
Xxxxxx Xxxxx 16,354 $ 10,139.48
------------ ------------------- --------------------
SUBTOTAL: 1,468,018.00 $ 910,171.16
TOTAL: 6,318,017.00 $ 3,917,170.54
------------------- --------------------
------------------- --------------------
EXHIBIT B
FORM OF FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ETOYS INC.
The undersigned, Xxxxxx X. Xxxx and Xxxxx X. Xxx hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of eToys Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on November 8, 1996.
3. The Certificate of Incorporation of this corporation shall be
amended and restated to read in full as follows:
ARTICLE I
"The name of this corporation is eToys Inc. (the "CORPORATION").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 00 Xxxx Xxxxx Xxxxxx, Xxxxx, Xxxxxx xx Xxxx, Xxxxxxxx 00000. The
name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
ARTICLE IV
(A) CLASSES OF STOCK. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "COMMON STOCK" and "PREFERRED
STOCK." The total number of shares which the Corporation is authorized to issue
is Fifty-Seven Million Thirty-Six Thousand Three Hundred (57,036,300) shares,
each with a par value of $0.0001 per share. Fifty Million (50,000,000) shares
shall be Common Stock and Seven Million Thirty-Six Thousand Three Hundred
(7,036,300) shares shall be Preferred Stock.
(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this First Amended and Restated Certificate of
Incorporation may be issued from time to time in one or more series. The first
series of Preferred Stock shall be designated "SERIES A PREFERRED STOCK" and
shall consist of Seven Million Thirty-Six Thousand Three
Hundred (7,036,300) shares. The rights, preferences, privileges, and
restrictions granted to and imposed on the Series A Preferred Stock are as set
forth below in this Article IV(B).
1. DIVIDEND PROVISIONS.
(a) Subject to the rights of series of Preferred Stock which
may from time to time come into existence, the holders of shares of Series A
Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of the Corporation) on the
Common Stock of the Corporation, at the rate of $0.043 per share per annum on
each outstanding share of Series A Preferred Stock, (as adjusted for any stock
splits, stock dividends, recapitalizations or the like) or, if greater (as
determined on a per annum basis and on an as converted basis for the Series A
Preferred Stock), an amount equal to that paid on any other outstanding shares
of this corporation) payable quarterly when, as and if declared by the Board of
Directors. Such dividends shall not be cumulative.
(b) After payment of such dividends, any additional
dividends shall be distributed among all holders of Common Stock and all holders
of Series A Preferred Stock in proportion to the number of shares of Common
Stock which would be held by each such holder if all shares of Series A
Preferred Stock were converted to Common Stock at the then effective conversion
rate.
2. LIQUIDATION.
(a) PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
subject to the rights of series of Preferred Stock that may from time to time
come into existence, the holders of the Series A Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of Common Stock by reason of their
ownership thereof, an amount per share equal to $0.62 per share for each share
of Series A Preferred Stock then held by them, plus declared but unpaid
dividends. If, upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of Preferred Stock
that may from time to time come into existence, the entire assets and funds of
the Corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(b) REMAINING ASSETS. Upon the completion of the
distribution required by Section 2(a) above and any other distribution that may
be required with respect to series of Preferred Stock that may from time to time
come into existence, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among the holders of the
Series A Preferred Stock and the Common Stock pro rata based on the number of
shares of Common Stock held by each (assuming conversion of all such Series A
Preferred Stock) until
-2-
such holders of Series A Preferred Stock shall have received an aggregate of
$1.86 per share (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) (including amounts paid pursuant to Section 2(a)
above); thereafter, subject to the rights of series of Preferred Stock that may
from time to time come into existence, if assets remain in the Corporation, the
holders of the Common Stock of the Corporation shall receive all of the
remaining assets of the Corporation pro rata based on the number of shares of
Common Stock held by each.
(c) CERTAIN ACQUISITIONS.
(i) DEEMED LIQUIDATION. For purposes of this
Section 2, a liquidation, dissolution or winding up of the Corporation shall be
deemed to be occasioned by, or to include, (A) the acquisition of the
Corporation by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger or
consolidation, but excluding any merger effected exclusively for the purpose of
changing the domicile of the Corporation); or (B) a sale of all or substantially
all of the assets of the Corporation, UNLESS the Corporation's stockholders of
record as constituted immediately prior to such acquisition or sale will,
immediately after such acquisition or sale (by virtue of securities issued as
consideration for the Corporation's acquisition or sale or otherwise) hold at
least 50% of the voting power of the surviving or acquiring entity in
approximately the same relative percentages after such acquisition or sale as
before such acquisition or sale.
(ii) VALUATION OF CONSIDERATION. In the event of a
deemed liquidation as described in Section 2(c)(i) above, if the consideration
received by the Corporation is other than cash, its value will be deemed its
fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter
or other similar restrictions on free marketability:
(1) If traded on a securities exchange or
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing;
(2) If actively traded over-the-counter,
the value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty-day period ending three (3) days prior
to the closing; and
(3) If there is no active public market,
the value shall be the fair market value thereof, as determined in good faith by
the Board of Directors of the Corporation.
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in Section 2(c)(ii)(A) to reflect
-3-
the approximate fair market value thereof, as determined in good faith by the
Board of Directors of the Corporation.
(iii) NOTICE OF TRANSACTION. The Corporation shall give
each holder of record of Preferred Stock written notice of such impending
transaction not later than twenty (20) days prior to the stockholders' meeting
called to approve such transaction, or twenty (20) days prior to the closing of
such transaction, whichever is earlier, and shall also notify such holders in
writing of the final approval of such transaction. The first of such notices
shall describe the material terms and conditions of the impending transaction
and the provisions of this Section 2, and the Corporation shall thereafter give
such holders prompt notice of any material changes. The transaction shall in no
event take place sooner than twenty (20) days after the Corporation has given
the first notice provided for herein or sooner than twenty (20) days after the
Corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of Preferred Stock that are entitled to such notice rights or
similar notice rights and that represent at least a majority of the voting power
of all then outstanding shares of such Preferred Stock.
(iv) EFFECT OF NONCOMPLIANCE. In the event the
requirements of this Section 2(c) are not complied with, the Corporation shall
forthwith either cause the closing of the transaction to be postponed until such
requirements have been complied with, or cancel such transaction, in which event
the rights, preferences and privileges of the holders of the Preferred Stock
shall revert to and be the same as such rights, preferences and privileges
existing immediately prior to the date of the first notice referred to in
Section 2(c)(iii) hereof.
3. REDEMPTION.
(a) Subject to the rights of series of Preferred Stock which
may from time to time come into existence, on or at any time after the date
November 26, 2002, this corporation shall, upon receipt by this corporation from
the holders of 66 2/3% of the then outstanding shares of Series A Preferred
Stock of their written consent to redemption hereunder of their respective
shares (the "REDEMPTION NOTICE"), at such time and to the extent that it may
lawfully do so, redeem in whole or in part the Series A Preferred Stock by
paying in cash therefor a sum equal to $0.62 per share (as adjusted for any
stock dividends, combinations or splits with respect to such share) plus all
declared but unpaid dividends on such share (the "SERIES A REDEMPTION PRICE").
