Contract
Exhibit 2.3
THIS WARRANT AND THE SECURITIES ISSUABLE ON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS.
To Purchase Shares of the Common Stock of
Dated as of July 11, 2006 (the “Effective Date”)
WHEREAS, BabyUniverse, Inc., a Florida corporation (the “Company”), has entered into a
Senior Loan and Security Agreement of even date herewith (the “Loan Agreement”) with
Hercules Technology Growth Capital, Inc., a Maryland corporation (“Hercules”);
WHEREAS, the Company entered into an engagement letter dated May 17, 2006 (the “Engagement
Letter”) with Xxxxxxxx Curhan Ford & Co. (the “Warrantholder”); providing for the
contingent issuance of warrants as a portion of the consideration for services provided in securing
the Loan Agreement;
WHEREAS, the Company desires to grant to Warrantholder, in consideration for, among other
things, the services provided in securing the Loan Agreement, the right to purchase shares of its
Common Stock pursuant to this Warrant Agreement (the “Agreement” or the “Warrant”);
NOW, THEREFORE, in consideration of the Engagement Letter and services rendered thereunder,
and in consideration of the mutual covenants and agreements contained herein, the Company and
Warrantholder agree as follows:
SECTION 1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.
For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and
purchase, from the Company, 2,757 (Two Thousand Seven Hundred Fifty Seven) fully paid and
non-assessable shares of the Common Stock (as defined below) at a purchase price of $8.20 (Eight
and 20/100 Dollars) per share (the “Exercise Price”). The number and Exercise Price of
such shares are subject to adjustment as provided in Section 8. As used herein, the following
terms shall have the following meanings:
“Act” means the Securities Exchange Act of 1933, as amended.
“Charter” means the Company’s Articles of Incorporation, Certificate of
Incorporation or other constitutional document, as may be amended from time to time.
“Common Stock” means the Company’s common stock, $0.001 par value per share.
“Merger Event” means a reorganization, recapitalization, consolidation or merger
(or similar transaction or series of related transactions) involving the Company in which
the Company is not the surviving entity, or in which the outstanding shares of the
Company’s capital stock are otherwise converted into or exchanged for shares or units of
capital of another entity.
“Purchase Price” means, with respect to any exercise of this Agreement, an amount
equal to the Exercise Price as of the relevant time multiplied by the number of shares of
Common Stock requested to be exercised under this Agreement pursuant to such exercise.
SECTION 2. TERM OF THE AGREEMENT.
Except as otherwise provided for herein, the term of this Agreement and the right to purchase
Common Stock as granted herein (the “Warrant) shall commence on the Effective Date and shall be
exercisable for a period ending five (5) years from the Effective Date.
SECTION 3. EXERCISE OF THE PURCHASE RIGHTS.
(a) Exercise. The purchase rights set forth in this Agreement are exercisable by the
Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of
the term set forth in Section 2, by tendering to the Company at its principal office a notice of
exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”), duly
completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the
Purchase Price in accordance with the terms set forth below, and in no event later than three (3)
days thereafter, the Company shall issue to the Warrantholder a certificate for the number of
shares of Common Stock purchased, and shall execute the acknowledgment of exercise in the form
attached hereto as Exhibit II (the “Acknowledgment of Exercise”) indicating the
number of shares which remain subject to future purchases, if any, under this Warrant. The Company
shall also comply with its requirements under Section 12(u) of this Agreement to ensure the timely
delivery of shares of Common Stock to Warrantholder.
