EXHIBIT 4.3
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AMENDED AND RESTATED CONVERTIBLE DEBENTURE
AND CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
Between
YES! ENTERTAINMENT CORPORATION,
INFINITY INVESTORS LIMITED
and
FAIRWAY CAPITAL LIMITED
______________________________
Dated as of March 18, 1997
______________________________
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TABLE OF CONTENTS
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Page
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ARTICLE I CERTAIN DEFINITIONS........................ 1
Section 1.1. Certain Definitions.................. 1
ARTICLE II PURCHASE OF SHARES......................... 5
Section 2.1. Purchase of Convertible Debentures;
Closing.............................. 5
ARTICLE III REPRESENTATIONS AND WARRANTIES............. 6
Section 3.1. Representations and Warranties of the
Company.............................. 6
Section 3.2. Representations and Warranties of the
Purchasers........................... 11
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES............ 14
Section 4.1. Transfer Restrictions................ 14
Section 4.2. Stop Transfer Instruction............ 15
Section 4.3. Furnishing of Information............ 15
Section 4.4. Copies and Use of Disclosure
Materials............................ 16
Section 4.5. Blue Sky Laws........................ 16
Section 4.6. Integration.......................... 16
Section 4.7. Certain Agreements................... 16
Section 4.8. Purchaser Ownership of Common Stock.. 17
Section 4.9. Listing of Underlying Shares......... 17
Section 4.10. Purchaser's Rights if Trading in
Common Stock is Suspended or Delisted 17
Section 4.11. No Violation of Applicable Law....... 18
Section 4.12. Repurchase Restrictions.............. 18
Section 4.13. Legal Opinion........................ 19
Section 4.14. Notice of Breaches................... 19
Section 4.15. The Warrants......................... 19
Section 4.16. Conversion Procedures................ 19
Section 4.17. Transfer Agent....................... 20
Section 4.18. Right of First Refusal............... 20
Section 4.19. Restriction on Debt.................. 21
ARTICLE V MISCELLANEOUS.............................. 21
Section 5.1. Fees and Expenses.................... 21
Section 5.2. Entire Agreement; Amendments......... 21
Section 5.3. Notices.............................. 21
Section 5.4. Amendments; Waivers.................. 23
Section 5.5. Headings............................. 23
Section 5.6. Successors and Assigns............... 23
Section 5.7. No Third-Party Beneficiaries......... 23
Section 5.8. Governing Law........................ 23
Section 5.9. Survival............................. 23
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Page
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Section 5.10. Counterpart Signatures............... 24
Section 5.11. 24 Publicity......................... 24
Section 5.12. Severability......................... 24
Section 5.13. Remedies............................. 24
Exhibit A Form of 5% Convertible Debenture
Exhibit B Form of Certificate of Designation
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
P.C. Legal Opinion
Exhibit E(1) Form of Fairway Warrant
Exhibit E(2) Form of Infinity Warrant
Exhibit F Conversion Procedures
Schedule 2.1(b) Debentures and Warrants
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Consents and Approvals
Schedule 3.1(g) Litigation
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AMENDED AND RESTATED CONVERTIBLE DEBENTURE AND CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT, dated as of March 18, 1997 (this "Agreement"), by and
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among YES! Entertainment Corporation, a Delaware corporation (the "Company"),
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Infinity Investors Limited, a corporation organized and existing under the laws
of Nevis, West Indies ("Infinity") and Fairway Capital Limited, a corporation
organized and existing under the laws of Nevis, West Indies ("Fairway").
Infinity and Fairway are each a "Purchaser" and are collectively, the
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"Purchasers".
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WHEREAS, the Company and the Purchasers are parties to that certain
Convertible Debenture Purchase Agreement, dated as of January 28, 1997 (the
"January Purchase Agreement"), pursuant to which, among other things, (i) the
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Company issued and sold to the Purchasers an aggregate of $10,000,000 principal
amount of the Company's 5% Convertible Debentures, due January 28, 2000
(collectively, the "January Debentures") and (ii) the Company delivered an
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aggregate of 300,000 Common Stock purchase Warrants (collectively, the "January
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Warrants");
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WHEREAS, the Company and the Purchasers desire to supersede in their
entirety all of the January Debentures and January Warrants with $1,566,667
aggregate principal amount of 5% Convertible Debentures, shares of a to be
created series of convertible preferred stock of the Company with an aggregate
stated value of $8,500,000 and newly issued Common Stock purchase warrants;
WHEREAS, the Company and the Purchasers have agreed to supersede the
January Purchase Agreement in its entirety hereby to effectuate the
understandings and agreements set forth above;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
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Section 1.1. Certain Definitions. As used in this Agree ment, and
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unless the context requires a different meaning, the following terms have the
meanings indicated:
"Affiliate" means, with respect to any Person, any Person that,
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directly or indirectly, controls, is controlled by or is
under common control with such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
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"under common control with") shall mean the possession, directly or indirectly,
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of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Appraiser" means a nationally recognized or major regional investment
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banking firm or firm of independent certified public accountants of national
standing retained to determine the Warrant Repurchase Price in accordance with
the terms hereof.
