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STOCK ACQUISITION AGREEMENT
by and between
KIDS MART, INC.
and
WOOLWORTH CORPORATION
Dated as of May 10, 1996
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TABLE OF CONTENTS
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I. ISSUANCE AND ACQUISITION OF SHARES .......................... 1
1.1. Issuance and Acquisition of Shares ................. 1
1.2. Closing ............................................ 2
1.3. Restrictive Legend ................................. 3
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .............. 4
2.1. Due Organization, etc. ............................. 4
2.2. Authorization; Execution and Delivery of
Agreement ........................................ 4
2.3. No Conflict; No Consent ............................ 5
2.4. Capital Stock ...................................... 6
2.5. Certain Financial Information ...................... 6
2.6. No Brokers ......................................... 7
2.7. Litigation and Claims .............................. 7
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ............ 8
3.1. Due Organization, etc. ............................. 8
3.2. Authorization; Execution and Delivery of
Agreement ........................................ 8
3.3. No Conflict; No Consent ............................ 8
3.4. No Brokers ......................................... 9
3.5. Investment Purposes ................................ 9
3.6. Litigation and Claims .............................. 10
IV. REGISTRATION RIGHTS ........................................ 10
4.1 "Piggyback" Registration; Shelf Registration ....... 10
4.2. Demand Registration ................................ 12
4.3. General Provisions ................................. 13
4.4 Information, Documents, etc. ....................... 13
4.5 Expenses ........................................... 14
4.6. Cooperation ........................................ 14
4.7. Action to Suspend Effectiveness; Supplement to
Registration Statement ........................... 15
4.8. Indemnification .................................... 16
4.9. Registration Rights of Transferees ................. 20
4.10. Changes in Common Stock ............................ 21
4.11. Standstill ......................................... 21
V. COVENANTS OF THE COMPANY ................................... 21
5.1. Financial Statements and Other Reports ............. 21
5.2. Operation of Business .............................. 22
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5.3. Cooperation in Sale Transactions ................... 23
5.4. Xxxx-Xxxxx-Xxxxxx Filings .......................... 23
VI. COVENANTS OF THE PURCHASER ................................. 23
6.1. Transfer Restrictions .............................. 24
VII. CONDITIONS PRECEDENT TO CLOSING ............................ 24
7.1. Conditions With Respect to Both Parties ............ 24
7.2. Conditions With Respect to the Purchaser ........... 25
7.3. Condition With Respect to the Company .............. 25
VIII. TERMINATION ................................................ 25
8.1. Termination ........................................ 26
8.2 Effect of Termination .............................. 26
IX. GENERAL PROVISIONS ......................................... 26
9.1. Public Disclosure and Confidentiality .............. 26
9.2. Certain Definitions ................................ 27
9.3. Survival of Representations, Warranties and
Agreements ....................................... 28
9.4. Notices ............................................ 28
9.5. Entire Agreement; Counterparts; Assignment ......... 29
9.6. Governing Law ...................................... 29
9.7. Severability of Provisions ......................... 30
9.8. Modification; Waiver ............................... 30
9.9. Expenses ........................................... 30
9.10. Equitable Relief ................................... 30
9.11. Joint Drafting ..................................... 30
Exhibit A - Articles of Amendment designating terms, rights and
preferences of Series A Convertible Preferred Stock
Exhibit B - Opinion of Xxxxxxxxx, Xxxxxxx & Xxxxx
Exhibit C - Opinion of Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
Exhibit D - Opinion of General Counsel of the Purchaser
Exhibit E - Opinion of Skadden, Arps, Slate, Xxxxxxx & Xxxx
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STOCK ACQUISITION AGREEMENT
STOCK ACQUISITION AGREEMENT (this "Agreement") dated as of May 30, 1996
by and between KIDS MART, INC., a Florida corporation (the "Company"), and
WOOLWORTH CORPORATION, a New York corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Purchaser and the Company are concurrently herewith
entering into a Mutual Release and Settlement Agreement dated as of the date
hereof (the "Settlement Agreement");
WHEREAS, in connection with entering into the Settlement Agreement, the
Company wishes to issue to the Purchaser, and the Purchaser wishes to acquire
from the Company, an aggregate of 1,000,000 shares of a new series of the
Preferred Stock, $.0001 par value, of the Company, designated as "Series A
Convertible Preferred Stock" and having the terms, rights and preferences
specified in Exhibit A hereto (the "Preferred Stock");
WHEREAS, the Purchaser and the Company are entering into this Agreement
to provide for such issuance and acquisition and to establish various rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
I. ISSUANCE AND ACQUISITION OF SHARES
1.1 Issuance and Acquisition of Shares. Upon the terms and
subject to the conditions set forth in this Agreement, and for good and
valuable consideration received in connection with the transactions
contemplated by the Settlement Agreement, the Company agrees to issue, sell and
deliver to the Purchaser, and the Purchaser agrees to acquire and purchase from
the Company, 1,000,000 previously unissued shares of the Preferred Stock (the
"Shares"), free and clear of all liens, security interests, pledges, voting
agreements, claims, options and encumbrances of every kind, character and
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description whatsoever other than the transfer restrictions created by this
Agreement ("Encumbrances").
1.2 Closing. (a) The closing of the acquisition by the Purchaser
of the Shares (the "Closing") shall take place at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX at 3:00 p.m. (i) on May
30, 1996 or (ii) in the event that all of the conditions set forth in Article
VII of this Agreement shall not have been satisfied or waived on or prior to
such time on May 30, 1996, as soon as practicable after all such conditions
shall have been satisfied or waived (the date of the Closing being referred to
herein as the "Closing Date").
(b) At the Closing, the Company will deliver to the
Purchaser the following:
(i) a fully-executed copy of the Articles of Amendment
attached as Exhibit A hereto (the "Articles of Amendment"), and an
officer's or director's certificate of the Company certifying that the
Articles of Amendment have been duly filed with the Department of State,
State of Florida and are fully effective; and
(ii) an opinion of Xxxxxxxxx, Xxxxxxx & Xxxxx, outside
counsel to the Company, substantially in the form of Exhibit B hereto;
(iii) an opinion of Xxxx, Scholer, Fierman, Xxxx &
Handler, LLP, special counsel to the Company, substantially in the form
of Exhibit C hereto; and
(iv) the other documents and instruments contemplated
by the Settlement Agreement to be delivered (or caused to be delivered)
by the Company.
(c) At the Closing, the Purchaser will deliver to the
Company
(i) the documents and instruments contemplated by the
Settlement Agreement to be delivered (or caused to be delivered) by the
Purchaser;
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(ii) an opinion of the Purchaser's General Counsel,
substantially in the form of Exhibit D hereto; and
(ii) an opinion of Skadden, Arps, Slate, Xxxxxxx &
Xxxx, special counsel to the Purchaser, substantially in the form of
Exhibit E hereto.
(d) Within five business days of the Closing, the Company
will deliver one or more stock certificates representing the Shares bearing the
legends described in Section 1.3 hereof.
