ETOYS INC.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of the 27th
day of June, 1997 by and between eToys Inc., a Delaware corporation (the
"Company"), and Xxxxx X. Xxx (the "Purchaser").
In consideration of the mutual covenants and representations herein set
forth, the Company and Purchaser agree as follows:
1. PURCHASE. Subject to the terms and conditions of this Agreement,
the Company hereby agrees to issue to Purchaser and Purchaser agrees to
acquire from the Company on the Closing Date (as defined below), 416,667
shares of the Company's Common Stock (the "Stock") at a price of $0.015 per
share, for the aggregate purchase price of $6,250 (the "Purchase Price"). The
Purchase Price for the Stock shall be paid by check or wire transfer.
2. CLOSING. The purchase and sale of the Stock shall occur at a
Closing to be held at such time and place (the "Closing Date"), as designated
by the Company no less than two business days prior to the Closing Date. The
Closing will take place at the principal office of the Company or at such
other place as shall be designated by the Company. At the Closing, Purchaser
shall deliver to the Company the consideration to be paid for the Stock, and
the Company will issue the Stock registered in the name of Purchaser.
3. COMPANY'S REPRESENTATIONS AND WARRANTIES. Except as set forth on
Exhibit A attached hereto, the Company represents and warrants to Purchaser
as follows:
(a) The Company is a Corporation duly organized and validly
existing under, and by virtue of, the laws of the State of Delaware and is in
good standing under such laws. The Company has requisite corporate power and
authority to own and operate its properties and assets, and to carry on its
business as presently conducted and as proposed to be conducted. The Company
is not presently qualified to do business as a foreign corporation in any
jurisdiction, and the failure to be so qualified will not have a material
adverse affect on the Company's business as now conducted or as now proposed
to be conducted.
(b) The Company will have at the Closing all requisite legal and
corporate power and authority to execute and deliver this Agreement, to sell
and issue the Stock hereunder and to carry out and perform its obligations
under the terms of this Agreement.
(c) The authorized capital stock of the Company consists or will,
upon the filing of the Certificate, consist of 50,000,000 shares of Common
Stock and 25,000,000 shares of
undesignated Preferred Stock. Immediately prior to the Closing, no shares of
common or capital stock will be outstanding. The Stock, when issued pursuant
to the terms of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable.
(d) All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution,
delivery and performance of the Agreement by the Company, the authorization,
sale, issuance and delivery of the Stock and the performance of all of the
Company's obligations under this Agreement has been taken or will be taken
prior to the Closing. This Agreement, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms.
(e) The Company is not in violation or default of any term of its
Certificate or Bylaws, or in any material respect of any term or provision of
any material mortgage, indebtedness, indenture, contract, agreement,
instrument, judgment, order or decree, and to its knowledge is not in
violation of any statute, rule or regulation applicable to the Company where
such violation would materially and adversely affect the Company.
(f) The Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES. In connection with the
purchase of the Stock, Purchaser hereby represents and warrants to the
Company:
(a) Purchaser has substantial experience in investing in
newly-formed technology companies or in evaluating and investing in private
placement transactions, so Purchaser is capable of evaluating the merits and
risks of Purchaser's investment in the Company. Purchaser, by reason of
Purchaser's business or financial experience or the business or financial
experience of Purchaser's professional advisors who are unaffiliated with the
Company or any affiliate or selling agent of the Company, directly or
indirectly, has the capacity to protect Purchaser's own interests in
connection with the purchase of the Stock.
(b) Purchaser is acquiring or will be acquiring the Stock for
investment for Purchaser's own account, not as a nominee or agent and not
with the view to, or for resale in connection with, any distribution thereof
Purchaser understands that the Stock have not been, and will not be,
registered under the Securities Act of 1933 (the "Securities Act") by reason
of a specific exemption from the registration provisions of the Securities
Act that depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed herein. Purchaser has not been formed for the specific purpose of
acquiring the Stock. Purchaser further understands that the Company shall
have no obligation to register the Stock under the Securities Act on behalf
of Purchaser.
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(c) Purchaser acknowledges that the Stock must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including (except as limited by Rule
144(k)), among other things, the existence of a public market for the shares,
the availability of certain current public information about the Company, the
resale occurring not less than one year after a party has purchased and paid
for the security to be sold, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" (as provided
by Rule 144(f)) and the number of shares being sold during any three-month
period not exceeding specified limitations.
