EXHIBIT 10.38
STOCK GRANT AGREEMENT
This Stock Grant Agreement (this "Agreement") is made as of the 30th
day of October, 1999 by and among The Right Start, Inc., a California
corporation (the "Company"), XxxxxXxxxx.xxx Inc., a Delaware corporation (the
"Subsidiary") and Guidance Solutions, Inc. (the "Developer"); (the Company and
the Subsidiary shall be collectively referred to herein as the "Right Start");
WHEREAS, the Company, as of the date hereof, owns a majority of the
outstanding common stock, par value $.01 per share of Subsidiary (the "Common
Stock");
WHEREAS, Developer has provided services to the Company and Subsidiary
in connection with Subsidiary's electronic commerce Internet web site currently
located at xxx.xxxxxxxxxx.xxx (the "Web Site");
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WHEREAS, the Board of Directors of each of the Company and Subsidiary
(each a "Board") believes that an ongoing relationship between the Subsidiary
and the Developer will be instrumental in increasing the value of the Subsidiary
and, accordingly, that it is in the best interests of the Subsidiary and its
stockholders to provide Developer with a direct interest in the success of the
Subsidiary; and
WHEREAS, in order to provide the Developer with an equity incentive in
the Subsidiary, the Company, in accordance with the terms of this Agreement, has
agreed to transfer to the Developer an aggregate of 288,333 shares of the
Subsidiary's Common Stock (the "Shares").
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
SECTION 1
Authorization and Grant of Stock
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.1 Authorization of Restricted Stock. The Company has authorized the
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transfer to the Developer of 288,333 shares of the Subsidiary's Common Stock
held by the Company, on the terms set forth herein.
.2 Grant of the Shares; Consideration. The Company hereby grants to the
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Developer the Shares, 171,000 of which shall be granted on the date hereof to
Developer for services previously rendered by Developer in connection with the
performance of that certain Services Agreement dated as of February 15, 1999,
between the Company and Developer, and 117,333 shares of which shall be granted
on the date hereof to Developer as an incentive to continue to provide
partnering and development services to the Right Start.
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.3 Stock Issuance. On the date hereof, the Company shall issue the Shares
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to Developer. Upon issuance, Developer shall be entitled to exercise all rights
as a Common Stock holder of Subsidiary without limitation.
SECTION 2
Representations and Warranties
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.1 Representations and Warranties of the Company and Subsidiary.
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.1 Organization; Good Standing; Qualification. The Company and the
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Subsidiary are corporations duly organized, validly existing, and in good
standing under the laws of their states of incorporation, have all requisite
corporate power and authority to execute and deliver this Agreement and to carry
out the provisions of this Agreement, and the Company has all requisite
corporate power and authority to transfer the Shares.
.2 Authorization. All corporate action on the part of the Company
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and the Subsidiary, and their respective officers, directors and stockholders
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company and Subsidiary hereunder, and the
transfer and delivery of the Shares being granted hereunder, has been taken and
this Agreement, when executed and delivered, will constitute the valid and
legally binding obligations of the Company and the Subsidiary, each enforceable
in accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) as to rights to indemnity and contribution that may be
limited by applicable laws.
.3 Valid Transfer of Common Stock.
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(a) The Company is the sole legal and the beneficial owner of the
Shares to be granted to Developer hereunder and is conveying to the Developer
such Shares, free and clear of any liens, claims, interests, charges and
encumbrances.
(b) The Company has neither previously sold, assigned, conveyed,
transferred or otherwise disposed of, in whole or in part, the Shares to be
transferred by it hereunder, nor entered into any agreement to sell, assign,
convey, transfer or otherwise dispose of, in whole or in part, such Shares.
.4 Capitalization and Voting Rights. As of the date hereof, the
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authorized capital of the Subsidiary consists of:
(a) Preferred Stock. 5,000,000 shares of blank check Preferred
Stock, par value $.01, of which 3,333,333 shares have been designated as Series
A Convertible Preferred Stock; no shares of Preferred Stock are issued and
outstanding.
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(b) Common Stock. 20,000,000 shares of common stock, par value
$.01, of which 9,100,000 shares are issued and outstanding.
SECTION 3
Transferability; Registration Rights; Financial Information
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.1 Transferability of Common Stock. The Shares may be transferred by
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Developer in compliance with applicable state and federal securities laws,
provided each person or entity to whom all or a portion of such Common Stock is
transferred agrees to be bound by this Section 3.1. Each certificate
representing any shares of Common Stock constituting all or a portion of the
Shares (unless Subsidiary shall have received an opinion from counsel at
Developer's expense (which counsel may be counsel to the Subsidiary) reasonably
acceptable to the Subsidiary to the effect that such securities may lawfully be
disposed of without registration, qualification or legend) shall be imprinted
with the following legend (a "'33 Act Legend"):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
.2 Registration Rights. The Subsidiary shall also grant to
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Developer registration rights with respect to the Shares. Such registration
rights to be granted to Developer shall consist of one demand registration and
unlimited piggyback registrations for the Shares held by Developer at the time
of registration, all of which registration rights may be exercised only after
the Subsidiary's initial public offering. Such registration rights shall be
subject to customary terms regarding cut-backs, allocation among shareholders
and indemnification.