The Purchase Price may be paid at the Warrantholder’s election either (i) by cash or check, or (ii)
by surrender of all or a portion of the Warrant for shares of Common Stock to be exercised under
this Agreement and, if applicable, an amended Agreement representing the remaining number of shares
purchasable hereunder, as determined below (“Net Issuance”). If the Warrantholder elects
the Net Issuance method, the Company will issue Common Stock in accordance with the following
formula:
| X=Y(A-B) A |
||||
Where:
|
X= | the number of shares of Common Stock to be issued to the Warrantholder. | ||
| Y = the number of shares of Common Stock requested to be exercised under this Agreement. | ||||
| A = the fair market value of one (1) share of Common Stock at the time of issuance of such shares of Common Stock. | ||||
| B= | the Exercise Price. |
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For purposes of the above calculation, current fair market value of Common Stock shall mean with
respect to each share of Common Stock:
| (i) | if the exercise is after, and not in connection with an Initial Public Offering, and: |
(A) if the Common Stock is traded on a securities exchange, the fair market
value shall be deemed to be the average of the closing prices over a five (5)
trading day period ending one (1) trading day before the day the current fair
market value of the securities is being determined; or
(B) if the Common Stock is traded over-the-counter, the fair market value
shall be deemed to be the average of the closing bid and asked prices quoted on the
NASDAQ system (or similar system) over the five (5) trading day period ending one
(1) trading day before the day the current fair market value of the securities is
being determined;
| (ii) | if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ National Market or the over-the-counter market, the current fair market value of Common Stock shall be the highest price per share which the Company could obtain from a willing buyer (not a current employee or director or any person affiliated with Warrantholder or other holder of this Warrant) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors unless the Company shall become subject to a Merger Event, in which case the fair market value of Common Stock shall be deemed to be the per share value received by the holders of the Company’s Common Stock pursuant to such Merger Event. |
Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended
Agreement representing the remaining number of shares purchasable hereunder. All other terms and
conditions of such amended Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
(b) Exercise Prior to Expiration. To the extent this Agreement is not previously exercised as
to all Common Stock subject hereto, and if the fair market value of one share of the Common Stock
is greater than the Exercise Price then in effect, this Agreement shall be deemed automatically
exercised pursuant to Section 3(a) (even if not surrendered) as of the last business day on, or if
the expiration date is not a business day then immediately before, the expiration date of this
Warrant. For purposes of such automatic exercise, the fair market value of one share of the Common
Stock upon such expiration shall be determined pursuant to Section 3(a). To the extent this
Agreement or any portion thereof is deemed automatically exercised pursuant to this Section 3(b),
the Company agrees to promptly notify the Warrantholder of the number of shares of Common Stock, if
any, the Warrantholder is to receive by reason of such automatic exercise, and payment thereof
shall be made through Net Issuance, and a certificate representing the number of shares of Common
Stock to be issued to the Warrantholder shall be promptly issued and delivered to the
Warrantholder.
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SECTION 4. RESERVATION OF SHARES.
During the term of this Agreement, the Company will at all times have authorized and reserved
a sufficient number of shares of its Common Stock to provide for the exercise of the rights to
purchase Common Stock as provided for herein.
SECTION 5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Agreement, but in lieu of such fractional shares the Company shall make a cash payment
therefor upon the basis of the Exercise Price then in effect.
SECTION 6. NO RIGHTS AS SHAREHOLDER/STOCKHOLDER.
This Agreement does not entitle the Warrantholder to any voting rights or other rights as a
shareholder/stockholder of the Company prior to the exercise of this Agreement.
SECTION 7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the registered holder of
this Agreement. Warrantholder’s initial address, for purposes of such registry, is set forth below
Warrantholder’s signature on this Agreement. Warrantholder may change such address by giving
written notice of such changed address to the Company.
SECTION 8. ADJUSTMENT RIGHTS.
The Exercise Price and the number of shares of Common Stock purchasable hereunder are subject
to adjustment, as follows:
(a) Merger Event. If at any time there shall be Merger Event, then, as a part of such Merger
Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to
receive, upon exercise of this Agreement, the number of shares of common stock or other securities
or property of the successor corporation resulting from such Merger Event that would have been
issuable if Warrantholder had exercised this Agreement immediately prior to the effective date of
the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the
Company’s Board of Directors) shall be made in the application of the provisions of this Agreement
with respect to the rights and interests of the Warrantholder after the Merger Event to the end
that the provisions of this Agreement (including adjustments of the Exercise Price and number of
shares of Common Stock purchasable) shall be applicable in their entirety, and to the greatest
extent possible. Without limiting the foregoing, in connection with any Merger Event, upon the
closing thereof, the successor or surviving entity shall assume the obligations of this Agreement.
In connection with a Merger Event and upon Warrantholder’s written election to the Company, the
Company shall cause this Warrant Agreement to be exchanged for the consideration that Warrantholder
would have received if Warrantholder chose to exercise its right to have shares issued pursuant to
the Net Issuance provisions of this Warrant Agreement immediately prior to the effective date of
the Merger Event without actually exercising such right, and without acquiring such shares and
exchanging such shares for such consideration.
