STOCK PURCHASE AGREEMENT
EXHIBIT 99.5
THIS STOCK PURCHASE AGREEMENT is made as of June 13, 2007, by and between BabyUniverse, Inc.
(the “Company”), a corporation organized under the laws of the State of Florida, with its principal
offices at 000 Xxxxx X.X. Xxxxxxx Xxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, and the purchaser whose
name and address is set forth on the signature pages hereof (the “Purchaser”).
IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the
Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms and conditions
of this Agreement, the Company has authorized the issuance and sale to the Purchaser of that
aggregate number of shares (the “Shares”) of the common stock, par value $0.001 per share, of the
Company (the “Common Stock”), which is equal to (x) $5,500,000.00 divided by (y) U.S.$6.40 (the
“Purchase Price Per Share”).
SECTION 2. Agreement to Sell and Purchase the Shares.
2.1 At the First Closing (as defined below), the Company will, subject to the terms and
conditions of this Agreement, issue and sell to the Purchaser, and the Purchaser will buy from
the Company, upon the terms and conditions hereinafter set forth, 351,563 (the “First Tranche
Shares”) of the total number of Shares referenced in Section 1, the maximum number of such Shares
which the Company has determined may be sold when added to the number of Shares issuable,
directly or indirectly to the Other Purchasers (as defined below), without triggering the
shareholder approval requirements set forth in Nasdaq Marketplace Rule 4350(i), for an aggregate
purchase price of U.S.$2,250,003.20, equal to the number of Shares so issued and sold to the
Purchaser at the First Closing, multiplied by the Purchase Price Per Share. At the Second
Closing (as defined below), the Company will, subject to the terms and conditions of this
Agreement, issue and sell to the Purchaser, and the Purchaser will buy from the Company, upon the
terms and conditions hereinafter set forth, the balance of the aggregate number of Shares
referenced in Section 1 that were not issued and sold to the Purchaser at the First Closing (the
“Second Tranche Shares”), for an aggregate purchase price of $3,249,996.80, equal to the number
of Second Tranche Shares multiplied by the Purchaser Price Per Share.
2.2 In order to facilitate the Second Closing, prior to the First closing, the Company and
the Purchaser shall (i) agree on a national bank of recognized standing to serve as the escrow
agent to hold and disburse funds (the Second Closing Date Funds”) of the Purchaser in the amount
of the aggregate purchase price payable to the Company on the Second Closing Date pursuant to the
provisions of the last sentence of Section 2.1 (the Escrow Agent”), and (ii) enter with the
Escrow Agent into the Escrow Agent’s standard form of escrow agreement, subject to reasonable
modifications thereto proposed by the Company or the Purchaser and accepted by the Escrow Agent
(the “Escrow Agreement”), which shall provide that the Second Closing Date Funds shall be
disbursed in their entirety to the Company on the Second Closing Date subject only to the
delivery by the
Company to the Escrow Agent of a Certificate dated such date stating that (i) the issuance
of the Second Tranche Shares to the Purchaser was approved by the shareholders of the Company to
the extent required by Nasdaq Marketplace Rule 4350(i); (ii) the Company’s merger transactions
(the “eToys Merger”), as contemplated by the terms of that certain Agreement and Plan of Merger,
dated as of March 13, 2007, by and among the Company, Baby Acquisition Sub, Inc. and eToys
Direct, Inc. (the “eToys Merger Agreement”), has closed pursuant to the terms of the eToys Merger
Agreement; (iii) the Company has delivered to the Purchaser one or more original stock
certificates representing the Second Tranche Shares; and (iv) the Option Agreement has been
executed and delivered to the Purchaser by the shareholder(s) of the Company party thereto. The
Escrow Agreement shall also provide that if the funds of the Purchaser held pursuant thereto have
not been disbursed to the Company on or prior to December 31, 2007, all such funds shall be
returned to the Purchaser and the Escrow Agreement shall thereupon terminate.
2.3 The Company may, in its sole and absolute discretion, enter into the same general form
of purchase agreement with certain other investors (the “Other Purchasers”) and may, in its sole
and absolute discretion, complete sales to them of additional Shares and/or securities
convertible or exercisable into, or exchangeable for, such Shares, and such sales may be on
pricing and other economic and non-economic terms different from those contained in this
Agreement. The Purchaser and such Other Purchasers, if any, are hereinafter sometimes
collectively referred to as the “Purchasers,” and this Agreement and the Agreements executed by
such Other Purchasers, if any, are hereinafter sometimes collectively referred to as the
“Agreements.”
SECTION 3. Delivery of the Shares at the Closing.
3.1 The completion of the purchase and sale of the First Tranche Shares by and to the
Purchaser (the “First Closing”) shall occur at the offices of Xxxxxxxx & Xxxxxxxx LLP, 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 as soon as practicable and as agreed to by the
parties hereto, on a date within three business days following the execution and mutual delivery
of this Agreement, or on such later date or at such different location as the parties shall agree
in writing, but not prior to the date that the conditions for the First Closing set forth below
have been satisfied or waived by the appropriate party (the “First Closing Date”). At the First
Closing, the Company shall deliver to the Purchaser one or more stock certificates registered in
the name of the Purchaser, or, if so indicated on the Stock Certificate Questionnaire attached
hereto as Appendix I, in such nominee name(s) as designated by the Purchaser, representing the
First Tranche Shares, each bearing an appropriate legend referring to the fact that such Shares
were sold in reliance upon the exemption from registration under the Securities Act of 1933, as
amended (the “Securities Act”) provided by Section 4(2) thereof and Rule 506 thereunder (the
“Legend”). The name(s) in which the certificates are to be registered are set forth in the Stock
Certificate Questionnaire attached hereto as Appendix I. At the First Closing, (a) the Purchaser
shall deliver to the Company same-day funds in the full amount of the aggregate purchase price
for the First Tranche Shares, (b) the Company shall also deliver to the Purchaser (i) a legal
opinion in a form reasonably satisfactory to counsel to the Purchaser and (ii) a certificate
executed by the chief executive officer and the chief financial or accounting officer of the
Company, dated as of the First Closing Date, to the effect that the representations and
warranties of the Company
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set forth herein are true and correct as of such First Closing Date and that the Company has
complied with all the agreements and satisfied all the conditions herein on its part to be
performed or satisfied on or prior to such First Closing Date, and (c) the Escrow Agent, the
Company and the Purchaser shall execute and mutually deliver the Escrow Agreement, and the
Purchaser shall deposit thereunder with the Escrow Agent a sum equal to the amount of the Second
closing Date Funds.
3.2 The completion of the purchase and sale of the Second Tranche Shares by and to the
Purchaser (the “Second Closing”) shall occur at the offices of Xxxxxxxx & Xxxxxxxx LLP, 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 as soon as practicable and as agreed to by the
parties hereto, during the period between the closing of the eToys merger pursuant to the terms
of the eToys Merger Agreement and the effective time of the eToys Merger under Delaware law, but
not prior to the time that the conditions for the Second Closing set forth below have been
satisfied or waived by the appropriate party (the date thereof, the “Second Closing Date”). At
the Second Closing, the Company shall (i) deliver to the Purchaser one or more stock certificates
representing the Second Tranche Shares, registered in the same name as the stock certificate
representing the First Trance Shares, each bearing the Legend, and (ii) cause to be delivered to
the Purchaser an Option Agreement, in the form attached hereto as Annex A (the “Option
Agreement”), executed by each of the Company shareholders party thereto, pursuant to which such
shareholders shall have conferred on the Purchaser the right thereunder (the “Option”) to acquire
from such shareholder a maximum aggregate number of shares of Common Stock owned by such
shareholders as is equal to 10.2% of the sum of (x) the number of the First Tranche Shares and
(y) the number of the Second Tranche Shares, at an exercise price shares equal to the Purchaser
Price Paid Per Share, such right to be exercisable during the fifteen (15) month period
commencing on the date that is six months and one day after the effective time of the eToys
Merger. At the Second Closing, (a) the Second Closing Date Funds shall be delivered in addition
to the Company by the Escrow Agreement pursuant to the terms of the Escrow Agreement, and (b) the
Company shall also deliver to the Purchaser an update to the legal opinion delivered to the
Purchaser at the First Closing, in a form reasonably satisfactory to counsel for the Purchaser.
