Exhibit 10.3
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Purchase Agreement") dated as of
September 24, 1996 is entered into by Children's Concept, Inc., a Pennsylvania
corporation (the "Company"), Fourcar, B.V. and its affiliates set forth on the
signature page hereto (collectively "Fourcar"), Vulcan Ventures, Inc. ("Vulcan")
and the other entities and individuals who have executed counterpart signature
pages hereto as of the respective dates set forth on such signature pages
(Fourcar, Vulcan and the other entities and individuals who have executed
counterpart signature pages hereto are hereafter referred to as the
"Purchasers").
In consideration of the respective representations, warranties,
covenants and agreements set forth herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I
AUTHORIZATION AND ISSUANCE
OF SECURITIES
1.1 AUTHORIZATION OF ISSUE.
(a) Series C Convertible Preferred Stock. The Company has duly
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authorized the issuance and sale to the Purchasers of an aggregate of up to
750,000 shares of Series C Convertible Preferred Stock, par value $.01 per share
(the "Series C Preferred Stock"), of the Company. The designations, rights,
preferences and other terms and conditions relating to the Series C Preferred
Stock shall be as set forth on Exhibit A.
(b) Series BB Convertible Preferred Stock. The Company has duly
authorized the issuance to certain of the Purchasers, pursuant to Paragraph
1.2(b), of an aggregate of up to 846,412 shares of Series BB Convertible
Preferred Stock, par value $.01 per share (the "Series BB Preferred Stock"), of
the Company. The designations, rights, preferences and other terms and
conditions relating to the Series BB Preferred Stock shall be as set forth on
Exhibit B.
1.2 ISSUANCE OF SECURITIES. Subject to the terms and conditions set
forth herein, at the Closing (as defined in Paragraph 4.1) and the issuance and
delivery conditions set forth in Paragraph 4.2:
(a) The Company shall sell, and the Purchasers, except for
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation ("DLJ"), shall purchase from
the Company for $22.50 per share (the "Purchase Price"), that number of shares
of Series C
Preferred Stock representing the total number of shares committed by each such
Purchaser as set forth on Exhibit C.
(b) Certain Purchasers shall exchange the number of shares of
Series B Convertible Preferred Stock, par value $.01 per share (the "Series B
Preferred Stock") held by such Purchasers, as set forth in Exhibit C, for an
equal number of shares of Series BB Preferred Stock. Except as expressly
provided herein to the contrary, Purchasers who exchange shares of Series B
Preferred Stock for shares of Series BB Preferred Stock shall remain bound by
the surviving provisions of that certain Purchase Agreement among the Company,
Schlessinger and the Purchasers (as defined therein), as amended (the "Series B
Purchase Agreement"). Upon receipt of certificates representing shares of Series
B Preferred Stock surrendered for exchange hereunder and the issuance of
corresponding shares of Series BB Preferred Stock, the Company shall cancel the
surrendered shares of Series B Preferred Stock.
(c) The Company shall sell, and DLJ shall purchase from the
Company, that number of shares of Series C Preferred Stock as shall be mutually
agreed to by the Company and DLJ, calculated in accordance with the terms of the
letter agreement (the "Letter Agreement") dated June 10, 1996 between the
Company and DLJ which shall represent full and complete payment of DLJ's
financing fee in connection to the sale of shares of Series C Preferred Stock at
the Closing.
1.3 THE CONVERTED SHARES. The Company has authorized and has reserved
and covenants to continue to reserve a sufficient number of its previously
authorized but unissued shares of Common Stock, par value $.01 per share
("Common Stock"), to satisfy the rights of conversion of the holders of the
Series C Preferred Stock and the Series BB Preferred Stock.
1.4 THE SECURITIES. The Series C Preferred Stock and the Series BB
Preferred Stock and any shares of Common Stock issuable upon conversion of the
Series C Preferred Stock and the Series BB Preferred Stock and such shares when
issued are sometimes collectively referred to herein as the "Shares."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers the matters set forth
in this Article II:
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2.1 ORGANIZATION, STANDING AND QUALIFICATION. The Company and each of
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has all
requisite corporate power and authority to own, lease and operate its
properties, to carry on its business as currently conducted and as now proposed
to be conducted, and to carry out the transactions contemplated hereby. The
Company and each of its subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction, if any, in
which the conduct of its business or its ownership, leasing or operation of
property requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the Company's business, financial
condition or results of operations. The Company has made available to Purchasers
true, correct and complete copies of its Articles of Incorporation and its
bylaws, in each case as amended and as in effect on the date hereof (the
"Articles of Incorporation" and the "Bylaws," respectively), and has previously
made available to Purchasers the Company's complete corporate minute and stock
books which include all actions of the Company's Board of Directors and
shareholders, whether by meeting or by written consent in lieu of a meeting.
2.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock of which 5,065,003 shares are
currently issued and outstanding, fully paid and non-assessable. The Company is
authorized to issue up to 4,000,000 shares of preferred stock, $.01 par value,
(a) 1,000,000 shares of which have been designated as Series A Convertible
Preferred Stock, par value $.01 per share, of which 806,559 shares are currently
issued and outstanding, fully paid and non-assessable and (b) 1,000,000 shares
of which have been designated as Series B Convertible Preferred Stock, par value
$.01 per share of which 846,412 shares are currently issued and outstanding,
fully paid and non-assessable. Except as set forth in the disclosure schedule,
there are no options, warrants, rights, shareholders agreements or other
instruments or agreements outstanding giving any person or entity the right to
acquire any shares of capital stock of the Company.
2.3 AGREEMENTS. Except as set forth in the disclosure schedule and
except as entered into in the ordinary course of business, the Company is not a
party to or bound by any material written, oral or implied contract, agreement,
lease or other commitment. All of the Company's material agreements are valid,
binding and enforceable against the respective parties thereto in accordance
with their respective terms and the Company has no knowledge of any breach or
anticipated breach of any material agreements.
2.4 NO DEFAULTS. The Company is not in default and the transactions
contemplated hereby will not result in the Company being in default (a) under
(i) the Articles of Incorporation or Bylaws, or (ii) any material written, oral
or implied, contract, agreement, lease or other commitment to which the Company
is a party and, to the best knowledge of the Company, the other party to such
contract agreement, lease or other commitment is not in default thereunder, or
(b) with respect to any order, writ, injunction or decree of any court or any
federal, state, municipal or other domestic or foreign governmental department,
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commission, board, bureau, agency or instrumentality which, in the aggregate,
would have a material adverse effect on the Company's business, financial
condition or results of operations.