(b) Reclassification of Shares. Except as set forth in Section 8(a), if the Company at any
time shall, by combination, reclassification, exchange or subdivision of securities or otherwise,
change any of the securities as to which purchase rights under this Agreement exist into the same
or a different number of securities of any other class or classes, this Agreement
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shall thereafter represent the right to acquire such number and kind of securities as would
have been issuable as the result of such change with respect to the securities which were subject
to the purchase rights under this Agreement immediately prior to the effective date of such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall combine or
subdivide its Common Stock, (i) in the case of a subdivision, the Exercise Price shall be
proportionately decreased, and the number of shares of Common Stock issuable upon exercise of this
Agreement shall be proportionately increased, or (ii) in the case of a combination, the Exercise
Price shall be proportionately increased, and the number of shares of Common Stock issuable upon
the exercise of this Agreement shall be proportionately decreased.
(d) Stock Dividends. If the Company at any time while this Agreement is outstanding and
unexpired shall:
| (i) | pay a dividend with respect to the Common Stock payable in Common Stock, then the Exercise Price shall be adjusted, from and after the date of determination of stockholders entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution; or | ||
| (ii) | make any other distribution with respect to Common Stock, except any distribution specifically provided for in any other clause of this Section 8, then, in each such case, provision shall be made by the Company such that the Warrantholder shall receive upon exercise or conversion of this Warrant a proportionate share of any such distribution as though it were the holder of the Common Stock as of the record date fixed for the determination of the stockholders of the Company entitled to receive such distribution. |
(e) Antidilution Rights. Antidilution rights applicable to the Common Stock purchasable
hereunder shall be as set forth in the Company’s Charter from time to time and shall be applicable
with respect to the Common Stock issuable hereunder. The Company shall promptly provide the
Warrantholder with any restatement, amendment, modification or waiver of the Charter;
provided, that no such amendment, modification or waiver shall impair or reduce the
antidilution rights applicable to the Common Stock as of the date hereof unless such amendment,
modification or waiver affects the rights of Warrantholder with respect to the Common Stock in the
same manner as it affects all other holders of Common Stock. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other equity security to
occur after the Effective Date of this Agreement, which notice shall include (a) the price at which
such stock or security is to be sold, (b) the number of shares to be issued, and (c) such other
information as necessary for Warrantholder to determine if a dilutive event has occurred and the
number of additional shares of Common Stock that may be purchased upon the occurrence of any
dilutive event. For the avoidance of doubt, there shall be no duplicate anti-dilution adjustment
pursuant to this subsection (e), the forgoing subsection (d) and the Company’s Charter.
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(f) Notice of Adjustments. If: (i) the Company shall declare any dividend or distribution
upon its stock, whether in stock, cash, property or other securities; (ii) the Company shall offer
for subscription prorata to the holders of any class of its Common Stock or other convertible stock
any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) the Company shall sell, lease, license or otherwise transfer all or substantially all of its
assets; or (v) there shall be any voluntary dissolution, liquidation or winding up of the Company;
then, in connection with each such event, the Company shall send to the Warrantholder: (A) at least
thirty (30) days’ prior written notice of the date on which the books of the Company shall close or
a record shall be taken for such dividend, distribution, subscription rights (specifying the date
on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote
in respect of such Merger Event, dissolution, liquidation or winding up; and (B) in the case of any
such Merger Event, sale, lease, license or other transfer of all or substantially all assets,
dissolution, liquidation or winding up, at least thirty (30) days’ prior written notice of the date
when the same shall take place (and specifying the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up).
Each such written notice (or a subsequent notice given at least five (5) days prior to the
Merger Event, dissolution, liquidation, or winding up) shall set forth, in reasonable detail, (i)
the event requiring the notice, and (ii) if any adjustment is required to be made, (A) the amount
of such adjustment, (B) the method by which such adjustment was calculated, (C) the adjusted
Exercise Price (if the Exercise Price has been adjusted), and (D) the number of shares subject to
purchase hereunder after giving effect to such adjustment, and shall be given by first class mail,
postage prepaid, or by reputable overnight courier with all charges prepaid, addressed to the
Warrantholder at the address for Warrantholder set forth in the registry referred to in Section 7.
(g) Timely Notice. Failure to timely provide such notice required by subsection (f) above
shall entitle Warrantholder to retain the benefit of the applicable notice period notwithstanding
anything to the contrary contained in any insufficient notice received by Warrantholder. For
purposes of this subsection (g), and notwithstanding anything to the contrary in Section 12(g), the
notice period shall begin on the date Warrantholder actually receives a written notice containing
all the information required to be provided in such subsection (f).
SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Common Stock. The Common Stock issuable upon exercise of the
Warrantholder’s rights has been or will be duly and validly reserved and, when issued in accordance
with the provisions of this Agreement, will be validly issued, fully paid and non-assessable, and
will be free of any taxes, liens, charges or encumbrances of any nature whatsoever;
provided, that the Common Stock issuable pursuant to this Agreement may be subject to
restrictions on transfer under state and/or federal securities laws. The Company has made
available to the Warrantholder true, correct and complete copies of its Charter and current bylaws.
The issuance of certificates for shares of Common Stock upon exercise of this Agreement shall be
made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost
incurred by the Company in connection with such exercise and the related issuance of shares of
Common Stock; provided, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer and the issuance and delivery of any certificate in a name other
than that of the Warrantholder.
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(b) Due Authority. The execution and delivery by the Company of this Agreement and the
performance of all obligations of the Company hereunder, including the issuance to Warrantholder of
the right to acquire the shares of Common Stock, have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement constitutes a legal, valid and binding
agreement of the Company, enforceable in accordance with its terms.
(c) Consents and Approvals. No consent or approval of, giving of notice to, registration
with, or taking of any other action in respect of any state, federal or other governmental
authority or agency is required with respect to the execution, delivery and performance by the
Company of its obligations under this Agreement, except for the filing of notices pursuant to
Regulation D under the Act and any filing required by applicable state securities law or any
exchange on which shares of the Company’s stock shall be traded, which filings will be effective by
the time required thereby.
(d) Issued Securities. All issued and outstanding shares of the Company’s securities have
been duly authorized and validly issued and are fully paid and nonassessable. All outstanding
shares of the Company’s securities were issued in full compliance with all federal and state
securities laws.
(e) Other Commitments to Register Securities. Other than warrants to purchase 130,000 shares
of common stock at an exercise price of $11.50 per share granted to the Company’s underwriter in
connection with the Company’s initial public offering in 2005, and warrants to purchase 110,000
shares of common stock at an exercise price of $8.10 per share granted to KBA Ventures, LLC (f/k/a
Posh Tots, LLC), and the Warrants issued to Hercules in connection with the Loan Agreement, the
Company is not, pursuant to the terms of any other agreement currently in existence, under any
obligation to register under the Act any of its presently outstanding securities or any of its
securities which may hereafter be issued.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder’s representations in
Section 10, the issuance of the Common Stock upon exercise of this Agreement constitutes a
transaction exempt from (i) the registration requirements of Section 5 of the Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities
laws.
(g) Compliance with Rule 144. If the Warrantholder proposes to sell Common Stock issuable upon
the exercise of this Agreement, or the Common Stock into which it is convertible, in compliance
with Rule 144 promulgated by the SEC, then, upon Warrantholder’s written request to the Company,
the Company shall furnish to the Warrantholder, within ten days after receipt of such request, a
written statement confirming the Company’s compliance with the filing requirements of the SEC as
set forth in such Rule, as such Rule may be amended from time to time.
SECTION 10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Agreement has been entered into by the Company in reliance upon the following representations
and covenants of the Warrantholder:
(a) Investment Purpose. This Warrant has been acquired for investment and not with a view to
the sale or distribution of any part thereof, and the Warrantholder has no present
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intention of selling or engaging in any public distribution of the same except pursuant to a
registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Common Stock issuable upon
exercise of this Agreement is not registered under the Act or qualified under applicable state
securities laws on the ground that the issuance contemplated by this Agreement will be exempt from
the registration and qualifications requirements thereof, and (ii) that the Company’s reliance on
such exemption is predicated on the representations set forth in this Section 10.
(c) Financial Risk. The Warrantholder has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its investment, and has the
ability to bear the economic risks of its investment.
(d) Risk of No Registration. The Warrantholder understands that if a registration statement
covering the securities under the Act is not in effect when it desires to sell (i) the rights to
purchase Common Stock pursuant to this Agreement or (ii) the Common Stock issuable upon exercise of
the right to purchase, it may be required to hold such securities for an indefinite period. The
Warrantholder also understands that any sale of (A) its rights hereunder to purchase Common Stock
or (B) Common Stock issued or issuable hereunder which might be made by it in reliance upon Rule
144 under the Act may be made only in accordance with the terms and conditions of that Rule.
(e) Accredited Investor. Warrantholder is an “accredited investor” within the meaning of the
Securities and Exchange Rule 501 of Regulation D, as presently in effect.
