KIDS STUFF, INC.
AND
XXXXXXXXX FINANCIAL GROUP, INC.
REPRESENTATIVE'S
PURCHASE OPTION AGREEMENT
Dated as of , 1998
REPRESENTATIVE'S PURCHASE OPTION AGREEMENT dated as of , 1998 among Kids
Stuff, Inc., a Delaware corporation (the "Company") and Xxxxxxxxx Financial
Group, Inc., a Delaware corporation (hereinafter referred to variously as the
"Holder" or the "Representative").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue to the Representative an option (the
"Representative's Purchase Option") to purchase up to an aggregate of 40,000
units (the "Units"), with each Unit comprised of one share of Series 1
Convertible Preferred Stock (the "Preferred Stock") and two Series 1 Convertible
Preferred Stock Warrants (the "Preferred Warrants"); and
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Representative and the Company, to underwrite the Company's proposed public
offering of 400,000 Units, at a public offering price of $5.00 per Unit (the
"Public Offering"); and
WHEREAS, the Representative's Purchase Option to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is defined in the
Underwriting Agreement) by the Company to the Representative in consideration
for, and as part of the compensation in connection with the Public Offering;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of an aggregate of ten dollars ($10.00), the
agreements herein set forth and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant. The Holder is hereby granted the right to purchase, at any
time from , 1999 until; 5:30 p.m., New York time, on , 2003 up to an aggregate
40,000 Units (subject to adjustment as provided in Section 8 hereof) at a price
of $8.25 (165% of the initial public offering price), subject to the terms and
conditions of this Agreement. Except as set forth herein, the Units issuable
upon exercise of the Representative's Purchase Options are in all respects
identical to the Units being purchased by the Representative for resale to the
public pursuant to the terms and provisions of the Underwriting Agreement.
2. Purchase Option Certificates. The purchase option certificates (the
"Purchase Option Certificates") delivered and to be delivered pursuant to this
Agreement shall be in the form set forth in Exhibit A, attached hereto and made
a part hereof, with such appropriate insertions, omissions, substitutions, and
other variations as required or permitted by this Agreement.
3. Exercise of Purchase Option. The Purchase Options initially are
exercisable at an aggregate initial exercise price (subject to adjustment as
provided in Section 8 hereof) as set forth in Section 6 hereof payable by
certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender at the Company's
principal offices in Ohio (presently located at 0000 Xxxxxx Xxxxxxx Xxxxxx,
X.X., Xxxxx 000, Xxxxxx, Xxxx 00000), of a Purchase Option Certificate with the
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annexed Form of Election to Purchase duly executed, together with payment of the
Purchase Price (as hereinafter defined) for the Units, the registered holder of
a Purchase Option Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the securities comprising the Units so
purchased. The purchase rights represented by each Representative's Purchase
Option Certificate are exercisable at the option of the Holder thereof, in whole
or in part (but not as to fractional Units). In the case of the purchase of less
than all the Units purchasable under any Purchase Option Certificate, the
Company shall cancel the Purchase Option Certificate upon the surrender thereof
and shall execute and deliver a new Purchase Option Certificate of like tenor
for the balance of the securities purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the Representative's
Purchase Options, the issuance of certificates for the Units shall be made
forthwith (and in any event within three (3) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of Sections 5 and 7 hereof) be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Representative and the Company shall
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not be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
The Representative's Purchase Option Certificates and the certificates
representing the Units issuable upon exercise of the Representative's Purchase
Options shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors or President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the then
present Secretary or Assistant Secretary of the Company. Representative's
Purchase Option Certificates shall be dated the date of execution by the Company
upon initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of the Representative's Purchase Options.
The Holder of a Representative's Purchase Option Certificate, by its acceptance
thereof, covenants and agrees that the Representative's Purchase Options are
being acquired as an investment and not with a view to the distribution thereof;
and that the Representative's Purchase Options may not be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part, for a
period of one (1) year from the date of the Public Offering, except to officers
or partners of the
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Representative or members of the selling group and/or their officers and
partners.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise provided
in Section 8 hereof, the initial exercise price of each of the Units
underlying the Representative's Purchase Options shall be $8.25. The
adjusted exercise price shall be the price which shall result from time to
time from any and all adjustments of the initial exercise price in
accordance with the provisions of Section 8 hereof. Moreover, the initial
exercise price of the Preferred Warrants issuable upon exercise of the
Units underlying the Representative's Purchase Options shall be $8.25.