"BNY" means BNY Financial Corporation, 0000 Xxxxxx xx xxx Xxxxxxxx,
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Xxx Xxxx, Xxx Xxxx 00000.
"BNY Bank Obligations" means the borrowings and interest due thereon
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(including, without limitation, any interest accruing after the commencement of
any case, proceeding or other action relating to the liquidation, dissolution,
assignment for the benefit of creditors, receivership, arrangement, bankruptcy,
insolvency or reorganization of the Company regardless of whether such interest
is allowable, payable or accruable to BNY in such case, proceeding or other
action) under the Receivables Agreement, as the same may from time to time be
amended, supplemented, otherwise modified, replaced or refinanced.
"Business Day" means any day except Saturday, Sunday and any day which
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shall be a legal holiday or a day on which banking institutions in the state of
New York or the State of California are authorized or required by law or other
government actions to close.
"Certificate of Designation" means the certificate of designation,
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substantially in the form of Exhibit B attached hereto, the final form of which
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is subject to the approval by the Purchasers, which is to be filed by the
Company with the Secretary of State of the State of Delaware on or prior to the
Closing Date.
"Commission" means the Securities and Exchange Commission.
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"Common Stock" means the Company's common stock, par value $.001 per
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share.
"Convertible Debentures" means the Company's 5% Convertible
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Debentures, due January 28, 2000, in the form attached
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hereto as Exhibit A, to be issued in accordance with and subject to the terms
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and conditions hereof.
"Disclosure Materials" means, collectively, the SEC Documents and the
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Schedules to this Agreement furnished by or on behalf of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
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encumbrance, right of first refusal, charge or security interest of any kind in
or on such asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in Section
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3.1(a).
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"Person" means an individual or a corporation, partnership, trust,
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incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" means the shares of the Company's Series A
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Convertible Preferred Stock, par value $.001 per share, with the respective
rights, preferences and privileges set forth in the Certificate of Designation.
"Receivables Agreement" means the Accounts Receivable Management and
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Security Agreement, dated as of July 31, 1995, among the Company and BNY.
"Registration Rights Agreement" means the Registration Rights
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Agreement, dated as of January 28, 1997, by and between the Company and the
Purchasers, as amended by the Amended and Restated Registration Rights Agreement
of even date herewith, in the form attached hereto as Exhibit C, as the same may
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be amended, supplemented or otherwise modified in accordance with its terms.
"SEC Documents" shall have the meaning set forth in Section 3.1(k).
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"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" shall have the meaning set forth in Section 2.1(a).
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"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
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"Trading Day" means (a) a day on which the Common Stock is traded on
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the Nasdaq National Market or Nasdaq SmallCap Market or principal national
securities exchange or market on which the Common Stock has been listed or
quoted, or (b) if the Common Stock is not listed or quoted on the Nasdaq
National Market or Nasdaq SmallCap Market or any principal national securities
exchange or market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the Nasdaq Stock Market, or (c) if the
Common Stock is not listed on the American Stock Exchange, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices).
"Transaction Documents" shall have the meaning set forth in Section
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3.1(b).
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"Transfer Agent" shall have the meaning set forth in Section 4.17.
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"Transfer Agent Agreement" means the Book Entry Transfer Agent
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Agreement, dated as of the date hereof, between the Company, the Purchasers and
the Transfer Agent.
"Underlying Securities Registration Statement" means a registration
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statement contemplated by the Registration Rights Agreement and relating to the
Underlying Shares and Warrant Shares.
"Underlying Shares" means the shares of Common Stock issuable upon the
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conversion of the Convertible Debentures and the Shares in accordance with their
terms and the Certificate of Designation.
