CONTRIBUTION AND INTEREST PURCHASE AGREEMENT
by and among
ZANY BRAINY, INC.,
ONLINE RETAIL PARTNERS LLC
and
ZB HOLDINGS LLC
As of October 18, 1999
This CONTRIBUTION AND INTEREST PURCHASE AGREEMENT (this "Agreement") is
entered into as of this 18th day of October, 1999 by and among Zany Brainy,
Inc., a Pennsylvania corporation ("Zany Brainy"), Online Retail Partners LLC, a
Delaware limited liability company ("ONRP"), and ZB Holdings LLC, a Delaware
limited liability company (the "Company"). Each of Zany Brainy and ONRP is
hereinafter referred to as a "Contributor" and together, the "Contributors."
RECITALS
A. Zany Brainy has agreed to enter into (i) a Services Agreement with
Xxxxxxxxxx.xxx LLC, a Delaware limited liability company ("XX.xxx"), dated as of
the Closing Date (as defined herein), substantially in the form attached hereto
as Exhibit A (the "Services Agreement"), pursuant to which Zany Brainy will
provide XX.xxx various transition and other services, (ii) a Trademark License
Agreement with XX.xxx, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit B (the "Trademark License Agreement"), pursuant to
which Zany Brainy will license various Zany Brainy trademarks to XX.xxx for use
in XX.xxx's web site business, (iii) a Supply Agreement with XX.xxx, dated as of
the Closing Date, substantially in the form attached hereto as Exhibit C (the
"Supply Agreement"), pursuant to which Zany Brainy will procure products on
behalf of XX.xxx for the purpose of selling such products on XX.xxx's web site,
(iv) a Data Sharing/License Agreement with ONRP Services LLC ("ONRPS"), a
Delaware limited liability company and a wholly-owned subsidiary of ONRP, Zany
Brainy and XX.xxx, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit D (the "Data Sharing/License Agreement"), pursuant to
which each party will, to the extent permitted, share information regarding such
party's customers with the other parties, and (v) the Limited Liability Company
Agreement of ZB Holdings LLC with ONRP and the Company, dated as of the Closing
Date, substantially in the form attached hereto as Exhibit E (the "Operating
Agreement"). The foregoing agreements, together with the Web Site Services
Agreement (as defined below), shall be referred to herein collectively as the
"Transaction Agreements";
B. Zany Brainy has agreed to contribute (i) certain tangible and
intangible assets, including certain trademark and related licenses, as set
forth in the Trademark License Agreement, to the Company as set forth herein and
in the Transaction Agreements; (ii) $5.0 million of cash and (iii) 100% of the
membership interests in XX.xxx, all in exchange for 500,000 Voting Preferred
Interests and 666,667 Non-Voting Preferred Interests (as such terms are defined
in the Operating Agreement) (together, the "Preferred Interests");
C. ONRPS has agreed to enter into a Web Site Services Agreement with
XX.xxx, dated as of the Closing Date, substantially in the form attached hereto
as Exhibit F (the "Web Site Services Agreement"), pursuant to which ONRPS will
provide various web site development, hosting, marketing and consulting
services;
D. ONRP has agreed to contribute $5.0 million of cash to the Company in
exchange for 500,000 Voting Common Interests (as such term is defined in the
Operating Agreement)
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(the "Common Interests" and, together with the Preferred Interests, the
"Interests"); and
E. The Company has agreed to accept the foregoing contributions and has
agreed to issue Interests of the Company as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants, and agreements herein contained, and for
other good and valuable consideration mutually exchanged by the parties hereto,
the receipt and sufficiency of which are hereby acknowledged, Zany Brainy, ONRP
and the Company agree as follows:
AGREEMENT
SECTION 1 - CONTRIBUTION OF ASSETS
SECTION 1.1 Contribution by Zany Brainy.
(a) Cash Contribution. Upon the terms and subject to the conditions
set forth in this Agreement, Zany Brainy hereby agrees to transfer and deliver
to the Company, as an initial capital contribution, FIVE MILLION DOLLARS
($5,000,000) of cash (the "Zany Brainy Cash Contribution"). Zany Brainy agrees
to make the Zany Brainy Cash Contribution by wire transfer of immediately
available funds.
(b) Transfer of Contributed Assets. Upon the terms and subject to the
conditions set forth in this Agreement, Zany Brainy hereby assigns, transfers
and delivers to the Company, as an initial capital contribution, free and clear
of all Encumbrances, all tangible and intangible personal property and other
assets (including the ownership interest in XX.xxx) identified in Schedule
1.1(b) (collectively, the "Contributed Assets").
(c) Excluded Assets. Except as expressly identified in Schedule
1.1(b), Zany Brainy is not contributing to the Company, and there shall not be
included in the Contributed Assets, any of the other assets of Zany Brainy.
Zany Brainy and the Company agree that they shall cooperate with each other
following the Closing Date to ensure that any monies received by either of them
following the Closing Date are apportioned as provided in this Agreement.
(d) Assumed Liabilities. Subject to the conditions of this Agreement,
the Company hereby assumes and agrees to pay, discharge or fulfill all of the
liabilities and obligations in respect of (i) the obligations expressly
identified in Schedule 1.1(d) and (ii) the Contributed Assets, to the extent
that such liability or obligations arise out of facts or circumstances occurring
on or after the Closing Date (the "Assumed Liabilities"). Notwithstanding
anything contained in this Agreement to the contrary, except for the Assumed
Liabilities, the Company is not assuming any liabilities of any nature, whether
accrued, absolute, contingent or otherwise, known or unknown, asserted or
unasserted. The liabilities which are not assumed by the Company under this
Agreement are hereinafter sometimes
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referred to as the "Excluded Liabilities." The assumption of said liabilities by
any party hereunder shall not enlarge any rights of third parties under
contracts or arrangements with the Company or Zany Brainy and nothing herein
shall prevent any party from contesting in good faith with any third party any
of said liabilities.