6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The
Representative's Purchase Options, the Units issuable upon exercise of the
Representative's Purchase Options and the shares of Preferred Stock, the
Preferred Warrants and the shares of Preferred Stock underlying the
Preferred Warrants underlying the Units have been registered pursuant to a
registration statement on form SB-2 (the "Registration Statement") under
the Securities Act of 1933, as amended (the "Act").
7.2 Piggyback Registration. If, at any time commencing after , 1999,
through and including , 2005 (84 months from the Effective Date), the
Company proposes to register any of its securities under the Act (other
than in connection with a merger or pursuant to Form S-8) it will give
written notice by registered mail, at least thirty (30) days prior to the
filing of each such registration statement, to the Representative and to
all other Holders of the Representative's Purchase Options and/or the Units
underlying same of its intention to do so. If any of the Representative or
other Holders of the Representative's Purchase Options and/or the Units
underlying same notify the Company within twenty (20) days after receipt of
any
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such notice of its or their desire to include any such securities in
such proposed registration statement, the Company shall afford each of the
Representative and such Holders of the Representative's Purchase Options
and/or the Units underlying same the opportunity to have any such Units
underlying same registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice
pursuant to this Section 7.2 (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
7.3 Demand Registration.
(a) At any time commencing after , 1999 (12 months from the Effective
Date) through and including , 2003 (60 months from the Effective Date), the
Holders of the Representative's Purchase Options and/or Units underlying same
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the Representative's Purchase Options) shall have the
right (which right is in addition to the registration rights under Section 7.2
hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Commission, on one occasion, a registration statement
and such other documents, including a prospectus, as may be necessary in the
opinion of both counsel for the Company and
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counsel for the Representative and Holders, in order to comply with the
provisions of the Act, so as to permit a public offering and sale of their
respective Units underlying same for nine (9) consecutive months by such Holders
and any other Holders of the Representative's Purchase Options and/or Units
underlying same who notify the Company within ten (10) days after receiving
notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Representative's Purchase Options and the Units
underlying same within ten (10) days from the date of the receipt of any such
registration request.
(c) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing after , 1999 (12
months from the Effective Date) through and including , 2003 (60 months from the
Effective Date), any Holder or Holders of a Majority of Representative's
Purchase Options and/or the Units underlying same shall have the right,
exercisable by written request to the Company, to have the Company prepare and
file, on one occasion, with the Commission a registration statement so as to
permit a public offering and sale for nine (9) consecutive months by any such
Holder or Holders, provided, however, that the provisions of Section 7.4(b)
hereof shall not apply to any such registration request and registration and all
costs incident thereto shall be at the expense of the Holder or Holders making
such request.
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(d) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Units, the shares
of Preferred Stock, the Preferred Warrants and the shares of Preferred Stock
underlying the Preferred Warrants underlying the Representative's Purchase
Options within the time period specified in Section 7.4(a) hereof pursuant to
the written notice specified in Section 7.3(a) of a Majority of the Holders of
the Representative's Purchase Options and/or Units underlying same, the Company
agrees that upon the written notice of election of a Majority of the Holders of
the Representative's Purchase Options and/or Units underlying same it shall
repurchase (i) any and all Units underlying the Representative's Purchase
Options at the higher of Market Price per Unit of the Units on (x) the date of
the notice sent pursuant to Section 7.3(a) or (y) the expiration of the period
specified in Section 7.4(a). Such repurchase shall be in immediately available
funds and shall close within two (2) days after the later of (i) the expiration
of the period specified in Section 7.4(a) or (ii) the delivery of the written
notice of election specified in this Section 7.3(d).
7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the
Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand
therefor, shall use its best efforts to have any registration
statement declared effective at the earliest possible
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time, and shall furnish each Holder desiring to sell Units
underlying the Representative's Purchase Options, such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses
of Holder(s) counsel and any underwriting or selling commissions),
fees and expenses in connection with all registration statements filed
pursuant to Sections 7.2 and 7.3(a) hereof including, without
limitation, the Company's legal and accounting fees, printing
expenses, and blue sky fees and expenses. The Holder(s) will pay all
costs, fees and expenses in connection with any registration statement
filed pursuant to Section 7.3(c). If the Company shall fail to comply
with the provisions of Section 7.4(a), the Company shall, in addition
to any other equitable or other relief available to the Holder(s), be
liable for any or all incidental, special and consequential damages
and damages due to loss of profit sustained by the Holder(s)
requesting registration of their securities hereunder.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Units (inclusive of the
shares of Preferred Stock, the Preferred Warrants and the shares of
Preferred Stock underlying the Preferred Warrants) underlying the
Representative's Purchase Options included in a registration statement
for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holder(s), provided that the
Company shall not be obligated to execute or file any general consent
to service of process or to qualify as a
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foreign corporation to do business under the laws of any such
jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Units
underlying same to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of
Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which any of them may become subject under the Act, the Exchange Act
or otherwise, arising from such registration statement but only to the
same extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify the Representative contained
in Section 7 of the Underwriting Agreement.