.3 Securities Laws; Investor Representations; Legends.
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.1 No Issuance in Violation of Securities Laws; Legends.
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Notwithstanding the foregoing, the Shares shall not be delivered to Developer if
such delivery would constitute a violation of any applicable Federal or state
securities or other laws or regulations. As a condition to the delivery of the
Shares to Developer, the Company may require Developer to make certain
representations and warranties that may be required by applicable law or
regulation, and, specifically, may require Developer to provide evidence
satisfactory to the Company that the Shares are being acquired only for
investment purposes and without any present intention to sell or distribute such
shares in violation of any federal or state securities or other laws or
regulations.
.2 Investor Representations and Warranties. In connection
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with the grant of the Shares, the Developer represents and warrants to the
Company that:
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4.5.2.1 the Shares to be acquired by the Developer
pursuant to this Agreement will be acquired for the Developer's own
accounts and not with a view to, or intention of, distribution thereof
in violation of the Securities Act or any applicable state securities
laws, and the Shares will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
4.5.2.2 the Developer is familiar with the term
"accredited investor" as defined in Rule 501 under the Securities Act
and the Developer is an "accredited investor" within the meaning of
such term in Rule 501 under the Securities Act;
4.5.2.3 the Developer is sophisticated in financial
matters and is able to evaluate the risks and benefits of the
investment in the Common Stock;
4.5.2.4 the Developer is able to bear the economic risk
of its investment in the Common Stock constituting the Shares for an
indefinite period of time because the Shares have not been registered
under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from
such registration is available;
4.5.2.5 is Agreement constitutes the legal, valid and
binding obligation of the Developer, enforceable in accordance with its
terms, and the execution, delivery and performance of this Agreement by
the Developer does not and will not conflict with or violate any law,
regulation, judgment, order or decree to which Developer is subject
which would have a material adverse effect on Developer; and
4.5.2.6 the Developer is not an "investment company" or
a person directly or indirectly controlled by or acting on behalf of a
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
.3 Financial Information. Unless notified by Developer to
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the contrary, the Subsidiary shall provide to Developer (so long as Subsidiary
is not a reporting company under the Securities Exchange Act of 1934, as
amended) audited annual financial information and unaudited quarterly financial
information (each including a balance sheet as of such period end date, and
statements of cash-flows and statements of operations of Subsidiary for such
period).
.4 California Corporate Securities Law. The grant of the
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securities which are the subject of this Agreement has not been qualified with
the Commissioner of Corporations of the State of California and the issuance of
such securities or the payment or receipt of any part of the consideration
therefor prior to such qualification is unlawful, unless an exemption from such
qualification is available. The rights of all parties to this Agreement are
expressly conditioned upon such qualification being obtained, or such exemption
being available.
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SECTION 4
Miscellaneous
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.1 Governing Law. This Agreement shall be governed in all respects by
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the laws of the State of California.
.2 Successors and Assigns. Except as otherwise provided herein, the
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provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Developer to receive the Shares shall
not be assignable other than to an affiliate of Developer without the prior
written consent of the Company.
.3 Entire Agreement; Amendment. This Agreement and the other
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documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof, and no party shall be liable or bound to any other party in any manner
by any warranties, representations or covenants except as specifically set forth
herein or therein. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
.4 Notices, etc. All notices and other communications required or
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permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Developer, to 0000 Xxx Xxx Xxxxxx, Xxxxxx xxx Xxx,
Xxxxxxxxxx 00000; attention: Xxxx Xxxxxxx, Chief Financial Officer (or to such
other address as Developer shall have furnished to the Company in writing), or
(b) if to the Company or Subsidiary, to 0000 Xxxxxxxx Xxxxxx Xxxxx, Xxxx X,
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000; attention: President (or to such other
address as the Company or Subsidiary shall have furnished to the Developer).
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or 72 hours after
the same has been deposited in a regularly maintained receptacle for the deposit
of the United States mail, addressed and mailed as aforesaid.
.5 Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
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IN WITNESS WHEREOF, the foregoing Agreement is hereby executed as of
the date first above written.
COMPANY: THE RIGHT START, INC.
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By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
SUBSIDIARY: XXXXXXXXXX.XXX INC.
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By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
DEVELOPER: GUIDANCE SOLUTIONS, INC.
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By: /s/ Xxxx Xxxxxxxx
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Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
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