(d) Purchaser understands that no public market now exists for any
of the securities issued by the Company, that the Company has made no
assurances that a public market will ever exist for the Stock and that, even
if such a public market exists at some future time, the Company may not then
be satisfying the current public information requirements of Rule 144.
(e) Purchaser and Purchaser's representatives have had the
opportunity to ask questions of, and receive answers from, representatives of
the Company concerning the Company and the terms and conditions of this
transaction as well as to obtain any information requested by Purchaser. Any
questions raised by Purchaser or Purchaser's representatives concerning the
transaction have been answered to the satisfaction of Purchaser and
Purchaser's representatives. Purchaser's decision to enter into the
transactions contemplated hereby is based in part on the answers to such
questions as Purchaser and Purchaser's representatives have raised concerning
the transaction and on Purchaser's own evaluation of the risks and merits of
the purchase and the Company's proposed business activities.
(f) All corporate or partnership action, if applicable, on the
part of Purchaser, its directors, partners and its stockholders necessary for
the authorization, execution, delivery and performance of this Agreement by
Purchaser has been taken. This Agreement, when executed and delivered by
Purchaser, will constitute a valid and legally binding obligation of
Purchaser, enforceable in accordance with its terms.
(g) Purchaser has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by such Purchaser, any liability
for brokerage or finders' fees or agents' commissions or any similar charges
in connection with this Agreement.
(h) Purchaser has reviewed with its own tax advisors the federal,
state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Purchaser is relying solely on
such advisors and not on any statements or representations of the Company or
any of its agents and understands that Purchaser (and not the Company) shall
be responsible for Purchaser's own tax liability that may arise as a result
of this investment or the transactions contemplated by this Agreement.
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5. RESTRICTION ON TRANSFER; RIGHT OF FIRST REFUSAL
(a) Before any shares of Stock registered in the name of Purchaser
may be sold or transferred (including transfer by operation of law), such
shares shall first be offered to the Company.
(i) Purchaser shall deliver a notice ("Notice") to the
Company stating (A) Purchaser's bona fide intention to sell or transfer such
shares, (B) the number of such shares to be sold or transferred, (C) the
price for which he proposes to sell or transfer such shares, and (D) the name
of the proposed purchaser or transferee.
(ii) Within 30 days after receipt of the Notice, the Company
or its assignee may elect to purchase all (but not less than all) shares to
which the Notice refers, at the price per share specified in the Notice. Full
payment for all the shares to which the Notice refers shall be made by the
Company or its assignee to Purchaser by cash.
(iii) If the shares to which the Notice refers are not
elected to be purchased, as provided in subparagraph 5(a)(ii), Purchaser may
sell the shares to any person named/in the Notice at the price specified in
the Notice or at a higher price, provided that such sale or transfer is
consummated within 60 days of the date of said Notice to the Company, and
provided, further, that any such sale is in accordance with all the terms and
conditions hereof. Any sale or transfer after such 60 day period or on terms
more favorable to the proposed purchaser or transferee then described in the
Notice shall be subject again to this subparagraph 5(a).
(iv) The provisions of this subparagraph 5(a) shall
terminate on the earlier of (A) the effective date of a registration
statement filed by the Company under the Securities Act, with respect to an
underwritten public offering of Common Stock of the Company (an "Initial
Public Offering") or (B) the closing date of a sale of assets or merger of
the Company pursuant to which stockholders of this Company receive securities
of a buyer whose shares are publicly traded. The provisions of this
subparagraph 5(a) shall not apply to a transfer of any shares of Stock by
Purchaser, either during its lifetime or on death by will or intestacy to its
other ancestors, descendants or spouse, or any custodian or trustee for the
account of Purchaser or Purchaser's ancestors, descendants or spouse;
provided, in each such case a transferee shall receive and hold such shares
subject to the provisions of this paragraph 5 and there shall be no further
transfer of such shares except in accordance herewith.
(b) Purchaser agrees in connection with the Company's Initial
Public Offering, not to sell, make any short sale of, loan, grant any option
for the purchase of or otherwise dispose of any shares of Stock without the
prior written consent of Company or its underwriters, for such period of time
(not to exceed 180 days) from the effective date of such registration as may
be requested by the Company or such underwriters; provided, that the officers
and directors of the Company who own stock of the Company also agree to such
restrictions.