SECTION 4. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to, and covenants with, the Purchaser, as of the date hereof and as
of the First Closing Date and the Second Closing Date, as follows:
4.1 Organization; Good Standing. The Company has two material subsidiaries, Huta
Duna, Inc. (d/b/a, XxxxxxxxxXxxx.xxx), a California corporation, and Posh Tots, Inc., a Virginia
corporation (the “Subsidiaries”). The Company and each of the Subsidiaries are duly organized,
validly existing and in good standing under the laws of their respective jurisdictions of
incorporation or organization. The Company and each of its Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction in which the
nature of the business conducted by it or location of the assets or properties owned, leased or
licensed by it requires such qualification, except for such jurisdictions where the failure to so
qualify individually or in the aggregate would not have a material adverse effect on the assets,
properties, condition, financial or otherwise, or in the results of operations, business affairs
or business prospects of the Company and its
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subsidiaries considered as a whole (a “Material Adverse Effect”); and to the Company’s
knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.
4.2 Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock and 10,000,000 shares of preferred stock,
par value $0.001 per share (the “Preferred Stock”), of the Company. As of the date hereof: (i)
5,694,914 shares of Common Stock are issued and outstanding and 317,259 shares of Preferred Stock
are issued and outstanding, all of which are designated “Series A Convertible Preferred Stock”;
(ii) 268,748 shares of Common Stock are reserved for issuance and issuable upon exercise of
outstanding options to purchase Common Stock; and (iii) 413,983 shares of Common Stock are
reserved for issuance and issuable upon exercise of outstanding warrants to purchase Common
Stock, and there are no other rights to purchase from the Company any shares of its capital stock
other than pursuant to this Agreement and other agreements in effect on the date hereof. The
certificates evidencing the Shares issued or issuable to the Purchaser pursuant to the terms of
this Agreement are (or will be) in due and proper legal form and have been duly authorized for
issuance by the Company. All of the issued and outstanding shares of Common Stock and Preferred
Stock have been duly and validly issued and are fully paid and nonassessable. There are no
statutory preemptive or other similar rights to subscribe for or to purchase or acquire any
shares of Common Stock of the Company or any of its subsidiaries or any such rights pursuant to
its Articles of Incorporation or Certificate of Incorporation or by-laws or any agreement or
instrument to or by which the Company or any of its subsidiaries is a party or bound. The
Shares, when issued and delivered and paid for as provided herein, will be duly and validly
issued and will be fully paid and nonassessable and will be issued free and clear of any security
interests, liens, encumbrances, equities or claims. Except as disclosed in the Confidential
Private Placement Memorandum, dated May 8, 2007 and attached hereto as Annex B, relating to the
offering of the Shares, including all exhibits thereto, documents expressly incorporated by
reference therein and annexes thereto, as the same was supplemented pursuant to the Supplement
No. 1 to Confidential Private Placement Memorandum, dated May 24, 2007 and attached hereto as
Annex C, and Supplement No. 2 to Confidential Private Placement Memorandum, dated June 8, 2007
and attached hereto as Annex D (the “Memorandum”), or this Agreement, there is no outstanding
option, warrant or other right calling for the issuance of, and there is no commitment, plan or
arrangement to issue, any share of stock of the Company or any of its subsidiaries or any
security convertible into, or exercisable or exchangeable for, such stock. All outstanding
shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued,
and are fully paid and nonassessable and are owned directly by the Company or by another
wholly-owned subsidiary of the Company free and clear of any security interests, liens,
encumbrances, equities or claims.
4.3 Due Authorization. This Agreement has been duly authorized, executed and
delivered by the Company and, assuming execution by each of the other parties thereto, constitute
the legal, valid and binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to the enforcement of
creditor’s rights and the application of equitable principles relating to the availability of
remedies, and except as rights to indemnity or contribution,
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including, but not limited to, the indemnification provisions contained in Section 7.3 of
this Agreement, may be limited by federal or state securities laws or the public policy
underlying such laws. All necessary corporate action has been duly and validly taken by the
Company to authorize the execution, delivery and performance of this Agreement and the issuance
and sale of the Shares by the Company.
4.4 No Default or Consents. Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation by the Company of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale by the Company of the
Shares) will give rise to a right to terminate or accelerate the due date of any payment due
under, or conflict with or result in the breach of any term or provision of, or constitute a
default (or an event which with notice or lapse of time or both would constitute a default)
under, or require any consent or waiver under, or result in the execution or imposition of any
lien, charge or encumbrance upon any properties or assets of the Company or its subsidiaries
pursuant to the terms of, any indenture, mortgage, deed of trust or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which either the Company or its
subsidiaries or any of their properties or businesses is bound, or any franchise, license,
permit, judgment, decree, order, statute, rule or regulation applicable to the Company or any of
its subsidiaries or violate any provision of the charter or by-laws of the Company or any of its
subsidiaries, except for such consents or waivers which have already been obtained and are in
full force and effect.
4.5 Permits. The Company and each of the Subsidiaries has all requisite corporate
power and authority, and all necessary authorizations, approvals, consents, orders, licenses,
certificates and permits of and from all governmental or regulatory bodies or any other person or
entity (collectively, the “Permits”), to own, lease and license its assets and properties and
conduct its business, all of which are valid and in full force and effect, except where the lack
of such Permits, individually or in the aggregate, would not have a Material Adverse Effect. The
Company and each of the Subsidiaries has fulfilled and performed in all material respects all of
its material obligations with respect to such Permits and no event has occurred that allows, or
after notice or lapse of time would allow, revocation or termination thereof or results in any
other material impairment of the rights of the Company thereunder. Except as may be required as
to the Company under the Securities Act and state Blue Sky laws, no other Permits are required to
enter into, deliver and perform this Agreement and to issue and sell the Shares to the Purchaser.
4.6 Real and Personal Property. The Company and each of the Subsidiaries has good
and marketable title in fee simple to all real property, and good and marketable title to all
other property, owned by it, in each case free and clear of all liens, encumbrances, claims,
security interests and defects, except such as are disclosed in the SEC Documents (as defined
below), or do not materially affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property by the Company and the Subsidiaries.
All property held under lease by the Company and the Subsidiaries is held by them under valid,
existing and enforceable leases, free and clear of all liens, encumbrances, claims, security
interests and defects, except such as are disclosed in the SEC Documents (as defined below), or
have arisen in the ordinary course of business of the
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Company and its subsidiaries and do not materially interfere with the use made or proposed
to be made of such property by the Company and the Subsidiaries.
4.7 Material Contracts. Each contract, document or other agreement described in the
Memorandum which is material to the current business of the Company is in full force and effect
and is valid and enforceable by and against the Company or any of its subsidiaries, as the case
may be, in accordance with its terms. Neither the Company nor any of its subsidiaries, if a
subsidiary is a party, nor to the Company’s knowledge, any other party, is in default in the
observance or performance of any term or obligation to be performed by it under any such
agreement, except to the extent that any such default or event, individually or in the aggregate,
would not have a Material Adverse Effect.
4.8 No Violation. Neither the Company nor its subsidiaries is in violation of its
any term of its charter or by-laws or of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation, where the consequences of such violation, individually or in the
aggregate, would have a Material Adverse Effect.
4.9 Consents and Approvals. Each approval, consent, order, authorization,
designation, declaration or filing of, by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the Company of this
Agreement and the consummation of the transactions herein contemplated required to be obtained or
performed by the Company on or prior to the date hereof has been so obtained or performed.
4.10 No Material Misstatement. The Memorandum (excluding for purposes of this
Section 4.10 the exhibits and annexes thereto and the documents incorporated by reference
therein) did not, as of its date, does not as of the date hereof, and will not as of the Closing
Date, contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.11 Incorporated Documents.
(a) The documents incorporated by reference in the Memorandum or attached as exhibits thereto,
at the time (if applicable) they became effective or were filed with the Securities and Exchange
Commission (the “Commission”), as the case may be, complied in all material respects with the
requirements of the Securities Act or the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as applicable, and the rules and regulations of the Commission thereunder (the
“Rules and Regulations”), and none of such documents included any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they were made, not
misleading as of their respective filing or effective dates, or if amended, as so amended.
(b) In the past 12 calendar months, the Company has filed all documents required to be filed
by it prior to the date hereof with the Commission pursuant to the reporting requirements of the
Exchange Act (the “SEC Documents”).
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4.12 Financial Statements. The financial statements of the Company (including all
notes and schedules thereto) included or incorporated by reference in the Memorandum present
fairly the financial position of the Company and its consolidated subsidiaries at the dates
indicated and the statement of operations, stockholders’ equity and cash flows of the Company and
its consolidated subsidiaries for the periods specified; and such financial statements and
related schedules and notes thereto, and the unaudited financial information included or
incorporated by reference in the Memorandum have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods involved. The summary
financial data included in the Memorandum present fairly the information shown therein as at the
respective dates and for the respective periods specified and have been presented on a basis
consistent with the consolidated financial statements and other financial information set forth
in the Memorandum. There are no material off-balance sheet arrangements (as defined in Item 303
of the Commission’s Regulation S-K) that have or are reasonably likely to have a material current
or future effect on the Company’s financial condition, revenues or expenses, changes in financial
condition, results of operations, liquidity, capital expenditures or capital resources.
