1
EXHIBIT 4.3
--------------------------------------------------------------------------------
AMENDED AND RESTATED
SECURITIES
PURCHASE AGREEMENT
Between
YES! ENTERTAINMENT CORPORATION,
INFINITY INVESTORS LIMITED,
FAIRWAY CAPITAL LIMITED,
and
XXXXXXXX & XXXXXX CAPITAL CORP.
---------------------------
Dated July 25, 1997
---------------------------
--------------------------------------------------------------------------------
2
TABLE OF CONTENTS
PAGE
----
SECTION 1. CERTAIN DEFINITIONS........................................................................... 1
1.1 Certain Definitions........................................................................... 1
SECTION 2. PURCHASE OF SECURITIES........................................................................ 6
2.1 Exchange of Securities; Issuance of Securities................................................ 6
2.2 Closing....................................................................................... 6
SECTION 3. REPRESENTATIONS AND WARRANTIES................................................................ 7
3.1 Representations and Warranties of the Company................................................. 7
3.2 Representations and Warranties of the Purchasers.............................................. 11
SECTION 4. OTHER AGREEMENTS OF THE PARTIES............................................................... 13
4.1 Transfer Restrictions......................................................................... 13
4.2 Stop Transfer Instruction..................................................................... 14
4.3 Furnishing of Information..................................................................... 14
4.4 Copies and Use of Disclosure Materials........................................................ 15
4.5 Blue Sky Laws................................................................................. 15
4.6 Integration................................................................................... 15
4.7 Certain Agreements............................................................................ 15
4.8 Purchaser Ownership of Common Stock........................................................... 16
4.9 Listing of Underlying Shares.................................................................. 16
4.10 Purchaser's Rights if Trading in Common Stock is Suspended or
Delisted...................................................................................... 16
4.11 No Violation of Applicable Law................................................................ 17
4.12 Repurchase Restrictions....................................................................... 17
4.13 Legal Opinion................................................................................. 17
4.14 Notice of Breaches............................................................................ 17
4.15 Conversion Procedures......................................................................... 18
4.16 Transfer Agent................................................................................ 18
4.17 Right of First Refusal........................................................................ 18
4.18 Restriction on Debt........................................................................... 19
4.19 Restriction on Short Sales.................................................................... 19
4.20 Restrictions on Conversion and Sale........................................................... 19
SECTION 5. MISCELLANEOUS................................................................................. 21
5.1 Fees and Expenses............................................................................. 21
5.2 Entire Agreement; Amendments.................................................................. 21
5.3 Notices....................................................................................... 21
5.4 Amendments; Waivers........................................................................... 22
5.5 Headings...................................................................................... 22
5.6 Successors and Assigns........................................................................ 23
i
3
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
5.7 No Third-Party Beneficiaries.................................................................. 23
5.8 Governing Law................................................................................. 23
5.9 Survival...................................................................................... 23
5.10 Counterpart Signatures........................................................................ 23
5.11 Publicity..................................................................................... 23
5.12 Severability.................................................................................. 23
5.13 Remedies...................................................................................... 24
Exhibit A Form of Certificate of Designation
Exhibit B Form of 5% Convertible Debenture
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Xxxxxx Godward LLP
Legal Opinion
Exhibit F Conversion Procedures
Schedule 2.2(b) Debentures, Preferred Stock, Warrants
Schedule 3.1(a) Company Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 4.20(b) Ownership Percentages
ii
4
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, dated July 25,
1997 (this "Agreement"), by and among YES! ENTERTAINMENT CORPORATION, a Delaware
corporation (the "Company"), INFINITY INVESTORS LIMITED, a corporation organized
and existing under the laws of Nevis, West Indies ("Infinity"), FAIRWAY CAPITAL
LIMITED, a corporation organized and existing under the laws of Nevis, West
Indies ("Fairway" and, together with Infinity, the "Original Purchasers"), and
XXXXXXXX & XXXXXX CAPITAL CORP., a California corporation ("Xxxxxxxx") (each a
"Purchaser," and collectively, the "Purchasers").
WHEREAS, the Company and the Original Purchasers are parties to that
certain Amended and Restated Convertible Debenture and Convertible Preferred
Stock Purchase Agreement, dated as of March 18, 1997 (the "March Purchase
Agreement"), pursuant to which, among other things, (i) the Company issued and
sold to the Original Purchasers an aggregate of $1,566,667 principal amount of
the Company's 5% convertible debentures, due January 28, 2000 (collectively, the
"March Debentures"), (ii) the Company issued 85,000 shares of its Series A
Convertible Preferred Stock (the "Series A Preferred") to the Original
Purchasers, and (iii) the Company delivered Common Stock Purchase Warrants
exercisable into 300,000 shares of Common Stock (collectively, the "Warrants");
WHEREAS, subject to the terms of this Agreement the Company and the
Original Purchasers desire to amend and restate the March Purchase Agreement, to
modify certain terms with respect to the March Debentures and to exchange the
Series A Preferred;
WHEREAS, the Company and the Original Purchasers pursuant to Section
5.4 of the March Purchase Agreement agree to amend the March Purchase Agreement
and restate the March Purchase Agreement in its entirety;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
SECTION 1. CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"AFFILIATE" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the
1
5
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"AGREEMENT EFFECTIVE DATE" shall mean April 30, 1997.
"APPLICABLE CUMULATIVE CONVERSION PERCENTAGE" is as set forth in
Section 4.20(b)(ii)(A).
"APPLICABLE CONVERSION PRICE" is as defined in Section 4.20(g).
"APPLICABLE SALES PERCENTAGE" is as set forth in Section
4.20(b)(ii)(B).
"APPRAISER" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
national standing retained to determine the Warrant Repurchase Price in
accordance with the terms hereof.
"BNY" means BNY Financial Corporation, 0000 Xxxxxx xx xxx Xxxxxxxx,
Xxx Xxxx, Xxx Xxxx 00000.