(e) Conveyance Instruments. In order to effectuate the contribution
of the Contributed Assets, Zany Brainy will, at the Closing, execute and
deliver, or cause to be executed and delivered, all such documents or
instruments of assignment, transfer or conveyance, in each case dated the
Closing Date (collectively, the "Conveyance Instruments"), as the parties shall
reasonably deem necessary or appropriate to vest in, transfer or confirm title
to the foregoing.
SECTION 1.2 Contribution by ONRP. Upon the terms and subject to the
conditions set forth in this Agreement, ONRP hereby agrees to transfer and
deliver to the Company, as an initial capital contribution, FIVE MILLION DOLLARS
($5,000,000) of cash (the "ONRP Cash Contribution"). ONRP agrees to make the
ONRP Cash Contribution by wire transfer of immediately available funds.
SECTION 1.3 Issuance of Interests by the Company in Consideration for
Contributions.
(a) Zany Brainy. In consideration for the Zany Brainy Cash
Contribution, Contributed Assets and Zany Brainy's willingness to enter into the
Transaction Agreements, upon the terms and subject to the conditions set forth
in this Agreement, on the Closing Date, the Company shall issue to Zany Brainy
500,000 Voting Preferred Interests and 666,667 Non-Voting Preferred Interests.
(b) ONRP. In consideration for the ONRP Cash Contribution and ONRP's
willingness to enter into the Operating Agreement, upon the terms and subject to
the conditions set forth in this Agreement, on the Closing Date, the Company
shall issue to ONRP 500,000 Voting Common Interests.
SECTION 1.4 Time and Place of Closing. The closing of the contributions
of assets and purchases and sales of the Interests provided for in this
Agreement (the "Closing") shall be held at the offices of Xxxxxx & Xxxxxxx
located at 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, on October
20, 1999 (the "Closing Date") or at such other place or earlier or later date or
time as may be fixed by mutual agreement of all parties hereto. For purposes of
interpreting this Agreement, the Closing shall be deemed to have been effective
as of the close of business on the Closing Date.
SECTION 1.5 Further Assurances. Each party hereto shall execute and
deliver after the date hereof such instruments and take such other actions as
any other party may reasonably request in order to carry the intent of this
Agreement or to better evidence or effectuate the transactions contemplated
herein.
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SECTION 2 - CLOSING CONDITIONS
SECTION 2.1 The respective obligations of each party to effect this
Agreement shall be subject to the satisfaction or waiver, where permissible,
prior to or on the Closing Date, of the following conditions:
(a) ONRP shall have received cash proceeds of at least $60.0 million
from the issuance of equity interests in ONRP and/or other investments made by
third parties to fund Internet ventures;
(b) ONRP shall have advised Zany Brainy that it has entered into a
Contribution and Interest Purchase Agreement with each of Ulta Salon, Cosmetics
& Fragrance, Inc. and Dick's Sporting Goods, Inc. or, if such documents have not
been entered into, ONRP shall advise Zany Brainy of the status of such
documents; and
(c) All representations and warranties of the parties contained in
this Agreement shall be true and correct, in all material respects, as if made
on the Closing Date. In addition, all covenants of the parties contained herein
which are to be performed on or prior to the Closing Date shall have been
complied with in all material respects.
SECTION 3 - EVENTS OCCURRING ON THE CLOSING DATE
SECTION 3.1 Deliveries by Zany Brainy. On the Closing Date, Zany Brainy
shall deliver the following:
(a) Operating Agreement. An executed copy of the Operating Agreement,
substantially in the form attached hereto as Exhibit E.
(b) Services Agreement. An executed copy of the Services Agreement,
signed by Zany Brainy and XX.xxx, substantially in the form attached hereto as
Exhibit A.
(c) Trademark License Agreement. An executed copy of the Trademark
License Agreement, signed by Zany Brainy and XX.xxx, substantially in the form
attached hereto as Exhibit B.
(d) Supply Agreement. An executed copy of the Supply Agreement,
signed by Zany Brainy and XX.xxx, substantially in the form attached hereto as
Exhibit C.
(e) Data Sharing/License Agreement. An executed copy of the Data
Sharing/License Agreement, signed by Zany Brainy and XX.xxx, substantially in
the form attached hereto as Exhibit D.
(f) Web Site Services Agreement. An executed copy of the Web Site
Services Agreement, signed by XX.xxx, substantially in the form attached hereto
as Exhibit F.
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(g) Funds. The Zany Brainy Cash Contribution by wire transfer of
immediately available funds.
(h) Contributed Assets. Transfer documents in form and substance
reasonably acceptable to ONRP relating to the Contributed Assets.
SECTION 3.2 Deliveries by ONRP. On the Closing Date, ONRP shall deliver
the following:
(a) Operating Agreement. An executed copy of the Operating Agreement,
substantially in the form attached hereto as Exhibit E.
(b) Data Sharing/License Agreement. An executed copy of the Data
Sharing/License Agreement, signed by ONRPS, substantially in the form attached
hereto as Exhibit D.
(c) Web Site Services Agreement. An executed copy of the Web Site
Services Agreement, signed by ONRPS, substantially in the form attached hereto
as Exhibit F.