4.13 Intellectual Property. The Company and each of the Subsidiaries owns or
possesses legally enforceable rights to use all patents, patent rights, inventions, trademarks,
trademark applications, trade names, service marks, copyrights, copyright applications, licenses,
know-how and other similar rights and proprietary knowledge (collectively, “Intangibles”)
necessary for the conduct of its current business. Neither the Company nor either of the
Subsidiaries has received any notice of, and is not aware of, any infringement of or conflict
with asserted rights of others with respect to any Intangibles, except for any such infringement
or conflict that would not result in a Material Adverse Effect.
4.14 No Material Adverse Change. Since the date of the most recent financial
statements of the Company included or incorporated by reference in the Memorandum (the “Financial
Statements”) and except as otherwise discussed in the Memorandum, (i) there has not been any
material adverse change in the business, properties, management, financial position,
stockholders’ equity, results of operations or prospects of the Company and its subsidiaries
taken as a whole; (ii) neither the Company nor either of the Subsidiaries has sustained any
material loss or interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor disturbance or dispute or any action,
order or decree of any court or arbitrator or governmental or regulatory authority; and (iii)
since the date of the latest balance sheet included in the Financial Statements, neither the
Company nor either of the Subsidiaries has (A) issued or incurred any liability or obligation,
direct or contingent, for borrowed money, except such liabilities or obligations incurred in the
ordinary course of business or (B) entered into any transaction not in the ordinary course of
business.
4.15 No Registration Rights. No holder of any security of the Company has any
right, which has not been waived, to have any security owned by such holder included in the
offering of Shares contemplated by the Memorandum or (other than the Other Purchasers) in the
registration statements and/or amendments thereto to be filed by the Company pursuant to Section
7.1 (collectively, the “Registration Statement”) with the
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Commission or to demand registration of any such security owned by such holder for a period
of 180 days after the date of this Agreement.
4.16 Legal Proceedings. Except as described in the Memorandum, there are no legal
or governmental proceedings pending to which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its subsidiaries is the subject which the Company
believes will have a Material Adverse Effect.
4.17 Employees. Neither the Company nor any of its subsidiaries is involved in any
labor dispute nor, to the knowledge of the Company, is any such dispute threatened, which dispute
would have a Material Adverse Effect. The Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers or contractors which would have a
Material Adverse Effect. The Company is not aware of any threatened or pending litigation between
the Company or its subsidiaries and any of its executive officers which, if adversely determined,
could have a Material Adverse Effect and has no reason to believe that such officers will not
remain in the employment of the Company.
4.18 Taxes. The Company and each of the Subsidiaries has filed all Federal, state,
local and foreign tax returns which are required to be filed through the date hereof, which
returns are true and correct in all material respects or has received timely extensions thereof,
and has paid all taxes shown on such returns and all assessments received by it to the extent
that the same are material and have become due. There are no tax audits or investigations
pending, which if adversely determined would have a Material Adverse Effect; nor are there any
material proposed additional tax assessments against the Company or either of the Subsidiaries.
4.19 Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
customary in the businesses in which they are engaged or propose to engage after giving effect to
the transactions described in the Memorandum; all policies of insurance and fidelity or surety
bonds insuring the Company or either of the Subsidiaries or the Company’s or the Subsidiaries’
respective businesses, assets, employees, officers and directors are in full force and effect;
the Company and each of the Subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and neither the Company nor any subsidiary of the Company
has any reason to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that is not materially greater than the current
cost. Neither the Company nor either of the Subsidiaries has been denied any insurance coverage
which it has sought or for which it has applied.
4.20 Environmental Laws. (i) Each of the Company and its subsidiaries is in
compliance in all material respects with all rules, laws and regulation relating to the use,
treatment, storage and disposal of toxic substances and protection of health or the environment
(“Environmental Laws”) which are applicable to its business; (ii) neither the Company nor its
subsidiaries has received any notice from any governmental authority or third
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party of an asserted claim under Environmental Laws; (iii) each of the Company and its
subsidiaries has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and is in compliance with all material
terms and conditions of any such permit, license or approval; (iv) to the Company’s knowledge, no
facts currently exist that will require the Company or any of its subsidiaries to make future
material capital expenditures to comply with Environmental Laws; and (v) no property which is or
has been owned, leased or occupied by the Company or its subsidiaries has been designated as a
Superfund site pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. Section 9601, et. seq.) (“CERCLA”) or otherwise designated as
a contaminated site under applicable state or local law. Neither the Company nor any of its
subsidiaries has been named as a “potentially responsible party” under CERCLA.
4.21 Listing Compliance. The Company is in compliance with the requirements of The
Nasdaq Capital Market for continued quotation of the Common Stock thereon. The Company has taken
no action designed to, or likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act or the quotation of the Common Stock on The Nasdaq Capital
Market, nor has the Company received any notification that the Commission or The Nasdaq Capital
Market is contemplating terminating such registration or quotation. The transactions
contemplated by this Agreement will not contravene the rules and regulations of The Nasdaq
Capital Market. The Company will use commercially reasonable efforts to continue the listing and
trading of its Common Stock on The Nasdaq Capital Market and to comply in all material respects
with the Company’s reporting, filing and other obligations under the rules of The Nasdaq Capital
Market. The Company covenants to file the appropriate additional listing application with The
Nasdaq Capital Market within three business days of, respectively, the First Closing Date and the
Second Closing Date, in order that the First Tranche Shares and the Second Tranche Shares be duly
authorized for quotation on The Nasdaq Capital Market.
4.22 Market Stabilization. The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected to cause or result in,
or which has constituted or which might reasonably be expected to constitute, the stabilization
or manipulation of the price of the Common Stock or any security of the Company to facilitate the
sale or resale of any of the Shares.
4.23 Independent Accountants. Singer, Lewak, Xxxxxxxxx and Xxxxxxxxx, LLP and
Xxxxxxxxx & Associates, P.A., whose reports are incorporated by reference in the Memorandum, are
and, during the periods covered by their reports, were, independent certified public accountants
as required by the Securities Act, and the Rules and Regulations and have not been engaged by the
Company to perform any “prohibited activities” (as defined in Section 10A of the Exchange Act).
4.24 Internal Controls. The books, records and accounts of the Company and the
Subsidiaries accurately and fairly reflect, in reasonable detail, the transactions in, and
dispositions of, the assets of, and the results of operations of, the Company and its
subsidiaries. The Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15 and 15d-14 under the Exchange Act),
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which: (i) are designed to ensure that material information relating to the Company is made
known to the Company’s principal executive officer and its principal financial officer by others
within the Company, particularly during the periods in which the periodic reports required under
the Exchange Act are required to be prepared; (ii) provide for the periodic evaluation of the
effectiveness of such disclosure controls and procedures at the end of the periods in which the
periodic reports are required to be prepared; and (iii) are effective in all material respects to
perform the functions for which they were established. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management’s general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management’s general or specific authorization;
and (iv) the recorded accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
4.25 Xxxxxxxx-Xxxxx Compliance. The Company is in compliance with all applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002, any related rules and regulations promulgated by
the Commission and applicable corporate governance requirements under the NASD Rules (as defined
below). The Company’s Board of Directors has validly appointed an audit committee whose
composition satisfies the requirements of Rule 4350(d)(2) of the Rules of the National
Association of Securities Dealers (the “NASD Rules”) and the Board of Directors and/or the audit
committee has adopted a charter that satisfies the requirements of Rule 4350(d)(1) of the NASD
Rules.
4.26 Foreign Corrupt Practices Act. The Company or any other person associated with
or acting on behalf of the Company including, without limitation, any director, officer, agent or
employee of the Company or its subsidiaries, has not, directly or indirectly, while acting on
behalf of the Company or its subsidiaries (i) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to political activity;
(ii) made any unlawful payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns from corporate funds; (iii) violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any similar
unlawful payment.
4.27 Foreign Transactions Reporting Act. The operations of the Company and its
subsidiaries are and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act
of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”)
and no action, suit or proceeding by or before any court or governmental agency, authority or
body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money
Laundering Laws is pending, or to the best knowledge of the Company, threatened.
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4.28 OFAC. Neither the Company nor any of its subsidiaries nor, to the knowledge of
the Company, any director, officer, agent, employee or affiliate of the Company or any of its
subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or
indirectly use the proceeds of the offering of the Shares, or lend, contribute or otherwise make
available such proceeds to any subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.