"BNY BANK OBLIGATIONS" means the borrowings and interest due
thereon (including, without limitation, any interest accruing after the
commencement of any case, proceeding or other action relating to the
liquidation, dissolution, assignment for the benefit of creditors, receivership,
arrangement, bankruptcy, insolvency or reorganization of the Company regardless
of whether such interest is allowable, payable or accruable to BNY in such case,
proceeding or other action) under the Receivables Agreement, as the same may
from time to time be amended, supplemented, otherwise modified, replaced or
refinanced.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York or the State of California are authorized or required by law
or other government actions to close.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation
in the form of Exhibit A attached hereto, which is to be filed by the Company
with the Secretary of State of the State of Delaware on or prior to the Closing
Date.
"CLOSING" and "CLOSING DATE" are as defined in Section 2.2(a).
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means shares now or hereafter authorized of the
class of Common Stock, par value $.001 per share, of the Company, stock of any
other class into which such shares may hereafter be reclassified or changed and
any other equity securities of the Company hereafter designated as Common Stock.
2
6
"CONVERSION DATE" when used in connection with the Debentures shall
have the meaning set forth therein, and when used in connection with the
Preferred Stock shall have the meaning set forth in the Certificate of
Designation.
"CONVERSION PRICE" when used in connection with the Debentures
shall have the meaning set forth therein, and when used in connection with the
Preferred Stock shall have the meaning set forth in the Certificate of
Designation.
"CONVERSION RATIO" when used in connection with the Debentures
shall have the meaning set forth therein, and when used in connection with the
Preferred Stock shall have the meaning set forth in the Certificate of
Designation.
"DEBENTURES" means the Company's 5% Convertible Debentures, due
April 30, 2002, in the form attached hereto as Exhibit B, to be issued in
accordance with and subject to the terms and conditions hereof and "Debenture"
means any of them.
"DISCLOSURE MATERIALS" means, collectively, the SEC Documents and
the Schedules to this Agreement furnished by or on behalf of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, right of first refusal, charge or security interest of any
kind in or on such asset or the revenues or income thereon or therefrom.
"LIQUIDATION PREFERENCE" is as set forth in the Certificate of
Designation.
"MAJOR PURCHASER" is as defined in Section 4.17.
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in
Section 3.1(a).
"OWNERSHIP PERCENTAGE" is as set forth in schedule 4.20(b).
"PER SHARE MARKET PRICE" When used in connection with the
Debentures shall have the meaning set forth therein, and when used in connection
with the Preferred Stock or the Underlying Shares shall have the meaning set
forth in the Certificate of Designation.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PREFERRED STOCK" means the shares of the Company's Series B
Convertible Preferred Stock, par value $.001 per share, with the respective
rights, preferences and privileges set forth in the Certificate of Designation.
3
7
"PREPAYMENT DATE" is as defined in the Debenture.
"PREPAYMENT PRICE" is as defined in the Debenture.
"PRIVATE PLACEMENT" is as defined in Section 4.17.
"PRIVATE PLACEMENT NOTICE" is as defined in Section 4.17.
"RECEIVABLES AGREEMENT" means the Accounts Receivable Management
and Security Agreement, dated as of July 31, 1995, among the Company and BNY.
"REDEMPTION DATE" shall have the meaning set forth in the
Certificate of Designation.
"REDEMPTION PRICE" shall have the meaning set forth in the
Certificate of Designation.
"REGISTRATION RIGHTS AGREEMENT" means the Amended and Restated
Registration Rights Agreement of even date herewith, in the form attached hereto
as Exhibit C, as the same may be amended, supplemented or otherwise modified in
accordance with its terms.
"SALES RESTRICTION" is as set forth in Section 4.20(b)(ii)(B).
"SEC DOCUMENTS" shall have the meaning set forth in Section 3.1(j).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" shall have the meaning set forth in Section 2.1(d).
"SHORT SALES" shall mean any sale of a security which the seller
does not own or any sale which is consummated by the delivery of a security
borrowed by, or for the account of, the seller. A person shall be deemed to own
a security if:
(1) he or his agent is title to it; or
(2) he has purchased, or has entered into an unconditional
contract, binding on both parties thereto, to purchase it
but has not yet received it; or
(3) he owns a security convertible into or exchangeable for
it and has tendered such security for conversion or
exchange; or
(4) he has an option to purchase or acquire it and has
exercised such option; or
4
8
(5) he has rights or warrants to subscribe to it and has
exercised such rights or warrants, provided, however, that a
person shall be deemed to own securities only to the extent
that he has a net long position in such securities.
"SUBSIDIARIES" shall have the meaning set forth in Section 3.1(a).
"TRADING DAY" means (a) a day on which the Common Stock is traded
on the Nasdaq National Market or Nasdaq SmallCap Market or principal national
securities exchange or market on which the Common Stock has been listed or
quoted, or (b) if the Common Stock is not listed or quoted on the Nasdaq
National Market or Nasdaq SmallCap Market or any principal national securities
exchange or market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices).
"TRANSACTION DOCUMENTS" shall have the meaning set forth in Section
3.1(b).
"TRANSFER AGENT" shall have the meaning set forth in Section 4.16.
"UNDERLYING SECURITIES REGISTRATION STATEMENT" means the
registration statement contemplated by the Registration Rights Agreement and
relating to the Underlying Shares and Warrant Shares.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
the conversion of the Debentures and the Shares in accordance with their terms
and the Certificate of Designation.
"WARRANT EXERCISE PRICE" means the "Exercise Price" as defined in
the Warrants.
"WARRANT REPURCHASE PRICE" with respect to any Warrant delivered
hereunder shall mean (A) if the average Per Share Market Price for the five
Trading Days immediately preceding the date of the notice triggering a
repurchase hereunder is greater than the Warrant Exercise Price, the product of
(1) the number of shares of Common Stock issuable upon exercise in full of such
Warrant (less such number of shares of Common Stock as shall have been
previously issued upon conversion of such Warrant) and (2) the average Per Share
Market Price for the five Trading Days immediately preceding the date of the
notice triggering a repurchase hereunder, less the Warrant Exercise Price; or
(B) if the average Per Share Market Price for the five Trading Days immediately
preceding the date of the notice triggering a repurchase hereunder is less than
or equal to the Warrant Exercise Price, such amount as is determined in good
faith by the Purchasers; provided, however, that, if the Company notifies the
Purchasers within 10 Business Days of its receipt of such a valuation by the
Purchaser pursuant to clause (B) above that it disagrees with such valuation,
within 10 Business Days of such notice, an Appraiser mutually acceptable to each
of the Purchasers and the Company shall determine such amount; provided,
further, if the Company and the Purchasers fail to appoint such mutually
acceptable Appraiser within 10 Business Days of the expiration of such 10 day
period, each of
5
9
the Company and the Purchasers shall appoint an Appraiser, who (within 10
Business Days of such appointment) shall appoint a third Appraiser to determine
conclusively the repurchase price for such Warrant, with the fees and
disbursements of any such Appraiser being shared equally by the Company and the
Purchasers.