(d) Funds. The ONRP Cash Contribution by wire transfer of immediately
available funds.
SECTION 3.3 Deliveries by the Company. On the Closing Date, the Company
shall deliver the following:
(a) Operating Agreement. An executed copy of the Operating Agreement,
substantially in the form attached hereto as Exhibit E.
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF ZANY BRAINY
Zany Brainy represents and warrants to the Company as follows:
SECTION 4.1 Investment Status. Zany Brainy is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act of 1933, as amended
(the "Securities Act"). Zany Brainy is purchasing the Preferred Interests for
its own account, for investment only and not with a view to, or any present
intention of, effecting a distribution of such securities or any part thereof
except pursuant to a registration or an available exemption under applicable
law. Zany Brainy acknowledges that its Preferred Interests have not been
registered under the Securities Act or the securities laws of any state or other
jurisdiction and cannot be disposed of unless they are subsequently registered
under the Securities Act and any applicable state laws or exemption from such
registration is available.
SECTION 4.2 Authority. Zany Brainy has full legal right, authority and
power to enter into this Agreement and each agreement, document and instrument
to be executed and
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delivered by or on behalf of Zany Brainy pursuant to or as contemplated by this
Agreement and to carry out the transactions and perform fully its obligations
contemplated hereby and thereby, and the execution, delivery and performance by
Zany Brainy of this Agreement and each such other agreement, document and
instrument have been duly authorized by all necessary action under Zany Brainy's
articles of incorporation, as amended, and by-laws. XX.xxx has full legal right,
authority and power to enter into each agreement, document and instrument to be
executed and delivered by or on behalf of XX.xxx pursuant to or as contemplated
by this Agreement and to carry out the transactions and perform fully its
obligations contemplated hereby and thereby, and the execution, delivery and
performance of XX.xxx of each such agreement, document and instrument have been
duly authorized by all necessary action under XX.xxx's certificate of formation
and the limited liability company agreement. This Agreement and each agreement,
document and instrument executed and delivered by Zany Brainy or XX.xxx pursuant
to or as contemplated by this Agreement constitute, or when executed and
delivered will constitute, valid and binding obligations of Zany Brainy or
XX.xxx, as applicable, enforceable in accordance with their respective terms
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and general principles of equity.
SECTION 4.3 No Prior Activity. XX.xxx was formed for the purpose of
entering into the transactions contemplated hereby, has not engaged in any
activity before the date hereof other than in connection with the transactions
contemplated hereby and has not incurred any liabilities as of the date hereof,
except in connection with the transactions contemplated by this Agreement.
SECTION 4.4 Investment Banking; Brokerage Fees. Zany Brainy and XX.xxx
have not incurred or become liable for any broker's or finder's fee, banking
fees or similar compensation relating to or in connection with this Agreement or
the transactions contemplated hereby.
SECTION 4.5 Non-Contravention. The execution, delivery and performance by
Zany Brainy of this Agreement and the related documents to be executed and
delivered by Zany Brainy or XX.xxx, as applicable, do not: (i) violate or result
in a default (whether after the giving of notice, lapse of time or both) under
any contract or obligation to which Zany Brainy or XX.xxx, as applicable, is a
party or by which Zany Brainy or XX.xxx, as applicable, is bound (including,
without limitation, any contracts included in the Contributed Assets or the
Assumed Liabilities (the "Contributed Contracts")), or any provision of Zany
Brainy's articles of incorporation, as amended, or by-laws or XX.xxx's
certificate of formation or its limited liability company agreement; (ii)
violate or result in a violation of, or constitute a default under, any
provision of any law, regulation or rule, or any order of, or any restriction
imposed by, any court or governmental agency applicable to Zany Brainy or
XX.xxx; (iii) require from Zany Brainy or XX.xxx any notice to, declaration or
filing with, or consent or approval of, any governmental authority or other
third party; (iv) accelerate any obligation under or give rise to a right of
termination or result in the loss of benefit under any indenture or loan or
credit agreement or any other material agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or
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arbitration award to which Zany Brainy or XX.xxx is a party or by which the
property of Zany Brainy or XX.xxx is bound or affected or result in the creation
or imposition of any mortgage, pledge, lien, security interest or other charge
or encumbrance on any of the assets or properties of Zany Brainy or XX.xxx or
(v) result in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the Contributed Assets, in
each of clauses (i) through (v) except as would not, individually or in the
aggregate, have a material adverse effect on Zany Brainy or XX.xxx or the
Company.
SECTION 4.6 Organization and Good Standing. Zany Brainy is a corporation
duly organized, validly subsisting under the corporate laws of the Commonwealth
of Pennsylvania. Zany Brainy is duly licensed or qualified to transact business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of the business or the character of the properties owned or leased by
Zany Brainy requires such licensing or qualification, except where the failure
to so qualify would not have a material adverse effect on Zany Brainy or the
Company. XX.xxx is a limited liability company duly formed and validly existing
under the laws of the State of Delaware. XX.xxx is duly licensed or qualified to
transact business and is in good standing in each jurisdiction in which the
nature of the business or the character of the properties owned or leased by
XX.xxx requires such licensing or qualification, except where the failure to so
qualify would not have a material adverse effect on XX.xxx or the Company.
SECTION 4.7 XX.xxx. XX.xxx is a wholly-owned subsidiary of Zany Brainy.
Except as set forth on Schedule 4.7, there are no outstanding options, warrants,
calls, rights or any other agreements relating to the sale, issuance or voting
of any equity interests of XX.xxx, or any securities or other instruments
convertible into, exchangeable for or evidencing the right to purchase any
equity interests of XX.xxx.