4.29 ERISA. The Company has fulfilled its obligations, if any, under the minimum
funding standards of Section 302 of the U.S. Employee Retirement Income Security Act of 1974
(“ERISA”) and the regulations and published interpretations thereunder with respect to each
“plan” as defined in Section 3(3) of ERISA (and such regulations and published interpretations)
in which its employees are eligible to participate and each such plan is in compliance in all
material respects with the presently applicable provisions of ERISA and such regulations and
published interpretations. No “Reportable Event” (as defined in ERISA) has occurred with respect
to any “Pension Plan” (as defined in ERISA) for which the Company could have any liability.
4.30 Investment Company. The Company is not, and after giving effect to the
offering and sale of the Shares and the application of the proceeds thereof as described in the
Memorandum will not be, an “investment company” or an entity “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.
4.31 Brokers or Finders. No broker, investment banker, financial advisor or other
individual, corporation, general or limited partnership, limited liability company, firm, joint
venture, association, enterprise, joint securities company, trust, unincorporated organization or
other entity, other than CIBC World Markets Corp. (the “Placement Agent”), the fees and expenses
of which will be paid by the Company, is entitled to any broker’s, finder’s, financial advisor’s
or other similar fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
4.32 Use of Proceeds. The Company intends to use the net proceeds from the sale of
the Shares as described in the Memorandum.
4.33 No Restrictions on Subsidiaries. The subsidiaries of the Company are not
currently prohibited, directly or indirectly, under any agreement or other instrument to which
any such subsidiary is a party or is subject, from paying any dividends to the Company, from
making any other distribution on the subsidiary’s capital stock, from repaying to the Company any
loans or advances to the subsidiary from the Company or from transferring any of such
subsidiary’s properties or assets to the Company.
4.34 Form S-3. The Company is not an “ineligible issuer” (as defined in Rule 405
promulgated under the Securities Act) and is eligible to register the Shares for resale by the
Purchaser on a registration statement on Form S-3 under the Securities Act.
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Provided that the Purchaser is not deemed to be an underwriter with respect to any shares,
to the Company’s knowledge, there exist no facts or circumstances (including without limitation
any required approvals or waivers or any circumstances that may delay or prevent the obtaining of
accountant’s consents) that reasonably could be expected to prohibit or delay the preparation and
filing of a registration statement on Form S-3 that will be available for the resale of the
Shares by the Purchaser.
4.35 Related Party Transactions. Except for those transactions that are not
required to be disclosed by the Company pursuant to the Rules and Regulations under the Exchange
Act, no transaction has occurred during the time periods covered by the SEC Documents between or
among the Company or its subsidiaries and any of its officers or directors, shareholders or any
affiliate or affiliates of any such officer or director or shareholder that is not described in
the Memorandum or the SEC Documents.
SECTION 5. Representations, Warranties and Covenants of the Purchaser. The Purchaser
represents and warrants to, and covenants with, the Company, as of the date hereof and as of the
First Closing Date and the Second Closing Date, that:
5.1 Experience. (i) The Purchaser is knowledgeable, sophisticated and experienced
in financial and business matters, and in making, and is qualified to make, decisions with
respect to investments in shares representing an investment decision like that involved in the
purchase of the Shares and the shares of Common Stock that are covered by the Option Agreement
(the “Option Shares”), including investments in securities issued by the Company and/or
comparable entities, has the ability to bear the economic risks of an investment in the Shares
and the Option Shares and has reviewed carefully the information in the Memorandum and has had
the opportunity to request, receive, review and consider all information it deems relevant in
making an informed decision to purchase the Shares and the Option Shares; (ii) the Purchaser is
acquiring the number of Shares set forth on the signature pages hereto and the Option in the
ordinary course of its business and for its own account for investment only and with no present
intention of distributing any of such Shares, Option or Option Shares and subject to no
arrangement or understanding with any other persons regarding the distribution of such Shares,
Option or Option Shares (this representation and warranty not limiting the Purchaser’s right to
sell pursuant to the Registration Statement or otherwise in compliance with the Securities Act
and the Rules and Regulations, or, other than with respect to any claims arising out of a breach
of this representation and warranty, the Purchaser’s right to indemnification under Section 7.3);
(iii) the Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any
of the Shares, the Option or the Option Shares, except in compliance with the Securities Act and
the Rules and Regulations, any applicable state securities laws and Section 5.10 hereof; (iv) the
Purchaser has completed or caused to be completed the Registration Statement Questionnaire
attached hereto as part of Appendix I, for use in preparation of the Registration Statement, and
the answers thereto are true and correct as of the date hereof and will be true and correct as of
the effective date of the Registration Statement and the Purchaser will promptly notify the
Company of any material change in any such information provided in the Registration Statement
Questionnaire until such time as the Purchaser has sold all of its Shares and Option Shares or
until the Company is no longer required to keep the Registration Statement effective; (v) the
Purchaser has, in
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connection with its decision to purchase the number of Shares set forth on the signature
pages hereto and the Option, relied solely upon the Memorandum and the representations and
warranties of the Company contained herein; (vi) the Purchaser has had an opportunity to discuss
this investment with representatives of the Company and ask questions of them; and (vii) the
Purchaser is an “accredited investor” within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act.
5.2 Reliance on Exemptions. The Purchaser understands that the Shares, the Option
and the Option Shares are being offered and sold to it in reliance upon specific exemptions from
the registration requirements of the Securities Act, the Rules and Regulations and state
securities laws and that the Company is relying upon the truth and accuracy of, and the
Purchaser’s compliance with, the representations, warranties, covenants, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of the Purchaser to acquire the Shares, the
Option and the Option Shares.
5.3 Confidentiality. The Purchaser understands that the information contained in
the Memorandum is strictly confidential and proprietary to the Company and has been prepared from
the Company’s publicly available documents and other information and is being submitted to the
Purchaser solely for the Purchaser’s confidential use. The Purchaser agrees to use the
information contained in the Memorandum for the sole purpose of evaluating a possible investment
in the Shares, the Option and the Option Shares and the Purchaser acknowledges that it is
prohibited from reproducing or distributing the Memorandum, this Agreement, or any other offering
materials or other information provided by the Company in connection with the Purchaser’s
consideration of its investment in the Company, in whole or in part, or divulging or discussing
any of their contents, except to its financial, investment or legal advisors who need to know
such contents in connection with its proposed investment in the Shares, the Option and the Option
Shares and who are informed of the confidentiality obligations set forth in this Section 5.3.
Further, the existence and nature of all conversations and presentations, if any, regarding the
Company and this offering must be kept strictly confidential. The Purchaser understands that the
federal securities laws impose restrictions on trading based on material non-public information
regarding the Company. In addition, the Purchaser hereby acknowledges that unauthorized
disclosure of information regarding this offering may result in a violation of the Commission’s
Regulation FD. In addition to the above, the Purchaser shall maintain in confidence the receipt
and content of any notice of a Suspension (as defined in Section 5.8). The foregoing agreements
shall not apply to any information that is or becomes publicly available through no fault of the
Purchaser, or that the Purchaser is required to disclose pursuant to law or legal process;
provided, however, that if the Purchaser is requested or ordered to disclose any such information
pursuant to any court or other government order or any other applicable legal procedure, it shall
provide the Company with prompt notice of any such request or order in time sufficient to enable
the Company to seek an appropriate protective order.
5.4 Investment Decision. The Purchaser understands that nothing in this Agreement
or any other materials presented to the Purchaser in connection with the purchase and sale of the
Shares, the Option and the Option Shares constitutes legal, tax or investment advice. The
Purchaser has consulted such legal, tax and investment advisors as it,
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in its sole discretion, has deemed necessary or appropriate in connection with its purchase
of the Shares, the Option and the Option Shares.
5.5 Risk of Loss. The Purchaser understands that its investment in the Shares, the
Option and the Option Shares involves a significant degree of risk, including a risk of total
loss of the Purchaser’s investment, and the Purchaser has full cognizance of and understands all
of the risk factors related to the Purchaser’s purchase of the Shares, the Option and the Option
Shares, including, but not limited to, those set forth under the caption “Risk Factors” in the
Memorandum. The Purchaser understands that the market price of the Common Stock can be volatile
and that no representation is being made as to the future value of the Common Stock.
5.6 Legend. The Purchaser understands that, until such time as the Registration
Statement has been declared effective or the Shares and the Option Shares may be sold pursuant to
Rule 144 under the Securities Act without any restriction as to the number of securities as of a
particular date that can then be immediately sold thereon, the Shares will bear a restrictive
legend in substantially the following form:
“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH
CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE
SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE OF A
TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES
ACT AND SUCH OTHER APPLICABLE LAWS.”