2.5 INTELLECTUAL PROPERTY RIGHTS. The Company owns, has the right to
use and, where necessary, has made proper application for the use of the name
"Zany Brainy" in all jurisdictions in which the Company currently transacts
business. The Company has federally registered service marks with the United
States Patent and Trademark Office for the "Zany Brainy" name, the "Zany Brainy"
design and the words "A Zillion Neat Things For Kids". No claim is pending or
threatened to the effect that any such intellectual property owned by the
Company is invalid or unenforceable by the Company.
2.6 LITIGATION. There is no litigation or governmental proceeding or
investigation pending, or to the knowledge of the Company, threatened against
the Company (nor to the knowledge of the Company, any basis therefor) affecting
any of its respective properties or assets. The Company is not in default with
respect to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or government agency. There are no actions or proceedings
pending or, to the Company's knowledge, threatened (or any basis therefor known
to the Company), which might result, either in any case or in the aggregate, in
any material adverse effect on the business, operations, affairs or condition of
the Company or in any of its properties or assets, or which might call into
question the validity of this Purchase Agreement, any of the Shares, or any
action taken or to be taken pursuant hereto or thereto.
2.7 TAX MATTERS. All federal, state, local and foreign tax returns and
tax reports required to be filed by the Company and its subsidiaries have been
filed in accordance with applicable laws with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed except for any such returns or reports as to which the consequences of
any failure to file are not material for the Company and its business. All
federal, state, local and foreign income, profits, franchise, sales, use,
occupation, property, excise, payroll, withholding and other taxes (including
interest and penalties) required to have been paid by the Company and its
subsidiaries have been fully paid or adequately provided for on the balance
sheet, except for tax and liabilities arising in the ordinary course of business
since February 3, 1996. There are no pending audits and the Company has not been
notified by any tax authority that any such audits are contemplated.
2.8 OFFERING MEMORANDUM. The Company has delivered to the Purchasers
its Private Placement Memorandum dated July 1996 (the "Offering Memorandum"),
which Offering Memorandum has been material to the Purchasers in their decision
to enter into this Purchase Agreement. The description of the business,
operations, products, properties and assets of the Company contained in the
Offering Memorandum, the identity of all persons material to the ongoing
operation of the Company's business and product development, as well as all
other factual statements contained therein, are true and correct in all material
respects. The financial projections attached as Exhibit 6 to the Offering
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Memorandum (the "Projections") and any other estimate contained in the Offering
Memorandum are derived in good faith by the Company from assumptions that are
believed to be reasonable, but no representation or warranty is made regarding
the accuracy of the Projections or that any other projections of future
performance or results contained in the Offering Memorandum will be achieved. If
the Company achieves the results contained in the Projections, the Company will
not have "earnings and profits" for the 1996 fiscal year, as that phrase is
defined for purposes of Section 305 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
2.9 COMPLIANCE. The Company (a) has in all material respects complied
with all federal, state, local and foreign laws, ordinances, regulations and
orders applicable to it, the Company's business or the ownership of the
Company's assets, and (b) has all federal, state, local and foreign governmental
licenses and permits material to and necessary in the conduct of the Company's
business as currently being conducted. Such licenses and permits are in full
force and effect, and (i) no violations have been recorded in respect of any
such licenses or permits, (ii) no proceeding is pending or threatened to revoke
or limit any thereof, and (iii) no notice of non-compliance, assessment or
material change has been received by the Company.
2.10 POWER AND AUTHORITY. The Company has the power and authority to
make, deliver and perform this Purchase Agreement and the transactions
contemplated hereby. The execution, delivery and performance of this Purchase
Agreement have been duly authorized by all necessary corporate actions. In
addition, the issuance, sale and delivery of the Series C Preferred Stock and
the issuance, exchange and delivery of the Series BB Preferred Stock in
accordance with the terms of this Purchase Agreement have been duly authorized
by all requisite corporate action of the Company. When issued, sold and
delivered in accordance with this Purchase Agreement, the Series C Preferred
Stock and the Series BB Preferred Stock issued hereunder, will be validly issued
and outstanding and not subject to preemptive or any other similar rights of the
shareholders of the Company or others.
2.11 OFFERING EXEMPTION. Subject to the accuracy of the
representations and warranties of Purchasers set forth under Article III of this
Purchase Agreement, the offering and sale of the Series C Preferred Stock and
the exchange of the Series B Preferred Stock for shares of Series BB Preferred
Stock is exempt from registration under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to Section 4(2) thereof, and under applicable
state securities and "blue sky" laws.
2.12 FINANCIAL STATEMENTS. The Company has furnished to the Purchasers
the audited balance sheets and statements of operations and cash flows for the
fiscal year ended February 3, 1996 (the "Financial Statements"). The Financial
Statements were prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods reported upon. The
Financial Statements present fairly the financial condition, results of
operations and cash flows of the Company as of the dates and for the
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period indicated and are consistent with the books and records of the Company.
The Company has no material liabilities except as set forth on the Financial
Statements.
2.13 NO MATERIAL ADVERSE CHANGE. Except as set forth in the Disclosure
Schedule, since February 3, 1996, there has not been and, to the knowledge of
the Company, there is not threatened, any material adverse change in the
financial condition, business, prospects or affairs of the Company or any
material physical damage or loss to any of its properties or assets or to the
premises occupied by it (whether or not such damage or loss is covered by
insurance) and the Company has not taken any action outside of the ordinary
course of business, including but not limited to incurring any debt, liability
or obligation, purchasing or redeeming any shares of Common Stock of the Company
or paying any dividends on the Common Stock of the Company. The business,
condition, operations or prospects of the Company or any of its properties or
assets have not been adversely affected as the result of any legislative or
regulatory change, any revocation or change in any franchise, permit, license or
right to do business, or any other event or occurrence, whether or not insured
against.
2.14 TITLE TO ASSETS, PROPERTIES. The Company owns, or has a valid
leasehold interest in, or valid license for, all assets necessary for the
conduct of its business as currently conducted. All material tangible assets of
the Company are in a good state of maintenance and repair and are adequate for
use in the Company's business to the extent of its current operations. The
Company owns no real property. The Company enjoys peaceful and undisturbed
possession under all leases under which it is operating, and all said leases are
valid and subsisting in full force and effect. The Company's inventory is of
merchantable quality, in all material respects, except to the extent that it is
returnable to the vendor. Inventory returns to vendors, either as a result of
lack of merchantable quality or pursuant to the terms of purchase orders, do not
exceed 25% of the Company's inventory.