Any such redemption shall occur on the date forty-five (45) days after the
receipt of the Redemption Notice or as soon thereafter as the Company may
lawfully conduct such redemption under the terms of this Section 3.
(b) As used herein and in subsection (3)(c) below, the term
"REDEMPTION DATE" shall refer to each of "SERIES A REDEMPTION DATE" and the term
"REDEMPTION PRICE" shall refer to the "SERIES A REDEMPTION PRICE." Subject to
the rights of series of Preferred Stock which may from time to time come into
existence, at least fifteen (15) but no more than thirty (30) days prior to the
Redemption Date, if the holders of Series A Preferred Stock exercise their right
of redemption pursuant to subsection 3(a) above, written notice shall be mailed,
first class postage prepaid, to each holder of record (at the close of business
on the business day next
-4-
preceding the day on which notice is given) of the Series A Preferred Stock to
be redeemed, at the address last shown on the records of this corporation for
such holder, notifying such holder of the redemption to be effected, specifying
the number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and calling upon
such holder to surrender to this corporation, in the manner and at the place
designated, his, her or its certificate or certificates representing the shares
to be redeemed (the "REDEMPTION NOTICE"). Except as provided in
subsection (3)(c) on or after the Redemption Date, each holder of Series A
Preferred Stock to be redeemed shall surrender to this corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(c) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of shares of Series A Preferred Stock designated for redemption in the
Redemption Notice as holders of Series A Preferred Stock (except the right to
receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of this corporation or
be deemed to be outstanding for any purpose whatsoever. Subject to the rights
of series of Preferred Stock which may from time to time come into existence, if
the funds of this corporation legally available for redemption of shares of
Series A Preferred Stock on the Redemption Date are insufficient to redeem the
total number of shares of Series A Preferred Stock to be redeemed on such date,
those funds which are legally available will be used to redeem the maximum
possible number of such shares ratably among the holders of such shares to be
redeemed based upon their holdings of Series A Preferred Stock. The shares of
Series A Preferred Stock not redeemed shall remain outstanding and entitled to
all the rights and preferences provided herein. Subject to the rights of series
of Preferred Stock which may from time to time come into existence, at any time
thereafter when additional funds of this corporation are legally available for
the redemption of shares of Series A Preferred Stock, such funds will
immediately be used to redeem the balance of the shares of Series A Preferred
Stock which this corporation has not redeemed.
(d) Three (3) days prior to the Redemption Date, this
corporation shall deposit the Redemption Price of all outstanding shares of
Series A Preferred Stock designated for redemption in the Redemption Notice, and
not yet redeemed or converted, with a bank or trust company having aggregate
capital and surplus in excess of $50,000,000 as a trust fund for the benefit of
the respective holders of the shares designated for redemption and not yet
redeemed, Simultaneously, this corporation shall deposit irrevocable instruction
and authority to such bank or trust company to publish the notice of redemption
thereof (or to complete such publication if theretofore commenced) and to pay,
on and after the date fixed for redemption or prior thereto, the Redemption
Price of the Series A Preferred Stock to the holders thereof upon surrender of
their certificates. Any monies deposited by this corporation pursuant to this
subsection 3(d) for the redemption of shares which are thereafter converted into
shares of Common Stock pursuant
-5-
to Section 4 hereof no later than the close of business on the Redemption Date
shall be returned to this corporation forthwith upon such conversion. The
balance of any monies deposited by this corporation pursuant to this
subsection 3(d) remaining unclaimed at the expiration of two (2) years following
the Redemption Date shall thereafter be returned to this corporation, provided
that the stockholder to which such money would be payable hereunder shall be
entitled, upon proof of its ownership of the Series A Preferred Stock and
payment of any bond requested by the Company, to receive such monies but without
interest from the Redemption Date.
4. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
(a) RIGHT TO CONVERT. Subject to Section 4(c), each share
of Series A Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share and on or prior to
the close of business on the day prior to the Redemption Date, if any, as may be
specified in the Redemption Notice with respect to the Series A Preferred Stock,
at the office of the Corporation or any transfer agent for such stock, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing $0.62 by the Conversion Price applicable to such share, determined
as hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial Conversion Price per share of Series A Preferred Stock
shall be $0.62. Such initial Conversion Price shall be subject to adjustment as
set forth in Section 4(d).
(b) AUTOMATIC CONVERSION. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such share immediately upon the earlier of
(i) except as provided below in Section 4(c), the Corporation's sale of its
Common Stock in a firm commitment underwritten public offering pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), which results in aggregate gross cash proceeds to the
Corporation of at least $15,000,000 (an "IPO") or (ii) the date specified by
written consent or agreement of the holders of at least forty percent (40%) of
the then outstanding shares of Series A Preferred Stock.
(c) MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for such series of Preferred
Stock, and shall give written notice to the Corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock,
or to the nominee or nominees of such holder, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of such
series of Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten
-6-
offering of securities registered pursuant to the Securities Act the conversion
may, at the option of any holder tendering such Preferred Stock for conversion,
be conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive
Common Stock upon conversion of such Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of such
sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR
CERTAIN DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of
the Series A Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) (A) If the Corporation shall issue, after the
date upon which any shares of Series A Preferred Stock were first issued (the
"PURCHASE DATE"), any Additional Stock (as defined below) without consideration
or for a consideration per share less than the Conversion Price for the Series A
Preferred Stock in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for the Series A Preferred Stock in effect
immediately prior to each such issuance shall automatically (except as otherwise
provided in this clause (i)) be adjusted to a price determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance, plus
the number of shares of Common Stock that the aggregate consideration received
by the Corporation for such issuance would purchase at such Conversion Price;
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance, plus the number of shares of
such Additional Stock.
(B) No adjustment of the Conversion Price for
the Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of such Conversion Price
pursuant to this Section 4(d)(i) shall have the effect of increasing the
Conversion Price above the Conversion Price in effect immediately prior to such
adjustment.
(C) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined in
good faith by the Board of Directors irrespective of any accounting treatment.
-7-
(E) In the case of the issuance (whether before,
on or after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this Section 4(d)(i) and Section 4(d)(ii):
(1) The aggregate maximum number of shares
of Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
Sections 4(d)(i)(C) and 4(d)(i)(D)), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum exercise price provided
in such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by the Corporation for any such
securities and related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in Sections
4(d)(i)(C) and 4(d)(i)(D)).
(3) In the event of any change in the
number of shares of Common Stock deliverable or in the consideration payable to
the Corporation upon exercise of such options or rights or upon conversion of or
in exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of the Series A Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A Preferred Stock,
to the extent in any way affected by or computed using such options,
-8-
rights or securities or options or rights related to such securities, shall be
recomputed to reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities which remain in effect) actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities.