5.7 Residency. The Purchaser’s principal executive offices are in the jurisdiction
set forth immediately below the Purchaser’s name on the signature pages hereto.
5.8 Public Sale or Distribution. The Purchaser hereby covenants with the Company
not to make any sale of the Shares or the Option Shares under the Registration Statement without
complying with the provisions of this Agreement and without effectively causing any applicable
prospectus delivery requirement under the Securities Act to be satisfied (whether physically or
through compliance with Rule 172 under the Securities Act or any similar rule. The Purchaser
acknowledges that (i) upon the making of any request by
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the Commission or any other federal or state governmental authority for amendments or
supplements to the Registration Statement or the prospectus included therein (“Prospectus”) or
for additional information, (ii) upon the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any proceedings for that
purpose, (iii) upon the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose,
(iv) upon the occurrence of any event or passage of time that makes the financial statements
included in the Registration Statement ineligible for inclusion therein or any statement made in
such Registration Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect, or (v) in light of the
existence of material non-public information regarding the Company which the Board of Directors
of the Company reasonably determines not to be in the best interests of the Company to disclose,
including a significant business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or similar transaction) available to the Company, but which would be
required to be disclosed in a Registration Statement, the Company may be required to suspend the
use of the Prospectus (a “Suspension”) until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the Commission, or until such
time as the Company has filed an appropriate report with the Commission pursuant to the Exchange
Act. Without the Company’s prior written consent, which consent shall not unreasonably be
withheld or delayed, the Purchaser shall not use any written materials to offer the Shares or the
Option Shares for resale other than the Prospectus, including any “free writing prospectus” as
defined in Rule 405 under the Securities Act. The Purchaser hereby covenants that it will not
sell any Shares or Option Shares pursuant to said Prospectus during the period commencing at the
time at which the Company gives the Purchaser written notice of the Suspension of the use of said
Prospectus and ending at the time the Company gives the Purchaser written notice that the
Purchaser may thereafter effect sales pursuant to said Prospectus. Notwithstanding the
foregoing, the Company agrees that no Suspension shall be for a period of longer than 60
consecutive days, and no Suspension shall be for a period of an aggregate in any 365-day period
of longer than 90 days.
5.9 Organization; Validity; Enforcement. The Purchaser further represents and
warrants to, and covenants with, the Company that (i) the Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, (ii) the making and performance of this Agreement by the Purchaser
and the consummation of the transactions herein contemplated will not violate any provision of
the organizational documents of the Purchaser or conflict with, result in the breach or violation
of, or constitute, either by itself or upon notice or the passage of time or both, a default
under any material agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Purchaser is a party, or any statute or any
authorization, judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental agency or body applicable to the Purchaser, (iii) no
consent, approval, authorization or other order of any court, regulatory body, administrative
agency or other governmental agency or body is
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required on the part of the Purchaser for the execution and delivery of this Agreement or
the consummation of the transactions contemplated by this Agreement, (iv) upon the execution and
delivery of this Agreement, this Agreement shall constitute a legal, valid and binding obligation
of the Purchaser, enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to the enforcement of creditor’s rights and the application of equitable
principles relating to the availability of remedies, and except as rights to indemnity or
contribution, including, but not limited to, the indemnification provisions set forth in Section
7.3 of this Agreement, may be limited by federal or state securities laws or the public policy
underlying such laws, and (v) there is not in effect any order enjoining or restraining the
Purchaser from entering into or engaging in any of the transactions contemplated by this
Agreement.
5.10 Short Sales. Notwithstanding any term to the contrary herein, the Purchaser
and its employees, agents and affiliates have not taken, and after the date hereof the Purchaser
and its employees, agents and affiliates shall not take, any action that has caused or will cause
the Purchaser and its employees, agents and affiliates to have, directly or indirectly, effected
any short sale of the Common Stock, whether or not against the box, established any “put
equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act with respect to the
Common Stock, granted any other right (including, without limitation, any put or call option)
with respect to the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock.
SECTION 6. Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement or by the Placement Agent, all covenants and
agreements made by the Company and the Purchaser herein and in the certificates for the Shares
delivered pursuant hereto shall survive the execution of this Agreement, the delivery to the
Purchaser of the Shares being purchased and the payment therefor. All representations and
warranties made by the Company and the Purchaser herein and in the certificates for the Shares
delivered pursuant hereto shall survive for a period of one year following the later of the
execution of this Agreement, the delivery to the Purchaser of the Shares being purchased and the
payment therefor.
SECTION 7. Registration of the Shares; Compliance with the Securities Act.
7.1 Registration Procedures and Expenses. The Company shall:
(a) as soon as practicable, but in no event later than fifteen days following (i) the First
Closing Date, in the case of the First Tranche Shares, and (ii) the Second Closing Date, in the
case of the Second Tranche Shares and the Option Shares (the “Filing Deadline”), prepare and file
with the Commission a Registration Statement on Form S-3 (or, if permissible under the Rules and
Regulations, a post-effective amendment to a then effective registration statement on such form)
relating to the resale of (x) the Shares and the Option Shares and (y) any shares of Common Stock
issued or issuable directly or indirectly with respect to the securities referred to in clause (x)
by way of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization (together,
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for purposes of this Section 7, the “Registrable Securities”) by the Purchaser from time to
time on The Nasdaq Capital Market, or the facilities of any other national securities exchange on
which the Common Stock is then traded or in privately negotiated transactions;
(b) use its reasonable best efforts, subject to receipt of necessary information from the
Purchasers whose securities are included therein, to cause the Commission to declare the
Registration Statement (or post-effective amendment, as applicable) effective within 30 days after
the applicable Closing Date or, if the Commission reviews the Registration Statement, within 120
days after the applicable Closing Date (the “Effective Deadline”);
(c) promptly prepare and file with the Commission such amendments and supplements to the
Registration Statement and the Prospectus as may be necessary to keep the Registration Statement
effective until (the “Effectiveness Period”) the earliest of (i) two years after the effective date
of the Registration Statement, or (ii) such time as the Registrable Securities become eligible for
resale by non-affiliates pursuant to Rule 144(k) under the Securities Act or any other rule of
similar effect, or (iii) such time as all of the Registrable Securities have been sold pursuant to
the Registration Statement;
(d) so long as the Registration Statement is effective covering the resale of the Registrable
Securities owned by the Purchaser, furnish to the Purchaser with respect to the Shares and the
Option Shares registered under the Registration Statement (and to each underwriter, if any, of such
Shares and Option Shares) such number of copies of prospectuses and such other documents as the
Purchaser may reasonably request, in order to facilitate the public sale or other disposition of
all or any of the Registrable Securities by the Purchaser;
(e) file documents required of the Company for normal Blue Sky clearance in states specified
in writing by the Purchaser; provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any jurisdiction in which it
is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in paragraphs (a) through (e) of this
Section 7.1 and the registration of the Registrable Securities pursuant to the Registration
Statement, other than fees and expenses, if any, of counsel or other advisers to the Purchaser or
the Other Purchasers (in each case except as otherwise provided herein) or underwriting discounts,
brokerage fees and commissions incurred by the Purchaser or the Other Purchasers, if any, in
connection with the offering pursuant to the Registration Statement;
(g) file a Form D with respect to offer and sale of the Shares to the Purchaser as required
under Regulation D under the Securities Act and to provide a copy thereof to the Purchaser promptly
after filing; and
(h) file, not later than the next business day after the Closing Date, a Current Report on
Form 8-K with the Commission disclosing all material terms of the transactions contemplated hereby
in accordance with the applicable Rules and Regulations.
The Company understands that the Purchaser disclaims being an underwriter, but the Purchaser
being deemed an underwriter shall not relieve the Company of any obligations it
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has hereunder. A questionnaire related to the Registration Statement to be completed by the
Purchaser is attached hereto as part of Appendix I.
7.2 Transfer of Shares. The Purchaser agrees that it will not effect any
disposition of the Shares (as well as any Option Shares) or its right to purchase the Shares (as
well as any Option Shares) that would constitute a sale within the meaning of the Securities Act
or any applicable state securities laws, except as contemplated in the Registration Statement or
as otherwise permitted by law, and that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding the Purchaser or its plan of
distribution.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term “Purchaser/Affiliate” shall mean any affiliate of
the Purchaser, including a transferee of the Shares or the
Option Shares from the Purchaser who is an affiliate of the
Purchaser, and any person who controls the Purchaser or any
affiliate of the Purchaser within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act; and
(ii) the term “Registration Statement” shall include any
preliminary prospectus, final prospectus, free writing
prospectus, exhibit, supplement or amendment included in or
relating to, and any document incorporated by reference in, the
Registration Statement.