1.3 Restrictive Legend. Any certificate evidencing the Shares, or
shares of Common Stock issuable upon conversion of the Shares, shall bear
legends substantially in the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW.
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS PURSUANT TO THAT CERTAIN STOCK ACQUISITION AGREEMENT DATED
AS OF MAY 23, 1996 BY AND BETWEEN KIDS MART, INC. (THE "COMPANY") AND
WOOLWORTH CORPORATION, ON FILE AT THE COMPANY'S OFFICES.
At such time as any of the Shares or of the Common Stock (as
hereinafter defined) issuable upon conversion of the Shares shall no longer be
subject to one or both of the restrictions referred to in such legends, and
upon receipt of an opinion of counsel reasonably acceptable to the Company to
such effect, the Company shall take and cause to be taken, at the request of
any holder of such Shares, such action as shall be necessary so that such
holder shall be issued certificates representing such Shares that do not refer
to such restriction(s).
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II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the date
hereof and as of the Closing Date as follows:
2.1. Due Organization, etc. The Company and each of its
Subsidiaries (as hereinafter defined) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and each has all requisite corporate power and authority to own,
operate and lease its respective properties and assets and to conduct its
respective businesses as now conducted. "Subsidiary" means a corporation or
other business arrangement a majority of the outstanding voting securities or
ownership interests of which is owned, directly or indirectly, by the Company,
by one or more other Subsidiaries or by the Company and one or more other
Subsidiaries.
2.2. Authorization; Execution and Delivery of Agreement. (a) The
execution and delivery of this Agreement and the Settlement Agreement and the
consummation of the transactions contemplated hereby (including the issuance of
the Shares to the Purchaser) and thereby (i) are within the corporate power and
authority of the Company (and in the case of the Settlement Agreement, LFS
Acquisition Corp., a Delaware corporation ("LFS")), (ii) do not require the
approval or consent of any stockholders of the Company or LFS and (iii) have
been duly authorized by all necessary corporate action on the part of the
Company and LFS. Each of this Agreement and the Settlement Agreement has been
duly executed and delivered by the Company (and in the case of the Settlement
Agreement, LFS) and each of this Agreement and the Settlement Agreement
constitutes the legal, valid, binding and enforceable obligation of the Company
(and in the case of the Settlement Agreement, LFS).
(b) The Shares have been duly authorized by all necessary
corporate action on the part of the Company, and, when issued and delivered by
the Company pursuant to this Agreement, the Shares will be validly issued,
fully paid and non-assessable, and the Purchaser will at such time acquire
valid title to the Shares, free and clear of any Encumbrances.
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(c) The Company has taken and will continue to take all
necessary action to reserve in connection with the possible conversion of the
Shares a sufficient number of shares of authorized but unissued Common Stock.
2.3. No Conflict; No Consent. The execution and delivery of this
Agreement and the Settlement Agreement and the consummation of the transactions
contemplated hereby (including the issuance of the Shares to the Purchaser) and
thereby do not conflict with, or result in any violation of or default under,
or permit the acceleration of any obligation under or the creation or
imposition of any Encumbrance on any of the properties or assets of the Company
or any Subsidiary under, (i) any provision of the articles of incorporation or
by-laws of the Company or any Subsidiary, (ii) any indenture, lease, mortgage,
deed of trust, loan agreement or other agreement or instrument, or any permit,
of the Company or any Subsidiary or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation of any federal, state, local or regulatory
authority (each, an "Authority") to which the Company or any of its
Subsidiaries is a party or by which any of them is bound, other than, in the
case of clauses (ii) and (iii), where such conflict, violation, default,
acceleration or Encumbrance would not, individually or in the aggregate, have a
material adverse effect on the condition, financial or otherwise, of the
business, operations, affairs, properties or assets (collectively, the
"Condition") of the Company and its Subsidiaries taken as a whole or on the
benefits intended to be afforded to the Purchaser under this Agreement or the
Settlement Agreement. No consent, approval, order or authorization of, or
registration, declaration, filing with or notice to, any Authority or third
party is required to be made or obtained by the Company or any Subsidiary in
order to execute or deliver this Agreement or the Settlement Agreement or to
consummate the transactions contemplated hereby or thereby, other than (v) such
as may be required under Article IV hereof in connection with certain
registration rights, (w) the filing of a Form D pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"), (x) as a result of
the periodic reporting requirements under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (y) filing of the Articles of Amendment with
the Department of State, State of Florida and (z) filing of a
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stipulation or discontinuance and dismissal with prejudice as contemplated by
the Settlement Agreement.
2.4. Capital Stock. (a) The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, par value $.0001 per share
("Common Stock"), of which 4,943,000 shares are issued and outstanding, and
100,000,000 shares of Preferred Xxxxx, x.0000 par value, of which no shares are
issued and outstanding. All of the issued and outstanding shares of Common
Stock have been validly issued and are fully paid and non-assessable. All of
the outstanding shares of capital stock of LFS, consisting solely of shares of
common stock, are owned directly by the Company. All outstanding capital stock
of each other Subsidiary of the Company is owned directly or indirectly by the
Company.
(b) There are not authorized or outstanding any subscriptions,
options, conversion rights, warrants or other agreements, securities or
commitments of any nature whatsoever (whether oral or written and whether firm
or conditional) obligating the Company or any Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, to any person any shares of
Common Stock or any other shares of the capital stock of the Company or any
shares of the capital stock of any Subsidiary, or any securities convertible
into or exchangeable for any such shares, or obligating the Company or any
Subsidiary to grant, extend or enter into any such agreement or commitment,
except for as of May 23, 1996: (i) warrants to purchase 110,000 shares of
Common Stock at $6.60 per share; (ii) warrants to purchase 600,000 shares of
Common Stock at $6.00 per share; and (iii) warrants to purchase 494,300 shares
of Common Stock at $6.00 per share. There are no outstanding options under the
Company's 1995 Stock Option Plan. No class or capital stock or stockholder of
the Company or any Subsidiary of the Company is entitled to preemptive rights,
rights of first refusal, rights of first offer or similar rights with respect
to any issuance by the Company or such Subsidiary of its capital stock.
2.5. Certain Financial Information. The financial information as
set forth below, provided by the Company and LFS to representatives of the
Purchaser in May 1996, in contemplation of entry into settlement of claims
among the Company, LFS, Xxxx Xxxxxxx, the Purchas-
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er and Xxxxxx Shoe Corporation ("Xxxxxx"), was prepared and provided in good
faith by the Company and LFS and was based upon assumptions believed by
management to reasonable: (i) Quarterly Projected Cash Flow 1996, (ii) Projected
Income Statement, Balance Sheet and Cash Flow on an Annual Basis for Fiscal
1996, 1997 and 1998, (iii) Quarterly Balance Sheet for Fiscal 1996 with and
without settlement, (iv) Quarterly Income Statement for 1996 and Balance Sheet
for 1997 and 1998, (v) Inventory Aging Schedule 4/27/96 as adjusted, (vi)
Monthly Income Statements for 1996, 1997 and 1998 and Operating Summary of
3-year plan, including store closings, (vii) Comp Store Sales Analysis and
(viii) Analysis of clearance liquidation. The parties to this Agreement
recognize that the preceding preliminary financial information constitutes
forward looking information and that actual results could differ materially from
current expectations. Among the factors that could impact actual results are the
following: adjustments in the Company's accounts as the result of the year-end
audit and of closing the Company's books, for both the fourth quarter and the
fiscal year, including adjustments related to reconciliations of supplier
accounts, and any charges associated with potential restructurings and/or asset
dispositions.