(e) The Holder(s) of the Units underlying the Representative's
Purchase Options to be sold pursuant to a registration statement, and
their successors and assigns, shall severally, and not jointly,
indemnify the Company, its officers and directors and each person, if
any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim
whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on
behalf of such Holders, or their
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successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same effect as
the provisions contained in Section 7 of the Underwriting Agreement
pursuant to which the Representative has agreed to indemnify the
Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Representative's Purchase
Options prior to the initial filing of any registration statement or
the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Units underlying the Representative's Purchase Options
to be included in any registration statement filed pursuant to Section
7.3 hereof, or permit any other registration statement to be or remain
effective during the effectiveness of a registration statement filed
pursuant to Section 7.3 hereof, without the prior written consent of
the Holders of the Representative's Purchase Options and Units
underlying same representing a Majority of such securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart,
addressed to such Holder or underwriter, of (i) an opinion of counsel
to the Company, dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "cold comfort" letter dated the
effective date of such registration
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statement (and, if such registration includes an underwritten
public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants
who have issued a report on the Company's financial statements
included in such registration statement, in each case covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within 15 months
thereafter, have made "generally available to its security holders"
(within the meaning of Rule 158 under the Act) an earnings statement
(which need not be audited) complying with Section 11(a) of the Act
and covering a period of at least 12 consecutive months beginning
after the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and
memoranda described below, and the managing underwriters, copies of
all correspondence between the Commission and the Company, its counsel
or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to the registration
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statement and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(k) The Company shall enter into an underwriting agreement with
the managing underwriters selected for such underwriting by Holders
holding a Majority of the Units underlying same requested to be
included in such underwriting. Such agreement shall be satisfactory in
form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and
covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter.
The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Units underlying same and
may, at their option, require that any or all the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters shall also be made to and for the benefit of such
Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or
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the underwriters except as they may relate to such Holders, their
intended methods of distribution, and except for matters related to
disclosures with respect to such Holders, contained or required to be
contained, in such registration statement under the Act and the rules
and regulations thereunder.
(1) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Representative's Purchase Options, shall
mean in excess of fifty percent (50%) of the then outstanding
Representative's Purchase Options assuming full exercise thereof that
(i) are not held by the Company, an affiliate, officer, creditor,
employee or agent thereof or any of their respective affiliates,
members of their families, persons acting as nominees or in
conjunction therewith or (ii) have not been resold to the public
pursuant to Rule 144 under the Act or a registration statement filed
with the Commission under the Act.
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8. Adjustments to Exercise Price and Number of Securities.
8.1 Intentionally Omitted.
8.2 Intentionally Omitted.
8.3 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Preferred Stock or
Common Stock, the Exercise Price and the conversion ratio of the
Preferred Stock shall forthwith be proportionately adjusted as set
forth herein.
8.4 Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 8, the
number of Units underlying the Representative's Purchase Options shall
be adjusted to the nearest full amount by multiplying a number equal
to the Exercise Price in effect immediately prior to such adjustment
by the number of securities underlying same issuable upon exercise of
the Representative's Purchase Options immediately prior to such
adjustment and dividing the product so obtained by the adjusted
Exercise Price.
8.5 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock
designated as Common Stock in the Certificate of Incorporation of the
Company as amended as of the date hereof, or (ii) any other class of
stock resulting from successive changes or reclassifications of such
Common Stock, consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the event
that the Company shall after the date hereof issue a class of Common
Stock with greater or
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superior voting rights than the shares of Common Stock
outstanding as of the date hereof, the Holder, at its option, may
receive upon exercise of any Warrant either shares of Common Stock or
a like number of such securities with greater or superior voting
rights.
8.6 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company
into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding
Common Stock), the corporation formed by such consolidation or merger
shall execute and deliver to each Holder a supplemental Purchase
Option agreement providing that each Holder shall have the right
thereafter (until the expiration of such Purchase Option Agreement) to
receive, upon exercise of such Purchase Option, the kind and amount of
shares of stock and other securities and property receivable upon such
consolidation or merger, by a holder of the number of Units of the
Company for which such Purchase Option might have been exercised
immediately prior to such consolidation or merger. Such supplemental
Purchase Option agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above
provision of this subsection shall similarly apply to successive
consolidations or mergers.