2.15 COMPLIANCE WITH ALL ERISA; BENEFIT PLANS; EMPLOYEES. Except as
set forth in the disclosure schedule, (i) the Company is not a party to any
collective bargaining agreement or employment agreement and is not a party to
any pending or threatened labor dispute, (ii) the Company does not maintain and
has never maintained any employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and (iii) the
Company does not have any pension or profit sharing plan for the benefit of
employees. There is no employee of the Company whose employment is not
terminable at will.
2.16 CONFLICTING INTERESTS. Except as set forth in the Disclosure
Schedule, no director, officer or any relative or an affiliate of the foregoing
has a pecuniary interest in, or loan, lease, royalty agreement or other
continuing transaction with, any supplier or customer of the Company or in any
other business enterprise with which the Company conducts business.
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2.17 CUSTOMERS, DEALERS AND SUPPLIERS. The Company has good working
relationships with its material customers, dealers and suppliers. None of such
customers, dealers or suppliers has terminated, or to the best knowledge of the
Company, has threatened or given notice to terminate, its relationship with the
Company.
2.18 DISCLOSURE. To the best knowledge of the Company, this Purchase
Agreement, including the Exhibits and Schedules thereto, does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein not misleading. The Company has
no information and knows of no fact which has or would have a material adverse
effect on the Company's business which has not been disclosed to the Purchasers
in the Purchase Agreement, including Exhibits and Schedules thereto.
2.19 INSURANCE. The Company carries insurance covering its (and its
subsidiaries) properties and businesses customary for the type and scope of its
properties and businesses, but in any event in amounts sufficient to prevent the
Company from becoming a co-insurer.
2.20 BOOKS AND RECORDS. The books of account, ledgers, order books,
records and documents of the Company accurately and completely reflect all
material information relating to the consolidated business of the Company, the
location and collection of its assets, and the nature of all transactions giving
rise to the obligations or accounts receivable of the Company.
ARTICLE III
REPRESENTATION AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company and
acknowledges, that, on the date such Purchaser purchases shares of Series C
Preferred Stock:
3.1 Such Purchaser is an "accredited investor" within the meaning of
Rule 501(1) of the General Rules and Regulations under the Securities Act; and
either alone or with such Purchaser's financial advisor, has such knowledge and
experience in financial and business matters that such Purchaser is capable of
evaluating the merits and risks of the investment to be made hereunder; and is
acquiring the Series C Preferred Stock for such Purchaser's own account for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act or resale.
3.2 Such Purchaser (together with such Purchaser's adviser(s), if any)
has been afforded the opportunity to ask questions and receive answers
concerning the terms and conditions of the offering of Series C Preferred Stock
and to obtain any additional information, to the extent the Company was able to
acquire such information without unreasonable effort or
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expense, necessary to (i) verify the accuracy of the information set forth in
the Offering Memorandum and (ii) to evaluate the merits and risks of purchasing
the shares of Series C Preferred Stock.
3.3 Such Purchaser acknowledges that it is obligated to the Company
for the entire amount committed by such Purchaser on the signature page hereto
or on such Purchaser's counterpart signature page hereto, as the case may be.
3.4 Such Purchaser understands that none of the Shares which are being
purchased or otherwise issued pursuant to this Purchase Agreement have been
registered under the Securities Act or the securities laws of certain states and
are being offered and sold in reliance on exemptions from the registration
requirements of such act and such laws. The Shares are subject to restrictions
on transferability and resale and may not be transferred or resold except as
permitted under such act and such laws pursuant to registration or exemption
therefrom. The Shares have not been approved or disapproved by the Securities
and Exchange Commission, any state securities commission or other regulatory
authority, nor have any of the foregoing authorities passed upon or endorsed the
merits of this offering or the accuracy or adequacy of the Offering Memorandum.
3.5 Such Purchaser has not employed any broker or finder in connection
with the transactions contemplated by this Purchase Agreement.
3.6 Such Purchaser is not in default and the transactions contemplated
hereby will not result in such Purchaser being in default under any material
written, oral or implied contract, agreement, lease or other commitment that
would have a materially adverse effect on the transactions contemplated hereby
to which such Purchaser is a party.
3.7 Such Purchaser agrees that this Purchase Agreement is enforceable
against such Purchaser in accordance with its terms.
3.8 IF A PURCHASER IS A RESIDENT OF THE COMMONWEALTH OF PENNSYLVANIA,
THE PURCHASER ACKNOWLEDGES AND AGREES THAT (a) THE SECURITIES PURCHASED BY SUCH
PURCHASER CANNOT BE SOLD FOR A PERIOD OF TWELVE (12) MONTHS FROM THE DATE OF
PURCHASE, EXCEPT AS PERMITTED UNDER SECTION 204.011 OF THE PENNSYLVANIA
SECURITIES REGULATIONS, AND (b) PURSUANT TO SECTION 207(M) OF THE PENNSYLVANIA
SECURITIES ACT, EACH PENNSYLVANIA RESIDENT WHO ACCEPTS AN OFFER TO PURCHASE
SECURITIES EXEMPTED FROM REGISTRATION UNDER SECTION 203(D) OF THE PENNSYLVANIA
SECURITIES ACT DIRECTLY FROM AN ISSUER OR AN AFFILIATE OF AN ISSUER HAS THE
RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER,
UNDERWRITER, IF ANY, OR ANY OTHER PERSON WITHIN TWO (2) BUSINESS DAYS FROM THE
DATE OF RECEIPT BY THE ISSUER OF HIS WRITTEN BINDING CONTRACT OF PURCHASE
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OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS NO WRITTEN BINDING CONTRACT
OF PURCHASE, WITHIN TWO (2) BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR
THE SECURITIES BEING OFFERED. TO ACCOMPLISH THE WITHDRAWAL, THE PURCHASER NEED
ONLY SEND A LETTER OR TELEGRAM TO THE ISSUER (OR THE PLACEMENT AGENT IF ONE IS
LISTED ON THE FRONT PAGE OF THE OFFERING DOCUMENT) INDICATING THE PURCHASER'S
INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED
PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY. IF THE PURCHASER IS
SENDING A LETTER, IT IS PRUDENT TO SEND IT BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT
WAS MAILED. SHOULD THE PURCHASER MAKE THE REQUEST ORALLY, THE PURCHASER SHOULD
ASK FOR WRITTEN CONFIRMATION THAT THE PURCHASER'S REQUEST HAS BEEN RECEIVED.