SECTION 4.8 Contributed Assets. Zany Brainy has good and marketable title
free and clear of all claims to the Contributed Assets owned by Zany Brainy,
except for claims that would not, individually or in the aggregate, have a
material adverse effect on the Company or the value or usefulness of the
Contributed Assets. With respect to Contributed Assets leased by Zany Brainy as
lessee, all leases, conditional sale contracts, franchises or licenses pursuant
to which Zany Brainy may hold or use (or permit others to hold or use) such
Contributed Assets are valid and in full force and effect, and there is not
under any of such instruments any existing default or event of default or event
which with notice or lapse of time or both would constitute such a default,
except for such defaults that would not, individually or in the aggregate, have
a material adverse effect on the Company or the value or usefulness of the
Contributed Assets. Any tangible assets included in the Contributed Assets are
in good condition, ordinary wear and tear excepted, for property of comparable
type, age and usage. Except as otherwise set forth herein, the Contributed
Assets as identified in Schedule 1.1(b) are provided on an "as-is" basis and
Zany Brainy makes no representation or warranty, express or implied, at law or
in equity, including, without limitation, with respect to merchantability or
fitness for any particular purpose and any such other representations or
warranties are hereby expressly disclaimed.
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SECTION 4.9 Contributed Contracts. To Zany Brainy's knowledge, the
Contributed Contracts are valid and binding, are in full force and effect and
are enforceable in accordance with their respective terms. Zany Brainy has not
assigned, mortgaged, pledged, encumbered or otherwise hypothecated any of its
right, title and interest under the Contributed Contracts. Except as set forth
on Schedule 4.9, neither Zany Brainy nor, to the best knowledge of Zany Brainy,
any other party thereto is in violation of or in default in respect of any
Contributed Contract. No notice has been received by Zany Brainy claiming any
such violation or default by Zany Brainy or indicating the desire or intention
of any other party thereto to amend, modify, rescind or terminate the same.
SECTION 4.10 Litigation. Except as set forth on Schedule 4.10, there is no
(a) action, suit, claim or proceeding pending or, to the knowledge of Zany
Brainy, threatened, against or affecting the Contributed Assets (whether or not
Zany Brainy or XX.xxx is a party or prospective party thereto), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (b) arbitration proceeding relating to the Contributed Assets or (c)
governmental inquiry pending or, to the knowledge of Zany Brainy, threatened
against, involving or affecting the Contributed Assets. There are no outstanding
orders, writs, judgments, injunctions or decrees of any court, governmental
agency or arbitration tribunal against, involving or affecting, the Contributed
Assets.
SECTION 4.11 Intellectual Property.
(a) All intellectual property which is being transferred is identified
in Schedule 1.1(b).
(b) Zany Brainy owns, or has a license to use, all intellectual
property identified on Schedule 1.1(b). There are no claims or demands of any
other entity pertaining to any such intellectual property and no proceedings
have been instituted, or are pending or, to the knowledge of Zany Brainy,
threatened, which challenge the rights of Zany Brainy in respect thereof. Zany
Brainy has no knowledge of any infringement by others of any intellectual
property rights of Zany Brainy. To the knowledge of Zany Brainy, the operation
of the Site does not infringe any intellectual property rights of any other
entity. No proceeding charging Zany Brainy with infringement of any adversely
held intellectual property rights has been filed or, to the knowledge of Zany
Brainy, is threatened to be filed. To the knowledge of Zany Brainy, there exists
no unexpired patent or patent application which includes claims that would be
infringed by or otherwise adversely affect the operation of the Site.
(c) All patents, patent applications, trademark registrations,
trademark applications and registered copyrights identified on Schedule 1.1(b)
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights, or the corresponding
offices of other jurisdictions as identified on Schedule 1.1(b), and have been
properly maintained and renewed in accordance with all applicable laws and
administrative regulations of the United States and each such jurisdiction.
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(d) All licenses or other agreements under which Zany Brainy is
granted intellectual property rights relating to the Site are listed in Schedule
1.1(b). All of said licenses or other agreements are in full force and effect,
there is no material default by Zany Brainy or, to the knowledge of Zany Brainy,
any other party thereto. To the knowledge of Zany Brainy, the licensors under
said licenses and other agreements have and had all requisite power and
authority to grant the rights purported to be conferred thereby. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to ONRP.
(e) Zany Brainy has taken all steps required in accordance with sound
business practice to establish and preserve its ownership of all intellectual
property rights listed on Schedule 1.1(b), except where failure to take such
steps would not have a material adverse effect on the operation of the Site.
Such practices include, without limitation, requiring professional and technical
employees to execute agreements under which such employees are required to
convey to Zany Brainy ownership of all inventions and developments conceived or
created by them in the course of their employment.
SECTION 4.12 Compliance with Law. Except as set forth in Schedule 4.12,
Zany Brainy is, to the knowledge of Zany Brainy, in compliance with all, and is
not in violation of any, law, ordinance, order, decree, rule or regulation of
any governmental agency or authority applicable to the Contributed Assets, the
violation of or noncompliance with which could have a material adverse effect on
the Contributed Assets.
SECTION 5 - REPRESENTATIONS AND WARRANTIES OF ONRP
ONRP represents and warrants to the Company as follows:
SECTION 5.1 Investment Status. ONRP is an "accredited investor" as such
term is defined in Rule 501 under the Securities Act. ONRP is purchasing the
Common Interests for its own account, for investment only and not with a view
to, or any present intention of, effecting a distribution of such securities or
any part thereof except pursuant to a registration or an available exemption
under applicable law. ONRP acknowledges that its Common Interests have not been
registered under the Securities Act or the securities laws of any state or other
jurisdiction and cannot be disposed of unless they are subsequently registered
under the Securities Act and any applicable state laws or exemption from such
registration is available.