SECTION 11. TRANSFERS.
Subject to compliance with applicable federal and state securities laws, this Agreement and all
rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes) upon surrender of this Agreement properly endorsed. Each taker and holder of
this Agreement, by taking or holding the same, consents and agrees that this Agreement, when
endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Agreement
shall have been so endorsed and its transfer recorded on the Company’s books, shall be treated by
the Company and all other persons dealing with this Agreement as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this Agreement. The
transfer of this Agreement shall be recorded on the books of the Company upon receipt by the
Company of a notice of transfer in the form attached hereto as Exhibit III (the “Transfer
Notice”), at its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer. Until the Company receives such Transfer
Notice, the Company may treat the registered owner hereof as the owner for all purposes.
Notwithstanding the foregoing, this Agreement may not be assigned without the prior written consent
of the Company.
SECTION 12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Agreement shall be construed and shall be given
effect in all respects as of the date hereof. This Agreement shall be binding upon any successors
or assigns of the Company.
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(b) Remedies. In the event of any default hereunder, the non-defaulting party may proceed to
protect and enforce its rights either by suit in equity and/or by action at law. The parties
hereto agree that the terms of this Agreement shall be specifically enforceable by either party
hereto notwithstanding the availability of an adequate remedy at law. If either party institutes
any action or proceeding to specifically enforce the provisions hereof, any person against whom
such action or proceeding is brought hereby waives the claim or defense that the complaining party
has an adequate remedy at law, and such person shall not offer in any such action or proceeding the
claim or defense that such remedy at law exists.
(c) No Impairment of Rights. The Company will not, by amendment of its Charter or through any
other means, avoid or seek to avoid the observance or performance of any of the terms of this
Agreement, but will at all times in good faith assist in the carrying out of all such terms and in
the taking of all such actions as may be necessary or appropriate in order to protect the rights of
the Warrantholder against impairment.
(d) Additional Documents. The Company, upon execution of this Agreement, shall provide the
Warrantholder with certified resolutions with respect to the representations, warranties and
covenants set forth in Sections 9(a) through 9(d), 9(f) and 9(g). The Company shall also supply
such other documents as the Warrantholder may from time to time reasonably request.
(e) Attorney’s Fees. In any litigation, arbitration or court proceeding between the Company
and the Warrantholder relating hereto, the prevailing party shall be entitled to reasonable
attorneys’ fees and reasonable expenses and all costs of proceedings incurred in enforcing this
Agreement. For the purposes of this Section 12(e), attorneys’ fees shall include without
limitation fees incurred in connection with the following: (i) contempt proceedings; (ii)
discovery; (iii) any motion, proceeding or other activity of any kind in connection with an
insolvency proceeding; (iv) garnishment, levy, and debtor and third party examinations; and (v)
post-judgment motions and proceedings of any kind, including without limitation any activity taken
to collect or enforce any judgment.
(f) Severability. In the event any one or more of the provisions of this Agreement shall for
any reason be held invalid, illegal or unenforceable, the remaining provisions of this Agreement
shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a
mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of
the parties underlying the invalid, illegal or unenforceable provision.
(g) Notices. Except as otherwise provided herein, any notice, demand, request, consent,
approval, declaration, service of process or other communication that is required, contemplated, or
permitted under this Agreement or with respect to the subject matter hereof shall be in writing,
and shall be deemed to have been validly served, given, delivered, and received upon the earlier
of: (i) the first business day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third calendar day after
deposit in the United States mails, with proper first class postage prepaid, and shall be addressed
to the party to be notified as follows:
If to Warrantholder:
Xxxxxxxx Curhan Ford & Co.
Attn: Xxxx Xxxxxxxx
000 Xxxxxxxxxx Xxxxxx — 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxxxx
000 Xxxxxxxxxx Xxxxxx — 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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With a copy to:
If to the Company:
BabyUniverse, Inc.
000 Xxxxx X.X. Xxxxxxx Xxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
000 Xxxxx X.X. Xxxxxxx Xxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as each party may designate for itself by like notice.
(h) Entire Agreement; Amendments. This Agreement constitutes the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof, and supersedes and
replaces in their entirety any prior proposals, term sheets, letters, negotiations or other
documents or agreements, whether written or oral, with respect to the subject matter hereof
(including the Engagement Letter). None of the terms of this Agreement may be amended except by an
instrument executed by each of the parties hereto.