2.6 No Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
2.7 Litigation and Claims. There is no claim, prosecution, suit,
action, arbitration, proceeding, investigation or review pending or, to the
knowledge of the Company, threatened against the Company, any of its
Subsidiaries or any of their respective properties or assets which questions the
validity of this Agreement, the Settlement Agreement, the Shares or any action
taken or to be taken pursuant hereto or thereto, seeks to prohibit or impose any
limitations on the Purchaser's ownership of the Shares, seeks to prohibit or
make illegal the acceptance for payment, purchase of or payment for the Shares
or which is reasonably likely to have a material adverse effect on the
transactions contemplated by this Agreement or the Settlement Agreement or on
the Condition of the Company and its Subsidiaries taken as a whole.
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III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as of the date
hereof and as of the Closing Date as follows:
3.1. Due Organization, etc. Each of the Purchaser and Xxxxxx is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.
3.2. Authorization; Execution and Delivery of Agreement. The
Purchaser (and Xxxxxx, in the case of the Settlement Agreement) has all
requisite corporate power and authority to execute this Agreement and the
Settlement Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Settlement
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Purchaser (and in the case of the Settlement Agreement, Xxxxxx). Each
of this Agreement and the Settlement Agreement has been duly executed and
delivered by the Purchaser (and in the case of the Settlement Agreement,
Xxxxxx) and constitutes the legal, valid, binding and enforceable obligation of
the Purchaser (and in the case of the Settlement Agreement, Xxxxxx).
3.3. No Conflict; No Consent. The execution and delivery of this
Agreement and the Settlement Agreement and the compliance by the Purchaser (and
in the case of the Settlement Agreement, Xxxxxx) with its obligations hereunder
and thereunder do not conflict with, or result in any violation of or default
under, or permit the acceleration of any obligation under, or the creation or
imposition of any Encumbrance on any of the properties or assets of the
Purchaser (or in the case of the Settlement Agreement, Xxxxxx) under, (i) any
provision of the certificate of incorporation or bylaws of the Purchaser or
Xxxxxx, (ii) any indenture, lease, mortgage, deed of trust, loan agreement or
other agreement or instrument, or any permit, of the Purchaser or Xxxxxx or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
of any Authority to which the Purchaser or Xxxxxx is a party or by which either
is bound, other
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than, in the case of clauses (ii) and (iii), where such conflict, violation,
default, acceleration or Encumbrance would not, individually or in the
aggregate, have a material adverse effect on the acquisition of the Shares by
the Purchaser, the benefits intended to be afforded to the Company hereunder or
under the Settlement Agreement or the compliance by the Purchaser (or in the
case of the Settlement Agreement, Xxxxxx) with its obligations hereunder or
under the Settlement Agreement. No consent, approval, order or authorization
of, or registration, declaration, filing with or notice to, any Authority or
third party is required to be made or obtained by the Purchaser or Xxxxxx in
order to execute or deliver this Agreement or the Settlement Agreement or for
the Purchaser (or in the case of the Settlement Agreement, Xxxxxx) to comply
with its obligations hereunder or thereunder, other than (w) filings pursuant to
the Securities Act in connection with the acquisition of the Shares and any
conversion thereof and any sale thereof or of the Common Stock received upon
conversion, (x) as may be required as a result of reporting requirements under
the Exchange Act, including pursuant to Sections 13(d) and 16 thereof, (y) any
filings that may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), in connection with any conversion of
the Preferred Stock into Common Stock and (z) filing of a stipulation of
discontinuance and dismissal with prejudice as contemplated by the Settlement
Agreement.
3.4. No Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Purchaser. Xxxxxx Xxxxxxx & Co. Incorporated has acted as financial advisor
to the Purchaser in connection with a review of the Company's business plan.
3.5. Investment Purposes. The Purchaser is acquiring the Shares
solely for its own account for the purpose of investment and not with a view to
the public distribution thereof. The Purchaser acknowledges the Purchaser's
understanding that the offering and sale of the Shares hereunder are intended to
be exempt from registration under the Securities Act by virtue of Section 4(2)
of the Securities Act and the provisions of
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Regulation D promulgated thereunder and represents that it is an "accredited
investor" (as defined in such regulation). The Purchaser has not relied upon
any representations, warranties or statements other than those set forth in
this Agreement, the Settlement Agreement and/or any certificates, opinions or
other documents to be delivered pursuant hereto or thereto.
3.6. Litigation and Claims. There is no claim, prosecution, suit,
action, arbitration, proceeding, investigation or review pending or, to the
knowledge of the Purchaser, threatened against the Purchaser, any of its
Subsidiaries or any of their respective properties or assets which questions
the validity of this Agreement, the Settlement Agreement or any action taken or
to be taken pursuant hereto or thereto, or which is reasonably likely to have a
material adverse effect on the transactions contemplated by this Agreement or
the Settlement Agreement.
IV. REGISTRATION RIGHTS
The Company covenants and agrees to provide the following registration
rights at any time from and after the date hereof:
4.1. "Piggyback" Registration; Shelf Registration. (a) Whenever the
Company proposes to file a registration statement relating to Common Stock
under the Securities Act, other than (i) a registration statement required to
be filed in respect of employee benefit plans of the Company on Form S-8 or any
similar form from time to time in effect, (ii) any registration statement on
Form S-4 or similar successor form relating to securities issued in connection
with a reorganization, (iii) any form that does not permit the inclusion of
Purchaser's Stock (as defined below) or (iv) any other form of registration
statement filed in connection with an exchange offer or an offering of
securities solely to the Company's existing stockholders, the Company shall, at
least 15 days prior to such filing, give written notice of such proposed filing
to the Purchaser. Upon receipt by the Company not more than seven days after
such notice of a written request from the Purchaser for registration of
Purchaser's Stock, the Company shall include such Purchaser's Stock in such
registration statement or in a
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separate registration statement concurrently filed, and shall use all
reasonable efforts to cause such registration statement to become effective
with respect to such Purchaser's Stock, unless the managing underwriter
therefor concludes in its reasonable judgment that compliance with this Section
4.1 would materially adversely affect such offering. If such registration
involves an underwritten offering, the Purchaser shall, as a condition to the
inclusion of such Purchaser's Stock in such registration, agree to sell
Purchaser's Stock to the underwriters selected by the Company at the same price
and on the same terms of underwriting applicable to the Company and any other
persons selling Common Stock pursuant thereto. Notwithstanding the foregoing,
at any time after giving written notice of its intention to register Common
Stock, the Company may, at its election, by the delivery of written notice to
the Purchaser, (1) in the case of a determination not to effect registration,
relieve itself of its obligation to register Purchaser's Stock in connection
with such registration, or (2) in the case of a determination to delay such
registration, delay the registration of such Purchaser's Stock for the same
period as the delay in the registration of such other Common Stock.