3.9 If the Purchaser is a resident of the Commonwealth of
Massachusetts, such Purchaser represents that its investment will not exceed 25%
of its net worth (excluding for such purposes the value of such Purchaser's
principal residence and its furnishings.
3.10 Such Purchaser, if it is an entity, is duly formed and validly
existing under the laws of the jurisdiction in which such Purchaser was
organized or came into existence and the execution, delivery and performance of
this Purchase Agreement and the Shareholders' Agreement (as defined in Paragraph
4.1) has been duly authorized by such Purchaser and such Purchaser has not been
organized for the specific purpose of acquiring the Shares being offered.
ARTICLE IV
CLOSING
4.1 CLOSING.
(a) The closing (the "Closing") shall take place simultaneously
with the execution hereof at the offices of Xxxxxx, Xxxxx & Bockius LLP or such
other place as shall be agreed to between the Company and Fourcar and Vulcan on
behalf of the Purchasers.
(b) From time to time prior to and following the Closing, the
Company may, but shall not be obligated to, offer and sell shares of Series C
Preferred Stock up to an aggregate, including shares of Series C Preferred Stock
sold to Purchasers, of $16,875,000 to such other purchasers as the Company may
determine in its sole discretion (collectively, the "Other Purchasers"), at a
price per share no less than the price per share paid by the Purchasers
hereunder, at one or more subsequent closings to occur not more than 60 days
after the Closing. By executing the counterpart signature page to this Purchase
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Agreement, the Purchasers hereunder agree to the inclusion of such Other
Purchasers as parties to this Purchase Agreement and the Amended and Restated
Shareholders' Agreement dated May 18, 1994, as amended (the "Shareholders'
Agreement"), and it shall be a condition to each subsequent closing that the
Other Purchasers shall become parties to this Purchase Agreement and the
Shareholders' Agreement and subject to the terms hereof and thereof. If such a
subsequent closing is held, the term "Closing", as used herein, shall be deemed
to apply to the initial closing and each such subsequent closing.
4.2 THE COMPANY'S DELIVERIES.
(a) At the Closing, the Company shall deliver to the Purchasers
the legal opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel for the Company, with
respect to the shares of Services C Preferred Stock and Series BB Preferred
Stock being issued by the Company at such Closing, in a form reasonably
acceptable to counsel for the Purchasers.
(b) As soon as practicable after the Closing, but in no event
more than ten business days after the Company has filed its amended and restated
Articles of Incorporation with the Secretary of the Commonwealth of the
Commonwealth of Pennsylvania, as provided in Paragraph 6.7, the Company shall
deliver to the Purchasers each of the following:
(i) A duly executed Series C Preferred Stock Certificate issued
to each Purchaser for that number of shares of Series C Preferred Stock set
forth opposite such Purchaser's name on Exhibit C; and
(ii) A duly executed Series BB Preferred Stock Certificate issued
to each Purchaser who, pursuant to Exhibit C, is exchanging its shares of
Series B Preferred Stock for an equal number of shares of Series BB
Preferred Stock, representing the number of shares of Series BB Preferred
Stock to be delivered hereunder.
4.3 PURCHASER DELIVERIES.
(a) Each Purchaser that, prior to the Closing, was not a
shareholder of the Company, shall deliver to the Company a counterpart signature
page to the Shareholders' Agreement, a copy of which is attached hereto as
Exhibit D; the failure to so deliver such signature page shall relieve the
Company of any and all obligations to such Purchaser under this Purchase
Agreement.
(b) Each Purchaser identified on Exhibit C as exchanging shares of
Series B Preferred Stock for Series BB Preferred Stock shall deliver to the
Company a certificate representing the number of shares of Series B Preferred
Stock to be exchanged.
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ARTICLE V
REGISTRATION RIGHTS
5.1 DEFINITIONS. As used in this Purchase Agreement, the following
terms shall have the following respective meanings:
"Commission" means the United States Securities and Exchange
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Commission, or any other federal agency at the time administering the Securities
Act.
"Exchange Act" means the Securities Exchange Act of 1934 or any
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similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"IPO" means the Company's initial public offering under the Securities
---
Act pursuant to Form S-1 or a comparable successor form.
"Qualified Public Offering" means a fully underwritten, firm
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commitment public offering pursuant to an effective registration under the
Securities Act covering the offer and sale by the Company of its Common Stock in
which the aggregate net proceeds to the Company exceed $15,000,000, and in which
the price per share of such Common Stock equals or exceeds $12.00 (such price
subject to equitable adjustment in the event of any stock split, stock dividend,
combination, reorganization, reclassification or other similar event).
"Registration Expenses" means the expenses so described in Paragraph
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5.6.
"Restricted Stock" means the Series C Preferred Stock and Series BB
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Preferred Stock being issued to the Purchasers on the date hereof, and any
additional shares of Common Stock issued with respect to the foregoing (by stock
dividend, stock split or otherwise), excluding such shares of Common Stock which
may at the time be sold pursuant to Rule 144(k) under the Securities Act (or
which may be otherwise sold without restriction under the Securities Act.)
"Securities Act" means the Securities Act of 1933 or any similar
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Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Selling Expenses" means the expenses so described in Paragraph 5.6.
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5.2 NOTICE OF PROPOSED TRANSFER. Subject to the limitations set
forth in the Shareholders' Agreement, prior to any proposed transfer of any
Restricted Stock (other than under the circumstances described in Paragraph
5.3), the shareholder wanting to make such a transfer shall give written notice
("Notice") to the Company of its intention to
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effect such transfer. Each Notice: (a) shall describe the manner and
circumstances of the proposed transfer and shall contain an undertaking by such
shareholder to furnish such other information as may be required to render the
opinion referred to below; and (b) shall designate counsel for the Company, or
other counsel, reasonably satisfactory to the Company, for the purpose of giving
the opinion referred to below. If such shareholder shall so designate counsel
other than counsel for the Company, such shareholder shall submit a copy of the
Notice to the counsel designated in the Notice. If, in the opinion of the
designated counsel, which, at the Company's option, need not be reduced to
writing, the proposed transfer of the Restricted Stock may be effected without
registration under the Securities Act and applicable state securities or blue-
sky laws, the Company, as promptly as practicable, but in any event no later
than ten business days after the Company's receipt of the Notice, shall notify
such shareholder and, such shareholder shall thereupon be entitled to transfer
such Restricted Stock in accordance with the terms of the Notice; provided,
however that no such transfer shall be allowed if otherwise prohibited by the
Shareholders' Agreement. Such shareholder shall not be entitled to transfer
Restricted Stock until receipt of notice from the Company under this Paragraph
5.2. Each certificate transferred as above provided shall bear a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "1933 ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND
WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE
TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT
VIOLATE THE 1933 ACT AND THE RULES AND REGULATIONS THEREUNDER."
except that such certificate shall not be required to bear such legend if (i)
such transfer is in accordance with the provisions of Rule 144 (or any other
rule permitting public sale without registration under the Securities Act) or
(ii) the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee (other than an affiliate of the
Company) would be entitled to transfer such securities in a public sale without
registration under the Securities Act.