SECTION 5.2 Authority. ONRP has full legal right, authority and power to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of ONRP pursuant to or as contemplated by
this Agreement and to carry out the transactions and to perform fully its
obligations contemplated hereby and thereby, and the execution, delivery and
performance by ONRP of this Agreement and each such other agreement, document
and instrument have been duly authorized by all necessary action under ONRP's
certificate of formation and the Amended and Restated Limited Liability Company
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Agreement, dated as of September 28, 1999, of ONRP (the "ONRP LLC Agreement").
This Agreement and each agreement, document and instrument executed and
delivered by ONRP pursuant to or as contemplated by this Agreement constitute,
or when executed and delivered will constitute, valid and binding obligations of
ONRP enforceable in accordance with their respective terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally,
and general principles of equity.
SECTION 5.3 Investment Banking; Brokerage Fees. ONRP has not incurred or
become liable for any broker's or finder's fee, banking fees or similar
compensation relating to or in connection with this Agreement or the
transactions contemplated hereby.
SECTION 5.4 Non-Contravention. The execution, delivery and performance by
ONRP of this Agreement and the related documents to be executed and delivered by
ONRP do not: (i) violate or result in a default (whether after the giving of
notice, lapse of time or both) under any contract or obligation to which ONRP is
a party or by which ONRP is bound, or any provision of ONRP's certificate of
formation or the ONRP LLC Agreement; (ii) violate or result in a violation of,
or constitute a default under, any provision of any law, regulation or rule, or
any order of, or any restriction imposed by, any court or governmental agency
applicable to ONRP; (iii) require from ONRP any notice to, declaration or filing
with, or consent or approval of, any governmental authority or other third
party; or (iv) accelerate any obligation under or give rise to a right of
termination or result in the loss of benefit under any indenture or loan or
credit agreement or any other material agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which ONRP is a party or by which
the property of ONRP is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets or properties of ONRP, in each of clauses (i)
through (iv) except as would not, individually or in the aggregate, have a
material adverse effect on ONRP or the Company.
SECTION 5.5 Organization and Good Standing. ONRP is a Delaware limited
liability company duly formed and validly existing under the laws of the State
of Delaware. ONRP is duly licensed or qualified to transact business in each
jurisdiction in which the nature of the business or the character of the
properties owned or leased by ONRP requires such licensing or qualification,
except where the failure to so qualify would not have a material adverse impact
on ONRP or the Company.
SECTION 6 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Contributors as follows:
SECTION 6.1 Organization and Good Standing. The Company is a limited
liability company duly formed and validly existing under the laws of the State
of Delaware. The Company is duly licensed or qualified to transact business in
each jurisdiction in which the nature of the business or the character of the
properties owned or leased by the Company
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requires such licensing or qualification, except where the failure to so qualify
would not have a material adverse impact on the Company.
SECTION 6.2 Authorization and Enforceability. The Company has full, legal
right, authority and power to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by or on behalf of the
Company pursuant to or as contemplated by this Agreement and to carry out the
transactions and to perform fully its obligations contemplated hereby and
thereby, and the execution, delivery and performance by the Company of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary action under the Company's certificate of formation
and the Operating Agreement. This Agreement and each agreement, document and
instrument executed and delivered by the Company pursuant to or as contemplated
by this Agreement constitute, or when executed and delivered will constitute,
valid and binding obligations of the Company enforceable in accordance with
their respective terms subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally, and general principles of equity.
Upon consummation of the transactions contemplated hereby, all of the Interests
issued pursuant to this Agreement (i) will have been duly authorized and validly
issued to each of the Contributors, (ii) will be fully paid and nonassessable,
and (iii) will have been issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
SECTION 6.3 No Prior Activity. The Company was formed for the purpose of
entering into the transactions contemplated hereby, has not engaged in any
activity before the date hereof other than in connection with the transactions
contemplated hereby and has not incurred any liabilities as of the date hereof,
except in connection with the transactions contemplated by this Agreement.
SECTION 6.4 Investment Banking; Brokerage. The Company has not incurred
or become liable for any broker's or finder's fee, banking fees or similar
compensation relating to or in connection with this Agreement or the
transactions contemplated hereby.
SECTION 6.5 Capital Structure. As of the date hereof, the Board of
Directors of the Company has authorized the issuance of 873,483 Common Interests
(including 373,483 Common Interests to be issued in connection with the Follow-
On Subscription (as defined in the Operating Agreement)) and 1,166,667 Preferred
Interests.
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SECTION 7 - RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
SECTION 7.1 Survival of Warranties. Each of the representations,
warranties, agreements, covenants and obligations herein or in any schedule,
exhibit, certificate or financial statement delivered by any party to the other
party incident to the transactions contemplated hereby are material, shall be
deemed to have been relied upon by the other party and shall survive the Closing
for the applicable surviving period set forth below regardless of any
investigation and shall not merge in the performance of any obligation by either
party hereto. Each of the representations and warranties set forth in this
Agreement shall survive the Closing for a period of two (2) years.
SECTION 7.2 Collection of Assets. Subsequent to the Closing, the Company
shall have the right and authority to collect all receivables (accrued after the
Closing) and other items transferred, sublicensed or assigned to it by Zany
Brainy hereunder and Zany Brainy agrees that it will promptly transfer,
sublicense or assign to the Company from time to time, any property that Zany
Brainy may receive with respect to any claims, contracts, licenses, leases,
commitments, sales orders, purchase orders, receivables or any other items
accrued in connection with the Contributed Assets after the Closing.