"Purchaser's Stock" means any shares of Common Stock to be issued upon
conversion of the Preferred Stock and for which the Purchaser requests
registration pursuant to this Section 4.1 or Section 4.2 hereof, it being
understood that (i) the Purchaser may request such registration with respect to
such shares of Common Stock prior to effecting any conversion of the Shares and
(ii) any such conversion need not be effected until immediately prior to the
sale of shares pursuant to the applicable registration statement.
(b) Without limiting the generality of Section 4.1(a), if the
Company files any shelf registration statement for the Common Stock or warrants
issued in connection with the January 1996 acquisition of LFS, or for the
underwriter's warrants issued in connection with the Company's initial public
offering; it will include in such registration statement all shares of Common
Stock issuable upon conversion of the Shares and use its reasonable best
efforts to cause such registration statement to remain current and effective
for a period of two years following its effectiveness.
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4.2. Demand Registration. (a) If at any time following the date
occurring 180 days after the Closing Date the Company shall receive a written
request from the holders of more than 500,000 Shares (or more than 500,000
shares of Common Stock issued upon conversion of the Shares, as adjusted for
stock dividends, subdivisions or reclassifications having a record date after
the Closing Date) requesting the Company to register Purchaser's Stock under
the Securities Act on Form X-0, X-0 or S-3 or any other similar form then in
effect and applicable to the Company, the Company agrees that it will use all
reasonable efforts to cause the prompt registration of such Purchaser's Stock;
it being understood that the Company currently can provide no assurance as to
its ability to provide the financial statements that would be required in
connection with such registration. The Company may postpone for a limited
time, which in no event shall in the aggregate be longer than 90 days,
compliance with a request for registration pursuant to this Section 4.2 if (i)
such compliance would materially adversely affect (including, without
limitation, through the premature disclosure thereof) a proposed financing
reorganization, recapitalization, merger, consolidation or similar transaction
or (ii) the Company is conducting a public offering of capital stock and the
managing underwriter concludes in its reasonable judgment that such compliance
would materially adversely affect such offering. Notwithstanding anything in
this Section 4.2 to the contrary, the Company shall not be required to: (x)
comply with more than one request pursuant to this Section 4.2, (y) comply with
this Section 4.2 during any period in which transfer of securities is
restricted pursuant to Section 4.11 or (z) prepare or cause to be prepared
audited financial statements of the Company other than those prepared in the
normal course of the Company's business at its fiscal year end. Any
underwriter selected by Purchaser to act as such in connection with a
registration pursuant to this Section 4.2 shall require the prior approval of
the Company which approval shall not be unreasonably withheld.
(b) The registration rights set forth in this Section 4.2
shall not be available to the Purchaser at any time (the "Holding Period Date")
that, in the unqualified written opinion of counsel for the Company (which
counsel must be reasonably acceptable to the Purchaser), the Purchaser is able
to sell any and all
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shares of Common Stock held by it pursuant to paragraph (k) of Rule 144 under
the Securities Act or otherwise without restriction (including, without
limitation, any restriction with respect to current public information regarding
the Company, amount of securities sold, manner of sale or provision of notice of
proposed sale) while being deemed not to be engaged in a distribution of such
shares and therefore not to be an underwriter thereof within the meaning of
Section 2(11) of the Securities Act.
4.3 General Provisions. The Company will use all reasonable efforts
to cause any registration statement referred to in Section 4.2 to become
effective and to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of 180 days from the
effective date of the registration statement and the date on which the Purchaser
completes its distribution of Purchaser's Stock. A request under Section 4.2(b)
shall not be deemed utilized unless a registration statement with respect
thereto becomes effective. The Company will use all reasonable efforts to effect
such qualifications under applicable blue sky or other state securities laws as
may be reasonably requested by the Purchaser (provided that the Company shall
not be obligated to file a general consent to service of process or qualify to
do business as a foreign corporation or otherwise subject itself to taxation in
any jurisdiction solely for the purpose of any such qualification) to permit or
facilitate such sale or other distribution. The Company will cause the
Purchaser's Stock to be listed on any national securities exchange or quoted on
any stock quotation system on which the shares of Common Stock are listed or
quoted.
4.4 Information, Documents, etc. Upon making a request for
registration pursuant to Sections 4.1 or 4.2, the Purchaser shall furnish to the
Company such information as the Company may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Article IV. The Company agrees that it will furnish to the
Purchaser the number of prospectuses, offering circulars or other documents, or
any amendments or supplements thereto, incident to any registration,
qualification or compliance referred to in this Article IV as the Purchaser
from time to time may reasonably request.
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4.5. Expenses. The Company will bear all expenses of registrations
pursuant to this Article IV (other than underwriting discounts and commissions
and brokerage commissions and fees, if any, payable with respect to shares of
Purchaser's Stock sold by the Purchaser and legal and audit fees incurred by
the Purchaser in connection with such registration, it being understood,
however, that legal fees reimbursable pursuant to Section 4.8 shall remain the
responsibility of the Company), including, without limitation, registration
fees, printing expenses, expenses of compliance with blue sky or other state
securities laws, and legal and audit fees incurred by the Company in connection
with such registration and amendments or supplements in connection therewith.
4.6. Cooperation. In connection with any registration of
Purchaser's Stock pursuant to this Article IV, the Company agrees to:
(a) enter into such customary agreements (including an
underwriting agreement containing such representations and warranties by the
Company and such other terms and provisions, including indemnification
provisions, as are customarily contained in underwriting agreements for
comparable offerings and, if no underwriting agreement is entered into, an
indemnification agreement on such terms as is customary in transactions of such
nature) and take all such other actions as the Purchaser or the underwriters,
if any, participating in such offering and sale may reasonably request in order
to expedite or facilitate such offering and sale;
(b) use its best efforts to furnish, at the request of any
underwriters participating in such offering and sale, (i) a comfort letter or
letters, dated the date of the final prospectus with respect to the Purchaser's
Stock and/or the date of the closing for the sale of the Purchaser's Stock from
the independent certified public accountants of the Company and addressed to any
underwriters participating in such offering and sale, which letter or letters
shall state that such accountants are independent with respect to the Company
within the meaning of Rule 1.01 of the Code of Professional Ethics of the
American Institute of Certified Public Accountants and shall address such
matters as the underwriters may reasonably request and as may be customary in
transac-
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tions of a similar nature for similar entities and (ii) an opinion, dated the
date of the closing for the sale of the Purchaser's Stock, of the counsel
representing the Company with respect to such offering and sale (which counsel
may be the General Counsel of the Company or other counsel reasonably
satisfactory to the Purchaser), addressed to any such underwriters, which
opinion shall address such matters as they may reasonably request and as may be
customary in transactions of a similar nature for similar entities; and
(c) make available for inspection by the Purchaser, the
underwriters, if any, participating in such offering and sale (which inspecting
underwriters shall, if reasonably possible, be limited to any manager or
managers for such participating underwriters), counsel for the Purchaser, one
accountant or accounting firm retained by the Purchaser and any such
underwriters, or any other agent retained by the Purchaser or such
underwriters, all financial and other records, corporate documents and
properties of the Company, and supply such additional information, as they
shall reasonably request, provided that the Company may condition any such
access upon execution of appropriate confidentiality provisions.