"Warrant Exercise Price" means the lesser of (a) $7.875 and (b) 125%
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of the average of the lowest Per Share Market Values for any five (5)
consecutive Trading Days during the 60 Trading Days following the Closing Date.
"Warrant Repurchase Price" with respect to any Warrant delivered
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hereunder shall equal (A) if the average Per Share Market Value for the five
Trading Days immediately preceding the date of the notice triggering a
repurchase hereunder or the date of payment in full of the repurchase price
calculated under Section 4.10, whichever is greater, is greater than the Warrant
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Exercise Price, then the product of (1) the number of shares of Common Stock
issuable upon exercise in full of such Warrant (less such number of
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shares of Common Stock as shall have been previously issued upon conversion of
such Warrant) and (2) the average Per Share Market Value for the five Trading
Days immediately preceding (a) the date of the notice triggering such repurchase
or (b) the date of payment in full of the repurchase price calculated under
Section 4.10, whichever is greater, less the Warrant Exercise Price; or (B) if
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the average Per Share Market Value for the five Trading Days immediately
preceding the date of the notice triggering such repurchase or the date of
payment in full of such repurchase price, whichever is greater, is less than or
equal to the Warrant Exercise Price, then such amount as is determined in good
faith by the Purchasers, provided that, if the Company notifies the Purchasers
within 10 Business Days of its receipt of such Purchaser valuation that it
disagrees with such valuation, within 10 Business Days of such Company notice,
an Appraiser mutually acceptable to each of the Purchasers and the Company shall
determine such amount; provided, however, if the Company and the Purchasers fail
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to appoint such mutually acceptable Appraiser within 10 Business Days of the
expiration of such 10 day period, each of the Company and the Purchasers shall
appoint an Appraiser, who (within 10 Business Days of such appointment) shall
appoint a third Appraiser to determine conclusively the repurchase price for
such Warrant, with the fees and disbursements of any such Appraiser being shared
equally by the Company and the Purchasers.
"Warrants" shall have the meaning set forth in Section 4.15.
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"Warrant Shares" shall have the meaning set forth in Section 3(d).
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ARTICLE II
PURCHASE OF SHARES
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Section 2.1. Purchase of Convertible Debentures; Closing.
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(a) Subject to the terms and conditions set forth in this Agreement,
the Company shall issue and sell to the Purchasers, and the Purchasers shall
purchase (i) an aggregate principal amount of $1,566,667 of Convertible
Debentures and (ii) an aggregate of 85,000 shares of Preferred Stock (the
"Shares"), having the respective rights, preferences and privileges set forth in
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the Certificate of Designation, for an aggregate purchase price of $10,000,000
plus interest from the date of the January Purchase Agreement until the date
hereof (the "Purchase Price").
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(b) The Closing.
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(i) The closing of the purchase and sale of the Convertible
Debentures, Shares and Warrants (the "Closing") shall take place at the offices
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of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, immediately following the execution hereof, or at such
other time and/or place as the Purchasers and the Company may agree. The date
of the Closing is hereinafter referred to as the "Closing Date".
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(ii) At the Closing and in the manner described in the Transfer
Agent Agreement, if applicable, (A) the Company shall deliver (i) the Debentures
and Warrants and certificates representing the Shares to be issued and delivered
to each Purchaser, as specified in Schedule 2.1(b) hereto, to the Persons (or
as directed thereby), registered in the names and in the amounts set forth
thereon, and (ii) to the Persons entitled thereto, all other documents,
instruments and writings required to have been delivered at or prior to the
Closing by the Company pursuant to this Agreement; (B) each Purchaser shall
deliver to the Company (i) the January Debentures and January Warrants issued to
such Purchaser (and shall deliver the January Warrants held by Xxxxx Xxxxxxx,
LLC) in connection with the closing of the transactions under the January
Purchase Agreement and (ii) all documents, instruments and writings required to
have been delivered at or prior to the Closing by such Purchaser pursuant to
this Agreement. The Company acknowledges and agrees that the $10,000,000 paid it
by the Purchasers at the closing of the transactions under the January Purchase
Agreement shall constitute full payment of the Purchase Price for the Warrants,
Shares and Convertible Debentures to be issued and sold to the Purchasers at the
Closing pursuant to this Agreement, and no other consideration shall be due from
the Purchasers at the Closing.