SECTION 7.3 Expenses. Each party shall pay its own costs and expenses
incurred or to be incurred by it in negotiating and preparing this Agreement and
the other documents contemplated hereby, and in carrying out and completing the
transactions contemplated by this Agreement and such other documents.
SECTION 7.4 Notice of Default. Promptly upon the occurrence of, or
promptly upon any party hereto becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach or default, or
would have caused or constituted a breach or default had such event occurred or
been known to such party prior to the date hereof, of any of the
representations, warranties or covenants of such party contained in or referred
to in this Agreement or in any Schedule or Exhibit referred to in this
Agreement, such party shall give detailed written notice thereof to each of the
other parties hereto and shall use its best efforts to prevent or promptly
remedy the same.
SECTION 7.5 Confidentiality. Each party agrees that all non-public
information, including, without limitation, data, customer lists or other
customer-specific or marketing information, customer buying patterns,
algorithms, know-how, ideas and all business, technical, pricing, cost and
financial information, provided to the other party and any other information
marked or disclosed as being confidential information that is obtained by the
other party (the "Confidential Information") is the confidential property of the
disclosing party. The party receiving such Confidential Information shall: (a)
limit access to any Confidential Information of the other party received by it
to its employees, contractors, consultants and agents who have a need-to-know in
connection with the performance of such party's duties and obligations under
this Agreement; (b) advise its employees, contractors, consultants and agents
having access to the Confidential Information of the confidential nature thereof
and of the obligations set forth in
12
this Agreement and similarly bind them in writing; (c) safeguard all
Confidential Information using a reasonable degree of care, but not less than
that degree of care used by it in safeguarding its own similar information or
material; and (d) not disclose any Confidential Information of the other party
received by it to third parties otherwise than in conformity with the provisions
of this Agreement. Confidential Information shall not include information the
receiving party can document (i) was or has become readily publicly available
without restriction through no fault of the receiving party or its employees or
agents; (ii) is received without restriction from a third party lawfully in
possession of such information and lawfully empowered to disclose such
information; or (iii) was rightfully in possession of the receiving party
without restriction prior to its disclosure by the other party. A party may
disclose Confidential Information of the other party to the extent required to
be disclosed under applicable law or by a governmental order, decree,
regulation, rule or process (provided that the receiving party gives written
notice to the disclosing party as far in advance as reasonably possible prior to
disclosure and the receiving party reasonably cooperates in seeking to dispute
such disclosure and/or receive confidential treatment for the disclosed
information). Each party acknowledges that the breach by any party of its
obligations pursuant to this Section 7.5 will result in irreparable injury to
the other parties, and in such event the exact amount of damages is now and will
be difficult to ascertain and the remedies at law for any such failure would not
be reasonable or adequate compensation. Accordingly, notwithstanding Section
10.4, each party agrees that in the event of a breach by any party of this
Section 7.5, the other parties shall be entitled to injunctive relief.
SECTION 8 - INDEMNIFICATION.
SECTION 8.1 Indemnification by Zany Brainy. Zany Brainy agrees to
indemnify and hold the Company and its subsidiaries and affiliates and persons
serving as officers, directors, partners or employees thereof (individually, a
"Zany Brainy Indemnified Party" and, collectively, the "Zany Brainy Indemnified
Parties") harmless from and against any damages, liabilities, losses, taxes,
fines, penalties, costs, and expenses (including, without limitation, reasonable
fees of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon any of the following matters:
(a) any breach of any representation or warranty of Zany Brainy under
this Agreement or in any certificate, schedule or exhibit delivered pursuant
hereto, or by reason of any claim, action or proceeding asserted or instituted
growing out of any matter or thing constituting a breach of such representations
or warranties;
(b) any other breach of any covenant of Zany Brainy under this
Agreement or in any certificate, schedule or exhibit delivered pursuant hereto,
or by reason of any claim, action or proceeding asserted or instituted growing
out of any matter or thing constituting a breach of such covenants; or
(c) any Excluded Liabilities.
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SECTION 8.2 Limitations on Indemnification by Zany Brainy.
Notwithstanding the foregoing, the right of the Zany Brainy Indemnified Parties
to indemnification under Section 8.1 shall be subject to the following
provisions:
(a) No indemnification shall be payable pursuant to Section 8.1 above
to any Zany Brainy Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 8.3 shall exceed $500,000 in the aggregate,
whereupon the full amount of such claims shall be recoverable in accordance with
the terms hereof; and
(b) The maximum aggregate liability of Zany Brainy, and the maximum
amount of damages which may be recovered by the Zany Brainy Indemnified Parties
from Zany Brainy pursuant to Section 8.1 shall not exceed FIVE MILLION DOLLARS
($5,000,000).
SECTION 8.3 Indemnification by ONRP. ONRP agrees to indemnify and hold
the Company and its subsidiaries and affiliates and persons serving as officers,
directors, partners or employees thereof (individually, an "ONRP Indemnified
Party" and, collectively, the "ONRP Indemnified Parties") harmless from and
against any damages, liabilities, losses, taxes, fines, penalties, costs, and
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any of the following matters:
(a) any other breach of any representation or warranty of ONRP under
this Agreement or in any certificate, schedule or exhibit delivered pursuant
hereto, or by reason of any claim, action or proceeding asserted or instituted
growing out of any matter or thing constituting a breach of such representations
or warranties; or
(b) any other breach of any covenant of ONRP under this Agreement or
in any certificate, schedule or exhibit delivered pursuant hereto, or by reason
of any claim, action or proceeding asserted or instituted growing out of any
matter or thing constituting a breach of such covenants.
