EXHIBIT 10.12
SECURITIES PURCHASE AGREEMENT
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SECURITIES PURCHASE AGREEMENT dated as of January 1, 1998 by and among Happy
Kids Inc., a New York corporation (hereinafter referred to as the
"Corporation"), and Xxxx X. Xxxxx and Xxxx X. Xxxxx (each hereinafter referred
to as a "Securityholder" and collectively as the "Securityholders").
W I T N E S S E T H :
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WHEREAS, the Securityholders currently own, or as of the Closing Date (as
hereinafter defined) will own, in the aggregate, 100% of the issued and
outstanding shares of capital stock of each of the entities set forth on
Schedule I attached hereto (the "Entities"); and
WHEREAS, each of the Securityholders desires to sell, transfer and assign to
the Corporation all of his respective interest in and to the issued and
outstanding shares of capital stock of each of the Entities; and
WHEREAS, the Corporation desires to issue and sell to the Securityholders,
and the Securityholders desire to purchase from the Corporation, in
consideration of the aforesaid, an aggregate of 4,262,500 shares (collectively,
the "Shares") of the common stock, $.01 par value ("Common Stock"), of the
Corporation.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
SECTION I
PURCHASE AND SALE OF THE SHARES
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Subject to the terms and conditions of this Agreement and on the basis of the
representations, warranties, covenants and agreements herein contained, the
Corporation hereby agrees to issue, sell and convey to each of the
Securityholders, and each of the Securityholders subscribes for and agrees to
purchase, acquire and accept from the Corporation, such number of the Shares as
is set forth opposite such Securityholder's name on Schedule II attached hereto.
In consideration of the aforesaid issuance, sale, conveyance and delivery of
such Shares, each of the Securityholders, individually and not in the aggregate,
hereby agrees to sell, transfer and assign to the Corporation such shares of
capital stock in each of the Entities as is owned by each of the Securityholders
as of the Closing Date, in each instance as is set forth on Schedule II attached
hereto, all such shares of capital stock together representing, as of the
Closing Date, 100% of the issued and outstanding shares of capital stock of each
of the Entities.
SECTION II
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE CORPORATION
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The Corporation represents and warrants to, and covenants and agrees with, the
Securityholders, as of the date hereof, that:
A. Organization; Good Standing. The Corporation is a corporation duly
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organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to own
its properties and to conduct the businesses in which it is now engaged.
B. Authority. The Corporation has full corporate power and authority to
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execute and deliver this Agreement and to perform all of its obligations
hereunder, and no consent or approval of any other person or governmental
authority is required therefor. The execution and delivery of this Agreement by
the Corporation, the performance by the Corporation of its covenants and
agreements hereunder and the consummation by the Corporation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement constitutes a valid and legally binding obligation of the
Corporation, enforceable against the Corporation in accordance with its terms.
C. No Legal Bar; Conflicts. Neither the execution and delivery of this
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Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the Certificate of Incorporation or By-Laws of the
Corporation or any law, statute, ordinance, regulation, order, judgment or
decree of any court or governmental agency, or conflicts with or results in any
breach of any of the terms of or constitutes a default under or results in the
termination of or the creation of any lien pursuant to the terms of any contract
or agreement to which the Corporation is a party or by which the Corporation or
any of its assets is bound.
D. Capitalization. The authorized capital stock of the Corporation consists
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of 30,000,000 shares of Common Stock and 5,000,000 shares of undesignated
Preferred Stock (the "Preferred Stock"). Immediately following the issuances
contemplated hereby, there will be 7,750,000 shares of Common Stock issued and
outstanding and no shares of Preferred Stock issued and outstanding. The Shares
being issued hereunder have been duly authorized and, when issued to the
Securityholders for the consideration herein provided, will be validly issued,
fully paid and nonassessable.
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SECTION III
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE SECURITYHOLDERS
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Each of the Securityholders, individually and not in the aggregate, represents
and warrants to, and covenants and agrees with, the Corporation, as of the date
hereof, that:
A. Authority. Such Securityholder has the full power, authority and legal
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right to execute and deliver this Agreement, and to perform his respective
covenants and agreements hereunder, and this Agreement constitutes a valid and
legally binding obligation of each of them enforceable against each of them in
accordance with its terms.