For purposes of this Agreement, when used in connection with the
Convertible Debentures, "Conversion Price," "Original Issue Date," "Conversion
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Date," "Conversion Ratio" and "Per Share Market Value" shall have the meanings
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set forth in the Convertible Debentures and, when used in connection with the
Preferred Stock such terms shall have the meanings set forth in the Certificate
of Designation.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
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Section 3.1. Representations and Warranties of the Company. The
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Company hereby represents and warrants to the Purchasers as follows:
(a) Organization and Qualification. The Company is a corporation, duly
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incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. At
the time the Company changed its state of incorporation from California to
Delaware, the Company was in good standing under the laws of the State of
California. The Company has no subsidiaries other than as set forth in the SEC
Documents (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
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corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not individually or
in the aggregate have a material adverse effect on the results of operations,
assets, prospects or financial condition of the Company and the Subsidiaries,
taken as a whole (a "Material Adverse Effect").
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(b) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Warrants, the Registration Rights Agreement, the
Transfer Agent Agreement, the Convertible Debentures and the Certificate of
Designation and otherwise to carry out its obligations hereunder and thereunder.
This Agreement, the Registration Rights Agreement, the Transfer Agent Agreement,
the Convertible Debentures, the Warrants and the Certificate of Designation are
collectively referred to as the "Transaction Documents." The execution and
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delivery of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Company. Each Transaction Document has been
duly executed and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable against the Company in
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accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding capital
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stock of the Company and each of the Subsidiaries is set forth in Schedule
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3.1(c). No shares of Common Stock are entitled to preemptive or similar rights.
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Except as specifically disclosed in Schedule 3.1(c), there are no outstanding
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options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Convertible Debentures, Shares and Warrants hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents.
(d) Issuance of Convertible Debentures, Shares and Warrants. The
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Convertible Debentures have been duly and validly authorized for issuance, offer
and sale pursuant to this Agreement and, when issued and delivered as provided
hereunder against payment in accordance with the terms hereof, shall be valid
and binding obligations of the Company enforceable in accordance with their
terms free and clear of all Liens. The Shares are duly authorized and, when paid
for in accordance with the terms hereof, shall be validly issued, fully paid and
nonassessable. The Warrants are duly authorized, and when issued and paid for in
accordance with the terms hereof, shall be validly issued, free and clear of all
Liens. The Company has and at all times while the Convertible Debentures, Shares
and Warrants are outstanding will maintain an adequate reserve of shares of
Common Stock to enable it to perform its obligations under this Agreement, the
Convertible Debentures, the Certificate of Designation and Warrants and in no
circumstances shall such reserved and available shares of Common Stock be less
than the sum of (i) two times the number of shares of Common Stock which would
be issuable upon conversion in full of the aggregate principal amount of the
Convertible Debentures and of the full number of Shares, assuming in each case
such conversion occurred on the Original Issue Date (collectively the
"Underlying Shares"), and (ii) the number of shares of Common Stock which would
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be issuable upon exercise in full of the Warrants (the "Warrant
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Shares"). When issued in accordance with the terms hereof and the Convertible
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Debentures, the Certificate of Designation, the Underlying Shares will be duly
authorized, validly issued, fully paid nonassessable, free and clear of all
Liens; and when issued upon exercise of the Warrants in accordance with their
respective terms, the Warrant Shares will be duly authorized, validly issued,
fully paid, nonassessable and free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of its certificate of incorporation or bylaws
(each as amended through the date hereof) or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company is a party or by which any property or asset of the Company is bound
or affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) or
(iii), such conflicts, defaults, terminations, amendments, accel erations,
cancellations and violations as could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any Transaction
Document, (y) have a Material Adverse Effect or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
Transaction Document. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, do not have a
Material Adverse Effect.
(f) Consents and Approvals. Except as obtained prior to the execution
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hereof, neither the Company nor any Subsidiary is required to obtain any
consent, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (i) the filing with the
Commission of an Underlying Securities Registration Statement contemplated by
the Registration Rights Agreement and the making of the applicable blue-sky
filings under state securities laws, each as contemplated by the Registration
Rights Agreement, which shall be filed in the time periods set forth in the
Registration Rights Agreement, (ii) the filing of the Certificate
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of Designation with the Secretary of State of the State of Delaware, which shall
occur prior to the Closing, and (iii) other than, in all other cases, where the
failure to obtain such consent, waiver, authorization or order, or to give or
make such notice or filing, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any of the
Transaction Documents, (y) have a Material Adverse Effect or (z) adversely
impair the Company's ability to perform fully on a timely basis its obligations
under any of the Transaction Documents.
