PROMETHEAN CAPITAL GROUP, LLC
A DELAWARE LIMITED LIABILITY COMPANY
PLACEMENT AGENT AGREEMENT
June 12, 2000
eToys Inc.
0000 Xxxxx Xxxx Xxxx., Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Dear Sirs:
The undersigned, eToys Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement with Promethean Capital Group, LLC, a Delaware
limited liability company (the "Placement Agent"), as follows:
1. INTRODUCTION. The Company intends to offer for sale and sell to a
limited number of persons (the "INVESTORS"), each of whom has represented and
warranted to the Company that it is an "accredited investor" as defined in Rule
501 of Regulation D ("REGULATION D") under the Securities Act of 1933, as
amended (the "1933 Act") the Securities described in EXHIBIT A attached hereto
(the "SECURITIES"). The Placement Agent shall be the Company's exclusive sales
agent in connection with the offering of the Securities by the Company (the
"OFFERING"), and the Company may not make sales directly to investors, engage
other placement agents or engage other qualified broker-dealers to assist in the
Offering.
This Agreement sets forth the understandings and agreements between the
Company and the Placement Agent whereby, subject to the terms and conditions
herein contained, the Placement Agent will solicit offers and obtain purchases
for the Securities. The minimum offering amount will be $100,000,000 (the
"MINIMUM OFFERING").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the Placement Agent that:
2.1. NO REGISTRATION OF THE SECURITIES; REGULATION D; COMPLIANCE WITH
SECURITIES LAWS.
2.1.1. The Securities are not required to be and have not and will
not be registered with the Securities and Exchange Commission (the
"COMMISSION") pursuant to the 1933 Act, and the rules and regulations
promulgated thereunder in connection with the Offering. The Securities
will be offered and sold in reliance upon the exemption provided by
Section 4(2) of the 1933 Act or Rule 506 of Regulation D. The Company
has complied with and will comply with the requirements of Section 4(2)
of the 1933 Act and Rule 506 of Regulation D in connection with the
Offering.
June 12, 2000
Page 2
2.1.2. The Company has not filed any registration statement
relating to the issuance of the Securities under the securities laws of
any state. The Securities will be offered and sold in reliance upon
applicable exemptions from registration under the laws, regulations and
policy statements of the Blue Sky States (as defined in Section 4.3.1
hereof).
2.1.3. For the purposes of this Agreement, the term "Affiliate"
means, when used with reference to a specified person, (a) any person or
entity directly or indirectly controlling, controlled by or under common
control with such specified person, and (b) any officer, director or
general partner of an entity referred to in clause (a). The term
"control" shall mean the power to direct the management and policies of a
person, directly or through one or more intermediaries, whether through
the ownership of voting securities, by contract, or otherwise.
2.2. ORGANIZATION; GOOD STANDING OF THE COMPANY. The Company is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware with full power and authority to acquire, own, lease and
manage its properties and assets and to conduct the business in which it is
engaged, and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership of property or the
conduct of its business requires such qualification, except such jurisdictions
where the failure to so qualify would not have a material adverse effect on its
business, properties or condition (financial or otherwise).
3. SALES OF SECURITIES.
3.1. AGENCY. On the basis of the representations, warranties and
covenants contained herein and subject to the terms and conditions set forth
herein, the Company hereby appoints the Placement Agent as its exclusive agent
for the period beginning on the date of this Agreement and ending on June 16,
2000, subject to extension by the mutual agreement of the Company and the
Placement Agent (the "OFFERING PERIOD"), subject to the earlier termination in
accordance with the terms hereof for the limited purpose of soliciting
subscriptions (the "SUBSCRIPTIONS") from prospective investors. On the basis of
the representations, warranties and covenants contained herein, and subject to
the terms and conditions set forth herein, the Placement Agent shall use its
reasonable efforts as agent to obtain the Subscriptions. In connection
therewith, the Placement Agent will not offer any Securities for sale, or
solicit any Subscription other than in accordance with the terms hereof.