B. Title to Shares. Such Securityholder is, or as of the Closing Date will
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be, the lawful record and beneficial owner of all of the shares of capital stock
of each of the Entities set forth opposite his name on Schedule II attached
hereto, free and clear of all pledges, security interests, liens, charges,
encumbrances, equities, claims, options or limitations affecting his ability to
vote such shares of capital stock or to transfer such shares of capital stock to
the Corporation. The shares of capital stock set forth on Schedule II attached
hereto constitute, as of the Closing Date, 100% of the issued and outstanding
shares of capital stock of each of the Entities. There are no issued or
outstanding options, warrants, contracts, calls, commitments or demands of any
nature relating to such shares of capital stock. At the Closing, the
Corporation will acquire good title to such shares of capital stock free and
clear of all pledges, security interests, liens, charges, encumbrances,
equities, claims, options or limitations of whatever nature.
C. No Legal Bar; Conflicts. Neither the execution and delivery of this
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Agreement, nor the consummation of the transactions contemplated hereby,
violates or will violate any law, statute, ordinance, regulation, order,
judgment or decree of any court or governmental agency, or violates or will
violate, or conflicts with or will conflict with or will result in any breach of
any of the terms of, or constitutes or will constitute a default under or result
in the termination of or the creation of any lien pursuant to the terms of any
contract, commitment, agreement, understanding or arrangement of any kind to
which such Securityholder is a party or by which such Securityholder or any of
such Securityholder's assets is bound.
D. No Litigation. No action, suit or proceeding against such Securityholder
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relating to the consummation of any of the transactions contemplated by this
Agreement nor any governmental action seeking to delay or enjoin any such
transactions is pending or threatened.
E. Access to Public Information. Such Securityholder has been given access
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to all public information relating to the business and affairs of the
Corporation which such Securityholder has requested and all additional
information which such Securityholder has considered necessary to verify the
accuracy of the information so received.
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F. Investment Intent. Such Securityholder (i) is an accredited investor
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within the meaning of Rule 501(a) under the Securities Act of 1933, as amended
(the "1933 Act") or, if not such an accredited investor, has, alone or together
with a purchaser representative within the meaning of Rule 501(h) under the 1933
Act, such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in securities in
general and to an investment in the Corporation in particular, (ii) is aware of
the limits on resale imposed by virtue of the nature of the transactions
contemplated by this Agreement and (iii) is acquiring the shares of the
Corporation hereunder without registration under the 1933 Act in reliance on the
exemption from registration contained in Section 4(2) of the 1933 Act, for
investment, and not with a view toward, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
such shares.
G. Economic Risk. Such Securityholder recognizes that the investment in the
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Common Stock involves a number of significant risks. Such Securityholder is
able to bear the substantial economic risks of an investment in the Common Stock
for an indefinite period of time, has no need for liquidity in such investment
and, at the present time, can afford a complete loss of such investment.
SECTION IV
THE CLOSING
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A. Time and Place of the Closing. The closing shall be held at the offices
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of Xxxxxxxx Ingersoll, 000 Xxxxxxx Xxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 at
10:00 A.M., local time, on a date (the "Closing Date") to be determined by
agreement of the parties hereto, but in no event later than the day before the
effective date of the Corporation's proposed initial public offering, or such
other time, place and date as the Securityholders and the Corporation may agree.
B. Delivery by the Corporation. Delivery of the Shares shall be made by the
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Corporation to the Securityholders on the Closing Date by delivering
certificates representing the Shares registered in the name of each of the
Securityholders, as applicable, each such certificate to be accompanied by any
requisite documentary or transfer tax stamps.
C. Delivery by the Securityholders. On the Closing Date, each of the
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Securityholders shall deliver to the Corporation certificates representing the
shares of capital stock of each Entity owned by each of the Securityholders, as
set forth on Schedule II attached hereto, duly endorsed in blank or accompanied
by duly executed instruments of transfers and (ii) any other documents that are
necessary to transfer to the Corporation good and marketable title to all the
shares of capital stock of each of the Entities.
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SECTION V
CONDITIONS TO THE CORPORATION'S
OBLIGATION TO CLOSE
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The obligation of the Corporation to issue the Shares and otherwise consummate
the transaction contemplated by this Agreement on the Closing Date is subject to
the following conditions precedent, which may be waived by the Corporation in
its sole discretion:
Representations and Warranties. The representations and warranties of each of
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the Securityholders contained herein shall be true and correct at and as of the
Closing Date with the same effect as though all such representations and
warranties were made at and as of the Closing Date.
