EXHIBIT 10.11
STOCK GRANT AGREEMENT
This Stock Grant Agreement (this "Agreement") is made as of the 30th day of
October, 1999 by and among The Right Start, Inc., a California corporation (the
"Company"), XxxxxXxxxx.xxx Inc., a Delaware corporation (the "Subsidiary") and
Guidance Solutions, Inc. (the "Developer"); (the Company and the Subsidiary
shall be collectively referred to herein as the "Right Start");
WHEREAS, the Company, as of the date hereof, owns a majority of the
outstanding common stock, par value $.01 per share of Subsidiary (the "Common
Stock");
WHEREAS, Developer has provided services to the Company and Subsidiary in
connection with Subsidiary's electronic commerce Internet web site currently
located at xxx.xxxxxxxxxx.xxx (the "Web Site");
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WHEREAS, the Board of Directors of each of the Company and Subsidiary (each
a "Board") believes that an ongoing relationship between the Subsidiary and the
Developer will be instrumental in increasing the value of the Subsidiary and,
accordingly, that it is in the best interests of the Subsidiary and its
stockholders to provide Developer with a direct interest in the success of the
Subsidiary; and
WHEREAS, in order to provide the Developer with an equity incentive in the
Subsidiary, the Company, in accordance with the terms of this Agreement, has
agreed to transfer to the Developer an aggregate of 288,333 shares of the
Subsidiary's Common Stock (the "Shares").
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
SECTION 1
Authorization and Grant of Stock
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1.1 Authorization of Restricted Stock. The Company has authorized the
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transfer to the Developer of 288,333 shares of the Subsidiary's Common Stock
held by the Company, on the terms set forth herein.
1.2 Grant of the Shares; Consideration. The Company hereby grants to the
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Developer the Shares, 171,000 of which shall be granted on the date hereof to
Developer for services previously rendered by Developer in connection with the
performance of that certain Services Agreement dated as of February 15, 1999,
between the Company and Developer, and 117,333 shares of which shall be granted
on the date hereof to Developer as an incentive to continue to provide
partnering and development services to the Right Start.
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1.3 Stock Issuance. On the date hereof, the Company shall issue the Shares
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to Developer. Upon issuance, Developer shall be entitled to exercise all rights
as a Common Stock holder of Subsidiary without limitation.
SECTION 2
Representations and Warranties
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2.1 Representations and Warranties of the Company and Subsidiary.
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2.1.1 Organization; Good Standing; Qualification. The Company and the
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Subsidiary are corporations duly organized, validly existing, and in good
standing under the laws of their states of incorporation, have all requisite
corporate power and authority to execute and deliver this Agreement and to carry
out the provisions of this Agreement, and the Company has all requisite
corporate power and authority to transfer the Shares.
2.1.2 Authorization. All corporate action on the part of the Company and
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the Subsidiary, and their respective officers, directors and stockholders
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company and Subsidiary hereunder, and the
transfer and delivery of the Shares being granted hereunder, has been taken and
this Agreement, when executed and delivered, will constitute the valid and
legally binding obligations of the Company and the Subsidiary, each enforceable
in accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) as to rights to indemnity and contribution that may be
limited by applicable laws.
2.1.3 Valid Transfer of Common Stock.
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(a) The Company is the sole legal and the beneficial owner of the Shares to
be granted to Developer hereunder and is conveying to the Developer such Shares,
free and clear of any liens, claims, interests, charges and encumbrances.
(b) The Company has neither previously sold, assigned, conveyed, transferred
or otherwise disposed of, in whole or in part, the Shares to be transferred by
it hereunder, nor entered into any agreement to sell, assign, convey, transfer
or otherwise dispose of, in whole or in part, such Shares.
2.1.4 Capitalization and Voting Rights. As of the date hereof, the
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authorized capital of the Subsidiary consists of:
(a) Preferred Stock. 5,000,000 shares of blank check Preferred Stock, par
value $.01, of which 3,333,333 shares have been designated as Series A
Convertible Preferred Stock; no shares of Preferred Stock are issued and
outstanding.
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(b) Common Stock. 20,000,000 shares of common stock, par value $.01, of
which 9,100,000 shares are issued and outstanding.
SECTION 3
Transferability; Registration Rights; Financial Information
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3.1 Transferability of Common Stock. The Shares may be transferred by
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Developer in compliance with applicable state and federal securities laws,
provided each person or entity to whom all or a portion of such Common Stock is
transferred agrees to be bound by this Section 3.1. Each certificate
representing any shares of Common Stock constituting all or a portion of the
Shares (unless Subsidiary shall have received an opinion from counsel at
Developer's expense (which counsel may be counsel to the Subsidiary) reasonably
acceptable to the Subsidiary to the effect that such securities may lawfully be
disposed of without registration, qualification or legend) shall be imprinted
with the following legend (a "'33 Act Legend"):
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be sold or transferred,
assigned, pledged or hypothecated unless and until registered under such
Act or unless the Company has received an opinion of counsel or other
evidence, satisfactory to the Company and its counsel, that such
registration is not required.