3.2. MINIMUM OFFERING; TERMINATION DATE. All sales of Securities will
be conditioned on the receipt and acceptance before the end of the Offering
Period of Subscriptions for the
June 12, 2000
Page 3
Minimum Offering. At the close of business on the last day of the Offering
Period (the "TERMINATION DATE"), the obligations of the Placement Agent
hereunder to use its best efforts as agent to obtain Subscriptions shall
terminate.
3.3. PRICE; MINIMUM PURCHASE. An Investor is required to purchase a
minimum of $5,000,000 of Securities, subject to waiver by the Company.
3.4. ACCEPTANCE OF SUBSCRIPTIONS. No Subscription shall be effective
unless accepted by the Company. A securities purchase agreements, to be
negotiated by the Company and prospective Investors (the "SECURITIES PURCHASE
AGREEMENT") must be executed by Investors. The Company retains the unconditional
right to reject any Subscription in whole or in part; in such event, if funds
have been delivered by the Investor thereunder with respect to such
Subscription, such funds shall be returned to such Investor as promptly as
practicable, and in such event, no interest on such funds shall be paid to such
Investor.
3.5. PAYMENT OF COMMISSION ON CLOSING DATE. If Securities Purchase
Agreements for Securities constituting at least the Minimum Offering have been
received and accepted on or before the Termination Date (the "CLOSING DATE"),
the Company will pay to the Placement Agent, in immediately available funds, an
amount equal to 2.0% of the amount so subscribed for on the Closing Date.
3.6. COMPANY TO PAY CERTAIN FEES AND EXPENSES. The Company shall bear
all of its own costs and expenses in connection with the transactions
contemplated hereby, including, but not limited to, expenses (i) for consulting,
legal, financial, printing, auditing, and accounting services related to the
Offering, (ii) in connection with the Company's responsibilities under Section
4.3 hereof (regarding blue sky qualification) and (iii) for engraving, issuance,
transfer and delivery (including payment of any applicable transfer tax) of
certificates evidencing the Securities. The Placement Agent shall bear all of
its own costs and expenses in connection with the transactions contemplated
hereby, including, but not limited to, expenses for marketing and legal services
related to the Offering.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Placement Agent as follows:
4.1. DELIVERY OF SUBSCRIPTION DOCUMENTS. The Company will deliver to
the Placement Agent, as soon as practicable, such reasonable number of copies of
the Securities Purchase Agreement and related agreements as the Placement Agent
may reasonably request.
June 12, 2000
Page 4
4.2. BLUE SKY QUALIFICATION.
4.2.1. At or prior to the beginning of the Offering Period, the
Company shall use its best efforts to qualify or register for sale the
offer and sale of Securities or to establish an exemption of the
Securities from qualification or registration, for offering and sale
under the laws of such jurisdictions in the United States as the Company
may reasonably determine (the "BLUE SKY STATES"), with the number of
Securities to be so qualified in each such jurisdiction being as
determined by the Company and thereafter to maintain such qualification
in effect until the Termination Date.
4.2.2. The Company shall have the responsibility for the filing of
material in connection with the offering and sale of the Securities to
qualify the Securities or to establish an exemption from qualification
for the Securities with the proper authorities in the Blue Sky States.
The Placement Agent will furnish to the Company all information
pertaining to the Placement Agent reasonably requested by the Company to
comply with the laws and regulations of the Blue Sky States. Any
materials so furnished will not contain any misstatement of a material
fact or omit to state any material fact necessary to make any statement
of fact contained therein not misleading.
4.3. DISTRIBUTION OF ADDITIONAL INFORMATION. Subject to the Company's
right to require confidential treatment by Investors of its proprietary
information, the Company will, during the Offering Period, make available to
each prospective Investor, and any person advising such prospective Investor,
all information required to be furnished by Regulation D and applicable state
securities laws pertaining to the Company and the Offering, and will give such
prospective Investor, and any person advising such prospective Investor, the
opportunity to ask questions and receive answers concerning the Company and the
Offering and to obtain any additional information, to the extent such
information is in the possession of the Company or can be acquired without
unreasonable effort or expense.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLACEMENT AGENT. The
Placement Agent represents and warrants to, and covenants with the Company,
that:
5.1. SOLICITATION OF INVESTORS.
June 12, 2000
Page 5
5.1.1. The Placement Agent shall use its reasonable efforts to
locate a limited number of Investors who desire the opportunity to
purchase Securities pursuant to the Offering. The Placement Agent will
not take any action or omit to take any action required to be taken by
this Agreement that would cause the offer and sale of Securities not to
be eligible for the exemption from the registration requirements of
Section 5 of the 1933 Act provided by Regulation D and other
administrative rules and regulations interpreting Section 4(2) of the
1933 Act, and the exemptive provisions of applicable state securities
laws.