(5) The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to Sections
4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Section 4(d)(i)(E)(3)
or (4).
(ii) "ADDITIONAL STOCK" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to Section 4(d)(i)(E)) by
the Corporation after the Purchase Date) other than:
(A) Common Stock issued pursuant to a
transaction described in Section 4(d)(iii) hereof,
(B) Shares of Common Stock issuable or issued to
employees, consultants or directors of the Corporation directly or pursuant to a
stock option plan or restricted stock plan approved by the Board of Directors of
the Corporation,
(C) Capital stock, or options or warrants to
purchase capital stock, issued to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings or similar
transactions, which issuances are primarily for other than equity financing
purposes,
(D) Shares of Common Stock or Preferred Stock
issuable upon exercise of warrants outstanding as of the date of this Amended
and Restated Certificate of Incorporation,
(E) Capital stock or warrants or options to
purchase capital stock issued in connection with bona fide acquisitions, mergers
or similar transactions, the terms of which are approved by the Board of
Directors of the Corporation,
(F) Shares of Common Stock issued or issuable
upon conversion of the Preferred Stock, and
(G) Shares of Common Stock issued or issuable in
a public offering.
(iii) In the event the Corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
-9-
indirectly, additional shares of Common Stock (hereinafter referred to as
"COMMON STOCK EQUIVALENTS") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents with the number of shares issuable with
respect to Common Stock Equivalents determined from time to time in the manner
provided for deemed issuances in Section 4(d)(i)(E).
(iv) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 4(d)(iii), then, in
each such case for the purpose of this Section 4(e), the holders of Preferred
Stock shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of such
Preferred Stock the number of shares of stock or other securities or property of
the Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of such Preferred Stock
after the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of such Preferred Stock) shall be applicable
after that event and be as nearly equivalent as practicable.
(g) NO IMPAIRMENT. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
-10-
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock pursuant to
this Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price for the Series A Preferred
Stock at the time in effect, and (C) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of a share of the Series A Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Preferred Stock, at least twenty (20) days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of such series of Preferred Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of such
series of Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to
-11-
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to this Certificate of Incorporation.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
5. VOTING RIGHTS. Except as provided below with respect to the
election of directors, the holder of each share of Preferred Stock shall have
the right to one vote for each share of Common Stock into which such Preferred
Stock could then be converted, and with respect to such vote, such holder shall
have full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the bylaws of
the Corporation, and shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote. In addition, as long as twenty-five percent (25%) of the number
of shares of Series A Preferred Stock issued by the Corporation on the date the
Series A Preferred Stock was originally issued remain outstanding, the holders
of the Series A Preferred Stock shall be entitled, voting together as a separate
class, to elect one (1) director of this corporation at each annual election of
directors. The holders of Common Stock shall be entitled, voting together as a
separate class, to elect two (2) directors of this corporation at each annual
meeting of directors. The holders of Preferred Stock and Common Stock voting
together as a single class shall have the right to elect any remaining
directors.
6. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, the Corporation
shall not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least 66-2/3% of the then outstanding
shares of Preferred Stock, voting together as a class:
(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any other transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Corporation is disposed of,
PROVIDED that this Section 6(a) shall not apply to a merger effected exclusively
for the purpose of changing the domicile of the Corporation;
(b) alter or change the rights, preferences or privileges of
the shares of the Series A Preferred Stock so as to affect adversely such
shares;
(c) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A Preferred Stock;
-12-
(d) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, the Series A Preferred Stock with respect to voting, redemption,
conversion, dividends or upon liquidation;
(e) redeem, purchase or otherwise acquire (or pay into or
set funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; PROVIDED, HOWEVER, that this restriction shall
not apply to the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for the Company or
any subsidiary pursuant to agreements under which the Company has the option to
repurchase such shares at cost or at cost upon the occurrence of certain events,
such as the termination of employment;
(f) increase the authorized number of directors of the
Corporation; or
(g) pay any dividend on the Common Stock other than
dividends on the Common Stock solely in the form of additional shares of Common
Stock.
7. STATUS OF REDEEMED OR CONVERTED STOCK. In the event any
shares of Preferred Stock shall be redeemed or converted pursuant to Section 3
or Section 4 hereof, the shares so converted shall be cancelled and shall not be
issuable by the Corporation. The Certificate of Incorporation of the
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
(C) COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
-13-
ARTICLE V
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(B) The Corporation shall indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
Corporation or any predecessor of the Corporation, or serves or served at any
other enterprise as a director or officer at the request of the Corporation or
any predecessor to the Corporation.
(C) Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of the Corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision."
ARTICLE VIII
To the fullest extent permitted by applicable law, this corporation is
authorized to provide indemnification of (and advancement of expenses to) agents
of this corporation (and any other persons to which Delaware law permits this
corporation to provide indemnification) through bylaw provisions, agreements
with such agents or other persons, vote of stockholders or disinterested
directors otherwise, in excess of the indemnification and advancement otherwise
permitted by Section 145 of the Delaware General Corporation Law, subject only
to limits created by applicable Delaware law (statutory or non-statutory), with
respect to actions for breach of duty to this corporation, its stockholders, and
others.
* * *
-14-
The foregoing First Amended and Restated Certificate of Incorporation has
been duly adopted by this corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Santa Monica, California, on the 22nd day of December, 1997.
/s/ Xxxxxx X. Xxxx
------------------------------
Xxxxxx X. Xxxx, President
/s/ Xxxxx X. Xxx
------------------------------
Xxxxx X. Xxx, Secretary
SIGNATURE PAGE TO eTOYS INC.
FIRST AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
EXHIBIT C
SCHEDULE OF EXCEPTIONS TO
REPRESENTATIONS AND WARRANTIES
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
December 23, 1997
This confidential Schedule of Exceptions (the "SCHEDULE") is delivered
pursuant to Section 2 of the Series A Preferred Stock Purchase Agreement by and
between eToys Inc., a Delaware corporation ("eTOYS" or the "COMPANY") and the
purchasers listed on EXHIBIT A to the Series A Preferred Stock Purchase
Agreement (the "PURCHASERS").
The section numbers in the Schedule correspond to the section numbers in
the Agreement; however, any information reasonably disclosed under any section
number of the Schedule shall be deemed to be disclosed and incorporated into any
other section number under the Agreement to which it pertains, whether or not
the specific section numbers are indicated below. All capitalized terms herein
shall have the meanings given them in the Agreement, unless otherwise indicated
in the Schedule.
Copies of agreements, plans, policies and other documents referred to
herein (the "DOCUMENTS") have been made available to the Purchasers. The
foregoing, however, does not modify or limit the representations and warranties
of the Company in Section 2 of the Agreement or the right of the Purchasers to
rely thereon.