(g) Litigation; Proceedings. Except as specifically set forth in
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Schedule 3.1(g), there is no action, suit, notice of violation, proceeding or
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investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
assets or properties before or by any court, governmental or administrative
agency or regulatory authority (Federal, state, county, local or foreign) which
(i) relates to or challenges the legality, validity or enforceability of the
Transaction Documents, Underlying Shares or Warrant Shares (ii) could,
individually or in the aggregate, if adversely determined, have a Material
Adverse Effect or (iii) could, individually or in the aggregate, adversely
impair the Company's ability to perform fully on a timely basis its obligations
under the Transaction Documents.
(h) No Default or Violation. Neither the Company nor any Subsidiary
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(i) is in default under or in violation of any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, except as could not,
in any such case, individually or in the aggregate, (x) adversely affect the
legality, validity or enforceability of any of the Transaction Documents, (y)
have a Material Adverse Effect or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under the Transaction Documents.
(i) Certain Fees. Except for $400,000 paid by the Company to
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Pennsylvania Merchant Group, no fees or commission will be payable by the
Company to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby.
(j) Private Offering. Assuming (without any independent investigation
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or verification by or on behalf of the Company) the accuracy of the
representations and warranties of the Purchasers set forth in Section 3.2, the
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offer and sale of the Convertible
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Debentures, Shares, the Warrants, the Underlying Shares and the Warrant Shares
are exempt from registration under Section 5 of the Securities Act of 1933, as
amended (the "Securities Act"). Neither the Company nor any person acting on its
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behalf has taken or will take any action (including, without limitation, any
offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Convertible
Debentures or Shares under the Securities Act) which might subject the offering,
issuance or sale of the Convertible Debentures, Shares, the Warrants, the
Underlying Shares or the Warrant Shares to the registration requirements of
Section 5 of the Securities Act.
(k) SEC Documents. The Company has filed all forms, reports and
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documents required to be filed by it under the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(the foregoing reports being collectively referred to herein as the "SEC
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Documents") on a timely basis, or has received a valid extension of such time of
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filing. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder and none of
the SEC Documents, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited and unaudited consolidated
balance sheets of the Company and its Subsidiaries contained in the SEC
Documents, and the related consolidated statements of income, changes in
stockholders' equity and changes in cash flows for the periods then ended,
including the footnotes thereto, except as indicated therein, have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods indicated, except that unaudited financial
statements contained therein do not contain notes and may be subject to normal
audit adjustments and normal annual adjustments and fairly present the financial
condition of the Company and its consolidated Subsidiaries as of and for the
dates thereof and, except as indicated therein, reflects all claims against and
all material debts and liabilities of the Company and its consolidated
Subsidiaries, fixed or contingent, as at and for the dates thereof; and the
related statements of income, stockholders' equity and changes in cash flows
fairly present the results of the operations of the Company and its consolidated
Subsidiaries and the changes in financial position for the period indicated.
Since the date of the financial statements included in the Company's last filed
Quarterly Report on Form 10-Q, there has been no event, occurrence or
development that has had a Material
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Adverse Effect which is not specifically disclosed in any of the Disclosure
Materials.
(l) Form S-3 Eligibility. The Company is eligible to register for
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resale securities with the Commission under Form S-3 promulgated under the
Securities Act.
(m) Investment Company. The Company is not, and following the Closing
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and issuance of the Convertible Debentures and the Shares will not be, nor is it
an Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(n) Solicitation Materials. The Company has not (i) distributed any
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offering materials in connection with the offering and sale of the Convertible
Debentures, the Shares, the Warrants, the Underlying Shares or the Warrant
Shares other than the Disclosure Materials or (ii) solicited any offer to buy or
sell the Convertible Debentures, the Shares, the Warrants, the Underlying Shares
or the Warrant Shares by means of any form of general solicitation or
advertising.
(o) Margin Requirements. The Company does not intend to, and will not,
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use the proceeds of the offer and sale of the Convertible Debentures, Shares and
Warrants hereunder, directly or indirectly, immediately, incidentally or
ultimately, (i) to purchase or carry Margin Stock (as such term is defined under
Regulation U of the Board of Governors of the Federal Reserve System, as in
effect from time to time) or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System.