5.3 REQUIRED REGISTRATION.
(a) The holders of at least two-thirds of the Restricted Stock
held by the Purchasers may request, in writing, at any time after June 2, 1998,
that the Company register under the Securities Act all or any portion of the
shares of Restricted Stock held by it for sale in the manner specified in such
notice.
12
(b) In addition to the rights granted in subsection (a), the
holders of at least two-thirds of the Restricted Stock may request in writing at
any time between the second and third anniversary of the closing of an IPO that
the Company register under the Securities Act all or any portion of the shares
of Restricted Stock held by such Purchasers for sale in the manner specified in
such notice; provided that (i) the Company shall only be obligated to honor such
demand if the Company is eligible to file a registration statement on Form S-3
and (ii) in no event shall the Company be obligated to file two registration
statements on behalf of the holders of Restricted Stock within any one year
period. The Company shall use best efforts to timely file all reports or other
material as it may be required to file pursuant to the Exchange Act. In the
event that the Company ceases or fails to be eligible to file a registration
statement on Form S-3 at any time between the second and third anniversary of
the closing of an IPO, the rights granted to the Purchasers pursuant to this
subsection (b) shall be extended from the date the Company again becomes
eligible to file a registration statement on Form S-3 for a period equal to one
year less the period between the second and third anniversary of an IPO during
which the Company was ineligible to file a registration statement on Form S-3.
(c) Notwithstanding anything to the contrary contained in
subparagraphs (a) or (b), no request may be made under this Paragraph 5.3 within
90 days after the effective date of a registration statement filed by the
Company covering an underwritten public offering.
(d) Promptly following receipt of any notice under this Paragraph
5.3, the Company immediately shall notify all holders of Restricted Stock from
whom notice has not been received that a request for registration pursuant to
subparagraph 5.3(a) has been received (such notice from the Company is called a
"Registration Notice") and shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
specified in such notice (which method shall be in accordance with the following
sentence) from the requesting holders, the number of shares of Restricted Stock
specified in such notice (and in all notices received from other holders of
Restricted Stock within 20 days after the giving of a Registration Notice from
the Company). Any sale or distribution shall be conducted through a broker-
dealer or managing underwriter acceptable to the Company, which acceptance shall
not be unreasonably withheld, or in such other manner as is reasonably
acceptable to the Company.
(e) The Company will be entitled to include in any registration
statement referred to in this Paragraph 5.3, for sale in accordance with the
method of disposition specified above, shares of Common Stock to be sold by the
Company for its own account, and shares of any other person having registration
rights with respect to Common Stock, provided that (i) the number of shares of
Common Stock to be sold by the Company for its own account shall not exceed 20%
of the number of shares of Restricted Stock requested to be registered by the
Purchasers and (ii) to the extent that, in the opinion of the managing
underwriter (if such method of disposition shall be an underwritten public
offering), such
13
inclusion would adversely affect the marketing of the Restricted Stock to be
sold, the number of shares of Common Stock to be registered and sold shall be
reduced as follows: First, the shares of Common Stock requested to be registered
by shareholders with "piggyback" or other registration rights (other than the
holders of the Restricted Stock) shall be reduced at the direction of the
Company in accordance with the underwriters opinions. In the event that the
elimination of all of such shares is not sufficient to reduce the number of
shares of Common Stock to be registered to the number recommended by the
underwriters, then the number of shares to be registered by the Company shall
then be reduced (to zero, if necessary). In the event that the holders of
Restricted Stock have requested more shares to be registered than recommended by
the underwriters, the number of shares of Restricted Stock shall be reduced pro
rata according to the number of shares requested by each such holder to be
registered; provided, however, that if the number of shares of Restricted Stock
requested to be registered by the Purchasers is reduced by more than 20%, then
the Purchasers shall have the option to terminate the registration of the
Restricted Stock pursuant to this Paragraph 5.3; provided, however, that if the
Purchasers elects to so terminate, it will not be deemed to have exercised its
demand right pursuant to this Paragraph 5.3. Except as provided in this
subparagraph 5.3(c) and except for registration statements on Form X-0, X-0 or
any successor thereto, the Company shall not file, or make any public
announcement that it intends to file, with the Commission any other registration
statement with respect to its equity securities, whether for its own account or
that of other shareholders, from the date of receipt of a notice from requesting
holders pursuant to this Paragraph 5.3 until the earlier of (x) completion of
the period of distribution of the registration contemplated thereby and (y) 90
days after the effectiveness of the registration statement relating thereto.
5.4 PIGGYBACK REGISTRATION. If the Company at any time (other than
pursuant to Paragraph 5.3) proposes to register any of its Common Stock under
the Securities Act for sale to the public, whether for its own account or for
the account of other security holders or both (except with respect to
registration statements on Forms X-0, X-0 or another form not available for
registering the Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do. Upon the written request of any such holder, given within 20
days after receipt of any such notice, to register any of its Restricted Stock,
the Company will use its best efforts to cause the Restricted Stock as to which
registration shall have been so requested to be included in the securities to be
covered by the registration statement proposed to be filed by the Company. In
the event that any registration pursuant to this Paragraph 5.4 shall be the
Company's underwritten public offering of Common Stock, the number of shares of
Restricted Stock to be included in such an underwriting may be reduced if and to
the extent that the managing underwriter shall be of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold by
the Company therein as follows: First, all persons (other than the Company) who
have requested shares to be registered and who are not holders of registration
rights shall be reduced (to zero, if necessary) in the manner provided by the
Company. In the event that the number of shares of stock requested to registered
after such reduction shall still be in excess of the number of shares
recommended to be registered by the
14
underwriters, then the number of shares shall be further reduced pro rata
according to the number of shares requested by each holder of registration
rights to be registered. Notwithstanding the foregoing provisions, the Company
may withdraw any registration statement referred to in this Paragraph 5.4
without thereby incurring any liability to the holders of Restricted Stock.