(a) The Company agrees to indemnify and hold harmless the Purchaser and each
Purchaser/Affiliate against any losses, claims, damages, liabilities or expenses, joint or several,
to which the Purchaser or Purchaser/Affiliate may become subject, under the Securities Act, the
Exchange Act, or any other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is effected with the prior
written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof as contemplated below) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the Registration Statement,
including the Prospectus, financial statements and schedules, and all other documents filed as a
part thereof, as amended at the time of effectiveness of the Registration Statement, including any
information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b)
of Rule 430A, or pursuant to Rules 430B, 430C or 434, of the Rules and Regulations, or the
Prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, or filed as part of the Registration Statement at the time of effectiveness if no Rule
424(b) filing is required, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state in any of them a material fact required to be stated
therein or necessary to make the statements in any of them, in light of the circumstances under
which they were made, not misleading, or arise out of or are based in whole or in part on any
breach by the Company of the representations or warranties of the Company contained in this
Agreement, or any failure of the Company to perform its obligations hereunder or under law, and
will promptly reimburse the
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Purchaser and each such Purchaser/Affiliate for any legal and other expenses as such expenses
are reasonably incurred by the Purchaser or such Purchaser/Affiliate in connection with
investigating, defending or preparing to defend, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable for amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company, which consent shall not
be unreasonably withheld, and, provided further, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage, liability, action or
expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information furnished to the
Company by the Purchaser expressly for use therein, or (ii) the failure of the Purchaser to comply
with the covenants and agreements contained in Sections 5 or 7.2, or (iii) the breach by the
Purchaser of any representation or warranty made by the Purchaser herein, or (iv) any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the
Purchaser prior to the pertinent sale or sales by the Purchaser, or (v) any violation by the
Purchaser of any applicable federal or state securities laws, rule or regulations.
(b) The Purchaser will severally, but not jointly with the Other Purchasers, indemnify and
hold harmless the Company, each of its directors, each of its officers, including such officers who
signed the Registration Statement, and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages, liabilities or expenses to which the Company, each of its directors, each of its
officers and each such controlling person may become subject, under the Securities Act, the
Exchange Act, or any other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, but only if such settlement is effected with
the written consent of the Purchaser) insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i)
any failure to comply with the covenants and agreements contained in Sections 5 or 7.2 hereof, or
(ii) the breach by the Purchaser of any representation or warranty made by the Purchaser herein, or
(iii) any untrue or alleged untrue statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements in the Registration Statement, the Prospectus or any amendment or supplement thereto not
misleading in light of the circumstances under which they were made, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information furnished to the
Company by the Purchaser expressly for use therein, and will reimburse the Company, each of its
directors, each of its officers and each such controlling person for any legal and other expense
reasonably incurred by the Company, each of its directors, each of its officers and each such
controlling person in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, however, that the Purchaser’s
aggregate liability under this Section 7 shall not exceed the amount of proceeds received by the
Purchaser on the sale of the Registrable Securities pursuant to the Registration Statement
(“Proceeds”).
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(c) Promptly after receipt by an indemnified party under this Section 7.3 of notice of the
threat or commencement of any action, indemnifiable hereunder such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this Section 7.3,
promptly notify the indemnifying party in writing thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise under the indemnity agreement contained in this Section 7.3 to
the extent it is not prejudiced as a result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded, based on an opinion
of counsel reasonably satisfactory to the indemnifying party, that there may be a conflict of
interest between the positions of the indemnifying party and the indemnified party in conducting
the defense of any such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such indemnified party
under this Section 7.3 for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in accordance with the proviso to
the preceding sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, reasonably satisfactory to such
indemnifying party, representing all of the indemnified parties who are parties to such action) or
(ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be
at the expense of the indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying party shall have
approved in writing the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnification could have been
sought hereunder by such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If the indemnification provided for in this Section 7.3 is required by its terms but is
for any reason held by a court of competent jurisdiction to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or (c) of this Section
7.3 in respect to any losses, claims, damages, liabilities or expenses referred to herein, then
each applicable indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to
herein (i) in such proportion as is appropriate to reflect the relative benefits received by the
-20-
Company and the Purchaser from the private placement of Shares hereunder or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause (i) above but the
relative fault of the Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement and/or the Registration
Statement which resulted in such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The respective relative benefits received by the Company
on the one hand and each Purchaser on the other shall be deemed to be in the same proportion as the
amount paid by such Purchaser to the Company pursuant to this Agreement for the Shares purchased by
such Purchaser that were sold pursuant to the Registration Statement bears to the difference
between the amount such Purchaser paid for the Shares that were sold pursuant to the Registration
Statement and the amount received by such Purchaser from such sale. The relative fault of the
Company, on the one hand, and each Purchaser on the other shall be determined by reference to,
among other things, whether the untrue or alleged statement of a material fact or the omission or
alleged omission to state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Company or by such Purchaser
and the parties’ relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) of this Section 7.3, any legal or other fees
or expenses reasonably incurred by such party in connection with investigating or defending any
action or claim. The provisions set forth in paragraph (c) of this Section 7.3 with respect to the
notice of the threat or commencement of any threat or action shall apply if a claim for
contribution is to be made under this paragraph (d); provided, however, that no
additional notice shall be required with respect to any threat or action for which notice has been
given under paragraph (c) for purposes of indemnification. The Company and each Purchaser agree
that it would not be just and equitable if contribution pursuant to this Section 7.3 were
determined solely by pro rata allocation (even if the Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account of the equitable
considerations referred to in this paragraph. Notwithstanding the provisions of this Section 7.3,
the Purchaser shall not be required to contribute any amount in excess of the amount by which the
Proceeds exceed the amount of any damages that such Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchaser’s obligation to contribute pursuant to this Section 7.3 is
several and not joint with the Other Purchasers.
7.4 Termination of Conditions and Obligations. The restrictions imposed by Section 5
or this Section 7 upon the transferability of the Shares (as well as the Option Shares) shall cease
and terminate as to any particular number of the Shares (as well as the Option Shares) upon the
earlier of (i) the passage of two years from the effective date of the Registration Statement
covering such Registrable Securities (unless the Purchaser is then, or was during the preceding
three months, an affiliate (as defined in Rule 144 promulgated under the Securities Act) of the
Company and (ii) such time as an opinion of counsel satisfactory in form and substance to the
Company shall have been rendered to the effect that such conditions are not necessary in order to
comply with the Securities Act.
-21-
7.5 Information Available. The Company, upon the reasonable request of the Purchaser
and with prior notice, will be available to the Purchaser or a representative thereof at the
Company’s headquarters to discuss information relevant for disclosure in the Registration Statement
covering the Registrable Securities and will otherwise cooperate with the Purchaser when conducting
an investigation for the purpose of reducing or eliminating the Purchaser’s exposure to liability
under the Securities Act, including the reasonable production of information at the Company’s
headquarters, subject to appropriate confidentiality limitations.
7.6 Delay in Filing or Effectiveness of Registration Statement. If the Registration
Statement is not filed by the Company with the Commission on or prior to the Filing Deadline, then
for each day following the Filing Deadline, until but excluding the date the Registration Statement
is filed, or if the Registration Statement is not declared effective by the Commission by the
Effective Deadline, then for each day following the Effective Deadline, until but excluding the
date the Commission declares the Registration Statement effective, the Company shall pay the
Purchaser with respect to any such failure, as liquidated damages and not as a penalty, an amount
per 30-day period equal to 1.0% (prorated for a period of less than 30 days) of the purchase price
paid by the Purchaser for the Shares pursuant to this Agreement; and for any such 30-day period,
such payment shall be made no later than three business days following such 30-day period. If the
Purchaser shall be prohibited from selling Registrable Securities under the Registration Statement
as a result of a Suspension of more than thirty (30) days or Suspensions on more than two (2)
occasions of not more than thirty (30) days each in any 12-month period, then for the period during
which a Suspension (an “Excess Period Suspension”) is in effect that exceeds the maximum allowed
period for a Suspension or Suspensions, but not including any day on which a Suspension is lifted,
the Company shall pay the Purchaser, as liquidated damages and not as a penalty, an amount per
30-day period equal to 1.0% (prorated for a period of less than 30 days) of the purchase price paid
by the Purchaser for the Shares pursuant to this Agreement, and such payment shall be made no later
than the first business day of the calendar month next succeeding the month in which any such
Excess Period Suspension occurs. For purposes of this Section 7.6, a Suspension shall be deemed
lifted on the date that notice that the Suspension has been lifted is delivered to the Purchaser
pursuant to Section 5.8 of this Agreement. Any payments made pursuant to this Section 7.6 shall
not constitute the Purchaser’s exclusive remedy for such events. Notwithstanding the foregoing
provisions, in no event shall the Company be obligated to pay any liquidated damages pursuant to
this Section 7.6 (i) to more than one Purchaser in respect of the same securities for the same
period of time or (ii) in an aggregate amount that exceeds 10% of the purchase price paid by the
Purchasers for the securities purchased pursuant to the Agreements. Such payments shall be made to
the Purchasers in cash.