4.7 Action to Suspend Effectiveness; Supplement to Registration
Statement. (a) the Company will notify the Purchaser promptly of (i) any
action by the Commission to suspend the effectiveness of the registration
statement covering the Purchaser's Stock or the institution or threatening of
any proceeding for such purpose (a "stop order") or (ii) the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Purchaser's Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. Immediately upon receipt of
any such notice, the Purchaser shall cease to offer or sell any Purchaser's
Stock pursuant to the registration statement in the jurisdiction to which such
stop order or suspension relates. The Company will use all reasonable efforts
to prevent the issuance of any such stop order or the suspension of any such
qualification and, if any such stop order is issued or any such qualification
is suspended, to obtain as soon as possible the withdrawal or revocation
thereof, and will notify the Purchaser and its counsel at the earliest
practicable date of the date on which the Purchaser may offer and
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19
sell Purchaser's Stock pursuant to the registration statement.
(b) Within the applicable period referred to in Section 4.3
following the effectiveness of a registration statement filed pursuant to this
Article IV, the Company will notify the Purchaser promptly of the occurrence of
any event or the existence of any state of facts that, in the judgment of the
Company, should be set forth in such registration statement. Immediately upon
receipt of such notice, the Purchaser shall cease to offer or sell any
Purchaser's Stock pursuant to such registration statement, cease to deliver or
use such registration statement and, if so requested by the Company, return to
the Company, at its expense, all copies (other than permanent file copies) of
such registration statement, in each case until such registration statement has
been amended or supplemented as hereinafter provided. The Company will, as
promptly as practicable, take such action as may be necessary to amend or
supplement such registration statement in order to set forth or reflect such
event or state of facts. The Company will furnish copies of such proposed
amendment or supplement to the Purchaser and its counsel and will not file or
distribute such amendment or supplement without the prior consent of the
Purchaser, which consent shall not be unreasonably withheld.
4.8. Indemnification. (a) In the event of the registration of any
of Purchaser's Stock under the Securities Act pursuant to the provisions of
this Article IV, the Company will, to the extent permitted by law, indemnify
and hold harmless the Purchaser, its Affiliates and Associates and each other
person, if any, who controls the Purchaser for purposes of the Securities Act
(each an "indemnified person") against any losses, claims, damages or
liabilities, joint or several, to which such indemnified person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of material fact
contained or incorporated by reference in any registration statement under
which such Purchaser's Stock was registered under the Securities Act, any final
prospectus contained therein (as such may be amended or supplemented) or any
document incorporated by reference therein, or arise out of
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20
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements made
therein not misleading in light of the circumstances in which made, and will
reimburse each such indemnified person for any legal or any other expenses
reasonably incurred by such indemnified person in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability (i) arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made or incorporated by reference in such registration statement or
such final prospectus (as such may be amended or supplemented) in reliance upon
and in conformity with written information furnished to the Company by such
indemnified person specifically for use in the preparation thereof, (ii) arises
in connection with a sale of Purchaser's Stock by such indemnified person in
contravention of Section 4.7(b) hereof or (iii) financial information provided
to the Company by the Purchaser or Xxxxxx in connection with the transactions
contemplated by the Purchase Agreement, dated as of February 3, 1995, as
amended, by and among LFS, Xxxxxx and the Purchaser. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of such indemnified person and shall survive any transfer of such
Purchaser's Stock by the Purchaser.
(b) In the event of the registration of any Purchaser's Stock
under the Securities Act pursuant to the provisions hereof, the Purchaser will,
to the extent permitted by law, indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who signs the registration
statement and each other person, if any, who controls the Company for purposes
of the Securities Act against losses, claims, damages or liabilities, joint or
several, to which the Company or such director, officer or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
material fact contained in any registration statement under which such
Purchaser's Stock was registered under the Securities Act, any final prospectus
contained there-
17
21
in (as such may be amended or supplemented) or any document incorporated by
reference therein, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements made therein not misleading in light of the
circumstances in which made, which untrue statement or alleged untrue statement
or omission or alleged omission has been made in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
specifically for use in the preparation thereof, and will reimburse the Company
and each such director, officer or controlling person for any legal or any
other expenses reasonably incurred by the Company or such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action.
(c) If the indemnification provided for in this Section 4.8 is
unavailable to a party that would have been an indemnified party hereunder in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each party that would have been an
indemnifying party thereunder shall, in lieu of indemnifying such indemnified
party, contribute to the extent permitted by law to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and such
indemnified party on the other hand in connection with the statement or omission
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof). The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or such indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement of omission. Both parties acknowledge and
agree that it would not be just and equitable if contribution pursuant to this
Section 4.8(c) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 4.8(c). The amount paid or payable by an indemnified
party as a result of the loss-
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22
es, claims, damages or liabilities (or actions in respect thereof) referred to
above in this Section 4.8(c) shall include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claims (which shall be limited as provided in
Section 4.8(f) if the indemnifying party has assumed the defense of any such
action in accordance with the provisions thereof). 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.
(d) Indemnification or, if appropriate, contribution similar to
that specified in the preceding provisions of this Section 4.8 (with appropriate
modifications) shall be given by the Company and the Purchaser with respect to
statements or omissions contained in applications or other written information
filed in any state or other jurisdiction in connection with the registration or
other qualification of such Shares under applicable state securities or blue sky
laws or regulations.
(e) In the event of any underwritten offering of Purchaser's
Stock under the Securities Act pursuant to this Article IV, the Company and the
Purchaser agree, to the extent practicable, to enter into an underwriting
agreement, in customary form (or, in the case of a registration statement
pursuant to Section 4.1 in such form as the Company may determine), with the
underwriters thereof, which underwriting agreement may contain additional
provisions with respect to indemnification and contribution.