5.5. REGISTRATION PROCEDURES. If and whenever the Company is required
by the provisions of Paragraphs 5.3 and 5.4 to effect the registration of any
shares of Restricted Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a registration
statement, which, in the case of an underwritten public offering pursuant to
Paragraph 5.3(a) or (b), shall be on Form S-3 (provided, that in the case of
Paragraph 5.3(a), if the Company does not qualify for use of Form S-3 in such
registration, such registration statement shall be a Form S-1 or other available
form satisfactory to the managing underwriter, if any, selected as therein
provided) with respect to such securities and use best efforts to cause such
registration statement to become and remain effective until the completion of
the distribution. The Company will provide the Purchasers with the opportunity
to review and comment on such registration statement;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in subparagraph 5.5(a) and as to comply with the provisions
of the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the intended method of
disposition set forth in such registration statement for such period;
(c) furnish to each seller and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or other disposition of the Restricted
Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the sellers of Restricted Stock or, in the case of
an underwritten public offering, the managing underwriter reasonably shall
request;
(e) use its best efforts to list or include the Restricted Stock
on the principal securities exchanges, or the Nasdaq National Market, if any, on
which the Common Stock is then being traded.
(f) make available for inspection by each seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney,
15
accountant or other agent retained by such seller or underwriter, all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement. All such
individuals exercising his right under this subparagraph 5.5(f) shall execute a
confidentiality agreement in a form reasonably acceptable to the Company.
In connection with each registration hereunder, the selling holders of
Restricted Stock shall furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Paragraphs 5.3 and
5.4 covering an underwritten public offering, the Company and each seller of
Restricted Stock agree to enter into a written agreement with the managing
underwriter selected in the manner herein provided and any other participating
underwriters in such form and containing such provisions as is reasonably
satisfactory to the Company and as are customary in the securities business for
such an arrangement between such underwriters and companies of the Company's
size and investment stature.
5.6 EXPENSES. All expenses incurred by the Company in complying with
Paragraphs 5.3 and 5.4, including without limitation all registration and filing
fees, printing expense, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses incurred in connection with
complying with state securities or "blue sky" laws (other than those which by
law must be paid by the selling security holders), fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, but excluding fees and expenses of any counsel or accountants
retained by holders of Restricted Stock, are called "Registration Expenses."
All underwriting discounts and selling commissions applicable to the sale of
Restricted Stock and fees and expenses of any counsel or accountants retained by
holders of Restricted Stock are called "Selling Expenses."
The Company shall pay all Registration Expenses in connection with two
registration statements pursuant to Paragraph 5.3, and the Company shall pay all
Registration Expenses in connection with any registration statement pursuant to
Paragraph 5.4. All Selling Expenses in connection with any registration
statement filed pursuant to Paragraphs 5.3 and 5.4 shall be borne by the
participating sellers.
16
ARTICLE VI
CERTAIN COVENANTS OF THE COMPANY
The Company covenants and agrees that, unless the Purchasers otherwise
agree in writing, for so long as the Purchasers hold at least twenty-five
percent (25%) of the shares of Series C Preferred Stock being issued to the
Purchasers pursuant to the terms of the Purchase Agreement:
6.1 PRESERVATION OF FRANCHISES AND EXISTENCE. The Company shall
maintain its corporate existence, rights, licenses and franchises in full force
and effect; provided, however, that the Company shall not be required to
preserve any right or franchise if the Board of Directors of the Company, as the
case may be, shall in good faith determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not materially disadvantageous to the Company.
6.2 USE OF PROCEEDS. Except as agreed to in advance in writing by the
Company and the Purchasers, the net proceeds received by the Company from the
sale of the Series C Preferred Stock shall be used by the Company in a manner
consistent with the description set forth in the Offering Memorandum.
6.3 FINANCIAL STATEMENTS. The Company shall maintain proper books of
accounts and records and shall deliver to the Purchasers:
(a) Quarterly Reports: As soon as available and in any event
-----------------
within 30 days after the end of each of the first three quarters of each fiscal
year of the Company. Consolidated balance sheets of the Company and its
subsidiaries as of the end of such quarter and consolidated statements of income
and retained earnings and of changes in financial position of the Company and
its subsidiaries for such quarter and for the period commencing at the end of
the previous fiscal year ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year.
(b) Annual Reports: As soon as available and in any event within
--------------
90 days after the end of each fiscal year of the Company, a copy of the annual
audit report for such year for the Company and its subsidiaries including
therein consolidated balance sheets of the Company and its subsidiaries as of
the end of such fiscal year and consolidated balance sheets of the Company and
its subsidiaries as of the end of such fiscal year and consolidated statements
of income and retained earnings and of changes in financial position of the
Company and its subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
reported on by, and accompanied by an opinion of the Company's independent
certified public accounting firm.
17
6.4 MONTHLY REPORTS. The Company shall deliver, as soon as available
and in any event within 30 days after the end of each calendar month, to each
director and to each attendee at Board of Directors, meetings consolidated
balance sheets of the Company and its subsidiaries, if any, as of the end of
such month and consolidated statements of income and retained earnings of the
Company and its subsidiaries, if any, for such month and for the period
commencing at the end of the previous fiscal year and ending with the end of
such month, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and including
comparisons to monthly budgets, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officer of the
Company as having been prepared in accordance with generally accepted accounting
principles consistently applied.
6.5 INSPECTION. The Purchasers may visit and inspect any of the
properties of the Company, examine its books of account, take copies and
extracts therefrom and discuss the affairs, finances and accounts of the Company
with the Company's officers, employees and public accountants during reasonable
business hours, with a representative of the Company present, but subject to
such security and safety regulations as the Company, as the case may be, have in
effect generally and provided that any such inspection shall be conducted in
such a manner as not to interfere unreasonably with the conduct of the business
by the Company and provided that the Purchasers shall sign appropriate
undertakings of nondisclosure if the Company so requests.
6.6 ADDITIONAL SERIES C PREFERRED STOCK. Except as expressly permitted
or as required pursuant to the terms of this Agreement, the Company shall not
issue any shares of Series C Preferred Stock without the prior written consent
of Fourcar and Vulcan.