"WARRANTS" shall be as defined in the preamble to this Agreement.
"WARRANT SHARES" shall have the meaning set forth in Section
3.1(d).
SECTION 2. PURCHASE OF SECURITIES
2.1 EXCHANGE OF SECURITIES; ISSUANCE OF SECURITIES.
(a) INFINITY. Subject to the terms and conditions set forth in this
Agreement, Infinity shall receive and the Company shall issue and deliver upon
surrender by Infinity of the March Debentures and Series A Preferred currently
held by it: (i) Debentures in an aggregate principal amount of $1,717,481.83
(the "Infinity Debenture") and (ii) 343,252 shares of Preferred Stock (the
"Infinity Preferred Shares").
(b) FAIRWAY. Subject to the terms and conditions set forth in this
Agreement, Fairway shall receive and the Company shall issue and deliver upon
surrender by Fairway of the March Debentures and Series A Preferred currently
held by it: (i) Debentures in an aggregate principal amount of $190,831.72 (the
"Fairway Debenture") and (ii) 38,061 shares of Preferred Stock (the "Fairway
Preferred Shares").
(c) XXXXXXXX. Subject to the terms and conditions set forth in this
Agreement, Xxxxxxxx shall receive and the Company shall issue and deliver upon
surrender by Xxxxxxxx of the March Debentures and Series A Preferred currently
held by it: (i) Debentures in an aggregate principal amount of $47,707.84 (the
"Xxxxxxxx Debenture") and (ii) 9,533 shares of Preferred Stock (the "Xxxxxxxx
Preferred Shares").
(d) DEFINITIONS. The Infinity Debenture, Fairway Debenture and
Xxxxxxxx Debenture are sometimes collectively referred to herein as the
"Debentures." The Infinity Preferred Shares, Fairway Preferred Shares and
Xxxxxxxx Preferred Shares are sometimes referred to collectively herein as the
"Shares." The Shares, Debentures, Warrants, Underlying Shares and Warrant Shares
are sometimes collectively referred to as the "Securities."
2.2 CLOSING.
(a) The closing of the exchange of the March Debentures and
Debentures and of the Series A Preferred and Shares (the "Closing") shall take
place at the offices of Xxxxxx Godward LLP, Five Palo Alto Square, 0000 Xx
Xxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, immediately following the execution
hereof, or at such other time and/or place as the Purchasers
6
10
and the Company may agree. The date of the Closing is hereinafter referred to as
the "Closing Date".
(b) At the Closing (A) the Company shall deliver (i) the Debentures
and certificates representing the Shares to be issued and delivered to each
Purchaser, as specified in Schedule 2.2(b) hereto, to the Persons (or as
directed thereby), registered in the names and in the amounts set forth thereon,
and (ii) to the Persons entitled thereto, all other documents, instruments and
writings required to have been delivered at or prior to the Closing by the
Company pursuant to this Agreement; (B) each Purchaser shall deliver to the
Company (i) the March Debentures and Series A Preferred issued to such Purchaser
in connection with the closing of the transactions under the March Purchase
Agreement and (ii) all documents, instruments and writings required to have been
delivered at or prior to the Closing by such Purchaser pursuant to this
Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchasers as follows:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in the SEC
Documents (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not individually or
in the aggregate have a material adverse effect on the results of operations,
assets, prospects or financial condition of the Company and the Subsidiaries,
taken as a whole (a "Material Adverse Effect").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Warrants, the Registration Rights Agreement, the
Convertible Debentures and the Certificate of Designation and otherwise to carry
out its obligations hereunder and thereunder. This Agreement, the Registration
Rights Agreement, the Convertible Debentures, the Warrants and the Certificate
of Designation are collectively referred to as the "Transaction Documents." The
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company. Each Transaction
Document has been duly executed and delivered by the Company and constitutes the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such
7
11
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company and each of the Subsidiaries is set forth in Schedule
3.1(c). No shares of Common Stock are entitled to preemptive or similar rights.
Except as specifically disclosed in Schedule 3.1(c), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Convertible Debentures, Shares and Warrants hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents.
(d) ISSUANCE OF DEBENTURES, SHARES AND WARRANTS. The Debentures have
been duly and validly authorized for issuance, offer and sale pursuant to this
Agreement and, when issued and delivered as provided hereunder against payment
in accordance with the terms hereof, shall be valid and binding obligations of
the Company enforceable in accordance with their terms free and clear of all
Liens. The Shares are duly authorized and, when paid for in accordance with the
terms hereof, shall be validly issued, fully paid and nonassessable. The
Warrants are duly authorized, and when issued and paid for in accordance with
the terms hereof, shall be validly issued, free and clear of all Liens. The
Company has and at all times while the Debentures, Shares and Warrants are
outstanding will maintain an adequate reserve of shares of Common Stock to
enable it to perform its obligations under this Agreement, the Debentures, the
Certificate of Designation and Warrants and in no circumstances shall such
reserved and available shares of Common Stock be less than the sum of (i) two
times the number of Underlying Shares, assuming in each case such conversion
occurred on the Effective Date, and assuming the payment of dividends and
interest in additional Shares and Debentures, and (ii) the number of shares of
Common Stock which would be issuable upon exercise in full of the Warrants (the
"Warrant Shares"). When issued in accordance with the terms hereof and the
Convertible Debentures, the Certificate of Designation, the Underlying Shares
will be duly authorized, validly issued, fully paid nonassessable, free and
clear of all Liens; and when issued upon exercise of the Warrants in accordance
with their respective terms, the Warrant Shares will be duly authorized, validly
issued, fully paid, nonassessable and free and clear of all Liens.