SECTION VI
CONDITIONS TO THE SECURITYHOLDERS'
OBLIGATION TO CLOSE
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The obligation of each of the Securityholders to purchase the Shares being
purchased by such person and the obligations of each of the Securityholders to
otherwise consummate the transaction contemplated by this Agreement on the
Closing Date is subject to the following condition precedent, which may be
waived by the Securityholders in their sole discretion:
Representations and Warranties. The representations and warranties of the
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Corporation contained herein shall be true and correct at and as of the Closing
Date with the same effect as though all such representations and warranties were
made at and as of the Closing Date and the Corporation shall have complied with
all its covenants contained herein.
SECTION VII
MISCELLANEOUS
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A. Notices. All notices required or permitted under this Agreement shall be
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in writing and delivered, by any method providing for proof of delivery, to the
address of the party or parties set forth on Schedule I, attached hereto. Any
notice shall be deemed to have been given on the date of receipt.
B. Survival of Representations. Each representation, warranty, covenant and
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agreement of the parties hereto herein contained shall survive the date hereof,
notwithstanding any investigation at any time made by or on behalf of any party
hereto.
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C. Entire Agreement. This Agreement and the documents referred to herein
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contain the entire agreement between the parties hereto with respect to the
transactions contemplated hereby, and no modification hereof shall be effective
unless in writing and signed by the party against which it is sought to be
enforced.
D. Assignment. Other than as provided herein, this Agreement shall not be
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assignable by any of the parties hereto except pursuant to a writing executed by
all of the parties hereto.
E. Invalidity, Etc. If any provision of this Agreement, or the application
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of any such provision to any person or circumstance, shall be held invalid by a
court of competent jurisdiction, the remainder of this Agreement, or the
application of such provision to persons or circumstances other than those as to
which it is held invalid, shall not be affected thereby.
F. Headings. The headings of this Agreement are for convenience of reference
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only and are not part of the substance of this Agreement.
G. Binding Effect. This Agreement shall be binding upon and inure to the
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benefit of the parties hereto and their respective successors and assigns.
H. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of New York applicable in the case of
agreements made and to be performed entirely within such State.
I. Counterparts. This Agreement may be executed in counterparts, each of
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which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by the parties hereto as of the date first above written.
HAPPY KIDS INC.
By: _________________________________
Xxxx X. Xxxxx, President
and Chief Executive Officer
THE SECURITYHOLDERS
________________________________
Xxxx X. Xxxxx
________________________________
Xxxx X. Xxxxx
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SCHEDULE I
THE ENTITIES
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Name and Address of Entity State of Incorporation
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Happy Kids, Ltd. New York
000 X. 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Talk of the Town Apparel Corp. New York
000 X. 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
O.P. Kids, Inc., successor to O.P. Kids, LLC New Jersey
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxx Xxxxxx
H.O.T. Kidz, Inc., successor to H.O.T. Kidz, LLC New York
000 X. 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
J & B 18 Corp. New York
000 X. 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Hawk Industries, Inc. New Jersey
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxx Xxxxxx
SCHEDULE II
OWNERSHIP TABLE
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No. of Shares Owned in each Entity
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Talk of the No. of
Town Hawk Corporation
Name of Happy Kids, Apparel J & B 18 Industries, O.P. Kids, H.O.T. Kidz, Shares to be
Securityholder Ltd. Corp.(1) Corp.(2) Inc.(3) Inc.(4) Inc.(4) Received
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Xxxx X. Xxxxx 51 50 50 50 50 50 2,131,250
Xxxx X. Xxxxx 49 50 50 50 50 50 2,131,250
4,262,500
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(1) Stock certificates representing ownership interests in Talk of the Town
Apparel Corp. will be delivered in January 1998. Although shares were
issued previously, no stock certificates were delivered.
(2) Corporate kit never ordered for J & B 18 Corp. Stock certificates
representing ownership interests in J & B 18 Corp. will be delivered in
January 1998.
(3) Stock certificates representing ownership interests in Hawk Industries,
Inc. will be delivered in January 1998. Although shares were issued
previously, no stock certificates were delivered.
(4) O.P. Kids, Inc. and H.O.T. Kidz, Inc. will be formed in January 1998.
Immediately prior to the effectiveness of the Corporation's proposed
initial public offering O.P. Kids, LLC will be merged into O.P. Kids, Inc.
and H.O.T. Kidz, LLC will be merged into H.O.T. Kidz, Inc. Each of O.P.
Kids, Inc. and H.O.T. Kidz, Inc. will be owned by Messrs. Xxxx Xxxxx and
Xxxx Xxxxx as noted above.