6.7 CERTAIN AMENDMENTS. The Company and the Purchasers acknowledge
that, prior to the Closing, the Company and certain shareholders of the Company
shall have executed consents in lieu of a meeting of the Company's shareholders
to duly amend the Company's Articles of Incorporation in order to, among other
things, amend certain provisions relating to the preferences of the Company's
Series A Preferred Stock and Series B Preferred Stock. The Company covenants
that, as soon as practicable after the Closing, the Company shall provide notice
of such amendment to non-consenting shareholders of the Company, and, as soon as
practicable after the waiting period required under Pennsylvania law, file
amended and restated Articles of Incorporation with the Secretary of the
Commonwealth of the Commonwealth of Pennsylvania.
ARTICLE VII
CERTAIN COVENANTS AND RIGHTS OF PURCHASERS
18
7.1 COVENANT NOT TO COMPETE: CONFIDENTIALITY
(a) Each Purchaser agrees that, unless the President or the Chief
Executive Officer of the Company otherwise consents, so long as he is bound by
this Purchase Agreement and for a two year period thereafter, he will not,
directly or indirectly, engage in (as a principal, partner, director, officer,
agent, employee, consultant, owner, independent contractor or otherwise, with or
without compensation) or hold a financial interest in (i) any retailing business
that primarily engages in, or plans to primarily engage in, the sale of any
combination of the following children's merchandise: multimedia/educational
----------
merchandise, books, educationally-oriented or specialty-market games and toys,
audiotapes, videotapes, computer software products and arts and crafts supplies
(the "Company's Merchandise Assortment") and has more than 3,000 square feet of
retail selling space in any one store or (ii) any retailing business that
dedicates more than 15% of its retail selling space to any combination of the
Company's Merchandise Assortment and has more than 7,500 square feet of retail
selling space dedicated to such merchandise. The preceding sentence shall not
apply to (A) the ownership of five percent (5%) or less of the shares of any
class of equity securities of a company whose securities are traded on a
national securities exchange or the Nasdaq National Market, (B) any investment
in Kid Source, Inc. or (C) as shall be mutually agreed upon by the parties in a
separate agreement. Each Purchaser acknowledges that the restrictions contained
in this subparagraph, in view of the nature of the business in which the Company
is engaged, are reasonable and necessary in order to protect the legitimate
interests of the Company, and that any violation thereof would result in
irreparable injuries to the Company, entitling the Company to obtain from any
court of competent jurisdiction preliminary and permanent injunctive relief as
well as damages and an equitable accounting of all earnings, profits and other
benefits arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies to which Company may be entitled. If
any of the provisions in this subparagraph shall for any reason be held to be
excessively broad as to duration, area or scope, it shall be construed by
limiting and reducing it, so as to be valid and enforceable to the fullest
extent compatible with the applicable law or the determination by a court of
competent jurisdiction.
(b) From and after the date hereof, each Purchaser agrees to
maintain the confidentiality of, and not use for any purpose unrelated to the
business of the Company, all information that it receives from or about the
Company, other than information which (i) is or becomes generally available to
the public other than as a result of a disclosure by such Purchaser, (ii) is
already in such Purchaser's possession, provided that such information is not
subject to another confidentiality agreement with, or other legal or fiduciary
obligations of secrecy or confidentiality to the Company, or (iii) becomes
available to such Purchaser on a nonconfidential basis from a person unrelated
to the Company who is under no obligation of confidentiality to the Company.
7.2 PREEMPTIVE RIGHTS. Each time the Company proposes to issue any
shares of its Common Stock or securities convertible into Common Stock
(hereafter the "New
19
Issue Securities"), the Company shall first offer the New Issue Securities to
the Purchasers in accordance with the following provisions:
(a) The Company shall give a notice to its Purchasers (the "First
Notice"), stating (i) its intention to issue the New Issue Securities, (ii) the
number of such shares or amount of New Issue Securities to be issued and (iii)
the consideration for which it proposes to issue the New Issue Securities.
(b) By notice given to the Company within twenty (20) days after
the First Notice, any Purchaser may elect to purchase, for the consideration and
on the terms specified in such notice, up to that proportion of the New Issue
Securities which equals the proportion that the number of Shares (as that term
is defined in the Shareholders' Agreement) held by such Purchaser bears to the
total number of Shares on a fully converted and fully diluted basis.
(c) The preemptive right contained in this Paragraph shall not
include the issuance or sale of securities of the Company, as duly approved by
the Board of Directors, (i) to employees in connection with their employment,
(ii) to Directors of the Company or (iii) to any independent contractor in
connection with the performance by such independent contractor of services on
behalf of the Company.
ARTICLE VII
MISCELLANEOUS
8.1 AMENDMENTS, CONSENTS AND WAIVERS. This Purchase Agreement may
not be changed, modified or discharged orally, nor may any waiver or consent be
given orally hereunder, and every such change, modification, discharge, waiver
or consent shall be in writing and, except as provided in the following
sentence, signed by the person against which enforcement thereof is sought.
This Purchase Agreement may be amended and any of its restrictions or provisions
may be waived only with the consent of the Company and holders of a majority of
the shares of Series C Preferred Stock held by Purchasers. Written consent of
the holders of a majority of shares of Series C Preferred Stock held by
Purchasers, or by the holder of a valid proxy to vote a majority of shares of
Series C Preferred Stock held by Purchasers, shall constitute the agreement,
consent and approval of Purchasers for all purposes of this Purchase Agreement.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made herein shall survive the execution and delivery of this
Purchase Agreement until the earlier of a Qualified Public Offering or the end
of the Company's fiscal year ending January 31, 1998.
20
8.3 TERM OF AGREEMENT. Unless terminated sooner by unanimous
agreement in writing of the Company and the Purchasers, this Agreement shall
terminate upon receipt by the Company of the proceeds from a distribution of
equity securities of the Company in a Qualified Public Offering; provided,
--------
however, that Article V and Paragraph 7.1 of Article VII shall survive the
-------
termination of this Agreement.
8.4 COPY OF AGREEMENT TO BE KEPT ON FILE. The Company shall keep on
file at its principal executive offices, and will exhibit to any Purchaser or
its duly authorized representative at any and all reasonable times, an executed
copy of this Agreement and all amendments thereto.
8.5 STOCK CERTIFICATES TO BE MARKED WITH LEGEND. All certificates
representing shares purchased hereunder shall be marked with the following
legend:
"This certificate and the securities represented hereby are held
subject to the terms, covenants and conditions of an agreement
dated as of September 24, 1996 between the Company and the
holder hereof, as it may be amended from time to time, and may
not be transferred or disposed of except in accordance with the
terms and provisions thereof. A copy of said agreement and all
amendments thereto is on file and may be inspected at the
principal executive offices of the Company."