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of its certificate of incorporation or bylaws
(each as amended through the date hereof) or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company
8
12
is a party or by which any property or asset of the Company is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) or
(iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any Transaction
Document, (y) have a Material Adverse Effect or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
Transaction Document. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, do not have a
Material Adverse Effect.
(f) CONSENTS AND APPROVALS. Except as obtained prior to the execution
hereof, neither the Company nor any Subsidiary is required to obtain any
consent, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (i) the filing with the
Commission of an Underlying Securities Registration Statement and the making of
the applicable blue-sky filings under state securities laws, each as
contemplated by the Registration Rights Agreement, which shall be filed in the
time periods set forth in the Registration Rights Agreement, (ii) the filing of
the Certificate of Designation with the Secretary of State of the State of
Delaware, which shall occur prior to the Closing, and (iii) other than, in all
other cases, where the failure to obtain such consent, waiver, authorization or
order, or to give or make such notice or filing, could not, individually or in
the aggregate, (x) adversely affect the legality, validity or enforceability of
any of the Transaction Documents, (y) have a Material Adverse Effect or (z)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents.
(g) LITIGATION; PROCEEDINGS. Except as specifically set forth in
Schedule 3.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
assets or properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) which
(i) relates to or challenges the legality, validity or enforceability of the
Transaction Documents, Underlying Shares or Warrant Shares (ii) could,
individually or in the aggregate, if adversely determined, have a Material
Adverse Effect or (iii) could, individually or in the aggregate, adversely
impair the Company's ability to perform fully on a timely basis its obligations
under the Transaction Documents.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary
(i) is in default under or in violation of any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, except as could not,
9
13
in any such case, individually or in the aggregate, (x) adversely affect the
legality, validity or enforceability of any of the Transaction Documents, (y)
have a Material Adverse Effect or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under the Transaction Documents.
(i) CERTAIN FEES Except for $200,000, the Xxxxxxxx Debenture and the
Xxxxxxxx Preferred Shares paid by the Company to Xxxxxxxx, no fees or commission
will be payable by the Company to any broker, finder, investment banker or bank
with respect to the consummation of the transactions contemplated hereby.
(j) PRIVATE OFFERING. Assuming (without any independent investigation
or verification by or on behalf of the Company) the accuracy of the
representations and warranties of the Purchasers set forth in Section 3.2, the
offer and sale of the Debentures, Shares, the Warrants, the Underlying Shares
and the Warrant Shares are exempt from registration under Section 5 of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of the Company
under circumstances which would require the integration of such offering with
the offering of the Convertible Debentures or Shares under the Securities Act)
which might subject the offering, issuance or sale of the Debentures, Shares,
the Warrants, the Underlying Shares or the Warrant Shares to the registration
requirements of Section 5 of the Securities Act.
(k) SEC DOCUMENTS. The Company has filed all forms, reports and
documents required to be filed by it under the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(the foregoing reports being collectively referred to herein as the "SEC
Documents") on a timely basis, or has received a valid extension of such time of
filing. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder and none of
the SEC Documents, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited and unaudited consolidated
balance sheets of the Company and its Subsidiaries contained in the SEC
Documents, and the related consolidated statements of income, changes in
stockholders' equity and changes in cash flows for the periods then ended,
including the footnotes thereto, except as indicated therein, have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods indicated, except that unaudited financial
statements contained therein do not contain notes and may be subject to normal
audit adjustments and normal annual adjustments and fairly present the financial
condition of the Company and its consolidated Subsidiaries as of and for the
dates thereof and, except as indicated therein, reflects all claims against and
all material debts and liabilities of the Company and its consolidated
Subsidiaries, fixed or contingent, as at and for the dates thereof; and the
related statements of income, stockholders' equity and changes in cash flows
fairly present the results of the operations of the Company and its consolidated
Subsidiaries and the changes in financial position for the period indicated.
Since the date of the financial statements included in the Company's
10
14
last filed Quarterly Report on Form 10-Q, there has been no event, occurrence or
development that has had a Material Adverse Effect which is not specifically
disclosed in any of the Disclosure Materials.
(l) FORM S-3 ELIGIBILITY. The Company meets the registrant
requirements and meets the registrant requirements set forth in connection with
offerings by persons other than the issuer set forth in the General Instructions
of Form S-3 promulgated under the Securities Act.
(m) INVESTMENT COMPANY. The Company is not, and following the Closing
and issuance of the Debentures and the Shares will not be, nor is it an
Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(n) SOLICITATION MATERIALS. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the Debentures,
the Shares, the Warrants, the Underlying Shares or the Warrant Shares other than
the Disclosure Materials or (ii) solicited any offer to buy or sell the
Debentures, the Shares, the Warrants, the Underlying Shares or the Warrant
Shares by means of any form of general solicitation or advertising.
(o) MARGIN REQUIREMENTS. The Company does not intend to, and will
not, use the proceeds of the offer and sale of the Debentures, Shares and
Warrants hereunder, directly or indirectly, immediately, incidentally or
ultimately, (i) to purchase or carry Margin Stock (as such term is defined under
Regulation U of the Board of Governors of the Federal Reserve System, as in
effect from time to time) or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The acquisition of the Debentures, Shares
and Warrants to be purchased by such Purchaser hereunder has been duly
authorized by all necessary action on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other general
principles of equity.
11
15
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Debentures,
Shares and the Warrants to be purchased by it hereunder, and the Underlying
Shares and the Warrant Shares relating to such Debentures, Shares and Warrants,
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Debentures, Shares, Underlying Shares, Warrants
or Warrant Shares or any part thereof or interest therein, without prejudice,
however, to such Purchaser's right, subject to the provisions of this Agreement
and the Registration Rights Agreement, at all times to sell or otherwise dispose
of all or any part of such Debentures, Shares, Underlying Shares, Warrants or
Warrant Shares pursuant to under an effective registration statement under the
Securities Act or pursuant to an available exemption from the registration
requirements thereunder and in compliance with applicable state securities laws.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Debentures, Shares and Warrants to be acquired by it hereunder, it was and at
the date hereof, it is, and at each date it exercises Warrants it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) INVESTMENT COMPANY. The Purchaser is not, and following the
Closing and issuance of the Debentures and Shares will not be, nor is it an
Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(e) EXPERIENCE OF PURCHASER. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of an investment in the securities to be acquired by it hereunder, and has
so evaluated the merits and risks of such investment.
