WAIVER AND AGREEMENT
This Waiver and Agreement (this "AGREEMENT"), which waives certain rights
and obligations and sets forth certain agreements of the parties hereto set
forth in the Securities Purchase Agreement (the "PURCHASE AGREEMENT"), dated
June 12, 2000, by and among eToys Inc., a Delaware corporation (the "COMPANY"),
and HFTP Investment L.L.C. ("HFTP"), Xxxxxxxx, L.P. ("XXXXXXXX"), Xxxxxx Capital
Ltd. ("XXXXXX") and Xxxxxxx Capital Ltd. ("XXXXXXX" and together with HFTP,
Xxxxxxxx and Xxxxxx, the "BUYERS"), the Certificate of Designations, Preferences
and Rights of Series D Convertible Preferred Stock of eToys Inc. filed pursuant
to the Purchase Agreement on June 12, 2000 (the "CERTIFICATE OF DESIGNATIONS")
and the Registration Rights Agreement, dated June 12, 2000, by and among the
Company and each of the Buyers (the "REGISTRATION RIGHTS AGREEMENT"), is dated
and effective as of November 15, 2000.
WHEREAS, the Company desires that each Buyer waives certain provisions of
the Certificate of Designations and the Purchase Agreement and enter into
certain agreements relating to the parties rights and obligations;
WHEREAS, the Company has delivered to each of the Buyers, simultaneously
with the execution of this Agreement, a Company's Conversion Election Notice (as
defined in the Certificate of Designations) for an aggregate of 2,000 shares of
the Company's Series D Convertible Preferred Stock (the "PREFERRED SHARES")
convertible into shares of the Company's common stock, par value $0.0001 per
share (the "COMMON STOCK"); and
WHEREAS, the Company intends to submit an additional Company's Conversion
Election Notice to each of the Buyers for the conversion of Preferred Shares;
NOW THEREFORE, for the mutual consideration set forth below the Company
agrees and each of the Buyers, severally and not jointly, agrees as follows:
1. WAIVER TO THE PURCHASE AGREEMENT. Each of the Buyers, severally and
not jointly, waives its right to engage in any transaction constituting a Short
Sale (as defined in the Purchase Agreement), to the extent such transaction
would otherwise be prohibited by Section 4(l) of the Purchase Agreement, solely
as a result of the occurrence during the Forbearance Period (as defined below)
of an event described in either clause (c) or clause (d) of Section 4(l) of the
Purchase Agreement; provided, however, that if the Company fails to comply with
its obligations under Section 3, Section 5, Section 9 or Section 10 of this
Agreement or under the Certificate of Designations as it relates to the
Company's Conversion Election Notices delivered on the date of this Agreement
and pursuant to Section 3 hereof, this waiver will be void and of no effect.
Beginning on the first day following the end of the Forbearance Period, the
Closing Sale Prices (as defined in the Certificate of Designations) of the
Common Stock during the Forbearance Period will be applicable to the
determination of whether an event described in either clause (c) or clause (d)
of Section 4(l) of the Purchase Agreement has occurred after the end of the
Forbearance Period, provided that such Closing Sale Prices occurred within the
time period referred to in clause (c) or clause (d), as applicable, of Section
4(l) of the Purchase
Agreement with respect to a date of determination after the Forbearance Period.
2. CONVERSION RESTRICTIONS. Each of the Buyers, severally and not
jointly, waives its right to convert Preferred Shares pursuant to Section 2(b)
of the Certificate of Designations resulting solely from the occurrence during
the Forbearance Period of an event described in either clause (viii) or clause
(ix) of Section 9 of the Certificate of Designations; provided, however, that if
the Company fails to comply with its obligations under Section 3, Section 5,
Section 9 or Section 10 of this Agreement or under the Certificate of
Designations as it relates to the Company's Conversion Election Notices
delivered on the date of this Agreement and pursuant to Section 3 hereof, this
waiver will be void and of no effect. Beginning on the first day following the
end of the Forbearance Period, the Closing Sale Prices of the Common Stock
during the Forbearance Period will be applicable to the determination of whether
an event described in either clause (viii) or clause (ix) of Section 9 of the
Certificate of Designations has occurred after the end of the Forbearance
Period, provided that such Closing Sale Prices occurred within the time period
referred to in clause (viii) or clause (ix), as applicable, of Section 9 of the
Certificate of Designations with respect to a date of determination after the
Forbearance Period.