2.2
The Company has issued certain promissory notes that, upon the Closing,
will be automatically convertible into 1,468,018 shares of Series A Preferred
Stock. In connection with the issuance of such promissory notes, the Company
issued certain warrants that, upon the Closing, will be exercisable for an
aggregate of 721,757 shares of Series A Preferred Stock at an exercise price of
$0.62 per share.
2.7
The filing of the Restated Certificate will be necessary to consummate the
transactions contemplated by the Agreement.
2.8
[intentionally omitted]
2.9
The Company has filed an application for trademark registration with the
United States Patent and Trademark Office for the xxxx "ETOYS".
Pursuant to a Letter Agreement, dated March 14, 1997, by and between
idealab! and Xxxxxx Xxxxxxxx Productions, Xxxxxx Xxxxxxxx Productions agreed to
transfer to idealab! the domain names "xXxxx.xxx" and "x-xxxx.xxx" for certain
consideration. In December 1997, the Company entered into an agreement with
idealab! pursuant to which the rights to these domain names were transferred and
assigned by idealab! to eToys.
[intentionally omitted]
[intentionally omitted]
2.10
The Company did not timely file notices under the securities laws of the
states of Colorado, Maryland and Washington in connection with the issuance and
sale of promissory notes and warrants. These issuances were made to two
purchasers in the state of Colorado and to one purchaser in the states of
Maryland and Washington, respectively. The Company is currently in the process
of making these notice filings.
-2-
2.11 (a)
In June 1997, the Company issued and sold 2,500,000 shares of Common Stock
to Xxxx Xxxx pursuant to a Stock Purchase Agreement.
In June 1997, the Company issued and sold an aggregate of 833,334 shares
of Common Stock to Xxxxx Xxx pursuant to two Stock Purchase Agreements.
In June 1997, the Company issued and sold 6,466,667 shares of Common Stock
to idealab!, an affiliate of the Company. In November 1997, pursuant to a
letter agreement, idealab! returned 360,000 shares of Common Stock of the
Company to the Company in the form of a capital contribution.
Each of the Company's officers and directors have entered into proprietary
information and inventions agreements with the Company.
During 1997, the Company reimbursed Xxxxx Xxx for approximately $10,000 in
expenses incurred by Xx. Xxx on behalf of the Company.
During 1997, the Company reimbursed Xxxx Xxxx for approximately $15,000 in
expenses incurred by Xx. Xxxx on behalf of the Company.
The Company has entered into an indemnification agreement with each of its
current directors and with Xxxxx Xxx.
2.11 (b)
The Company is party to the following contracts that that involve
(i) obligations (contingent or otherwise) of, or payments to, the Company in
excess of, $10,000 , (ii) the license of a patent, copyright, trade secret or
other proprietary right to or from the Company, or (iii) the grant of rights to
manufacture, produce, assemble, license, market, or sell its products to any
other person or affect the Company's exclusive right to develop, manufacture,
assemble, distribute, market or sell its products:
Engagement Letter, dated July 9, 1997, by and between the Company and
Alexander Communications, Inc.
Lease, dated July 15, 1997, by and between the Company and E.A. Three,
Ltd. (the "WAREHOUSE LEASE").
[intentionally omitted]
Lease, dated August 21, 1997, by and between the Company and Xxxxxx X.
Xxxxxxx and Xxx Xxxxxxx (the "OFFICE LEASE").
-3-
Lease, dated September 29, 1997, by and between the Company and IKON
Office Solutions (copier lease) (the "COPIER LEASE").
Content License Agreement, dated October 1, 1997, by and between the
Company and Xx. Xxxxxxxx Xxxxxxxx.
Interactive Marketing Agreement, dated as of October 1, 1997, by and
between the Company and America Online, Inc.
Network Advertising Agreement, effective as of November 1, 1997, by and
between the Company and Excite.
Content and Services Agreement, dated as of October 1, 1997, by and
between WebTV Network, Inc. and the Company.
Shopping Development - Merchant Services Agreement, dated as of
November 10, 1997, by and between GTE Media Ventures Incorporated and the
Company.
Market Square Agreement, effective as of October 27, 1997, by and between
AT&T Corp. and the Company.
The Company is a party to an agreement with FoneMart pursuant to which the
Company rents its phone system on a month to month basis (the "PHONE
SYSTEM LEASE").
The Company is a party to an agreement with Worldcom pursuant to which the
Company is provided with long distance telephone service and internet
access on a monthly basis.
Advertising Insertion Orders No. 6964 and 6979, dated as of July 9, 1997
and July 10, 1997, respectively, by and between the Company and Yahoo!
Inc.;
Sponsorship Agreement, dated as of July 17, 1997, by and between the
Company and Netscape Communications Corporation;
Internet Advertising Insertion Orders, dated as of July 17, 1997, by and
between the Company and SOFTBANK Interactive Marketing, Inc.;
Advertiser Agreements, dated as of July 10, 1997, July 16, 1997, and
July 16, 1997, by and between the Company and Infoseek;
Global Center Service Order No. E-Toys 0001.1;
Master Service Agreement, dated as of November 26, 1997, by and between
Global Center, Inc. and the Company; and
-4-
[intentionally omitted]
The Company enters into purchase orders in the ordinary course of business
pursuant to which it purchases inventory for ultimate resale to customers.
The dollar amounts of such purchase orders exceed $25,000 in the aggregate
and in some cases exceed $10,000 individually.
The Company enters into affiliate license agreements in the ordinary
course of business pursuant to which it supplies the affiliate with
artwork and text that can be placed on the affiliate's site and can act as
a link to the Company's site. The dollar amounts covered by such license
agreements exceed $25,000 in the aggregate and in some cases exceed
$10,000 individually.
2.11 (c)
Since the Company's inception, idealab! has paid for $100,000 in expenses
incurred by the Company. In November 1997, the Company and idealab! entered
into a letter agreement pursuant to which idealab! agreed to forgive the
Company's repayment of such $100,000 amount.
2.12
Concurrent with the Closing, the Company will enter into letter agreements
with both Intel Corporation and the DynaFund entities providing for certain
Board visitation rights.
2.13
Since the Company's inception, idealab! has paid for $100,000 in expenses
incurred by the Company. In November 1997, the Company and idealab! entered
into a letter agreement pursuant to which idealab! agreed to forgive the
Company's repayment of such $100,000 amount.
2.16
The Company leases certain warehouse space under the Warehouse Lease and
office space under the Office Lease. The Company also leases a copier and its
phone system under the Copier Lease and the Phone System Lease.
2.17
The Company's financial statements have not been prepared in accordance
with generally accepted accounting principles.
-5-
2.18
[intentionally omitted]
2.20
The Company has missed the deadline for filing its federal and state tax
returns for the fiscal year ended March 31, 1997. The Company filed these
returns on December 18, 1997. The Company believes that any penalties resulting
from such late filing will not exceed $2,000.