(i) Headings. The various headings in this Agreement are inserted for convenience only and
shall not affect the meaning or interpretation of this Agreement or any provisions hereof.
(j) Advice of Counsel. Each of the parties represents to each other party hereto that it has
discussed (or had an opportunity to discuss) with its counsel this Agreement and, specifically, the
provisions of Sections 12(n), 12(o), 12(p), 12(q) and 12(r).
(k) No Strict Construction. The parties hereto have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
(l) No Waiver. No omission or delay by Warrantholder at any time to enforce any right or
remedy reserved to it, or to require performance of any of the terms, covenants or provisions
hereof by the Company at any time designated, shall be a waiver of any such right or remedy to
which Warrantholder is entitled, nor shall it in any way affect the right of Warrantholder to
enforce such provisions thereafter.
(m) Survival. All agreements, representations and warranties contained in this Agreement or
in any document delivered pursuant hereto shall be for the benefit of the parties and shall survive
the execution and delivery of this Agreement and the expiration or other termination of this
Agreement.
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(n) Governing Law. This Agreement has been negotiated and delivered to Warrantholder in the
State of Florida, and shall have been accepted by Warrantholder in the State of Florida. Delivery
of Common Stock to Warrantholder by the Company under this Agreement is due in the State of
Florida. This Agreement shall be governed by, and construed and enforced in accordance with, the
laws of the State of Florida, excluding conflict of laws principles that would cause the
application of laws of any other jurisdiction.
(o) Consent to Jurisdiction and Venue. All judicial proceedings arising in or under or
related to this Agreement may be brought in any state or federal court of competent jurisdiction
located in the State of Florida. By execution and delivery of this Agreement, each party hereto
generally and unconditionally: (a) consents to personal jurisdiction in Palm Beach County, State of
Florida; (b) waives any objection as to jurisdiction or venue in Palm Beach County, State of
Florida; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the
aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. Service of process on any party hereto in any action arising out
of or relating to this Agreement shall be effective if given in accordance with the requirements
for notice set forth in Section 12(g), and shall be deemed effective and received as set forth in
Section 12(g). Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of either party to bring proceedings in the courts of any
other jurisdiction.
(p) Mutual Waiver of Jury Trial. Because disputes arising in connection with complex
financial transactions are most quickly and economically resolved by an experienced and expert
person and the parties wish applicable state and federal laws to apply (rather than arbitration
rules), the parties desire that their disputes be resolved by a judge applying such applicable
laws. EACH OF THE COMPANY AND WARRANTHOLDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY
JURY (TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW) OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM,
COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY THE COMPANY
AGAINST WARRANTHOLDER OR ITS ASSIGNEE OR BY WARRANTHOLDER OR ITS ASSIGNEE AGAINST THE COMPANY.
This waiver extends to all such Claims, including Claims that involve Persons other than the
Company and the Warrantholder; Claims that arise out of or are in any way connected to the
relationship between the Company and Warrantholder; and any Claims for damages, breach of contract,
specific performance, or any equitable or legal relief of any kind, arising out of this Agreement.
(q) Arbitration. If the Mutual Waiver of Jury Trial set forth in Section 12(p) is ineffective
or unenforceable, the parties agree that all Claims shall be submitted to binding arbitration in
accordance with the commercial arbitration rules of JAMS (the “Rules”), such arbitration to occur
before one arbitrator, which arbitrator shall be a retired Florida state judge or a retired Federal
court judge. Such proceeding shall be conducted in Palm Beach County, Florida, with Florida rules
of evidence and discovery applicable to such arbitration. The decision of the arbitrator shall be
binding on the parties, and shall be final and nonappealable to the maximum extent permitted by
law. Any judgment rendered by the arbitrator may be entered in a court of competent jurisdiction
and enforced by the prevailing party as a final judgment of such court.
(r) Prearbitration Relief. In the event Claims are to be resolved by arbitration, either
party may seek from a court of competent jurisdiction identified in Section 12(o), any prejudgment
order, writ or other relief and have such prejudgment order, writ or other relief
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enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise
subject to resolution by binding arbitration.
(s) Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto
may be executed in any number of counterparts, and by different parties hereto in separate
counterparts, each of which when so delivered shall be deemed an original, but all of which
counterparts shall constitute but one and the same instrument.