SECTION 8. Broker’s Fee. The Purchaser acknowledges that the Company intends to pay
to the Placement Agent a fee in respect of the sale of the Shares to the Purchaser. The Purchaser
and the Company hereby agree that the Purchaser shall not be responsible for such fee and that the
Company will indemnify and hold harmless the Purchaser and each Purchaser/Affiliate against any
losses, claims, damages, liabilities or expenses, joint or several, to which the Purchaser or
Purchaser/Affiliate may become subject with respect to such fee. Each of the parties hereto hereby
represents that, on the basis of any actions and agreements
-22-
by it, there are no other brokers or finders entitled to compensation in connection with the
sale of the Shares to the Purchaser.
SECTION 9. Independent Nature of Purchasers’ Obligations and Rights. The obligations
of the Purchaser under this Agreement are several and not joint with the obligations of any Other
Purchaser, and the Purchaser shall not be responsible in any way for the performance of the
obligations of any Other Purchaser under the Agreements. The decision of the Purchaser to purchase
the Shares pursuant to the Agreement has been made by the Purchaser independently of any Other
Purchaser. Nothing contained in this Agreement, and no action taken by the Purchaser pursuant
hereto, shall be deemed to constitute the Purchaser and the Other Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Purchaser and the Other Purchasers are in any way acting in concert or as a group with respect to
such obligations or the transactions contemplated by this Agreement. The Purchaser acknowledges
that no Other Purchaser has acted as agent for the Purchaser in connection with making its
investment hereunder and that no Other Purchaser will be acting as agent of the Purchaser in
connection with monitoring its investment in the Shares or enforcing its rights under this
Agreement. The Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it shall not be
necessary for any Other Purchaser to be joined as an additional party in any proceeding for such
purpose.
SECTION 10. Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii)
when received by confirmed facsimile or (iii) one (1) business day after deposit with a nationally
recognized overnight carrier, specifying next business day delivery, with written verification of
receipt. All communications shall be sent to the Company and the Purchaser as follows or at such
other addresses as the Company or the Purchaser may designate upon five (5) days’ advance written
notice to the other party:
| (a) | if to the Company, to: | |||
| BabyUniverse, Inc. | ||||
| 000 Xxxxx X.X. Xxxxxxx Xxx, Xxxxx 000 | ||||
| Xxxxxxx, Xxxxxxx 00000 | ||||
| Attn: Xxxxxxxx Xxxxxxx | ||||
| Facsimile: (000) 000-0000 | ||||
| with a copy to: | ||||
| Xxxxxxxx & Xxxxxx, LLP | ||||
| 0000 Xxxxxxx Xxxxxx, Xxxxx 000 | ||||
| Xxxxx Xxxxxx, Xxxxxxxxxx 00000 | ||||
| Attn: D. Xxxxxx Xxxxxx | ||||
| Facsimile: (000) 000-0000 | ||||
| (b) | if to the Purchaser, at its address as set forth at the end of this Agreement. |
-23-
SECTION 11. Changes. This Agreement may not be modified or amended except pursuant to
an instrument in writing signed by the Company and the Purchaser. Any amendment or modification
effected in accordance with this Section 11 shall be binding upon each holder of any securities
purchased under this Agreement at the time outstanding, each future holder of all such securities,
and the Company.
SECTION 12. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be part of this
Agreement.
SECTION 13. Severability. In case any provision contained in this Agreement should be
held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law; Venue. This Agreement is to be construed in accordance
with and governed by the federal law of the United States of America and the internal laws of the
State of California without giving effect to any choice of law rule that would cause the
application of the laws of any jurisdiction other than the internal laws of the State of California
to the rights and duties of the parties. Each of the Company and the Purchaser submits to the
nonexclusive jurisdiction of the United States District Court for the Central District of
California and of any California State court sitting in Los Angeles County for purposes of all
legal proceedings arising out of or relating to this Agreement and the transactions contemplated
hereby. Each of the Company and the Purchaser irrevocably waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum.
SECTION 15. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts have been signed by
each party hereto and delivered (including by facsimile) to the other parties.
SECTION 16. Entire Agreement. This Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the Company nor the
Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters.
SECTION 17. Fees and Expenses. Except as otherwise expressly set forth herein, each
of the Company and the Purchaser shall pay its respective fees and expenses related to the
transactions contemplated by this Agreement.
SECTION 18. Parties. This Agreement is made solely for the benefit of and is binding
upon the Purchaser and the Company and, to the extent provided in Section 7.3, any person
controlling the Company or the Purchaser, the officers and directors of the Company,
-24-
and their respective executors, administrators, successors and assigns, and, subject to the
provisions of Section 7.3, no other person shall acquire or have any right under or by virtue of
this Agreement. The term “successor and assigns” shall include any subsequent purchaser, as such
purchaser, of the Shares sold to the Purchaser pursuant to this Agreement, to the extent such
subsequent purchaser is a permitted assignee of the Purchaser pursuant to Section 21.
SECTION 19. Assignment. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective
successors, assigns, heirs, executors and administrators. This Agreement and the rights of the
Purchaser hereunder may be assigned by the Purchaser only with the prior written consent of the
Company, except such consent shall not be required in the case of any assignment by an investment
adviser to a fund for which it is the adviser or by or among funds that are under common control,
provided that, in each such case, such assignee agrees in writing to be bound by the terms of this
Agreement.
SECTION 20. Further Assurances. Each party agrees to cooperate fully with the other
party and to execute such further instruments, documents and agreements and to give such further
written assurance as may be reasonably requested by the other party to evidence and reflect the
transactions described herein and contemplated hereby and to carry into effect the intents and
purposes of this Agreement.
SECTION 21. Publicity. Notwithstanding anything to the contrary set forth herein, the
Company shall not publicly disclose the name of the Purchaser for marketing purposes or otherwise,
or include the name of the Purchaser in any filing with the Commission (other than the Registration
Statement and any exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any other regulatory agency or securities
exchange, without the prior written consent of the Purchaser, except to the extent such disclosure
is required by applicable laws, rules or regulations, in which case the Company shall provide the
Purchaser with prior notice of such disclosure; provided, further, that
notwithstanding the foregoing, the Company shall have the right to disclose the name of the
Purchaser in oral communications between the Company and its representatives and potential Other
Purchasers; provided, that, in connection with any disclosure pursuant to the foregoing proviso,
the Company shall only be permitted to disclose that the Purchaser has invested in the Common Stock
and shall not state or suggest that the Purchaser endorses, sponsors, promotes or encourages an
investment in the Company by any potential Other Purchaser.
[Remainder of Page Intentionally Left Blank]
-25-
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be
executed by their duly authorized representatives as of the day and year first above written.