8.6 INTEGRATION AND SEVERABILITY. This Purchase Agreement and the
Shareholders' Agreement shall embody the entire agreement and understanding
among Purchasers and the Company and shall supersede all prior agreements and
understandings relating to the subject matter hereof or thereof, except for (a)
the Purchase Agreement dated as of June 3, 1994 by the Company, Schlessinger and
the Purchasers (as defined therein), as amended, and (b) the Purchase Agreement
dated as of June 28, 1995 by the Company, Schlessinger and the Purchasers (as
defined therein).
8.7 SUCCESSORS AND ASSIGNS. All representations and warranties in
this Purchase Agreement or any certificate delivered pursuant hereto by or on
behalf of Purchasers and the Company shall bind and inure to the benefit of the
respective personal representatives, successors and assigns of such party
hereto, except where the context otherwise requires.
21
8.8 NOTICES AND OTHER COMMUNICATIONS. All notices, requests, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given, made and received only when delivered (personally, by
courier service such as Federal Express or by other messenger, or when deposited
in the United States mails, certified or registered mail, return receipt
requested, postage prepaid and addressed as set forth below:
(a) If to Purchasers:
To the address currently listed for such Purchaser in the
Company's records or such address as is set forth on the
counterpart signature pages hereto.
With a copy to:
Xxxxxxx, Dunaud, Mercadier & Xxxxxxxx
0000 Xxxxxx of the Americas, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxx-Xxxxxxxx Xxxxxxxx, Esquire
(b) If to the Company:
Children's Concept, Inc.
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
with a copy, given in the manner
prescribed above, to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Paragraph for the giving of notice.
8.9 GOVERNING LAW. This Purchase Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of Pennsylvania.
EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY COURT
OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF
22
PENNSYLVANIA AND THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA AND ANY OTHER COURT OF THE COMMONWEALTH OF PENNSYLVANIA AND THE
UNITED STATES WITH JURISDICTION TO HEAR APPEALS FROM ANY SUCH COURT, FOR THE
PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING OF ANY TYPE WHATSOEVER ARISING
OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY BROUGHT BY ANY PARTY, AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT
SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED
COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM,
THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS
AGREEMENT, OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT.
EACH PARTY HERETO FURTHER AGREES NOT TO BRING OR PURSUE ANY SUCH SUIT, ACTION OF
OTHER PROCEEDING IN ANY OTHER COURTS OR JURISDICTION.
8.1 HEADINGS. The headings of the various subdivisions hereof are
for convenience of reference only and shall in no way modify any of the terms or
provisions hereof.
8.1 EXECUTION IN COUNTERPARTS. This Purchase Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Purchase Agreement
shall become binding when one (1) or more counterparts hereof, individually or
taken together, shall bear the signatures of all of the parties reflected hereon
as signatories.
8.1 GENDER, ETC. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
8.1 COSTS, EXPENSES AND TAXES. The Company agrees to pay (i) the
reasonable fees and out-of-pocket expenses of XxXxxxxxx, Will & Xxxxx, special
counsel for the Purchasers, with respect to the preparation, execution and
delivery of this Agreement; and (ii) the reasonable out-of-pocket expenses, if
any, with respect to certain due diligence matters incurred by Fourcar in
connection with its investment hereto; provided, however that the fees and
expenses provided in (i) and (ii) above shall not exceed $10,000. In addition,
the Company shall pay any and all stamp and other taxes payable or determined to
be payable in connection with the execution and delivery of this Agreement, the
issuance of the Series C Preferred Stock and the Series BB Preferred Stock and
other instruments and documents to be
23
delivered hereunder or thereunder, and agrees to save the Purchasers harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
8.14 TREATMENT OF FOURCAR, B.V. AND AFFILIATES. Notwithstanding
anything contained in this Purchase Agreement or the Amended and Restated
Shareholders' Agreement, Fourcar, B.V., together with any entity that would be a
permitted transferee of Fourcar, B.V. for purposes of Paragraph 1(b) of the
Amended and Restated Shareholders' Agreement (each, a "Fourcar Affiiated
Entity"), whether a party hereto or a holder of any other equity securities
issued by the Company, shall be treated as one shareholder for the purposes of
(a) calculating any pro rata purchase commitment for any preemptive rights
contained herein and (b) receiving any benefit due the holders of the Series C
Preferred Stock. Fourcar may assign any such benefit to any Fourcar Affiliated
Entity.
24
IN WITNESS WHEREOF, the parties hereto intending to be legally bound, have
caused this Purchase Agreement to be executed and delivered as instrument under
seal as of the date set forth above.
CHILDREN'S CONCEPT, INC.
By:
__________________________
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
PURCHASERS:
FOURCAR, B.V.
By: _______________________________
Yves Sisteron,
Attorney-in-Fact
SOCIETE DE NOYANGE
By: _______________________________
Yves Sisteron,
Attorney-in-Fact
ASCHLOTEN BEHEER, B.V.
By: _______________________________
Yves Sisteron,
Attorney-in-Fact
BREUGELEM STIFTUNG
By: _______________________________
Yves Sisteron,
Attorney-in-Fact
25
FUNDACION XXXX MARCH LUXEMBURGO SA
By: ________________________________
Yves Sisteron,
Attorney-in-Fact
ARABELLA
By: ________________________________
Xxxxx XxXxxxxx,
Attorney-in-Fact
DULVERTON HOLDINGS LTD.
By: ____________________________
Yves Sisteron,
Attorney-in-Fact
DEANMORE HOLDINGS LTD.
By: ____________________________
Yves Sisteron,
Attorney-in-Fact
FONDATION APPOMATOX
By: ________________________________
Yves Sisteron,
Attorney-in-Fact
FONDATION XXXXXXXX
By: ________________________________
Yves Sisteron,
Attorney-in-Fact
26
XXXXXX XXXXXXX
By: _______________________________
Yves Sisteron,
Attorney-in-Fact
OAK INVESTMENT PARTNERS V,
LIMITED PARTNERSHIP
By: ________________________________
Xxxxxx X. Xxxxxxxxx,
General Partner of Oak Associates V,
Limited Partnership, the General Partner
of Oak Investment Partners V, Limited Partnership
OAK V AFFILIATES FUND
By: _______________________________
Xxxxxx X. Xxxxxxxxx,
General Partner of Oak V Affiliates,
the General Partner of Oak V Affiliates
Fund, Limited Partnership
VULCAN VENTURES, INC.
By: _____________________________
Xxxxxxx X. Xxxxx
Vice President
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