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(c) The Company shall not be required (i) to transfer on its books
any shares of Stock which shall have been sold or transferred in violation of
any of the provisions set forth in this Agreement, or (ii) to treat as owner
of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so
transferred.
6. LEGENDS. All certificates representing any of the shares of Stock
subject to the provisions of this Agreement shall have endorsed thereon
legends substantially in the following form:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THIS CERTIFICATE MUST BE
SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO
THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE."
(b) "THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN STOCK
PURCHASE AGREEMENT CONTAINING A RIGHT OF FIRST REFUSAL, COPIES OF WHICH MAY
BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY."
(c) Any legend required to be placed thereon by the California
Commissioner of Corporations, or required by applicable blue sky laws of any
state.
7. MISCELLANEOUS.
(a) The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the
intent of this Agreement.
(b) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by regular or certified mail with
postage and fees prepaid, addressed to Purchaser at its address shown on the
Company's records and to the Company at the address of its principal
corporate offices (attention: President) or at such other address as such
party may designate by ten days' advance written notice to the other party
hereto.
(c) The Company may assign its rights and delegate its duties
under this Agreement. If any such assignment or delegation requires consent
of the California Commissioner
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of Corporations, the parties agree to cooperate in requesting such consent.
This Agreement shall inure to the benefit of the successors and assigns of
the Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser, its heirs, executors, administrators, successors and
assigns.
(d) Purchaser hereby authorizes and directs the Secretary or
Transfer Agent of the Company to transfer the Stock as to which the right of
first refusal has been exercised from Purchaser to the Company.
(e) This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of California.
8. ARBITRATION. At the option of either party, any and all disputes or
controversies whether of law or fact and of any nature whatsoever arising
from or respecting this Agreement shall be decided by arbitration by the
American Arbitration Association in accordance with the commercial rules and
regulations of that Association.
The arbitrators shall be selected as follows: In the event the
Company and Purchaser agree on one arbitrator, the arbitration shall be
conducted by such arbitrator. In the event the Company and Purchaser do not
so agree, the Company and Purchaser shall each select one independent,
qualified arbitrator and the two arbitrators so selected shall select the
third arbitrator. The Company reserves the right to object to any individual
arbitrator who shall be employed by or affiliated with a competing
organization.
Arbitration shall take place in Pasadena, California, or any other
location mutually agreeable to the parties. At the request of either party,
arbitration proceedings will be conducted in the utmost secrecy; in such case
all documents, testimony and records shall be received, heard and maintained
by the arbitrators in secrecy under seal, available for the inspection only
of the Company or Purchaser and their respective attorneys and their
respective experts who shall agree in advance and in writing to receive all
such information confidentially and to maintain such information in secrecy
until such information shall become generally known. The arbitrator, who
shall act by majority vote, shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary
restraining order, a temporary and/or a permanent injunction, and shall also
be able to award damages, with or without an accounting and costs. The decree
or judgment of an award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
Reasonable notice of the time and place of arbitration shall be
given to all persons, other than the parties, as shall be required by law, in
which case such persons or those authorized representatives shall have the
right to attend and/or participate in all the arbitration hearings in such
manner as the law shall require.
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IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the day and year first above written.
PURCHASER COMPANY
Xxxxx X. Xxx eToys Inc.,
a Delaware corporation
/s/ Xxxxx X. Xxx By: /s/ Xxxxxx X. Xxxx
--------------------- ----------------------
Name: Xxxxxx X. Xxxx
--------------------
Title: President
Address: -------------------
0000 Xxxxxxx Xxxxxx
X. Xxxxxxxx, XX 00000
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EXHIBIT A
SCHEDULE OF EXCEPTIONS TO THE COMPANY'S REPRESENTATIONS AND WARRANTIES
On June 27, 1997, the Company intends to sell and issue: (i) 6,466,667 shares of
Common Stock being issued under a Stock and Note Purchase Agreement; (ii)
1,866,667 shares of Common Stock to certain founders and employees of the
Company pursuant to Stock Purchase Agreements; and (iii) 2,026,667 shares of
Common Stock to certain founders and employees of the Company pursuant to
Restricted Stock Purchase Agreements.