(f) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such Purchaser
is able to bear the economic risk of an investment in the securities to be
acquired by it hereunder and, at the present time, is able to afford a complete
loss of such investment.
(g) PROHIBITED TRANSACTIONS. The securities to be acquired by such
Purchaser hereunder are not being acquired, directly or indirectly, with the
assets of any "employee benefit plan", within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.
(h) ACCESS TO INFORMATION. Such Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the securities offered hereunder and the merits and risks of investing in
such securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in such securities;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment
12
16
decision with respect to the investment and to verify the accuracy and
completeness of the information contained in the Disclosure Materials.
(i) RELIANCE. Such Purchaser understands and acknowledges that (i)
the Debentures, the Shares and the Warrants being offered and sold to it
hereunder are being offered and sold without registration under the Securities
Act in a private placement that is exempt from the registration provisions of
the Securities Act under Regulation D promulgated thereunder and (ii) the
availability of such exemption, depends in part on, and that the Company will
rely upon the accuracy and truthfulness of, the foregoing representations and
such Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
SECTION 4. OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) If any Purchaser should decide to dispose of any portion of the
principal amount of the Debentures, any of the Shares or any portion of the
Warrant to be purchased by it hereunder (and upon conversion or exercise
thereof, any Underlying Shares or Warrant Shares, as applicable), such Purchaser
understands and agrees that it may do so only (i) pursuant to an effective
registration statement under the Securities Act, (ii) to the Company or (iii)
pursuant to an available exemption from registration under the Securities Act.
No Purchaser may dispose of any portion of such securities pursuant to clause
4.1(a)(iii) unless such Purchaser provides prior written notice thereof to the
Company and complies with the provisions of the immediately following sentence.
In connection with any transfer of any Debentures, Warrants, Underlying Shares
or Warrant Shares other than pursuant to an effective registration statement or
to the Company, the Company may require that the transferor provide to the
Company an opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer of such Debentures, Shares, Warrants, Underlying Shares or Warrant
Shares, as the case may be, is being made in compliance with the Securities Act.
Any transfer of the Underlying Shares shall be subject to the transfer and sales
restrictions set forth in Sections 4.20 of this Agreement.
(b) The Purchasers agree to the imprinting, so long as required by
the terms of this Section 4.1(b), of the following legend on certificates
representing the Debentures, the Shares, the Underlying Shares, the Warrants and
the Warrant Shares to be modified as applicable:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE CONVERTIBLE [OR EXERCISABLE] HAVE BEEN REGISTERED
13
17
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS THEREUNDER, AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS.
THIS [ ] IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION
SET FORTH IN AN AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, DATED AS OF
JULY 25, 1997, AND EFFECTIVE AS OF APRIL 30, 1997 BETWEEN YES! ENTERTAINMENT
CORPORATION ("THE COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
The legend set forth above shall be removed upon the conversion of
Debentures or Shares or exercise of Warrants represented by such certificate at
any time after an Underlying Securities Registration Statement has been
declared, and so long as such Underlying Securities Registration Statement
remains effective under the Securities Act or, if not converted during such
time, at such other time as in the opinion of counsel to the Company experienced
in the area of United States securities laws such legend is no longer required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
certificates representing the Debentures, Shares, Warrants, Underlying Shares
and Warrant Shares shall also bear any other legends required by applicable
Federal or state securities laws, which legends may be removed as set forth
above in the immediately preceding sentence, or, with respect to legends
required pursuant to state securities laws, when such legends are no longer
required under the applicable requirements of such securities laws. The Company
agrees that it will provide each Purchaser, upon request, with a substitute
certificate or certificates, free from such legend at such time as such legend
is no longer applicable. Each Purchaser agrees that, in connection with any
transfer of Underlying Shares or Warrant Shares by it pursuant to an effective
registration statement under the Securities Act, such Purchaser will comply with
all applicable prospectus delivery requirements of the Securities Act. The
Company makes no representation, warranty or agreement as to the availability of
any exemption from registration under the Securities Act with respect to any
resale of the Debentures, Shares, Underlying Shares, Warrants or Warrant Shares.
4.2 STOP TRANSFER INSTRUCTION. For so long as an Underlying Securities
Registration Statement is effective, the Company may not issue any stop transfer
instruction or make any notation on its records with respect thereto to any
transfer agent (including the Transfer Agent) of the Company and shall issue
shares of Common Stock upon a conversion of Debentures or Shares or exercise of
Warrants in accordance with Section 4.1.
4.3 FURNISHING OF INFORMATION.
14
18
(a) As long as any Purchaser owns Debentures, Shares, Underlying
Shares, Warrants or Warrant Shares, the Company covenants to timely file (or
obtain extensions in respect thereof) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and to promptly furnish each Purchaser with true and complete copies of all
such filings. If the Company is not at the time required to file reports
pursuant to such sections, it will prepare and furnish to each Purchaser annual
and quarterly financial statements, together with a discussion and analysis of
such financial statements in form and substance substantially similar to those
that would otherwise be required to be included in reports required by Section
13(a) or 15(d) of the Exchange Act in the time period that such filings would
have been required to have been made under the Exchange Act.
(b) The Company shall deliver copies to the Purchasers of any
documents or financial statements it delivers to BNY pursuant to Section 11(a),
11(b) or 11(c/d) of the Receivables Agreement concurrently with such delivery to
BNY, provided that the Company shall not be obligated to deliver the
accountant's consent required under Section 11 of the Receivables Agreement and
shall not deliver to the Purchasers the other materials it is required to
deliver to BNY under such Section 11.
4.4 COPIES AND USE OF DISCLOSURE MATERIALS. The Company consents to the
use of the SEC Documents, and any amendments and supplements thereto, by the
Purchasers in connection with resales of the Underlying Shares or the Warrant
Shares to the extent such resales are not pursuant to an effective registration
statement.