Section 3.2. Representations and Warranties of the Purchasers. Each
------------------------------------------------
of the Purchasers, severally and not jointly, hereby represents and warrants to
the Company as follows:
(a) Organization; Authority. Such Purchaser is a corporation duly
-----------------------
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement, Transfer Agent Agreement and otherwise
to carry out its obligations hereunder and thereunder. The acquisition of the
Convertible Debentures and Shares to be purchased by such Purchaser hereunder
has been duly authorized by all necessary action on the part of such Purchaser.
Each of this
-12-
Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other general
principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the Convertible
-----------------
Debentures, Shares and the Warrant to be purchased by it hereunder, and the
Underlying Shares and the Warrant Shares relating to such Convertible
Debentures, Shares and Warrants, for its own account for investment purposes
only and not with a view to or for distributing or reselling such Convertible
Debentures, Shares, Underlying Shares, Warrant or Warrant Shares or any part
thereof or interest therein, without prejudice, however, to such Purchaser's
right, subject to the provisions of this Agreement and the Registration Rights
Agreement, at all times to sell or otherwise dispose of all or any part of such
Convertible Debentures, Shares, Underlying Shares, Warrant or Warrant Shares
pursuant to under an effective registration statement under the Securities Act
or pursuant to an available exemption from the registration requirements
thereunder and in compliance with applicable state securities laws.
(c) Purchaser Status. At the time such Purchaser was offered the
----------------
Convertible Debentures, Shares and Warrant to be acquired by it hereunder, it
was and at the date hereof, it is, and at each date it exercises Warrants it
will be, an "accredited investor" as defined in Rule 501(a) under the Securities
Act.
(d) Investment Company. The Purchaser is not, and following the
------------------
Closing and issuance of the Convertible Debentures and Shares will not be, nor
is it an Affiliate of an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(e) Experience of Purchaser. Such Purchaser, either alone or together
-----------------------
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of an investment in the securities to be acquired by it hereunder, and has
so evaluated the merits and risks of such investment.
(f) Ability of Purchaser to Bear Risk of Investment. Such Purchaser is
-----------------------------------------------
able to bear the economic risk of an investment in the securities to be acquired
by it hereunder and, at the pre sent time, is able to afford a complete loss of
such investment.
-13-
(g) Prohibited Transactions. The securities to be acquired by such
-----------------------
Purchaser hereunder are not being acquired, directly or indirectly, with the
assets of any "employee benefit plan", within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.
(h) Access to Information. Such Purchaser acknowledges receipt of the
---------------------
Disclosure Materials and further acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the securities offered hereunder and the merits and risks of investing in
such securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in such securities;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the investment
and to verify the accuracy and completeness of the information contained in the
Disclosure Materials.
(i) Reliance. Such Purchaser understands and acknowledges that (i) the
--------
Convertible Debentures, the Shares and the Warrants being offered and sold to it
hereunder are being offered and sold without registration under the Securities
Act in a private placement that is exempt from the registration provisions of
the Securities Act under Regulation D promulgated thereunder and (ii) the
availability of such exemption, depends in part on, and that the Company will
rely upon the accuracy and truthfulness of, the foregoing representations and
such Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
-----------
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
-------------------------------
Section 4.1. Transfer Restrictions. (a) If any Purchaser should
---------------------
decide to dispose of any portion of the principal amount of the Convertible
Debentures, any of the Shares or any portion of the Warrant to be purchased by
it hereunder (and upon conversion or exercise thereof, any Underlying Shares or
Warrant
-14-
Shares, as applicable), such Purchaser understands and agrees that it
may do so only (i) pursuant to an effective registration statement under the
Securities Act, (ii) to the Company or (iii) pursuant to an available exemption
from registration under the Securities Act. No Purchaser may dispose of any
portion of such securities pursuant to clause (iii) in the immediately prior
sentence unless such Purchaser provides prior written notice thereof to the
Company and complies with the provisions of the immediately following sentence.
In connection with any transfer of any Convertible Debentures, Warrants,
Underlying Shares or Warrant Shares other than pursuant to an effective
registration statement or to the Company, the Company may require that the
transferor provide to the Company an opinion of counsel experienced in the area
of United States securities laws selected by the transferor, the form and
substance of which opinion shall be reasonably satis factory to the Company, to
the effect that such transfer of such Convertible Debentures, Shares, Warrants,
Underlying Shares or Warrant Shares, as the case may be, is being made in
compliance with the Securities Act.