3. SATISFACTION OF MANDATORY CONVERSION AT THE COMPANY'S ELECTION
OBLIGATIONS. On or before January 1, 2001, the Company shall deliver to each of
the Buyers a Company's Conversion Election Notice which shall be for an
aggregate of at least 1,000 Preferred Shares, allocated among the Buyers
pursuant to the terms of Section 7 of the Certificate of Designations, which
notice shall set forth a Company's Election Conversion Date of not earlier than
January 31, 2001. The Company agrees and each of the Buyers, severally and not
jointly, agrees that the Actual Converted Percentage (as defined in the Purchase
Agreement) shall be equal to 50%, such that the Company shall have no further
obligations under Section 4(m) of the Purchase Agreement.
4. DEFINITIONS. "FORBEARANCE PERIOD" shall mean the period beginning on
and including the date hereof and ending on and including December 31, 2000;
provided, however, that if the Company fails to comply with its obligations
under Section 3, Section 5, Section 9 or Section 10 of this Agreement or under
the Certificate of Designations as it relates to the Company's Conversion
Election Notices delivered on the date of this Agreement and pursuant to Section
3 hereof, then such ending date shall be the earliest date on which the Company
fails to comply with its obligations under Section 3, Section 5, Section 9 or
Section 10 of this Agreement or under the Certificate of Designations as it
relates to the Company's Conversion Election Notices delivered on the date of
this Agreement and pursuant to Section 3 hereof.
5. REGISTRATION STATEMENT. The Company agrees that on or before November
28, 2000, it shall file an additional registration statement with the Securities
and Exchange Commission which is in compliance with Section 2(e) of the
Registration Rights Agreement.
6. CERTAIN REPRESENTATIONS. Each of the Buyers severally, and not
jointly,
represents that this Agreement constitutes a legal, valid and binding obligation
enforceable against it in accordance with its terms. The Company represents that
this Agreement constitutes a legal, valid and binding obligation enforceable
against it in accordance with its terms.
7. SUCCESSORS AND ASSIGNS. This Agreement is binding upon the parties
hereto and their successors and assigns, including any transferee of the
Preferred Shares.
8. COUNTERPARTS. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other parties hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
9. FILING OF FORM 8-K. On or before 8:30 a.m., Eastern Time, on November
17, 2000, the Company shall file a Current Report on Form 8-K with the SEC
describing the terms of this Agreement and the Company's $40 million secured
revolving credit facility with Foothill Capital Corporation (the "CREDIT
FACILITY") and including this Agreement and the Credit Facility as exhibits to
such Current Report on Form 8-K.
10. PUBLICITY. The Company and each Buyer shall have the right to approve
before issuance any press releases or any other public statements with respect
to this Agreement; provided, however, that the Company shall be entitled,
without the prior approval of any Buyer, to make any press release or other
public disclosure with respect to this Agreement as is required by applicable
law and regulations (although each Buyer shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof).
11. OTHER PROVISIONS. Except as set forth herein, all other provisions of
the Purchase Agreement shall remain in full force and effect.
* * * * *
IN WITNESS WHEREOF, the Buyers and the Company have caused this Waiver and
Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
ETOYS INC. HFTP INVESTMENT L.L.C.
By:/s/ XXXXXX X. XXXXXX By: Promethean Asset Management
--------------------- L.L.C.
Name: Xxxxxx X. Xxxxxx Its: Investment Manager
Title: Senior Vice President and
Chief Financial Officer
By:/s/ XXXXX X. X'XXXXX
-------------------------------
Name: Xxxxx X. X'Xxxxx
Title: Managing Member
XXXXXXXX, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: General Partner
By:/s/ XXXXXXX X. XXXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Operating Officer
XXXXXX CAPITAL LTD.
By:/s/ XXXXXX X. XXXXXXX
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Its: Authorized Signatory
XXXXXXX CAPITAL LTD.
By:/s/ XXXXXX X. XXXXXXX
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Its: Authorized Signatory