4.5 BLUE SKY LAWS. The Company shall qualify the Underlying Shares and
the Warrant Shares under the securities or Blue Sky laws of such jurisdictions
as each Purchaser may request and shall continue such qualification at all times
through the third anniversary of the Closing Date; provided, however, that the
Company shall not be required in connection therewith to qualify as a foreign
corporation where it is not now so qualified, or take any action that would
subject the Company to general service of process in any such jurisdiction where
it is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
4.6 INTEGRATION. The Company shall not and shall use its best efforts
to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Debentures, the Shares, the Warrants, the Underlying Shares or the Warrant
Shares in a manner that would require the registration under the Securities Act
of the sale of the Debentures, the Shares, the Warrants, the Underlying Shares
or the Warrant Shares to the Purchasers.
4.7 CERTAIN AGREEMENTS.
(a) From the date hereof through the third anniversary hereafter, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the Purchasers, (i) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any
15
19
rights of the Purchasers under the Transaction Documents; (ii) repay, repurchase
or offer to repay, repurchase or otherwise acquire in excess of 10,000 shares of
its Common Stock, other than shares which may be repurchased from employees of
the Company in connection with the termination of their employment with the
Company; or (iii) enter into any agreement with respect to any of the foregoing.
(b) The Company may not force any conversion or call a redemption of
any portion of the principal amount of the Debentures until such time as all of
the Shares have been converted or redeemed in accordance with the terms hereof
and the Certificate of Designation.
4.8 PURCHASER OWNERSHIP OF COMMON STOCK. No Purchaser may use its ability
to convert the Debentures or Shares issued to it hereunder or to use its ability
to acquire shares of Common Stock upon exercise of the Warrant to be issued to
it pursuant to the terms hereof to the extent that such conversion or exercise
would result in that Purchaser beneficially owning (for purposes of Rule 13d-3
under the Exchange Act) more than 4.9% of the outstanding shares of the Common
Stock; provided, however, that the provisions of this Section 4.8 shall not
apply to any forced conversion by the Company pursuant to Section 4(b) of the
Debentures or pursuant to Section 5(b) of the Certificate of Designation and,
provided, further, that if 10 days have elapsed since a Purchaser shall have
declared an "Event of Default" (as such term is defined in the Debentures), the
provisions of this Section 4.8 shall be null and void ab initio.
4.9 LISTING OF UNDERLYING SHARES. The Company shall, within seven (7)
Business Days of the Closing Date, file with the Nasdaq National Market an
additional shares listing application covering such Underlying Shares and
Warrant Shares that shall not have been previously covered by a Nasdaq
additional shares listing and shall take all steps necessary to cause such
application to be approved as soon as possible thereafter. The Company shall
also take all steps necessary to cause such shares to be listed on any other
national securities exchange or market on which the Common Stock is then listed
as soon as possible after the Closing Date. The Company shall provide to each
Purchaser evidence of such filings and listings, and shall maintain such
listings as long as any Purchaser holds Debentures, Shares, Warrants, Underlying
Shares or Warrant Shares. In the event the aggregate number of Underlying Shares
and Warrant Shares exceeds the number covered by the additional shares listing
application filed with the Nasdaq National Market, the Company shall promptly
file one or more appropriate listing applications to continually list for
trading a number of such additional shares, as the Company and the Purchasers
shall reasonably agree.
4.10 PURCHASER'S RIGHTS IF TRADING IN COMMON STOCK IS SUSPENDED OR
DELISTED. In the event that at any time within the three-year period after the
date hereof, trading in the shares of the Common Stock is suspended on or
delisted from the Nasdaq National Market (other than as a result of the
suspension of trading in securities on such market generally or temporary
suspensions pending the release of material information and other than a
suspension of trading if the Common Stock is quoted on the Nasdaq SmallCap
Market within one Business Day after such suspension), at each Purchaser's
option exercisable by five Business Days prior written notice to the Company,
the Company shall repay, redeem, or repurchase as applicable, all of the
Debentures owned by each Purchaser at the Prepayment Price as calculated on the
date
16
20
of such notice, all of the Shares owned by each Purchaser at the Redemption
Price as calculated on the date of such notice, all of the Warrants at the
Warrant Repurchase Price as calculated on the date of such notice, and all of
the Underlying Shares at the Per Share Market Price as calculated on the date of
such notice and interest on such amounts at the rate of 15% per annum accruing
from the fifth (5th) Business Day after such notice until the repurchase price
under this Section 4.10 is paid in full.
4.11 NO VIOLATION OF APPLICABLE LAW. Notwithstanding any provision of
this Agreement to the contrary, if any repurchase or redemption otherwise
required under this Agreement or the Registration Rights Agreement would be
prohibited by the relevant provisions of Delaware General Corporation Law, such
repurchase shall not be effected unless and until it is permitted under such
law; provided, however, that interest payable by the Company with respect to any
such repurchase or redemption shall continue to accrue in accordance with
Section 4.10.
4.12 REPURCHASE RESTRICTIONS. Notwithstanding any provision of this
Agreement to the contrary, if any repurchase or redemption otherwise required
under this Agreement or the Registration Rights Agreement would be prohibited in
the absence of consent from any lender of the Company or any of the
Subsidiaries, or by the holders of any class of securities of the Company, the
Company shall use its best efforts to obtain such consent as promptly as
practicable after the repurchase or redemption is required and such repurchase
or redemption shall not be effected unless and until such consent is obtained.
Interest payable by the Company with respect to any such repurchase or
redemption shall continue to accrue until such consent is obtained and the
repurchase price therefor paid. Nothing contained in this Section 4.12 shall be
construed as a waiver by the Purchaser of any rights it may have by virtue of
any breach of any representation or warranty of the Company herein as to the
absence of any requirement to obtain any such consent.
4.13 LEGAL OPINION. The Company shall cause the legal opinion of Xxxxxx
Godward LLP in the form of Exhibit D, to be delivered at the Closing.