(f) Any person entitled to indemnification hereunder shall (1)
give prompt written notice to the indemnifying party after the receipt by such
person of any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such person intends
to claim indemnification or contribution pursuant to this Agreement and (2)
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however, that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in
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23
the defense of such claim, but the fees and expenses of such counsel shall be
the responsibility of such person unless (i) the indemnifying party has agreed
in writing to pay such fees or expenses or (ii) the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party has reasonably concluded that there may be a conflict of
interest between the indemnifying party and the indemnified party with respect
to such claim or that defenses are available to the indemnified party or the
indemnifying party with respect to such claim that are not available to the
other, and if the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person. Whether or not such defense is assumed by
the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will not
be unreasonably withheld). No indemnifying party will consent to the entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release from all liability in respect of such claim or
litigation. If the indemnifying party is not entitled to, or elects not to,
assume the defense of a claim, it will not be obligated to pay the fees and
expenses of more than one counsel (plus one local counsel) for all indemnified
parties.
4.9. Registration Rights of Transferees. Notwithstanding anything to
the contrary contained herein, the Purchaser may assign its rights under this
Article IV with respect to any shares of Preferred Stock (or Common Stock issued
upon conversion of the Preferred Stock) sold or otherwise transferred by the
Purchaser to the transferee thereof, provided that such transferee, as a
condition of such assignment, executes and delivers to the Company an agreement
to be bound by the provisions of this Article IV as if it were the Purchaser. In
the event of any such assignment, (x) references in this Article IV to the
Purchaser shall be deemed to include any and all such transferees and (y) any
actions, demands or consents to be made or given by the Purchaser shall be
deemed made or given if made or given by holders of 50%
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24
or more in economic interest of the Shares (including, for these purposes,
Shares that have been converted).
4.10. Changes in Common Stock. If, and as often as, there are any
changes in or exchanges of the Common Stock by way of stock split, stock
dividend, combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions of this Article IV (including, but
not limited to, the definition of "Purchaser's Stock"), as may be required, so
that the rights and privileges granted hereby shall continue with respect to the
Common Stock as so changed or exchanged and shall apply to any securities of the
Company or another issuer received in any such transaction.
4.11. Standstill. If so requested by the managing underwriter in an
underwritten public offering of the Company's shares, the Purchaser shall not
effect any public sale or distribution of the issue being registered or a
similar security of the Corporation or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 or Rule 144A (or any similar provisions then in force) of the
Securities Act, during the 10 days prior to, and during the 180-day period
beginning on, the effective date of such registration statement (except as part
of such registration).
V. COVENANTS OF THE COMPANY
The Company covenants and agrees that:
5.1. Financial Statements and Other Reports. For so long as the
Purchaser owns Preferred Stock or Common Stock representing more than five
percent of the equity of the Company,
(a) The Company will, as soon as practicable and in any event
within 50 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, furnish to the Purchaser statements of
consolidated net income and cash flows and a statement of changes in
consolidated stockholders' equity of the Company and its Subsidiaries for the
period
21
25
from the beginning of the then current fiscal year to the end of such quarterly
period, and a consolidated balance sheet of the Company and its Subsidiaries as
of the end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding period or date in the preceding fiscal year,
all in reasonable detail and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments; provided,
however, that delivery pursuant to paragraph (c) below of a copy of the
Quarterly Report on Form 10-Q (without exhibits unless requested by the
Purchaser) of the Company for such quarterly period filed with the Commission
shall be deemed to satisfy the requirements of this paragraph (a);
(b) the Company will, as soon as practicable and in any event
within 120 days after the end of each fiscal year, furnish to the Purchaser
statements of consolidated net income and cash flows and a statement of changes
in consolidated stockholders' equity of the Company and its Subsidiaries for
such year, and a consolidated balance sheet of the Company and its Subsidiaries
as of the end of such year, setting forth in each case in comparative form the
corresponding figures from the preceding fiscal year, all in reasonable detail
and examined and reported on by independent public accountants of recognized
standing selected by the Company; provided, however, that delivery pursuant to
paragraph (c) below of a copy of the Annual Report on Form 10-Q (without
exhibits unless requested by the Purchaser) of the Company for such fiscal year
filed with the Commission shall be deemed to satisfy the requirements of this
paragraph (b); and
(c) the Company will furnish to the Purchaser copies of all
such financial statements, proxy statements, notices and reports as it shall
send to its stockholders (promptly upon transmission to stockholders) and copies
of all such registration statements (without exhibits), other than registration
statements relating to employee benefit or dividend reinvestment plans, and all
such regular and periodic reports as it shall file with the Commission
(promptly upon filing with the Commission).
5.2 Operation of Business. Until the Closing Date, the Company will
not:
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26
(a) enter into or become bound by any indenture, lease,
mortgage, deed of trust, loan agreement or other agreement or instrument that
would restrict, limit or impose conditions on the Company's compliance with the
provisions of this Agreement;
(b) declare, pay or set aside for payment any dividend or
other distribution (whether in cash, stock, property or otherwise) in respect
of any shares of its capital stock;
(c) subdivide or reclassify the outstanding shares of Common
Stock;
(d) issue any shares of capital stock of the Company or of any
Subsidiary; or
(e) redeem, purchase or otherwise acquire any shares of its
capital stock or any options, warrants or other rights to purchase or subscribe
to any of the foregoing.
5.3. Cooperation in Sale Transactions. In the event that the
Purchaser wishes to sell any shares of Preferred Stock or Common Stock in
accordance with the terms and conditions of this Agreement, the Company shall
reasonably cooperate with the Purchaser by providing publicly available
information regarding the Company to the Purchaser so as to enable such sales
to be made in accordance with applicable laws, rules and regulations
(including, without limitation, Rule 144 or any similar rule promulgated under
the Securities Act), and, if such sale is being made pursuant to Rule 144, by
using its reasonable efforts to comply with the current information
requirements under Rule 144 (provided that the Company can give no assurances
as to the availability of financial statements).
5.4. Xxxx-Xxxxx-Xxxxxx Filings. If a filing under the HSR Act is
required in connection with the acquisition of the Shares or any conversion of
the Shares, the Company agrees, upon request of the Purchaser, to take all
actions necessary to make, and to assist the Purchaser in making, any and all
such filings.
VI. COVENANTS OF THE PURCHASER
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The Purchaser covenants and agrees that:
6.1. Transfer Restrictions. In any sale or transfer by the
Purchaser of Shares, or of the shares of Common Stock received upon conversion
of the Shares, the Purchaser will ensure that the purchaser or transferee
thereof, together with all other persons or entities with which such purchaser
or transferee forms a "group" as such term is used in Section 13(d) of the
Exchange Act), do not acquire in a single transaction or series of transactions
from the Purchaser more than 250,000 Shares (or 250,000 shares of the Common
Stock received upon conversion of the Shares, as adjusted for stock splits,
combinations, dividends or reclassifications having a record date after the
Closing Date). The Purchaser shall not engage in any transaction designed to
evade the provisions of this Section 6.1. The restrictions of this Section
6.1, however, shall not apply to the following transactions: (i) any
registered, underwritten resale of the Shares (or of the Common Stock received
upon conversion of the Shares) involving a public distribution pursuant to the
registration rights granted in Article IV hereof or (ii) any pledge of the
Shares (or the Common Stock received upon conversion of the Shares) provided
that the pledgee agrees to be bound by the restrictions of this Section 6.1 if
and when it acquires the pledged Shares or shares as if it were the Purchaser.