SECTION 8.4 Limitations on Indemnification by ONRP. Notwithstanding the
foregoing, the right of the ONRP Indemnified Parties to indemnification under
Section 8.3 shall be subject to the following provisions:
(a) No indemnification shall be payable pursuant to Subsection 8.3
above to any ONRP Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 8.3 shall exceed $500,000 in the aggregate,
whereupon the full amount of such claims shall be recoverable in accordance with
the terms hereof; and
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(b) The maximum aggregate liability of ONRP, and the maximum amount of
damages which may be recovered by the ONRP Indemnified Parties from ONRP
pursuant to Section 8.3 shall not exceed FIVE MILLION DOLLARS ($5,000,000).
SECTION 8.5 Indemnification by the Company. The Company agrees to
indemnify and hold each of the Contributors and their respective subsidiaries
and affiliates and persons serving as officers, directors, partners or employees
thereof (individually, a "Company Indemnified Party" and, collectively, the
"Company Indemnified Parties") harmless from and against any damages,
liabilities, losses, taxes, fines, penalties, costs, and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) any breach of any representation or warranty of the Company under
this Agreement or in any certificate, schedule or exhibit delivered pursuant
hereto, or by reason of any claim, action or proceeding asserted or instituted
growing out of any matter or thing constituting a breach of such representations
or warranties;
(b) any breach of any other covenant of the Company under this
Agreement or in any certificate, schedule or exhibit delivered pursuant hereto,
or by reason of any claim, action or proceeding asserted or instituted growing
out of any matter or thing constituting a breach of such covenants; or
(c) any Assumed Liabilities.
SECTION 8.6 Limitations on Indemnification by the Company.
Notwithstanding the foregoing, the right of the Company Indemnified Parties to
indemnification under Section 8.5 shall be subject to the following provisions:
(a) no indemnification shall be payable pursuant to Section 8.5 above
to any Company Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 8.5 shall exceed $500,000 in the aggregate,
whereupon the full amount of such claims shall be recoverable in accordance with
the terms hereof; and
(b) the maximum aggregate liability of the Company, and the maximum
amount of damages which may be recovered by the Company Indemnified Parties from
the Company pursuant to Section 8.5 shall not exceed FIVE MILLION DOLLARS
($5,000,000).
SECTION 8.7 Notice; Defense of Claims. An indemnified party may make
claims for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted (and in any event within 15 calendar days after the service of
the
15
citation or sermons), but the failure to do so shall not relieve the
indemnifying party from any liability except to the extent that it is prejudiced
by the failure or delay in giving such notice. Such notice shall summarize the
bases for the claim for indemnification and any claim or liability being
asserted by a third party. Within 20 days after receiving such notice the
indemnifying party shall give written notice to the indemnified party stating
whether it disputes the claim for indemnification and whether it will defend
against any third party claim or liability at its own cost and expense. The
indemnifying party shall be entitled to direct the defense against a third party
claim or liability with counsel selected by it (subject to the consent of the
indemnified party, which consent shall not be unreasonably withheld) as long as
the indemnifying party is conducting a good faith and diligent defense. The
indemnified party shall at all times have the right to fully participate in the
defense of a third party claim or liability at its own expense directly or
through counsel; provided, however, that if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised in writing by the indemnifying party's counsel that
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the indemnified party may engage
separate counsel at the expense of the indemnifying party. If no such notice of
intent to dispute and defend a third party claim or liability is given by the
indemnifying party, or if such good faith and diligent defense is not being or
ceases to be conducted by the indemnifying party, the indemnified party shall
have the right, at the expense of the indemnifying party, to undertake the
defense of such claim or liability (with counsel selected by the indemnified
party), provided, however, that such claim or liability shall not be compromised
or settled without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld. If the indemnified party settles or
compromises such claim or liability without the prior written consent of the
indemnifying party, the indemnifying party will bear no liability hereunder for
or with respect to such claim or liability. In the event the indemnified party
assumes the defense of the claim or liability, the indemnified party will keep
the indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement. If the third party claim or liability is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
SECTION 9 - CERTAIN DEFINITIONS
"Agreement" shall have the meaning set forth in the Preamble.
"Assumed Liabilities" shall have the meaning set forth in Section 1.1(d).
"Closing" shall have the meaning set forth in Section 1.4.
"Closing Date" shall have the meaning set forth in the Preamble.
"Common Interests" shall have the meaning set forth in the Preamble.
16
"Company" shall have the meaning set forth in the Preamble.
"Company Indemnified Party" shall have the meaning set forth in Section
8.5.
"Confidential Information" shall have the meaning set forth in Section 7.5.
"Contributed Assets" shall have the meaning set forth in Section 1.1(b).
"Contributed Contracts" shall have the meaning set forth in Section 4.5.
"Contributor" shall have the meaning set forth in the Preamble.
"Conveyance Instruments" shall have the meaning set forth in Section
1.1(e).
"Data Sharing/License Agreement" shall have the meaning set forth in the
Preamble.
"Encumbrances" means title defects, liens, pledges, claims, rights of first
refusal, options, charges, security interests, mortgages, or other encumbrances
of any nature whatsoever.
"Excluded Liabilities" shall have the meaning set forth in Section 1.1(d).
"Interests" shall have the meaning set forth in the Preamble.
"New IP Assets" shall have the meaning set forth in Section 4.8.