5.1.2. The Placement Agent shall not offer or sell the Securities
by means or form of general solicitation or advertising within the
meaning of Rule 502(c) of Regulation D, including, but not limited to:
(a) any advertisement, article, notice or other communication published
in any newspaper, magazine or similar news medium or broadcast over
television or radio, and (b) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising.
5.2 INFORMATION WITH RESPECT TO POTENTIAL INVESTORS. The Placement
Agent shall make available to the Company and its counsel such information in
the Placement Agent's possession as the Company may reasonably request with
respect to the knowledge and experience in financial and business matters of
each Investor and its representative, if any, the ability of the Investor to
bear the economic risk of an investment in the Securities, and its knowledge and
experience in financial and business matters.
5.3 BROKER-DEALER. The Placement Agent is a broker-dealer registered
with the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") and in each state in which each Investor
resides if required by the laws of such state and is a member in good standing
of the National Association of Securities Dealers, Inc. Each agent of the
Placement Agent is a registered representative under the Exchange Act and in
each state in which each Investor resides if required by the laws of such state,
as applicable.
6. CONDITIONS PRECEDENT TO PLACEMENT AGENT'S OBLIGATIONS. The obligations
of the Placement Agent hereunder shall be subject to the accuracy, in all
material respects, throughout the Offering Period of the representations,
warranties and agreements of the Company, and to the performance by the Company
in all respects of its obligations hereunder.
7. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company to continue the Placement Agent's engagement pursuant to this
Agreement shall be subject to the accuracy in all material respects, as of the
date hereof and through the Closing Date, of the
June 12, 2000
Page 6
representations, warranties and agreements of the Placement Agent in this
Agreement, and to the performance by the Placement Agent in all respects of its
obligations hereunder.
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE. Except
as the context otherwise requires, all representations, warranties, any
agreements made in Section 2 hereof, covenants and agreements contained in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Placement Agent or the Company, or by
any controlling person of either, and shall survive the Termination Date.
9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY PLACEMENT AGENT. The Placement Agent agrees to
indemnify and hold harmless the Company (and each other person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act, each
officer of the Company who signs a registration statement and each director of
the Company) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses to
which the Company (or any such officer, director or controlling person) may
become subject (under the 1933 Act or otherwise), insofar as such actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses (or actions or proceedings in respect thereof) arise out
of, or are based upon, any misrepresentation made herein by the Placement Agent,
and the Placement Agent promptly will reimburse the Company (or such officer,
director or controlling person), as the case may be, for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim.
9.2 INDEMNIFICATION BY THE COMPANY. The Company shall defend,
protect, indemnify and hold harmless the Placement Agent and all of its members,
officers, directors, employees and direct or indirect investors and any of the
foregoing person's affiliates, agents or other representatives (collectively the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorney's fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or in the Securities
Purchase Agreement or any other certificate, instrument or document contemplated
hereby or thereby, or (c) any cause of action, suit or claim brought or made
against such Indemnitee (other than a cause of action, suit or claim which is
(x) brought or made by the Company and (y) is not a shareholder derivative suit)
and
June 12, 2000
Page 7
arising out of or resulting from (i) the Company's execution, delivery or
performance of or Indemnitees' enforcement of any terms of this Agreement
against the Company or (ii) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the
Securities. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth in Section 9.1
or Section 9.2, the mechanics and procedures with respect to the rights and
obligations under this Section 9 shall be the same as those set forth in
Sections 6(a) and (d) of the Registration Rights Agreement (as defined in the
Securities Purchase Agreement).