In any transaction subject to the restrictions of this Section 6.1 that occurs
prior to the Holding Period Date, the Purchaser agrees that as a condition of
such sale or transfer, the purchaser or transferee (and any subsequent
purchaser or transferee) must execute and deliver to the Company an agreement
to be bound by the provisions of this Section 6.1 as if it were the Purchaser.
VII. CONDITIONS PRECEDENT TO CLOSING
7.1. Conditions With Respect to Both Parties. The obligations of
both parties to consummate the Closing are subject to the following conditions:
(a) there shall not have been issued or be in effect (i) any
judgment, decree or order issued by any federal, state, local or foreign court
of competent jurisdiction or (ii) any statute, rule or regulation enacted or
promulgated by any federal, state, local or
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28
foreign legislative, administrative or regulatory body of competent
jurisdiction that, in either of cases (i) or (ii), prohibits the consummation
of the transactions contemplated hereby or makes such consummation illegal; and
(b) the Settlement Agreement shall have been entered into by
the Purchaser and the Company and be in full force and effect.
7.2. Conditions With Respect to the Purchaser. The obligation of
the Purchaser to consummate the Closing shall be subject to the condition
(unless such condition is expressly waived in writing by the Purchaser) that at
the Closing the representations and warranties of the Company herein shall have
been true and correct in all material respects as of the date hereof and shall
be true and correct in all material respects as of the Closing Date as if made
on and as of such date; the Company shall have performed in all material
respects all of its covenants and obligations under this Agreement to be
performed at or prior to the Closing; and the Purchaser shall have received at
the time of the Closing certificates from the Company reasonably satisfactory
in form to the Purchaser certifying to the satisfaction of all of the
conditions set forth in this Section 7.2.
7.3 Condition With Respect to the Company. The obligation of the
Company to consummate the Closing shall be subject to the condition (unless
such condition is expressly waived in writing by the Company) that at the
Closing the representations and warranties of the Purchaser herein shall have
been true and correct in all material respects as of the date hereof and shall
be true and correct in all material respects as of the Closing Date as if made
on and as of such date; the Purchaser shall have performed in all material
respects all of its covenants and obligations under this Agreement to be
performed at or prior to the Closing; and the Company shall have received at
the time of the Closing certificates from the Purchaser reasonably satisfactory
in form to the Company certifying to the satisfaction of all of the conditions
set forth in this Section 7.3.
VIII. TERMINATION
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8.1. Termination. This Agreement may be terminated:
(a) at any time prior to the Closing Date by the mutual
consent of the Purchaser and the Company;
(b) by either the Purchaser or the Company if the Closing
shall not have occurred on or before May 31, 1996 (unless such failure of the
Closing to occur is by reason of a breach of this Agreement or the Settlement
Agreement by the party seeking to terminate); or
(c) at any time prior to the Closing Date (i) by the Purchaser
if there has been a breach in any material respect on the part of the Company
in or of any of the representations and warranties of the Company set forth
herein, which breach cannot be or has not been promptly cured after notice by
the Purchaser of such breach, or if there has been any failure on the part of
the Company to comply in any material respect with any of its obligations or to
perform in any material respect any of its covenants hereunder, or (ii) by the
Company if there has been a breach in any material respect on the part of the
Purchaser set forth herein, which breach cannot be or has not been promptly
cured after notice by the Purchaser of such breach, or if there has been any
failure on the part of the Purchaser to comply in any material respect with any
of its obligations or perform in any material respect any of its covenants
hereunder.
8.2. Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability on the part of either the Purchaser or the Company
(or their respective officers or directors), except for liability arising from
a breach of this Agreement.
IX. GENERAL PROVISIONS
9.1. Public Disclosure and Confidentiality. Each party hereby
agrees that, except as may be reasonably viewed by the disclosing party as
appropriate in view of the requirements of applicable law or regulations of any
national securities exchange on which their securities may be listed, no press
release or public an-
26
30
nouncement or communication will be made or caused to be made concerning the
execution or performance of this Agreement or the Settlement Agreement or the
terms hereof or thereof unless specifically approved in advance by both
parties. In the event that a party reasonably views disclosure as appropriate
as contemplated by the previous sentence, such disclosing party shall use its
reasonable efforts to provide a copy of such disclosure to the other party
within a reasonable period of time prior to such disclosure.
9.2. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"Affiliate" has the meaning ascribed to it in Rule 12b-2 promulgated
under the Exchange Act, as in effect on the date hereof; provided, however,
that the Purchaser shall not be deemed to be an Affiliate of the Company.
"Associate" has the meaning ascribed to it in Rule 12b-2 promulgated
under the Exchange Act, as in effect on the date hereof; provided, however,
that the Purchaser shall not be deemed to be an Associate of the Company.
The terms set forth below are defined in the Sections indicated
adjacent thereto:
Term Section
---- -------
Agreement Preamble
Authority 2.3
Closing 1.2(a)
Closing Date 1.2(a)
Common Stock 2.4
Company Preamble
Condition 2.3
Encumbrances 1.1
Exchange Act 2.3
Holding Period Date 4.2(b)
indemnified person 4.8(a)
Xxxxxx 2.5
LFS 2.2
Preferred Stock Recitals
Purchaser Preamble
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Purchaser's Stock 4.1
Securities Act 2.3
Settlement Agreement Recitals
Shares 1.1
stop order 4.7(a)
Subsidiary 2.1
9.3. Survival of Representations, Warranties and Agreements. Each
representation and warranty in this Agreement and each agreement or covenant in
this Agreement which does not by its own terms expire on or prior to the Closing
Date shall survive the Closing.
9.4. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
certified mail, telex or telecopy (and promptly confirmed by certified mail,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to the Purchaser, to it at:
Woolworth Corporation
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telecopier: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
(b) if to the Company, to it at:
Kids Mart, Inc.
000 X. Xxxxxxx Xxxxxx
Xxxx xx Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telecopier: (000) 000-0000
with a copy to:
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Xxxx, Scholer, Fierman, Xxxx
& Handler, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
9.5. Entire Agreement; Counterparts; Assignment. (a) This Agreement
(including the documents and instruments referred to or incorporated herein),
together with the Settlement Agreement (and the exhibits and documents referred
to therein), constitutes the entire agreement, and supersedes all of the prior
agreements and undertakings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) This Agreement may be executed in two or more
counterparts which together shall constitute a single agreement.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors, heirs and permitted
assigns, but otherwise (except for transferees of Preferred Stock and/or Common
Stock under Article IV) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. This Agreement is not
assignable except (i) to transferees of Preferred Stock and/or Common Stock from
the Purchaser to the extent contemplated by Section 4.9 hereof, (ii) by consent
of each of the parties hereto or (iii) by operation of law; provided, however,
that the Purchaser may assign its rights and obligations hereunder to any
Affiliate or Associate of the Purchaser; and provided further that any
transferee to whom this Agreement is assigned must, as a condition to such
assignment, execute and deliver to the Company an agreement to be bound by the
terms of this Agreement. Any purported assignment of this Agreement in
violation of this Section 9.5(c) shall be null and void.