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8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Representative's Purchase
Options or the Units issuable upon the exercise of (i) the
Representative's Purchase Options, (ii) the options and warrants
outstanding on the date hereof and described in the prospectus relating
to the Public Offering or (iii) up to an aggregate of 400,000 shares of
common stock issuable upon the exercise of options granted under the
Company's 1997 Stock Incentive Plan; or
(b) If the amount of such adjustment shall be less than two
cents ($.02) per share, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least two cents ($.02) per share.
8.9 Dividends and Other Distributions. In the event that the
Company shall at any time prior to the exercise of all
Representative's Purchase Options declare a dividend (other than a
dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidences
of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another, or any other thing of
value, the Holders of the unexercised Representative's Purchase
Options shall thereafter be entitled, in addition to the
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shares of Common Stock, Warrants or other securities and property
receivable upon the exercise thereof, to receive, upon the exercise of
such Representative's Purchase Options, the same property, assets,
rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of
such dividend or distribution as if the Representative's Purchase
Options had been exercised immediately prior to the record date for
such dividend or distribution. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure
the timely performance of the provisions of this subsection 8.9.
8.10 Reserved.
9. Exchange and Replacement of Purchase Option Certificates. Each
Purchase Option Certificate is exchangeable without expense, upon the surrender
thereof by the registered Holder at the principal executive office of the
Company, for a new Purchase Option Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Units
underlying same in such denominations as shall be designated by the Holder
thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Purchase Option
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the
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Representative's Purchase Options, if mutilated, the Company will make and
deliver a new Purchase Option Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of Units, or the
securities underlying same, upon the exercise of the Representative's Purchase
Options, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of Units or other securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Preferred
Stock, solely for the purpose of issuance upon the exercise of the
Representative's Purchase Options, such number of shares of Preferred Stock or
other securities, properties or rights as shall be issuable upon the exercise of
the Purchase Options and the exercise of the Preferred Warrants included
therein. In addition, the Company will reserve for issuance such number of
shares of Common Stock as may issuable upon the conversion of the Preferred
Stock by the Company into shares of Common Stock. The Company covenants and
agrees that, upon exercise of the Representative's Purchase Options and payment
of the exercise prices therefor, all Units shall be duly and validly issued,
fully paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the
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Representative's Purchase Options shall be outstanding, the Company shall use
its best efforts to cause all securities issuable upon the exercise of the
Representative's Purchase Options to be listed (subject to official notice of
issuance) on all securities exchanges on which the Units issued to the public in
connection herewith may then be listed and/or quoted on the Bulletin Board.
12. Notices to Purchase Option Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Representative's Purchase Options and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
Units for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained
earnings, as indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the holders of any class of
its outstanding securities any additional shares of capital stock of
the Company or securities convertible into or
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exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property assets and business as an
entirety shall be proposed; then, in any one or more of such events the
Company shall give written notice of such event at least fifteen (15)
days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable securities
or subscription rights, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any
convertible or exchangeable securities, or subscription rights, options
or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. Notices. All notices requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
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(a) If to the registered Holder of the Representative's
Purchase Options, to the address of such Holder as shown on the books
of the Company; or
(b) If to the Company, to the address set forth in
Section 3 hereof or to such other address as the Company may
designate by notice to the Holders.
14. Supplements and Amendments. The Company and the Representative may from
time to time supplement or amend this Agreement without the approval of any
holders of Purchase Option Certificates (other than the Representative) in order
to cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any provisions herein or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Representative may deem necessary or desirable and which the
Company and the Representative deem shall not adversely affect the interests of
the Holders of Purchase Option Certificates.
15. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of business on
, 2004. Notwithstanding the foregoing, the indemnification provisions of Section
7 shall survive such termination until the close of business on , 2007.
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17. Governing Law: Submission to Jurisdiction. This Agreement and each
Purchase Option Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of such State without giving effect to the
rules of said State governing the conflicts of laws.
The Company, the Representative and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Representative and the Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, the Representative
and the Holders (at the option of the party bringing such action, proceeding or
claim) may be served by transmitting a copy thereof, by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
set forth in Section 3 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Representative and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to
24
such action or proceeding and/or incurred in connection with the preparation
therefor.