2.21
The Company does not currently have in effect fire insurance.
2.22
The Company has adopted a stock option plan.
2.24
The Company is currently in the process of applying for a business permit
from the city of Santa Xxxxxx.
-6-
EXHIBIT D
FORM OF INVESTORS' RIGHTS AGREEMENT
(See Exhibit 10.9)
EXHIBIT E
FORM OF RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
(See Exhibit 10.11)
EXHIBIT F
FORM OF VOTING AGREEMENT
(See Exhibit 10.10)
EXHIBIT G
FORM OF LEGAL OPINION
OF
VENTURE LAW GROUP
December 23, 1997
To the Purchasers of Series A Preferred
Stock of eToys, Inc. Listed
on EXHIBIT A to the Series A Preferred Stock
Purchase Agreement
Ladies and Gentlemen:
We have acted as counsel for eToys Inc., a Delaware corporation (the
"COMPANY"), in connection with the sale by the Company to you of 6,312,372
shares of the Company's Series A Preferred Stock (the "SHARES") pursuant to the
Series A Preferred Stock Purchase Agreement (the "PURCHASE AGREEMENT") dated
December 23, 1997 among the Company and the persons listed on EXHIBIT A attached
thereto (the "PURCHASERS"), and the negotiation, execution and delivery by the
Company of the Investors' Rights Agreement dated December 23, 1997 (the
"INVESTORS' RIGHTS AGREEMENT"), the Co-Sale Agreement dated December 23, 1997
(the "CO-SALE AGREEMENT") and the Voting Agreement dated December 23, 1997.
This opinion is given to you in compliance with Section 4.6 of the Purchase
Agreement. The Purchase Agreement, the Investors' Rights Agreement, the Co-Sale
Agreement and the Voting Agreement are referred to herein collectively as the
"AGREEMENTS." Unless defined herein, capitalized terms have the meaning given
them in the Agreements.
In rendering this opinion, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary for the
purpose of rendering this opinion. In addition, we have examined originals or
copies of documents, corporate records and other writings which we consider
relevant for the purposes of this opinion. In such examination, we have assumed
the genuineness of all signatures on original documents, the conformity to
original documents of all copies submitted to us and the due execution and
delivery of all documents where due execution and delivery are a prerequisite to
the effectiveness thereof. In making our examination of documents executed by
entities other than the Company, we have assumed that each other entity had the
power to enter into and perform all its obligations thereunder and we also have
assumed the due authorization by each such other entity of all requisite actions
and the due execution and delivery of such documents by each such other entity.
Whenever our opinion herein with respect to the existence or absence of
facts is indicated to be based on our knowledge or belief, it is intended to
signify that in the course of our representation of the Company in connection
with the transactions referred to in the first paragraph hereof, no information
has come to the attention of Xxxxx X. Xxxxx, Xxxx X. Xxx Xxxxxx or Xxxxxxxx X.
Xxxxxx (the only lawyers at Venture Law Group working on this
Page 2
transaction) that would give them actual knowledge of the existence or absence
of such facts. We have not undertaken any independent investigation to
determine the existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from the
fact of our representation of the Company.
In rendering the opinion set forth in paragraph (c) below relating to the
fully paid status of all of the issued shares of capital stock of the Company,
we have relied without independent verification on the Management Certificate of
the President of the Company (the "OPINION CERTIFICATE"), to the effect that the
Company has received the consideration approved by the Board of Directors for
all of the issued shares of capital stock of the Company.
In rendering the opinion set forth in paragraph (c) below to the extent
they relate to the status of the capitalization of the Company, we have relied
without further investigation on our review of the stock records of the Company
and statements in the Opinion Certificate relating to the capitalization of the
Company.
In rendering the opinion set forth in paragraph (a) below, (a) in order to
determine in which states qualification is appropriate, we have assumed that
qualification may be required only in those states in which the Company own or
lease real property, maintain offices or have employees, and we have relied on
the Company's listing of those states in the Opinion Certificate, and (b) as to
the qualification and good standing of the Company in the states so identified
in such Opinion Certificate, we have relied exclusively on certificates of
public officials, although we have not obtained tax good standing certificates
(other than a Delaware long-form good standing certificate and a California
franchise tax certificate for the Company) and no opinion is provided with
respect to tax good standing (other than with respect to the Company in
California).
In rendering the opinion in paragraph (e) below, we have reviewed and are
providing an opinion only with respect to those Contractual Obligations (as
defined in the Opinion Certificate), judgments and orders set forth in the
Opinion Certificate, and have assumed that the governing law (exclusive of
California laws relating to conflicts of laws) of each such Contractual
Obligation is California. We have not, however, reviewed the covenants in the
Contractual Obligations that contain financial ratios and other similar
financial restrictions, and no opinion is provided with respect thereto.
In rendering the opinion expressed in paragraph (h) below, we have assumed
and express no opinion with respect to the following: (a) that the
representations and warranties of the Purchasers set forth in the Agreements are
true and complete; and (b) the accuracy and completeness of the information
provided by the Company to the Purchasers in connection with
Page 3
such offer and sale. We have also assumed the accuracy of, and have relied
upon, the Company's representations to us that the Company has made no offer to
sell the Shares by means of any "GENERAL SOLICITATION," as defined in
Regulation D under the Securities Act or the "PUBLICATION OF ANY ADVERTISEMENT"
(as defined under the California Corporate Securities Law of 1968, as amended,
and the regulations thereunder) and that no offer or sale of the Shares has been
made or will be made in any states other than California, Illinois, Colorado,
Massachusetts, New York, Pennsylvania, Georgia, Connecticut, Florida, Maryland
and Washington.
The opinions hereinafter expressed are subject to the following further
qualifications:
(i) Our opinions are qualified by the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
relating to or affecting the rights of creditors generally, including, without
limitation, laws relating to fraudulent transfers or conveyances, preferences
and equitable subordination;
(ii) Our opinions are qualified by the limitations imposed by
general principles of equity upon the availability of equitable remedies or the
enforcement of provisions of the Agreements; and the effect of judicial
decisions which have held that certain provisions are unenforceable when their
enforcement would violate the implied covenant of good faith and fair dealing,
or would be commercially unreasonable, or where their breach is not material;
(iii) A requirement that provisions of the Agreements may only be
waived in writing will not be enforced to the extent an oral agreement has been
executed modifying provisions of the Agreements;
(iv) Our opinion is based upon current statutes, rules,
regulations, cases and official interpretive opinions, and it covers certain
items that are not directly or definitively addressed by such authorities;
(v) The effect of judicial decisions which may permit the
introduction of extrinsic evidence to modify the terms or the interpretation of
the Agreements;
(vi) The enforceability of provisions of the Agreements providing
for arbitration of disputes to the extent that arbitration of a particular
dispute would be against public policy;
(vii) The enforceability of provisions of the Agreements which
purport to establish evidentiary standards or to make determinations conclusive;
Page 4
(viii) The enforceability of provisions of the Agreements which
purport to establish particular courts as the forum for the adjudication of any
controversy relating to the Agreements;
(ix) The enforceability of provisions of the Agreements expressly
or by implication waiving broadly or vaguely stated rights, or waiving rights
granted by law where such waivers are against public policy;
(x) The enforceability of provisions of the Agreements providing
that rights or remedies are not exclusive, that every right or remedy is
cumulative, or that the election of a particular remedy or remedies does not
preclude recourse to one or more other remedies.