(b) The Purchasers agree to the imprinting, so long as required by the
terms of this Section 4.1(b), of the following legend on certificates
representing the Convertible Debentures, the Shares, the Underlying Shares, the
Warrants and the Warrant Shares to be modified as applicable:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE [OR EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREUNDER, AND IN COMPLIANCE WITH APPLICABLE
STATE SECURITIES LAWS.
[THIS WARRANT IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH
IN AN AMENDED AND RESTATED CONVERTIBLE DEBENTURE AND CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT, DATED AS OF MARCH 18, 1997, BETWEEN THE COMPANY
AND THE ORIGINAL HOLDER HEREOF. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF YES! ENTERTAINMENT CORPORATION.]
The legend set forth above shall be removed upon the conversion of
Convertible Debentures or Shares or exercise of Warrants represented by such
certificate at any time after an Underlying Securities Registration Statement
has been declared, and
-15-
so long as such Underlying Securities Registration Statement remains effective
under the Securities Act or, if not converted during such time, at such other
time as in the opinion of counsel to the Company experienced in the area of
United States securities laws such legend is no longer required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The certificates
representing the Convertible Debentures, Shares, Warrants, Underlying Shares and
Warrant Shares shall also bear any other legends required by applicable Federal
or state securities laws, which legends may be removed as set forth above in the
immediately preceding sentence, or, with respect to legends required pursuant to
state securities laws, when such legends are no longer required under the
applicable requirements of such securities laws. The Company agrees that it will
provide each Purchaser, upon request, with a substitute certificate or
certificates, free from such legend at such time as such legend is no longer
applicable. Each Purchaser agrees that, in connection with any transfer of
Underlying Shares or Warrant Shares by it pursuant to an effective registration
statement under the Securities Act, such Purchaser will comply with all
applicable prospectus delivery requirements of the Securities Act. The Company
makes no representation, warranty or agreement as to the availability of any
exemption from registration under the Securities Act with respect to any resale
of the Convertible Debentures, Shares, Underlying Shares, Warrants or Warrant
Shares.
Section 4.2. Stop Transfer Instruction. For so long as an
-------------------------
Underlying Securities Registration Statement is effective, the Company may not
issue any stop transfer instruction or make any notation on its records with
respect thereto to any transfer agent (including the Transfer Agent) of the
Company and shall issue shares of Common Stock upon a conversion of Convertible
Debentures or Shares or exercise of Warrants in accordance with Section 4.1.
Section 4.3. Furnishing of Information. (a) As long as any
-------------------------
Purchaser owns Convertible Debentures, Shares, Underlying Shares, Warrants or
Warrant Shares, the Company covenants to timely file (or obtain extensions in
respect thereof) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly
furnish each Purchaser with true and complete copies of all such filings. If the
Company is not at the time required to file reports pursuant to such sections,
it will prepare and furnish to each Purchaser annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act in the time period that such filings
-16-
would have been required to have been made under the Exchange Act.
(b) The Company shall deliver copies to the Purchasers of any
documents or financial statements it delivers to BNY pursuant to Section 11(a),
11(b) or 11(c/d) of the Receivables Agreement concurrently with such delivery to
BNY, provided that the Company shall not be obligated to deliver the
accountant's consent required under Section 11 of the Receivables Agreement and
shall not deliver to the Purchasers the other materials it is required to
deliver to BNY under such Section 11.
Section 4.4. Copies and Use of Disclosure Materials. The Company
--------------------------------------
consents to the use of the SEC Documents, and any amendments and supplements
thereto, by the Purchasers in connection with resales of the Underlying Shares
or the Warrant Shares to the extent such resales are not pursuant to an
effective registration statement.
Section 4.5. Blue Sky Laws. The Company shall qualify the Underlying
-------------
Shares and the Warrant Shares under the securities or Blue Sky laws of such
jurisdictions as each Purchaser may request and shall continue such
qualification at all times through the third anniversary of the Closing Date;
provided, however, that the Company shall not be required in connection
-------- -------
therewith to qualify as a foreign corporation where it is not now so qualified,
or take any action that would subject the Company to general service of process
in any such jurisdiction where it is not then so subject or subject the Company
to any material tax in any such jurisdiction where it is not then so subject.