18. Entire Agreement: Modification. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
19. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits or this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Purchase Option
Certificates or Units underlying same any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Representative and any other Holder(s)
of the Purchase Option Certificates or securities underlying same.
25
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] KIDS STUFF, INC.
By
Xxxxxxx Xxxxxx
President
Attest:
Secretary
XXXXXXXXX FINANCIAL GROUP, INC.
By
Name:
Title:
26
EXHIBIT A
[FORM OF PURCHASE OPTION CERTIFICATE]
THE REPRESENTATIVE'S PURCHASE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE
OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii)
AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S PURCHASE OPTIONS REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE PURCHASE OPTION AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME , 2003
No. W-001 40,000 Representative's Purchase Options
PURCHASE OPTION CERTIFICATE
This Purchase Option Certificate certifies that Xxxxxxxxx Financial
Group, Inc., or registered assigns, is the registered holder of 40,000
Representative's Purchase Options to purchase initially, at any time from , 1999
[one year from the effective date of the Registration Statement] until 5:30 p.m.
New York time on , 2003 ("Expiration Date"), up to 40,000 fully-paid and
non-assessable units (the "Units") comprised of one share of Series 1 Preferred
Stock (the "Preferred Stock") and two Preferred Stock Warrants (the "Preferred
Warrants") of Kids Stuff, Inc., a Delaware corporation (the "Company"), at the
initial exercise prices, subject to adjustment in certain events (the "Exercise
Prices"), of $8.25, upon surrender of this Purchase Option Certificate and
payment of the Exercise Price at an office or agency of the Company, but subject
to the conditions set forth herein and in the Representative's Purchase Option
Agreement dated as of , 1998 between the Company and Xxxxxxxxx Financial Group,
Inc. (the "Representative's Purchase Option Agreement"). Payment of the Exercise
Prices shall be made by
1
certified or official bank check in New York Clearing House funds payable to the
order of the Company.
No Representative's Purchase Option may be exercised after 5:30 p.m.,
New York time, on the Expiration Date, at which time all Representative's
Purchase Options evidenced hereby, unless exercised prior thereto, hereby shall
thereafter be void.
The Representative's Purchase Options evidenced by this Purchase Option
Certificate are part of a duly authorized issue of Units pursuant to the
Representative's Purchase Option Agreement, which agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Representative's Purchase Options.
The Representative's Purchase Option Agreement provides that upon the
occurrence of certain events the Exercise Price and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Purchase Option Certificate evidencing the adjustment in the Exercise Price and
the number and/or type of securities issuable upon the exercise of the
Representative's Purchase Options; provided, however, that the failure of the
Company to issue such new Purchase Option Certificates shall not in any way
change, alter or otherwise impair, the rights of the holder as set forth in the
Representative's Purchase Option Agreement.
Upon due presentment for registration of transfer of this Purchase
Option Certificate at an office or agency of the Company, a new Purchase Option
Certificate or Purchase Option Certificates of like tenor and evidencing in the
aggregate a like number of Representative's Purchase Options shall be issued to
the transferee(s) in exchange for this Purchase Option Certificate, subject to
the limitations provided herein and in the Representative's Purchase Option
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Representative's Purchase
Options evidenced by this Certificate, the Company shall forthwith issue to the
holder hereof a new Purchase Option Certificate representing such numbered
unexercised Representative's Purchase Options.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Purchase Option Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any
2
distribution to the holder(s) hereof, and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
All terms used in this Purchase Option Certificate which are defined in
the Representative's Purchase Option Agreement shall have the meanings assigned
to them in the Representative's Purchase Option Agreement.
IN WITNESS WHEREOF, the Company has caused this Purchase Option
Certificate to be duly executed under its corporate seal.
Dated as of , 1998
KIDS STUFF, INC.
[SEAL] By
Name: Xxxxxxx Xxxxxx
Title: President
Attest:
Secretary
3
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Purchase Option Certificate, to purchase Units underlying
the Representative's Purchase Options, and herewith tenders in payment for such
securities a certified or official bank check payable in New York Clearing House
Funds to the order of Kids Stuff, Inc. in the amount of $ , all in accordance
with the terms hereof. The undersigned requests that a certificates for such
securities be registered in the name of Xxxxxxxxx Financial Group, Inc. whose
address is 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 and that such Certificate be
delivered to Xxxxxxxxx Financial Group, Inc. whose address is 00 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000.
Dated:
Signature
(Signature must
conform in all
respects to name
of holder as
specified on the
face of the
Purchase Option
Certificate.)
Insert Social Security or Other
Identifying Number of Holder)