4.14 NOTICE OF BREACHES. Each of the Company and each Purchaser shall
give prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement or in the Registration
Rights Agreement, as well as any events or occurrences arising after the date
hereof and prior to, with respect to the Closing, which would reasonably be
likely to cause any representation or warranty or other agreement of such party,
as the case may be, contained herein to be incorrect or breached as of such
Closing Date. However, no disclosure by either party pursuant to this Section
4.14 shall be deemed to cure any breach of any representation, warranty or other
agreement contained herein or in the Registration Rights Agreement.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify each Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated hereby and by the Registration Rights Agreement
violates or would violate any written agreement or
17
21
understanding between such lender and the Company, and the Company shall
promptly furnish by facsimile to the holders of the Debentures and Shares a copy
of any written statement in support of or relating to such claim or notice.
4.15 CONVERSION PROCEDURES. Exhibit F sets forth the procedures that are
to followed in addition to the tendering of a Conversion Notice hereunder with
respect to the conversion of the Debentures or Shares including the form of
legal opinion, if necessary, that shall be rendered to the Transfer Agent and
such other information and instructions as may be reasonably necessary to enable
the Purchasers to exercise its right of conversion smoothly and expeditiously.
4.16 TRANSFER AGENT. Boston EquiServe shall act as transfer agent (the
"Transfer Agent") of the Company. The Company may not remove or replace the
Transfer Agent as its transfer agent without written consent of the Purchasers.
4.17 RIGHT OF FIRST REFUSAL. Except for sales of stock to key employees
and Company matching contributions pursuant to the Company's 401(k) plan, the
Company may not enter into any transaction prior to one hundred eighty days from
the Closing Date with a Person other than the Major Purchasers (as hereafter
defined) to sell or otherwise dispose of securities in any transaction intended
not to be subject to the registration requirements of the Securities Act (a
"Private Placement"), unless the Company first provides a written notice (the
"Private Placement Notice") to each Major Purchaser describing the terms and
conditions of such Private Placement (to which the Company shall attach any
written term sheet or other similar writing with respect thereto). Infinity and
Fairway (each a "Major Purchaser") shall have the right, exercisable within five
(5) Business Days of its receipt of such notice, to provide the Company with a
written notice of its intention to provide the financing described in the
Private Placement Notice on terms no less favorable to the Company than as set
forth in the Private Placement Notice. If a Major Purchaser indicates a desire
to provide, in the aggregate, in excess of the financing requested in the
Private Placement Notice, such Major Purchaser shall have the right to provide
up to such portion of the Private Placement as corresponds to the portion,
expressed as a percentage, that the principal amount of Debentures and stated
values of Preferred Stock, then held by such Major Purchaser bears to the
aggregate principal amount of Debentures in the aggregate, then outstanding. If
any Major Purchaser shall fail to elect to provide its respective pro rata
portion of the Private Placement financing, the other Major Purchaser shall be
entitled to provide a pro rata portion (determined in the manner referenced
above) of such shortfall. If a Major Purchaser fails to elect to exercise the
right of first refusal set forth in this Section, then the Company may
consummate the Private Placement on the terms and to the Persons (or Affiliates
of such Persons) set forth in the Private Placement Notice; provided, however,
that if the Company shall fail to consummate such Private Placement within
forty-five (45) days after the date of the Private Placement Notice relating
thereto, the Company may not consummate such Private Placement without again
complying with the terms of first refusal set forth in this Section. The
provisions of this Section shall not apply to (i) any issuance of Company
securities pursuant to a bona fide employee stock option, stock purchase or
non-employee director plan duly adopted by the Company or (ii) any Private
Placement Notice if all, or substantially all, of the proceeds of such Private
Placement shall be proposed to be used and shall actually be used to repay,
redeem or retrieve the Securities.
18
22
4.18 RESTRICTION ON DEBT. The Company covenants and agrees that from and
after the date hereof and so long as any of the Debentures remain outstanding,
or the Company shall have any obligation to the Purchasers hereunder or pursuant
hereto, the Company shall not, and shall not permit any Subsidiary to, without
the prior written consent of the Purchasers in each instance incur, create,
assume, guarantee or suffer to exist, or become or remain liable directly or
indirectly, for or on account of any indebtedness, obligations or liabilities
that rank pari passu with or senior to the indebtedness, obligations and
liabilities represented by the Debentures, except under the BNY Bank
Obligations.
4.19 RESTRICTION ON SHORT SALES. Each Purchaser covenants and agrees not
to engage in any Short Sales of Common Stock so long as the Purchasers or any of
their affiliates, as defined in the Exchange Act, hold any Shares or Debentures;
provided, however, that each Major Purchaser may engage in sales of Common Stock
issuable to a Major Purchaser upon conversion or upon exercise of a Warrant,
made within 72 hours prior to the time notice of conversion is given, or such
Warrant is exercised, as applicable.
4.20 RESTRICTIONS ON CONVERSION AND SALE.
(a) DEFINITIONS. "Applicable Conversion Price" shall mean the
"volume-weighted average" price of shares of Common Stock as defined and
reported by Bloomberg, L.P. for the twenty (20) consecutive Trading Day period
immediately preceding the first day of the month in which the conversion occurs
starting on the fourth month after the Agreement Effective Date.
(b) RESTRICTIONS.
(i) Each Purchaser agrees that they shall not sell nor offer to
sell any of the Underlying Shares until October 31, 1997, except in accordance
with the terms of the Securities.
(ii) Subject to, and in addition to, the provisions of the
Securities and Section 4.20(b) above, beginning on November 1, 1997, each
Purchaser is subject to the following restrictions with respect to the
conversion and sale of the Securities.