3.2 Registration Rights. The Subsidiary shall also grant to Developer
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registration rights with respect to the Shares. Such registration rights to be
granted to Developer shall consist of one demand registration and unlimited
piggyback registrations for the Shares held by Developer at the time of
registration, all of which registration rights may be exercised only after the
Subsidiary's initial public offering. Such registration rights shall be subject
to customary terms regarding cut-backs, allocation among shareholders and
indemnification.
3.3 Securities Laws; Investor Representations; Legends.
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3.3.1 No Issuance in Violation of Securities Laws; Legends. Notwithstanding
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the foregoing, the Shares shall not be delivered to Developer if such delivery
would constitute a violation of any applicable Federal or state securities or
other laws or regulations. As a condition to the delivery of the Shares to
Developer, the Company may require Developer to make certain representations and
warranties that may be required by applicable law or regulation, and,
specifically, may require Developer to provide evidence satisfactory to the
Company that the Shares are being acquired only for investment purposes and
without any present intention to sell or distribute such shares in violation of
any federal or state securities or other laws or regulations.
3.3.2 Investor Representations and Warranties. In connection with the
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grant of the Shares, the Developer represents and warrants to the Company that:
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4.5.2.1 the Shares to be acquired by the Developer pursuant to
this Agreement will be acquired for the Developer's own accounts and not with a
view to, or intention of, distribution thereof in violation of the Securities
Act or any applicable state securities laws, and the Shares will not be disposed
of in contravention of the Securities Act or any applicable state securities
laws.
4.5.2.2 the Developer is familiar with the term "accredited
investor" as defined in Rule 501 under the Securities Act and the Developer is
an "accredited investor" within the meaning of such term in Rule 501 under the
Securities Act;
4.5.2.3 the Developer is sophisticated in financial matters and
is able to evaluate the risks and benefits of the investment in the Common
Stock;
4.5.2.4 the Developer is able to bear the economic risk of its
investment in the Common Stock constituting the Shares for an indefinite period
of time because the Shares have not been registered under the Securities Act
and, therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available;
4.5.2.5 this Agreement constitutes the legal, valid and binding
obligation of the Developer, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by the Developer does not
and will not conflict with or violate any law, regulation, judgment, order or
decree to which Developer is subject which would have a material adverse effect
on Developer; and
4.5.2.6 the Developer is not an "investment company" or a person
directly or indirectly controlled by or acting on behalf of a "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
3.3.3 Financial Information. Unless notified by Developer to the contrary,
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the Subsidiary shall provide to Developer (so long as Subsidiary is not a
reporting company under the Securities Exchange Act of 1934, as amended) audited
annual financial information and unaudited quarterly financial information (each
including a balance sheet as of such period end date, and statements of cash-
flows and statements of operations of Subsidiary for such period).
3.3.4 California Corporate Securities Law. The grant of the securities
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which are the subject of this Agreement has not been qualified with the
Commissioner of Corporations of the State of California and the issuance of such
securities or the payment or receipt of any part of the consideration therefor
prior to such qualification is unlawful, unless an exemption from such
qualification is available. The rights of all parties to this Agreement are
expressly conditioned upon such qualification being obtained, or such exemption
being available.
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SECTION 4
Miscellaneous
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4.1 Governing Law. This Agreement shall be governed in all respects by the
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laws of the State of California.
4.2 Successors and Assigns. Except as otherwise provided herein, the
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provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Developer to receive the Shares shall
not be assignable other than to an affiliate of Developer without the prior
written consent of the Company.
4.3 Entire Agreement; Amendment. This Agreement and the other documents
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delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
4.4 Notices, etc. All notices and other communications required or
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permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Developer, to 0000 Xxx Xxx Xxxxxx, Xxxxxx xxx Xxx,
Xxxxxxxxxx 00000; attention: Xxxx Xxxxxxx, Chief Financial Officer (or to such
other address as Developer shall have furnished to the Company in writing), or
(b) if to the Company or Subsidiary, to 0000 Xxxxxxxx Xxxxxx Xxxxx, Xxxx X,
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000; attention: President (or to such other
address as the Company or Subsidiary shall have furnished to the Developer).
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or 72 hours after
the same has been deposited in a regularly maintained receptacle for the deposit
of the United States mail, addressed and mailed as aforesaid.
4.5 Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
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IN WITNESS WHEREOF, the foregoing Agreement is hereby executed as of the
date first above written.
COMPANY: THE RIGHT START, INC.
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By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
President and Chief Executive Officer
SUBSIDIARY: XXXXXXXXXX.XXX INC.
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By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
DEVELOPER: GUIDANCE SOLUTIONS, INC.
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By: /s/ Xxxx Xxxxxxxx
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Name: Xxxx Xxxxxxxx
Title: Chief Financial Officer
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