| BabyUniverse, Inc. | ||||||
| By: | |
|||||
| Title: Chief Executive Officer | ||||||
-26-
INVESTOR SIGNATURE PAGE
Print or Type:
| Name of Purchaser | ||||
| (Individual or Institution): | ||||
| Janus Investment Fund on behalf of its series Janus Venture Fund | ||||
| Name of Individual representing | ||||
| Purchaser (if an Institution): | ||||
| Title of Individual representing | ||||
| Purchaser (if an Institution): | ||||
Signature by: |
||||
| Individual Purchaser or Individual | ||||
| representing Purchaser: | ||||
| Address: | ||||||
| Telephone: | ||||||
| Telecopier: | ||||||
| Number of Shares to Be | Price Per Share In | Aggregate | ||
| Purchased | Dollars | Price | ||
777,490 |
U.S.$6.40 | U.S.$4,975,936 |
-27-
INVESTOR SIGNATURE PAGE
Print or Type:
| Name of Purchaser | ||||
| (Individual or Institution): | ||||
| Janus Capital Funds plc on behalf of its series US Venture Fund | ||||
| Name of Individual representing | ||||
| Purchaser (if an Institution): | ||||
| Title of Individual representing | ||||
| Purchaser (if an Institution): | ||||
Signature by: |
||||
| Individual Purchaser or Individual representing Purchaser: |
||||
| Address: | ||||||
| Telephone: | ||||||
| Telecopier: | ||||||
| Number of Shares to Be | Price Per Share In | Aggregate | ||
| Purchased | Dollars | Price | ||
70,095 |
U.S.$6.40 | U.S.$448,608 |
-28-
INVESTOR SIGNATURE PAGE
Print or Type: |
||||
| Name of Purchaser | ||||
| (Individual or Institution): | ||||
| Small Cap Growth Portfolio, a series of Ohio National Fund, Inc. | ||||
| Name of Individual representing | ||||
| Purchaser (if an Institution): | ||||
| Title of Individual representing | ||||
| Purchaser (if an Institution): | ||||
Signature by: |
||||
| Individual Purchaser or Individual representing Purchaser: |
||||
| Address: | ||||||
| Telephone: | ||||||
| Telecopier: | ||||||
| Number of Shares to Be | Price Per Share In | Aggregate | ||
| Purchased | Dollars | Price | ||
11,790 |
U.S.$6.40 | U.S.$75,456 |
-29-
APPENDIX I
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(TO BE READ IN CONJUNCTION WITH THE ENTIRE
STOCK PURCHASE AGREEMENT WHICH THIS FOLLOWS)
STOCK PURCHASE AGREEMENT WHICH THIS FOLLOWS)
| A. | Complete the following items on the Stock Purchase Agreement (Please sign two originals): | |
| 1. | Investor Signature Page: |
| (i) | Name of Purchaser (Individual or Institution) | ||
| (ii) | Name of Individual representing Purchaser (if an Institution) | ||
| (iii) | Title of Individual representing Purchaser (if an Institution) | ||
| (iv) | Signature of Individual Purchaser or Individual representing Purchaser | ||
| (v) | Amount and Purchase Price of Shares to be Purchased |
| 2. | Appendix I — Stock Certificate Questionnaire/Registration Statement Questionnaire: | |
| Provide the information requested by the Stock Certificate Questionnaire and the Registration Statement Questionnaire. | ||
| 3. | By ___:00 p.m. New York Time on ___, June ___, 2007, return one copy of the properly completed and signed Stock Purchase Agreement including the properly completed Appendix I (initially by facsimile with an original copy by overnight delivery) to each of: |
CIBC World Markets Corp.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx
Phone: (000) 000-0000
Telecopy: (000) 000-0000
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx
Phone: (000) 000-0000
Telecopy: (000) 000-0000
Xxxxxxxx & Xxxxxxxx LLP
1290 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Ze’-ev Eiger, Esq.
Phone: (000) 000-0000
Telecopy: (000) 000-0000
1290 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Ze’-ev Eiger, Esq.
Phone: (000) 000-0000
Telecopy: (000) 000-0000
Please complete all of the information on the signature page of the Stock Purchase
Agreement to facilitate the Closing and the physical delivery of the Shares.
| A copy of the Stock Purchase Agreement signed by the Company will be delivered to the Purchaser on the date delivered by the Purchaser. | ||
| B. | By ___:00 p.m. New York Time on ___, June ___, 2007, the Purchaser shall wire the purchase price for the Shares to the Company’s account specified in and pursuant to the enclosed Wire Instructions. | |
| C. | Upon the resale of the Shares and the Option Shares by the Purchaser after the Registration Statement covering the Registrable Securities is effective, as described in the Stock Purchase Agreement, the Purchaser must effectively cause the prospectus delivery requirement under the Securities Act to be satisfied (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule). |
Wire Instructions
Lydian Bank and Trust
Palm Beach, Florida
ABA # 000-000-000
Account Name: BabyUniverse, Inc.
Account No.: 000-000-000
Palm Beach, Florida
ABA # 000-000-000
Account Name: BabyUniverse, Inc.
Account No.: 000-000-000
IMPORTANT: Please clearly indicate on the wire (i) the name of the originator (i.e., the
Purchaser) and (ii) the beneficiary, BabyUniverse, Inc. Please also coordinate with your financial
institution to ensure that transaction fees are not inadvertently deducted from the wired funds
prior to their receipt by Lydian Bank and Trust.
PLEASE NOTE: If you will be initiating a wire transfer from overseas, please call Xxxxxx
Xxxxx, to obtain the Swift code number. Funds may be wired in U.S. dollars only.
CONTACT:
Attention: Xxxxxx Xxxxx
Tel. No.: 000.000.0000
Tel. No.: 000.000.0000
APPENDIX I
(PAGE 1 OF 3)
(PAGE 1 OF 3)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the following information:
1.
|
The exact name that your Shares are to be registered in (this is the name that will appear on your stock certificate(s). You may use a nominee name if appropriate: | |||
2.
|
The relationship between the Purchaser of the Shares and the Registered Holder listed in response to item 1 above: | |||
3.
|
The mailing address of the Registered Holder listed in response to item 1 above: | |||
4.
|
The Social Security Number or Tax Identification Number of the Registered Holder listed in response to item 1 above: |
|
APPENDIX I
(PAGE 2 OF 3)
(PAGE 2 OF 3)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please provide us with the
following information:
SECTION 1. Pursuant to the “Selling Stockholder” section of the Registration Statement, please
state your or your organization’s name exactly as it should appear in the Registration Statement:
SECTION 2. Please provide the number of shares of the Common Stock (including Option Shares)
that you or your organization will own immediately after each of the First Closing and the Second
Closing, including those Shares purchased by you or your organization pursuant to this Agreement
and those shares purchased by you or your organization through other transactions and provide the
number of shares of the Common Stock that you have or your organization has the right to acquire
within 60 days of each such Closing:
SECTION 3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
SECTION 4. Are you (i) an NASD Member (see definition), (ii) a Controlling (see definition)
shareholder of an NASD Member, (iii) a Person Associated with a Member of the NASD (see
definition), or (iv) an Underwriter or a Related Person (see definition) with respect to the
proposed offering; or (b) do you own any shares or other securities of any NASD Member not
purchased in the open market; or (c) have you made any outstanding subordinated loans to any NASD
Member?
Answer: [ ] Yes [ ] No If “yes,” please describe below
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
APPENDIX I
(PAGE 3 OF 3)
(PAGE 3 OF 3)
NASD Member. The term “NASD member” means either any broker or dealer admitted to
membership in the National Association of Securities Dealers, Inc. (“NASD”). (NASD Manual, By-laws
Article I, Definitions)
Control. The term “control” (including the terms “controlling,” “controlled by” and
“under common control with”) means the possession, direct or indirect, of the power, either
individually or with others, to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract, or otherwise. (Rule 405
under the Securities Act of 1933, as amended)
Person Associated with a member of the NASD. The term “person associated with a
member of the NASD” means every sole proprietor, partner, officer, director, branch manager or
executive representative of any NASD Member, or any natural person occupying a similar status or
performing similar functions, or any natural person engaged in the investment banking or securities
business who is directly or indirectly controlling or controlled by a NASD Member, whether or not
such person is registered or exempt from registration with the NASD pursuant to its bylaws. (NASD
Manual, By-laws Article I, Definitions)
Underwriter or a Related Person. The term “underwriter or a related person” means,
with respect to a proposed offering, underwriters, underwriters’ counsel, financial consultants and
advisors, finders, members of the selling or distribution group, and any and all other persons
associated with or related to any of such persons. (NASD Interpretation)
APPENDIX II
[Transfer Agent]
Attention:
Attention:
PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
hereby certifies
[fill in official name of individual or institution]
that he/she [said institution] is the Purchaser of the shares evidenced by the attached certificate, and as such, sold such shares on in
[date]
accordance with the terms of the Stock Purchase Agreement and in accordance with
Registration Statement number
or otherwise in
accordance with the Securities Act of 1933,
[fill in the number of or otherwise identify Registration Statement]
as amended, and, in the case of a transfer pursuant to the Registration Statement, the requirement of delivering a current prospectus by the
Company has been complied with in connection with such sale.
Print or Type:
| Name of Purchaser | ||||||
| (Individual or Institution): |
||||||
| Name of Individual representing | ||||||
| Purchaser (if an Institution) |
||||||
| Title of Individual representing | ||||||
| Purchaser (if an Institution): |
||||||
| Signature by: | ||||||
| Individual Purchaser or Individual repre- senting Purchaser: |
||||||
ANNEX A
FORM OF OPTION
37
ANNEX B
FORM OF CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
38
ANNEX C
FORM OF SUPPLEMENT NO. 1 TO
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
39
ANNEX D
FORM OF SUPPLEMENT NO. 2 TO
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
40