9.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
29
33
9.7. Severability of Provisions. If any provision or any portion of
any provision of this Agreement or the application of any such provision or any
portion thereof to any person or circumstance, shall be held invalid or
unenforceable, to the extent permitted by law, the remaining portion of such
provision and the remaining provisions of this Agreement, or the application of
such provision or portion of such provision as is held invalid or unenforceable
to persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby.
9.8. Modification; Waiver. No modification of or amendment to this
Agreement shall be valid unless in a writing signed by the parties hereto
referring specifically to this Agreement and stating the parties' intention to
modify or amend the same. Any waiver of any term or condition of this
Agreement must be in a writing signed by the party or parties sought to be
charged with such waiver referring specifically to the term or condition to be
waived, and no such waiver shall be deemed to constitute the waiver of any
other breach of the same or of any other term or condition of this Agreement.
9.9. Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto shall pay its own expenses incidental to the
preparation of this Agreement, the carrying out of the provisions hereof and
the consummation of the transactions contemplated hereby.
9.10. Equitable Relief. Each party acknowledges that, in the event
of any breach of this Agreement by a party, the other party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that such other party, in addition to any
other remedy to which it may be entitled, shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
compel specific performance of this Agreement.
9.11. Joint Drafting. The parties have jointly drafted this
Agreement, and this Agreement shall not be interpreted against or in favor of
any of the parties on the basis that any of the parties participated in the
drafting of this Agreement.
30
34
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers duly authorized hereunto, all as of the
date first written above.
KIDS MART, INC.
By: /s/ XXXXXXX XXXXXXX
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
WOOLWORTH CORPORATION
By: /s/ XXXX X. XXXXXX
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President & Treasurer
35
[XXXX, SCHOLER, FIERMAN, XXXX & HANDLER, LLP LETTERHEAD]
May 23, 1996
BY HAND
-------
Xxxxx Xxxxxxx, Esq.
Skadden, Arps, Slate,
Meager & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Re: Kids Mart, Inc.
---------------
Dear Xxxxx:
In connection with the "closing" of the "Mutual Release and Settlement
Agreement" (the "Settlement Agreement") among Kids Mart, Inc., LFS Acquisition
Corp. and Xxxx Xxxxxxx, on the one hand (collectively "Kids Mart"), and
Woolworth Corporation and Xxxxxx Shoe Corporation, on the other hand
("Woolworth"), Kids Mart hereby acknowledges that the releases running to them
and set forth in paragraph "9" of the Settlement Agreement will not become
effective until such time as Kids Mart, Inc. causes to be delivered to you, on
behalf of Woolworth, (i) the stock certificate representing the issuance to
Woolworth of the preferred stock contemplated under paragraph "3" of the
Settlement Agreement and (ii) the releases of Xxxxxxx X. Xxxxx, Xxxx X. Xxxxx,
Xxxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxxxxxx and Xxxxxxx X. Xxxxxxx, contemplated
under paragraph "7" of the Settlement Agreement.
When the subject preferred stock certificate and releases are delivered,
the aforesaid releases running to and for the benefit of Kids Mart shall
automatically become effective.
36
Xxxxx Xxxxxxx, Esq. 2 May 23, 1996
Please provide me with an acknowledged copy of this letter of
understanding to my file.
Sincerely,
/s/ XXXXXXX X. XXXXXXX
----------------------
Xxxxxxx X. Xxxxxxx
MHP/alz
Acknowledged and agreed to
as of the date hereof
XXXXXXX XXXX SLATE XXXXXXX & XXXX
Attorneys for Woolworth Corporation
By: /s/ XXXXX XXXXXXX
-----------------------
Xxxxx Xxxxxxx, Esq.
37
[XXXX, SCHOLER, FIERMAN, XXXX & HANDLER LETTERHEAD]
May 24, 1996
BY HAND AND BY TELECOPY
-----------------------
Xxxxx Xxxxxxx, Esq.
Skadden, Arps, Slate,
Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Re: Kids Mart, Inc.
---------------
Dear Xxxxx:
This letter supplements my letter to you of yesterday concerning the
timing of the effectiveness of Woolworth Corporation's releases.
In connection with the "closing" of the "Mutual Release and Settlement
Agreement" (the "Settlement Agreement") among Kids Mart, Inc., LFS Acquisition
Corp. and Xxxx Xxxxxxx, on the one hand (collectively "Kids Mart"), and
Woolworth Corporation and Xxxxxx Shoe Corporation, on the other hand
("Woolworth"), Kids Mart hereby acknowledges that the releases running to them
and set forth in paragraph "9" of the Settlement Agreement will not become
effective until such time as Kids Mart, Inc. causes to be delivered to you, on
behalf of Woolworth, the opinion of Xxxxxxxxx, Xxxxxxx & Xxxxx contemplated
under paragraph "1.2" of the Stock Acquisition Agreement.
When the subject opinion, preferred stock certificate and releases are
delivered, the aforesaid releases running to and for the benefit of Kids Mart
shall automatically become effective.
38
Xxxxx Xxxxxxx, Esq. May 24, 1996
2
Please provide me with an acknowledged copy of this letter of
understanding to my file.
Sincerely,
/s/ XXXXXXX X. XXXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxxx
MHP/alz
Acknowledged and agreed to
as of the date hereof
XXXXXXX XXXX SLATE XXXXXXX & XXXX
Attorneys for Woolworth Corporation
By: /s/ XXXXX XXXXXXX
--------------------------
Xxxxx Xxxxxxx, Esq.
39
[FLORIDA DEPARTMENT OF STATE LETTERHEAD]
May 24, 1996
CSC Networks
0000 Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Re: Document Number P93000024509
The Articles of Amendment to the Articles of Incorporation for KIDS MART, INC.,
a Florida corporation, were filed on May 24, 1996.
The certification requested is enclosed.
Should you have any question regarding this matter, please telephone (904)
000-0000, the Amendment Filing Section.
Xxxxxxx Xxxxx
Corporate Specialist
Division of Corporations Letter Number: 996A00026200
Account number: 072100000032 Account charged: 245.00
40
[LOGO]
[STATE OF FLORIDA DEPARTMENT OF STATE]
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on May 24, 1996, to Articles of Incorporation for KIDS MART, INC., a
Florida corporation, as shown by the records of this office.
The document number of this corporation is P93000024509.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Twenty-fourth day of May, 1996
[SEAL] /s/ XXXXXX X. XXXXXXX
---------------------
Xxxxxx X. Xxxxxxx
Secretary of State