(t) Specific Performance. The parties hereto hereby declare that it is impossible to measure
in money the damages which will accrue to the other by reason of any failure to perform any of the
obligations under this Agreement and agree that the terms of this Agreement shall be specifically
enforceable by any injured party to this Agreement. If an injured party to this Agreement
institutes any action or proceeding to specifically enforce the provisions hereof, any person
against whom such action or proceeding is brought hereby waives the claim or defense therein that
the other has an adequate remedy at law, and such person shall not offer in any such action or
proceeding the claim or defense that such remedy at law exists.
(u) Registration Rights.
(I) at any time prior to July 11, 2011, Warrantholder shall be entitled to “piggyback”
registration rights such that if the Company proposes to register (including for this purpose a
registration effected by the Company for security holders other than Warrantholder) any of its
Common Stock under the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to participants in a
Company stock plan, a registration on any form which does not include substantially the same
information as would be required to be included in a registration statement covering the sale of
the shares underlying the Warrant (the “Warrant Shares”)), the Company shall, at such time,
promptly give Warrantholder written notice (the “Company’s Notice”) of such registration.
Upon the written request of Warrantholder given within twenty (20) days of the Company’s Notice,
the Company shall cause to be registered under the Act all of the Warrant Shares that such
Warrantholder has requested to be registered; provided, however, if such public
offering is to be underwritten and, in the good faith judgment of the managing underwriter, the
inclusion of all of the Warrant Shares that Warrantholder has requested to be registered would
interfere with the successful marketing of the Company’s Common Stock or other securities, the
number of Warrant Shares to be included in such public offering shall be reduced as determined in
the good faith judgment of such managing underwriter; provided, further, that the
managing underwriter shall reduce, limit or exclude securities for registration in the following
order: (i) first, among securities requested to be included in such registration by any person who
does not have a contractual right to request registration of such securities; (ii) second, pro rata
among the securities requested to be included in such registration by persons with a right to
request registration of such securities, on the basis of the number of securities owned by such
holders requesting inclusion in the registration; and (iii) third, among the securities which the
Company proposes to sell. Upon request by the managing underwriter of such offering, any Warrant
Shares that are thereby excluded from the offering shall be withheld from the market by the
Warrantholder for a period (not to exceed 30 days prior to the effective date and 90 days
thereafter) that the managing underwriter reasonably determines is necessary in order to
successfully complete the underwritten public offering; provided, however, that the
foregoing restrictions shall not apply to Warrantholder unless all officers and directors of the
Company and all holders of one percent or more of the Company’s outstanding capital stock and all
holders with registration rights of any kind are bound by similar agreements or restrictions.
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(II) (i) The Company agrees to indemnify and hold harmless each Holder Indemnitee (as defined
below) from and against any losses, claims, damages, liabilities or expenses to which such Holder
Indemnitee may become subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) arise out
of, or are based upon (A) any untrue statement of a material fact contained in the Registration
Statement or prospectus, (B) any failure by the Company to fulfill any undertaking included in the
Registration Statement, (C) any breach of any representation, warranty or covenant made by the
Company in this Warrant and (D) any violation or alleged violation of the Securities Act, the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder relating to the offer or
sale of the Warrant Shares, and the Company will promptly reimburse such Holder Indemnitee for any
reasonable legal or other expenses incurred in investigating, defending or preparing to defend,
settling, compromising or paying any such action, proceeding or claim; provided,
however, that the Company shall not be liable in any such case to the extent that such
loss, claim, damage, liability or expense arises solely out of, or is based solely upon, an untrue
statement made in such Registration Statement in reliance upon and in conformity with written
information furnished to the Company by such Holder Indemnitee specifically for use in preparation
of the Registration Statement.
(ii) The Warrantholder or any holder under this Agreement agrees (severally and not jointly
with any other holder under this Agreement) to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the Securities Act,
each officer of the Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages, liabilities or expenses to which the Company (or any
such officer, director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) arise solely out of, or are based solely upon, any untrue statement
of a material fact contained in the Registration Statement, but only if and to the extent that such
untrue statement was made in reliance upon and in conformity with written information furnished by
the Warrantholder or any holder under this Agreement specifically for use in preparation of the
Registration Statement (provided, however, that the Warrantholder or any holder
under this Agreement shall not be liable in any such case for any untrue statement in any
Registration Statement or prospectus if such statement has been corrected in writing by the
Warrantholder or any holder under this Agreement and delivered to the Company at least three
business days prior to the pertinent sale or sales by the Warrantholder or any holder under this
Agreement). Notwithstanding the foregoing, the aggregate liability of each of the Warrantholder and
any holder under this Agreement pursuant to this subsection (ii) shall be limited to the net amount
received by the Warrantholder or any holder under this Agreement from the sale of the Warrant
Shares.