(xi) We express no opinion as to compliance with applicable
antifraud statutes, rules or regulations of applicable state and federal laws
concerning the issuance or sale of securities; and
(xii) Provisions in the Investors' Rights Agreement purporting to
provide for indemnification and contribution under certain circumstances may be
unenforceable.
(xiii) We express no opinion as to the enforceability of the Voting
Agreement.
Based upon and subject to the foregoing, and except as set forth in
the Schedule of Exceptions, we are of the opinion that:
(a) The Company is a corporation duly organized and existing under the
laws of the State of Delaware, and is in good standing under such laws. The
Company has the requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted. The Company is
qualified to do business as a foreign corporation in each state in which the
failure to be so qualified would have a material adverse effect on the Company.
(b) The Company has the requisite corporate power and authority to
execute and deliver the Agreements, to sell and issue the Shares thereunder, to
issue the Common Stock issuable upon conversion of the Shares and to carry out
and perform its obligations under the terms of the Agreements.
(c) The authorized capital stock of the Company consists or will, upon
the filing of the First Amended and Restated Certificate of Incorporation (the
"RESTATED CERTIFICATE"), consist of 50,000,000 shares of Common Stock, par value
$0.0001 per share, 10,050,000 of which are issued and outstanding prior to the
Closing Date, and 7,036,300 shares of Preferred Stock, par
Page 5
value $0.0001 per share, all of which have been designated Series A Preferred
Stock ("SERIES A PREFERRED"), none of which are issued and outstanding prior to
the Closing. All of such issued and outstanding shares are validly issued,
fully paid and nonassessable. The Company has reserved 7,036,300 shares of
Common Stock for issuance upon conversion of Preferred Stock, 1,468,018 shares
of Series A Preferred for issuance upon the automatic conversion of certain
outstanding promissory notes (the "NOTES"), 721,757 shares of Series A Preferred
for issuance upon the exercise of outstanding warrants (the "SERIES A
WARRANTS"), 50,000 shares of Common Stock for issuance upon the exercise of
outstanding warrants, and 7,036,300 shares of Series A Preferred for issuance
under the Purchase Agreement (including the Series A Preferred issuable upon the
automatic conversion of the Notes). There are options outstanding for the
purchase of 1,276,093 shares of Common Stock under the Company's 1997 Stock
Option Plan and 1,573,907 shares of Common Stock are available for issuance
thereunder. To our knowledge, except as described above, there are no
preemptive rights, options or warrants or other conversion privileges or rights
presently outstanding to purchase any of the authorized but unissued stock of
the Company, other than the rights of first refusal set forth in Section 2.3 of
the Investors' Rights Agreement.
(d) All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of the Agreements by the Company, the authorization, sale, issuance
and delivery of the Shares (and the Common Stock issuable upon conversion
thereof) and the performance of all of the Company's obligations under the
Agreements, including, without limitation, the execution and filing with the
Secretary of State of the State of Delaware of the Restated Certificate, has
been taken. The Agreements constitute valid and binding obligations of the
Company enforceable in accordance with their terms. The Shares have been
validly issued, and are fully paid and nonassessable and have the rights,
preferences and privileges described in the Restated Certificate; the shares of
Common Stock issuable upon conversion of the Shares have been duly and validly
reserved and, when issued in compliance with the provisions of the Purchase
Agreement and the Restated Certificate, will be validly issued, fully paid and
nonassessable.
(e) The execution, delivery and performance of and compliance with the
Agreements, and the issuance of the Shares and the Common Stock issuable upon
conversion of the Shares, have not resulted and will not result in any material
violation of, or conflict with, or constitute a material default under (i) the
Restated Certificate or the Company's Bylaws, (ii) any Contractual Obligation to
which the Company is a party or by which it is bound or (ii) any statute, rule
or regulation of Federal or California law or Delaware corporate law, or any
judgment or order set forth in the Opinion Certificate.
Page 6
(f) To our knowledge, there are no actions, suits, proceedings or
investigations pending or threatened against the Company, or its properties
before any court or governmental agency that, either in any case or in the
aggregate, might result in any materially adverse change in the business or
financial condition of the Company or any of its properties or assets, or in any
material impairment of the right or ability of the Company to carry on its
business as now conducted, or in any material liability on the part of the
Company, and none that questions the validity of the Agreements or any action
taken or to be taken in connection therewith.
(g) No consent, approval or authorization of or designation,
qualification, regulation, declaration or filing with, any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of the Agreements, or the offer, sale or issuance of the
Shares (and the Common Stock issuable upon conversion thereof), or the
consummation of any other transaction contemplated by the Agreements, except the
notice filing required by Section 25102(f) of the California Corporate
Securities Law of 1968, as amended.
(h) The offer, sale and issuance of the Shares to be issued in
conformity with the terms of the Purchase Agreement and the issuance of the
Common Stock, if any, to be issued upon conversion thereof, constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act and exempt from the qualification requirements of the California
Corporate Securities Law of 1968, as amended.
We express no opinion as to matters governed by any laws other than the
laws of the State of California, the general corporate law of the State of
Delaware and the federal law of the United States of America. We express no
opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the Agreements or the transactions
contemplated thereby.
Page 7
This opinion is furnished to you pursuant to Section 4.6 of the Purchase
Agreement and is solely for your benefit and may not be relied on by, nor may
copies be delivered to, any other person without our prior written consent. We
assume no obligation to inform you of any facts, circumstances, events or
changes in the law that may hereafter be brought to our attention that may
alter, affect or modify the opinion expressed herein.
Sincerely,
VENTURE LAW GROUP,
A Professional Corporation
JLB
EXHIBIT H
FORM OF ADDENDUM AGREEMENT
ETOYS INC.
ADDENDUM TO SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
This Addendum to Series A Preferred Stock Purchase Agreement (the
"ADDENDUM") is made as of _____________, 199_ by and among eToys Inc., a
Delaware corporation (the "COMPANY"), and the individuals and entities listed in
EXHIBIT A hereto (the "ADDITIONAL PURCHASERS").
RECITALS
On December ___, 1997, the Company entered into a Series A Preferred Stock
Purchase Agreement (the "PURCHASE AGREEMENT") with certain investors set forth
on EXHIBIT A attached thereto. The Purchase Agreement provides in Section 1.2
thereof that additional investors may, under conditions set forth therein,
become parties to the Purchase Agreement at any time on or before January 15,
1998.