(a) In any calendar month, each Purchaser may convert when
aggregated with all previous conversions by such Purchaser up to the "Applicable
Cumulative Conversion Percentage" (as set forth below) of the aggregate
Liquidation Preference of the Shares held by such Purchaser as of the date of
such conversion during the relevant month and may convert, when aggregated with
all previous conversions by such Purchaser, up to the Applicable Conversion
Percentage of aggregate principal amount of (and unpaid interest on) the
Debentures held by such Purchaser as of the date of such conversion during the
relevant month. For the purposes of this Section 4.20, the Applicable Cumulative
Conversion Percentage shall vary with the Applicable Conversion Price as set
forth in the table below:
19
23
Applicable Cumulative
Applicable Conversion Price Conversion Percentage
--------------------------- ---------------------
Less than $4.00 15%
Equal to or greater than $4.00 but less than $5.00 17.5%
Equal to or greater than $5.00 but less than $6.00 20%
Equal to or greater than $6.00 but less than $7.00 22.5%
Equal to or greater than $7.00 but less than $10.00 25%
Equal to or greater than $10.00 but less than $12.00 30%
Equal to or greater than $12.00 100%
(b) In any calendar week, any Purchaser may not sell more
shares of Common Stock, acquired upon conversion of Shares or Debentures, than
the "Sales Restriction" which shall be the number equal to the product of (a)
such Purchaser's Ownership Percentage as set forth in Schedule 4.20(b); (b) the
Applicable Sales Percentage (as set forth below); and (c) the greater of the
average weekly trading volume of Common Stock, as reported by Bloomberg, L.P.,
for the following periods: (i) the calendar week preceding the week in which
such sale occurs; (ii) for the four calendar weeks preceding the week in which
such sale occurs; or (iii) for the thirteen calendar weeks preceding the week in
which sale occurs; provided, however, that beginning on the first day of the
thirteenth month after the Agreement Effective Date, each Purchaser may sell up
to the greater of (x) Sales Restriction or (y) the number of shares of Common
Stock, acquired upon conversion of Shares or Convertible Debentures, equal to
the product of (i) such Purchaser's Ownership Percentage and (ii) 100,000. For
the purposes of this Section 4.20, the "Applicable Sales Percentage" shall vary
with the Per Share Market Price and with the month after the Agreement Effective
Date in which such sale occurs, as set forth in the table below:
Applicable Sales Percentage
-----------------------------
Months Four After
Through Month
Per Share Market Price Twelve Twelve
---------------------- ----------- ------
Less than $4.00 10% 20%
Equal to or greater than $4.00 but less than $5.00 12.5% 25%
Equal to or greater than $5.00 but less than $6.00 15% 30%
Equal to or greater than $6.00 but less than $7.00 17.5% 35%
Equal to or greater than $7.00 but less than $10.00 20% 40%
Equal to or greater than $10.00 but less than $12.00 22.5% 45%
Equal to or greater than $12.00 100% 100%
(c) On each Conversion Date, a Purchaser shall make a
representation that such Purchaser has not violated Section 4.19 of this
Agreement.
20
24
SECTION 5. MISCELLANEOUS
5.1 FEES AND EXPENSES. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement, except as set forth in the
Registration Rights Agreement; provided, however, the Company shall pay the
legal fees and expenses of the Major Purchasers incurred by them in connection
with the negotiation, preparation, execution and delivery of this Agreement and
the other documents delivered at the Closing. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the
Debentures and Shares pursuant hereto. Each Purchaser shall be responsible for
such Purchaser's own tax liability that may arise as a result of the investment
hereunder or the transactions contemplated by this Agreement.
5.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits and Schedules hereto, the definitive Debentures, the Certificate of
Designation, the Registration Rights Agreement and the Warrants contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
5.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (Eastern Standard
Time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m.
(Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern
Standard time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be:
If to the Company: YES! Entertainment Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxxxxx
Facsimile No.: (000) 000-0000
With copies to: Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
If to Infinity: Infinity Investors Limited
21
25
c/o Trident Trust Company (Cayman) Limited
0 Xxxxxxx Xxxxx
X.X. Xxx 000
Xxxxx Xxxxxx, Xxxxxx Island, B.V.I.
Attn: X. XxXxxxxxxx
Facsimile No.: (000) 000-0000
If to Fairway: Fairway Capital Limited
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0X0X0
Attn: X.X. Xxxxxxxx
Facsimile No.: 011-44-171-355-4975
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxx
Facsimile No.: (000) 000-0000
and Xx. Xxxxxx Xxxxxxxxx
c/o HW Finance
000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
If to Xxxxxxxx: Xxxxxxxx & Laffer Capital Corp.
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchasers, or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
22
26
5.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Neither the Company nor the Purchasers may assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other, except
that each Purchaser may assign its rights hereunder and under the Registration
Rights Agreement to an Affiliate thereof, provided, that such assignee
demonstrates to the reasonable satisfaction of the Company its satisfaction of
the representations and warranties set forth in Section 3.2 herein. The
assignment by a party of this Agreement or any rights hereunder shall not affect
the obligations of such party under this Agreement.
5.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person, except that the representations, warranties and other
agreements contained herein of the Company are intended for the benefit of and
may be relied upon and enforced by Xxxxx Xxxxxxx, LLC to the extent such
representations, warranties and agreements relate to the March Warrant delivered
to Xxxxx Xxxxxxx, LLC.
5.8 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
5.9 SURVIVAL. Each of the representations and warranties of the Company
and the Purchaser contained in Article III and the agreements and covenants of
the parties contained in Article IV and this Article V shall survive until a
date that is three years after the last Closing date.
5.10 COUNTERPART SIGNATURES. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 PUBLICITY. Prior to, or concurrently with, the filing of a
registration statement contemplated by this transaction the Company and the
Purchasers shall consult with each other in issuing any press releases or
otherwise making public statements with respect to the transactions contemplated
hereby and neither party shall issue any such press release or otherwise make
any such public statement without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, except for such releases
or public statements that are required by law. Any press release or public
statement made subsequent to
23
27
the filing of the registration statement contemplated by this transaction shall
not contain any statement regarding the trading on investment of the Major
Purchasers in connection with this Agreement, the March Agreement or the
predecessor thereto, without first obtaining the consent of such Major
Purchasers, which consent shall not be unreasonably withheld.
5.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
5.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement and the Company will be entitled to specific performance of the
obligations of the Purchasers hereunder with respect to the subsequent transfer
of Debentures, Shares and the Underlying Shares. Each of the Company and the
Purchasers agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of any breach of its obligations described in the
foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
24
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
YES! ENTERTAINMENT CORPORATION
By:______________________________________
Name:____________________________________
Title:___________________________________
INFINITY INVESTORS LIMITED
By:______________________________________
Name:____________________________________
Title:___________________________________
FAIRWAY CAPITAL LIMITED
By:______________________________________
Name:____________________________________
Title:___________________________________
XXXXXXXX & LAFFER CAPITAL CORP.
By:______________________________________
Name:____________________________________
Title:___________________________________
25