10. EFFECTIVE DATE AND TERMINATION OF AGREEMENT.
10.1 EFFECTIVE DATE. This Agreement shall become effective as of the
date of execution hereof.
10.2 FAILURE TO FULFILL CONDITIONS. In the event that either party
fails to fulfill (the "NON-FULFILLING PARTY") any of the conditions precedent to
the performance of the obligations of the other party (the "OTHER PARTY"), the
Other Party shall elect to either (a) waive such unfulfilled condition or
conditions and consummate the transaction which is the subject hereof, in which
event no claim may be asserted against the Non-Fulfilling Party by reason of the
matters which were the subject of such conditions, or (b) terminate this
Agreement as provided below.
11. NOTICES.
11.1 METHOD AND LOCATION OF NOTICES. Any notice, reply or other
communication required or permitted by this Agreement, except as herein
otherwise specifically provided, shall be in writing and (i) if sent to the
Placement Agent, shall be mailed, delivered or telecopied and confirmed to
Promethean Investment Group, Inc., 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (telecopier: 212-758-9334) Attention: Xxxxx X. Xxxxxx, Xx., with
a copy to Xxxxxx Xxxxxx Zavis, 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx
00000 (telecopier: 312-902-1061), Attention: Xxxxxx X. Xxxxxxxx, and (ii) if
sent to the Company, shall be mailed, delivered or telecopied and confirmed to
eToys Inc., 0000 Xxxxx Xxxx Xxxx., Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxxxx 00000
(telecopier:(000) 000-0000) Attn: General Counsel, with a copy to Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000
(telecopier:(000) 000-0000) Attention: Xxxxx X. Xxxx. Any party may change its
address for notice by giving notice of its new address to the other parties in
the manner specified above.
June 12, 2000
Page 8
11.2 TIME OF NOTICES. Notice shall be deemed to be given by the
Placement Agent to the Company or by the Company to the Placement Agent (i) if
by personal delivery, on the date of such delivery, (ii) if by telecopy, on the
date of transmission, and (iii) if mailed, three days after delivery to the
mails, postage prepaid, certified mail return receipt requested, to the
addresses provided in Section 11.1 hereof.
12. MISCELLANEOUS.
12.1 PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon each of the Placement Agent, the Company and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have a legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained.
12.2 CONSTRUCTION. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (other than Section 5-1401 of the
New York General Obligations Law and whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
12.3 DESCRIPTIVE HEADING; DEFINED TERMS. The descriptive headings of
the several sections and paragraphs of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement and shall not be
used in the construction or interpretation hereof. Capitalized terms not
otherwise defined in this Agreement shall have the respective meanings set forth
in the Securities Purchase Agreement.
12.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and, if executed in more than one counterpart, the executed
counterparts shall together constitute a single instrument.
12.5 ENTIRE AGREEMENT; WRITTEN WAIVERS. This Agreement constitutes the
entire agreement of the parties and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations between the
parties with respect to the subject matter hereof. Neither the Company nor the
Placement Agent has relied on any written or oral representations or
inducements, other than those which are set forth in this Agreement in executing
and delivering this Agreement. No waiver, alteration or modification of any of
the provisions hereof shall be binding unless it is in writing and signed by
each of the parties hereto.
June 12, 2000
Page 9
12.6 SEVERABILITY. If any of the provisions of this Agreement are
rendered or declared illegal by reason of any existing or subsequently enacted
legislation or by decree of a court of last resort, the remaining provisions of
the Agreement shall remain in full force and effect.
June 12, 2000
Page 10
If the foregoing correctly sets forth the understanding between the
Placement Agent and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among the parties.
Very truly yours,
PROMETHEAN CAPITAL GROUP, LLC
By:
---------------------------
Name:
-------------------------
Title
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AGREED AND ACCEPTED:
eTOYS INC.
By:
--------------------------
Name:
---------------------
Title:
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June 12, 2000
Page 11
EXHIBIT A
DESCRIPTION OF SECURITIES
10,000 shares of the Company's Series D Convertible Preferred Stock and
Warrants to purchase a number of shares of the Company's common stock.