"ONRP" shall have the meaning set forth in the Preamble.
"ONRP Cash Contribution" shall have the meaning set forth in Section 1.2.
"ONRP Indemnified Party" shall have the meaning set forth in Section 8.3.
"ONRP LLC Agreement" shall have the meaning set forth in Section 5.2.
"ONRPS" shall have the meaning set forth in the Preamble.
"Operating Agreement" shall have the meaning set forth in the Preamble.
"Preferred Interests" shall have the meaning set forth in the Preamble.
"Securities Act" shall have the meaning set forth in Section 4.1.
"Services Agreement" shall have the meaning set forth in the Preamble.
"Supply Agreement" shall have the meaning set forth in the Preamble.
"Trademark License Agreement" shall have the meaning set forth in the
Preamble.
17
"Transaction Agreements" shall have the meaning set forth in the Preamble.
"Web Site Services Agreement" shall have the meaning set forth in the
Preamble.
"Zany Brainy" shall have the meaning set forth in the Preamble.
"Zany Brainy Cash Contribution" shall have the meaning set forth in Section
1.1(a).
"Zany Brainy Indemnified Party" shall have the meaning set forth in Section
8.1.
"XX.xxx" shall have the meaning set forth in the Preamble.
SECTION 10 - MISCELLANEOUS
SECTION 10.1 The Bulk Sales Laws. The Company waives compliance by Zany
Brainy with the provisions of any applicable bulk sales, fraudulent conveyance
or other law for the protection of creditors in connection with the transfer of
the Contributed Assets under this Agreement, and Zany Brainy agrees to indemnify
and hold the Company harmless against any claim made against the Company by any
creditor of the Company as a result of a failure to comply with any such laws.
SECTION 10.2 Sales and Transfer Taxes. The Company shall pay the cost of
all sales and use and transfer taxes arising out of the contributions of Zany
Brainy to the Company set forth in Section 1.1 and Zany Brainy shall reimburse
the Company for fifty percent (50%) of such sales and use and transfer taxes.
SECTION 10.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (without regard
to its conflicts of law doctrines).
SECTION 10.4 Dispute Resolution. All disputes, claims, or controversies
arising out of or relating to this Agreement or the negotiation, validity or
performance hereof that are not resolved by mutual agreement shall be resolved
solely and exclusively by binding arbitration to be held in Delaware before a
single arbitrator who is reasonably acceptable to each of the parties. Each of
the parties hereto irrevocably and unconditionally consents to the exclusive
jurisdiction of Delaware to resolve all disputes, claims or controversies
arising out of or relating to this Agreement or the negotiation, validity or
performance hereof, and further consents to the jurisdiction of the courts of
Delaware for the purposes of enforcing the arbitration provisions of Section
10.4 of this Agreement.
The parties covenant and agree that they will participate in the
arbitration in good faith and that they will share equally its costs, except as
otherwise provided below. The arbitrator may in his or her discretion assess
costs and expenses (including the reasonable legal fees and expenses of the
prevailing party) against any party to a proceeding. Any party unsuccessfully
refusing to comply with an order of the arbitrators shall be liable for costs
and
18
expenses, including attorneys' fees, incurred by the other party in enforcing
the award. The provisions of this Section 10.4 shall be enforceable in any court
of competent jurisdiction.
SECTION 10.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument and shall become a binding Agreement when
the counterparts have been signed by each of the parties and delivered to the
other party.
SECTION 10.6 Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.7 Entire Agreement. This Agreement, including the exhibits,
schedules, and other documents and instruments referred to herein, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
SECTION 10.8 Severability. If any one or more provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal, or unenforceable provision had never
been contained herein.
SECTION 10.9 Modifications and Amendments. The terms and provisions of
this Agreement may be modified or amended only by written agreement executed by
all parties hereto.
SECTION 10.10 Schedules. All schedules attached hereto are hereby
incorporated in and made a part as if set forth in full herein.
SECTION 10.11 No Reliance on Other Information. Except for the
representations and warranties contained in this Agreement and in the other
documents executed and delivered in connection with the execution and delivery
of this Agreement, no party or other person acting for any of them makes any
other representation or warranty, express or implied, with respect to the
transactions contemplated hereby, and the parties hereby disclaim any such
representation or warranty, whether oral or written, whether by a party to this
Agreement or any of their respective representatives or affiliates or any other
person.
SECTION 10.12 Notices. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when received if personally delivered; when transmitted, if
transmitted by telecopy, electronic or digital transmission method; the day
after it is sent if sent for next day delivery to a domestic address by a
recognized overnight delivery service. All notices to a party will be
19
sent to the addresses set forth below or to such other address or person as such
party may designate by notice to each other party hereunder:
TO ZANY BRAINY: Zany Brainy, Inc.
0000 Xxxxxxxxxxx Xxxxxxxxx
Xxxx xx Xxxxxxx, XX 00000
Attn.: Legal Department
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxx, Xxxxx & Xxxxxxx LLP
One Oxford Centre
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attn.: Xxxxx Xxxx-Xxxxx, Esq.
Facsimile No.: (000) 000-0000
TO ONRP: Online Retail Partners LLC
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
TO COMPANY: At such address as the Company may specify in
writing to the other parties from time to time.
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ZANY BRAINY, INC.
By:
---------------------------
Name:
Title:
ONLINE RETAIL PARTNERS LLC
By:
---------------------------
Name:
Title:
ZB HOLDINGS LLC
By: ONLINE RETAIL PARTNERS LLC,
as sole member
By:
-----------------------------
Name:
Title:
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