(iii) Promptly after receipt by any indemnified person of a notice of a claim or the beginning
of any action in respect of which indemnity is to be sought against an indemnifying person pursuant
to this Section 12(u), such indemnified person shall notify the indemnifying person in writing of
such claim or of the commencement of such action, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have to any indemnified party under this
Section 12(u) (except to the extent that such omission materially and adversely affects the
indemnifying party’s ability to defend such action) or from any liability otherwise than under this
Section 12(u). Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party, shall
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be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such indemnified person of its election to
assume the defense thereof, such indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in connection with the
defense thereof, provided however, that if there exists or shall exist a conflict
of interest that would make it inappropriate, in the opinion of counsel to the indemnifying person,
for the same counsel to represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel
at the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate counsel (together
with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying
person be liable in respect of any amounts paid in settlement of any action unless the indemnifying
person shall have approved the terms of such settlement; provided, that such consent shall
not be unreasonably withheld. No indemnifying person shall, without the prior written consent of
the indemnified person, effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and indemnification could have been
sought hereunder by such indemnified person, unless such settlement includes an unconditional
release of such indemnified person from all liability on claims that are the subject matter of such
proceeding.
(iv) If the indemnification provided for in this Section 12(u) is unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) referred to herein, then
each indemnifying party shall contribute to the amount paid or payable by such indemnified party as
a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the Company on the one hand
and the Warrantholder or any holder under this Agreement on the other in connection with the
statements or omissions or other matters which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among other things, in the
case of an untrue statement, whether the untrue statement relates to information supplied by the
Company on the one hand or the Warrantholder or any holder under this Agreement on the other and
the parties’ relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement. The Company and the Warrantholder and any holder under this
Agreement agree that it would not be just and equitable if contribution pursuant to this subsection
(iv) were determined by pro rata allocation (even if the Warrantholder or any holder under this
Agreement were treated as one entity for such purpose) or by any other method of allocation which
does not take into account the equitable considerations referred to above in this subsection (iv).
The amount paid or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection (iv) shall be
deemed to include any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. Notwithstanding the provisions
of this subsection (iv), the Warrantholder or any holder under this Agreement shall not be required
to contribute any amount in excess of the net amount received by the Warrantholder or any holder
under this Agreement from the sale of the Warrant Shares. 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
obligations in this subsection of the Warrantholder or any holder under this Agreement to
contribute are several in proportion to the sales of Warrant Shares to which such loss relates and
not joint with any other holder under this Agreement.
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(v) For purposes of this Section 12(u), the term “Holder Indemnitee” shall include the
Warrantholder or any holder under this Agreement, its officers, directors, employees, partners,
agents and any person controlling the Warrantholder or any holder under this Agreement; the term
“Registration Statement” shall include any final prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement; and the term “untrue statement” shall
include (A) any untrue statement or alleged untrue statement, or any omission or alleged omission
to state in the Registration Statement a material fact required to be stated therein or necessary
to make the statements therein not misleading and (B) any untrue statement or alleged untrue
statement, or any omission or alleged omission to state in the prospectus a material fact required
to be stated therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(w) Shorting. The Warrantholder or any holder under this Agreement agrees that the
Warrantholder or any holder under this Agreement has not engaged and shall not, directly or
indirectly engage in any short-sales involving the Company’s Common Stock. The Warrantholder or
any holder under this Agreement understands that the foregoing sentence is material to the
Company’s entering into this Agreement and the transactions contemplated hereby. Notwithstanding
the foregoing, nothing herein shall restrict the Warrantholder or any holder under this Agreement
in the exercise of its rights under this Agreement including without limitation to purchase shares
of the Company’s Common Stock under this Agreement or to sell such shares that the Warrantholder or
any holder under this Agreement may acquire hereunder.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by its officers
thereunto duly authorized as of the Effective Date.
| COMPANY: | BabyUniverse, Inc. |
|||
| By: | /s/ Xxxxxxxx Xxxxxxx | |||
| Name: | Xxxxxxxx Xxxxxxx | |||
| Title: | Executive Vice President | |||
| WARRANTHOLDER: | Xxxxxxxx Curhan Ford & Co. |
|||
| By: | /s/ | |||
| Name: | ||||
| Title: | ||||
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