AGREEMENT
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. AUTHORIZATION AND SALE OF PREFERRED STOCK.
1.1 SALE OF PREFERRED STOCK. Subject to the terms and conditions
hereof, at the Closing (as defined in Section 2.1 hereof) the Company will issue
and sell to each Additional Purchaser, and each Additional Purchaser severally
agrees to purchase from the Company, that number of Additional Shares specified
opposite such Additional Purchaser's name on EXHIBIT A hereto, at a cash
purchase price of $0.62 per share. Each of the Additional Purchasers, by its
signature hereto, shall hereby (i) become a party to the Purchase Agreement,
(ii) be considered a "PURCHASER" for all purposes under the Purchase Agreement
and (iii) have all the rights and obligations of a Purchaser thereunder. The
Additional Shares acquired by the Additional Purchasers thereunder shall be
considered "STOCK" for all purposes under the Purchase Agreement, as amended.
In addition, each Additional Purchaser, by its signature hereto, shall hereby
(a) become a party to the Investors' Rights Agreement dated December ____, 1997
(the "RIGHTS AGREEMENT"), (b) be considered an "INVESTOR" for all purposes under
the Rights Agreement and (c) have all rights and obligations of an "INVESTOR"
thereunder. Further, each Additional Purchaser, by its signature hereto, shall
hereby (x) become a party to the Voting Agreement dated December ____, 1997 (the
"VOTING AGREEMENT"), (y) be considered an "INVESTOR" for all purposes under the
Voting Agreement and (z) have all rights and obligations under the Voting
Agreement. Further, each Additional Purchaser, by its signature hereto, shall
hereby (q) become a party to the Right of First Refusal and Co-Sale Agreement
dated December ____, 1997 (the "CO-SALE AGREEMENT"), (r) be considered an
"INVESTOR" for all
purposes under the Co-Sale Agreement and (s) have all rights and obligations of
an "INVESTOR" thereunder. Finally, each Additional Purchaser, by its signature
hereto, shall hereby (h) become a party to the Intel Letter Agreement dated
December __, 1997 (the "INTEL LETTER AGREEMENT"), (i) be considered a "party"
for all purposes under the Intel Letter Agreement and (j) have all rights and
obligations of a party thereunder.
2. CLOSING; DELIVERY.
2.1 CLOSING. The closing of the purchase and sale of the
Additional Shares hereunder (the "CLOSING") shall be held at the offices of
Venture Law Group, Menlo Park, California, at such other time and place as the
Company and the Additional Purchasers purchasing a majority of the Additional
Shares may agree.
2.2 DELIVERY. At the Closing, the Company will deliver to each
Additional Purchaser a certificate representing the number of Additional Shares
set forth opposite such Additional Purchaser's name on EXHIBIT A, against
payment of the purchase price therefor by each Additional Purchaser by wire
transfer to the Company.
3. DISCLOSURE; CAPITALIZATION.
3.1 DISCLOSURE. Each Additional Purchaser hereby acknowledges
receipt of the Purchase Agreement and the exhibits thereto. The Company affirms
to each Additional Purchaser that:
(i) The representations and warranties of the Company set
forth in Section 2 of the Purchase Agreement were true and accurate when made;
(ii) Except as set forth in Section 3.2 hereof, those
representations and warranties, which are incorporated herein by this reference
and made a part hereof, remain true and accurate in all material respects as of
the date hereof, except (A) for changes resulting from the transactions
contemplated in the Purchase Agreement and this Addendum and (B) as set forth in
the Schedule of Exceptions to Representations and Warranties delivered to the
Additional Purchasers prior to the date hereof.
(iii) The conditions to closing set forth in Section 4 of the
Purchase Agreement and in Section 5 hereof have been satisfied, provided that
the conditions set forth in Section 4.1 of the Purchase Agreement shall include
references to changes in the Company's representations and warranties and the
Company's status, respectively, as set forth herein and in the Exhibits attached
hereto, and resulting from the consummation of the transactions contemplated by
the Purchase Agreement and this Addendum.
3.2 CAPITALIZATION. Immediately prior to the Closing, the
authorized capital of the Company shall consist of:
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(i) 7,036,300 shares of Preferred Stock, all of which have
been designated Series A Preferred Stock, __________ of which are issued and
outstanding. The rights, privileges and preferences of the Preferred Stock are
as stated in the Restated Certificate.
(ii) 50,000,000 shares of Common Stock, __________shares of
which are issued and outstanding. All of the outstanding shares of Common
Stock have been duly authorized, fully paid and are nonassessable and issued in
compliance with all applicable federal and state securities laws. The Company
has reserved 7,036,300 shares of Common Stock for issuance upon conversion of
the Preferred Stock.
(iii) The Company has reserved 2,950,000 shares of Common
Stock for issuance to officers, directors, employees and consultants of the
Company pursuant to its 1997 Stock Option Plan duly adopted by the Board of
Directors and approved by the Company stockholders (the "STOCK PLAN").
__________shares have been granted and are currently outstanding, and
__________shares of Common Stock remain available for issuance to officers,
directors, employees and consultants pursuant to the Stock Plan.
(iv) There are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements, orally or in writing, for the purchase or
acquisition from the Company of any shares of its capital stock. Except as
otherwise contemplated herein, the Company is not a party or subject to any
agreement or understanding, and, to the best of the Company's knowledge, there
is no agreement or understanding between any persons that affects or relates to
the voting or giving of written consents with respect to any security or the
voting by a director of the Company.
4. REPRESENTATIONS AND WARRANTIES OF ADDITIONAL PURCHASERS. Each
Additional Purchaser acknowledges that such Additional Purchaser has reviewed
the representations and warranties set forth in Section 3 of the Purchase
Agreement and agrees with the Company that such representations and warranties,
which are incorporated herein by this reference and made a part hereof, are true
and correct as of the date hereof as they relate to such Additional Purchaser's
purchase of the Additional Shares hereunder.
5. CONDITIONS TO ADDITIONAL PURCHASERS' OBLIGATIONS AT CLOSING. The
obligation of each Additional Purchaser to purchase the Additional Shares at the
Closing is subject to the fulfillment to such Additional Purchaser's
satisfaction at or prior to the Closing of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct on
the date of the Closing with the same force and effect as if they had been made
on and as of said date, subject to changes contemplated by this Addendum; and
the Company shall have performed all obligations and conditions herein required
to be performed or observed by it at or prior to the Closing.
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5.2 CONSENTS AND WAIVERS. The Company shall have obtained any and
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Addendum.
5.3 LEGAL OPINION. Upon request, each of the Additional
Purchasers will be entitled to receive from Venture Law Group, legal counsel for
the Company, a legal opinion substantially in the form delivered to the
investors pursuant to Section 4.6 of the Purchase Agreement.
6. CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company under Sections 1.1 of this Addendum are subject to the fulfillment
at or before the Closing of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Additional Purchaser contained in Section 4 hereof shall be
true at the Closing.
6.2 CONSENTS AND WAIVERS. The Company shall have obtained any and
all consents and waivers necessary or appropriate for the Purchasers to become
parties to the Investors' Rights Agreement and for the consummation of the
transactions contemplated by this Addendum.
7. MISCELLANEOUS.
7.1 INCORPORATION BY REFERENCE. The provisions set forth in
Section 6 of the Purchase Agreement are incorporated herein by this reference
and made a part hereof.
7.2 COUNTERPARTS. This Addendum may be executed in any number of
counterparts, each of which may be executed by less than all of the Additional
Purchasers, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
[Signature Page Follows]
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The parties hereto have executed this Addendum as of the date first set
forth above.
COMPANY:
eTOYS INC.
By:
--------------------------------------
Xxxxxx X. Xxxx
President and Chief Executive officer
Address: 0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
SIGNATURE PAGE TO ADDENDUM TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT
The parties hereto have executed this Addendum as of the date first set
forth above.
ADDITIONAL PURCHASERS:
By:
-----------------------------------------
Name:
---------------------------------------
(Print)
Title:
--------------------------------------
(If applicable)
Address:
--------------------------------
--------------------------------
SIGNATURE PAGE TO ADDENDUM TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF ADDITIONAL PURCHASERS
(SECOND SERIES A PREFERRED STOCK CLOSING)
AGGREGATE
NAME NUMBER OF SHARES PURCHASE PRICE
---- ---------------- --------------
EXHIBIT I
FORM OF INTEL LETTER AGREEMENT
Exhibit I
INTEL CORPORATION
December 19, 1997
To: The Parties Listed Below
Re: SERIES A PREFERRED STOCK FINANCING OF eTOYS INC.
Ladies and Gentlemen:
Reference is made to the Series A Preferred Stock Purchase Agreement,
dated as of December 19, 1997, by and between eToys Inc. (the "Company") and the
investors listed on Exhibit A thereto (the "Purchase Agreement"). Reference is
also made to the Investors' Rights Agreement, dated as of December 19, 1997, by
and among the Company, the investors listed on Exhibit A thereto and Xxxxxx X.
Xxxx and Xxxxx X. Xxx (the "Rights Agreement"). This letter and the exhibit
hereto constitutes the Intel Letter Agreement referred to in the Purchase
Agreement and the Rights Agreement.
The parties hereto agree to the terms of Exhibit A attached to this
letter.
All exhibits to this letter are incorporated herein and made a part hereof
by this reference.
Please indicate your acceptance of this letter as a part of the Purchase
Agreement and the Rights Agreement by countersigning in the space provided
below.
Very truly yours,
INTEL CORPORATION
By: /s/ Illegible
----------------------
ACCEPTED:
eTOYS INC.
By: /s/ Xxxxxx X. Xxxx
--------------------------
Name: Xxxxxx X. Xxxx
-----------------------
Title: CEO
------------------------
[Signatures intentionally omitted. See signature pages to Series A Preferred
Stock Purchase Agreement.]
SIGNATURE PAGE TO INTEL LETTER AGREEMENT
eTOYS INC. SERIES A PREFERRED FINANCING
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EXHIBIT A
1. PROTECTION OF CONFIDENTIAL INFORMATION. Confidential or
proprietary information disclosed by any party under the Series A Preferred
Stock Purchase Agreement, dated as of December 19, 1997, by and between eToys
Inc. (the "Company") and the investors listed on Exhibit A thereto (the
"Purchase Agreement") or the Investors' Rights Agreement, dated as of December
19, 1997, by and among the Company, the investors listed on Exhibit A thereto
and Xxxxxx X. Xxxx and Xxxxx X. Xxx (the "Rights Agreement"), as well as the
terms of the Purchase Agreement and the Rights Agreement and the investment of
Intel Corporation ("Intel") in the Company, shall be considered confidential
information (the "Confidential Information") and shall not be disclosed by the
Company or any other party hereto to any third party, subject to Paragraph 2 of
this Exhibit A below. Each party shall immediately notify the other parties of
any information that comes to its attention which might indicate that there has
been a loss of confidentiality with respect to the Confidential Information. In
the event that the Company or any other party becomes legally compelled (by
statute or regulation or by oral questions, interrogatories, request for
information or documents, subpoena, criminal or civil investigative demand or
similar process, including without limitation, in connection with any public or
private offering of the Company's capital stock) to disclose any of the
Confidential Information, such party (the "Disclosing Party") shall provide the
other parties (the "Non-Disclosing Parties") with prompt written notice of that
fact so that the appropriate party may seek (with the cooperation and reasonable
efforts of the other parties) a protective order, confidential treatment or
other appropriate remedy. In such event, the Disclosing Party shall furnish
only that portion of the Confidential Information which is legally required and
shall exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded the Confidential Information to the extent reasonably
requested by the Non-Disclosing Parties. The provisions of this Paragraph 1 of
this Exhibit A shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties to
the Purchase Agreement or the Rights Agreement with respect to the transaction
contemplated thereby.
2. DISCLOSURE OF TERMS; PRESS RELEASES. Notwithstanding the
provisions of Paragraph 1 of this Exhibit A, from and after the closing of the
transactions contemplated by the Purchase Agreement, the Company and the other
parties hereto may disclose the existence of the Purchase Agreement, the Rights
Agreement and the general terms thereof, as well as Intel's investment in the
Company solely to the Company's or the other parties' respective investors,
investment bankers, lenders, accountants, legal counsel, business partners, and
bona fide prospective investors, employees, lenders and business partners, in
each case only where such persons or entities are under appropriate
nondisclosure obligations. In addition, the Company and the other parties
hereto may disclose the fact that Intel is an investor in the Company to third
parties without the requirement for nondisclosure agreements. Within sixty (60)
days of the Closing, the Company may issue a press release disclosing that Intel
has invested in the Company; provided that the release does not disclose the
amount or other specific terms of the investment and is approved in advance in
writing by Intel. Intel, at its sole discretion, may provide an executive quote
or other material regarding its investment in the Company. No other
announcement regarding Intel's investment in the Company in a press conference,
in any
A-1
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professional or trade publication, in any marketing materials or otherwise to
the general public may be made without the prior written consent of Intel, which
consent may be withheld at the sole discretion of Intel. Notwithstanding the
foregoing, Intel may disclose its investment in the Company and the terms
thereof to third parties or to the public at its discretion, and the Company and
the other parties hereto shall have the right to disclose to third parties any
such information disclosed by Intel in a press release or other public
announcement. If the Company, Intel or the other parties hereto determine that
any disclosure not otherwise authorized by hereby is required by law or
regulation, then the provisions of Paragraph 1 of this Exhibit A regarding
disclosure of Confidential Information by a Disclosing Party shall govern.
A-2
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