Section 4.6. Integration. The Company shall not and shall use its
-----------
best efforts to ensure that no Affiliate shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Convertible Debentures, the Shares, the Warrants, the Underlying Shares
or the Warrant Shares in a manner that would require the registration under the
Securities Act of the sale of the Convertible Debentures, the Shares, the
Warrants, the Underlying Shares or the Warrant Shares to the Purchasers.
Section 4.7. Certain Agreements. From the date hereof through the
------------------
third anniversary hereafter, the Company shall not and shall cause the
Subsidiaries not to, without the consent of the Purchasers, (i) amend its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Purchasers under the Transaction Documents;
(ii) repay, repurchase or offer to repay, repurchase or otherwise acquire in
-17-
excess of 10,000 shares of its Common Stock, other than shares which may be
repurchased from employees of the Company in connection with the termination of
their employment with the Company; or (iii) enter into any agreement with
respect to any of the foregoing.
The Company may not force any conversion or call a redemption of any
portion of the principal amount of the Convertible Debentures until such time as
all of the Shares have been converted or redeemed in accordance with the terms
hereof and the Certificate of Designation.
Section 4.8. Purchaser Ownership of Common Stock. No Purchaser may
-----------------------------------
use its ability to convert the Convertible Debentures or Shares issued to it
hereunder or to use its ability to acquire shares of Common Stock upon exercise
of the Warrant to be issued to it pursuant to the terms hereof to the extent
that such conversion or exercise would result in that Purchaser beneficially
owning (for purposes of Rule 13d-3 under the Exchange Act) more than 4.9% of the
outstanding shares of the Common Stock; provided, however, that the provisions
-------- -------
of this Section 4.8 shall not apply to any forced conversion by the Company
pursuant to Section 4(b) of the Convertible Debentures or pursuant to Section
5(b) of the Certificate of Incorporation and, provided, further, that if 10 days
-------- -------
have elapsed since a Purchaser shall have declared an "Event of Default" (as
such term is defined in the Convertible Debentures), the provisions of this
Section 4.8 shall be null and void ab initio.
----------- ------
Section 4.9. Listing of Underlying Shares. The Company shall, within
----------------------------
seven (7) Business Days of the Closing Date, file with the Nasdaq Stock Market
an additional shares listing application covering the listing of an aggregate of
4,325,591 Underlying Shares and Warrant Shares and shall take all steps
necessary to cause such application to be approved as soon as possible
thereafter. The Company shall also take all steps necessary to cause such
shares to be listed on any other national securities exchange or market on which
the Common Stock is then listed as soon as possible after the Closing Date. The
Company shall provide to each Purchaser evidence of such filings and listings,
and shall maintain such listings as long as any Purchaser holds Convertible
Debentures, Shares, Warrants, Underlying Shares or Warrant Shares. In the event
the aggregate number of Underlying Shares and Warrant Shares exceeds 4,325,591,
the Company shall promptly file one or more appropriate listing applications to
continually list for trading a number of such additional shares, as the Company
and the Purchasers shall reasonably agree.
-18-
Section 4.10. Purchaser's Rights if Trading in Common Stock is Suspended
----------------------------------------------------------
or Delisted. In the event that at any time within the three-year period after
-----------
the date hereof, trading in the shares of the Common Stock is suspended on or
delisted from the Nasdaq National Market (other than as a result of the
suspension of trading in securities on such market generally or temporary
suspensions pending the release of material information and other than a
suspension of trading if the Common Stock is quoted on the Nasdaq SmallCap
Market within one Business Day after such suspension), at each Purchaser's
option exercisable by five Business Days prior written notice to the Company,
the Company shall repurchase and redeem as applicable, all of the Convertible
Debentures, Shares, Warrants, Underlying Shares and Warrant Shares owned by such
Purchaser at an aggregate purchase price equal to the sum of (I)(A) the product
of (1) the average Per Share Market Value for the five (5) Trading Days
immediately preceding (a) the day of such notice or (b) the date of payment in
full of the repurchase price calculated under this Section 4.10, whichever is
greater, multiplied by (2) the Conversion Ratio on the date of the repurchase
notice, (II) the Warrant Repurchase Price, (III) the number of Underlying Shares
and Warrant Shares then held by such Purchaser multiplied by the average Per
Share Market Value for the five (5) Trading Days immediately preceding (A) the
date of the notice or (B) the date of payment in full by the Company of the
repurchase price calculated under this Section 4.10, whichever is greater, and
(IV) interest on such amounts set forth in I - III above accruing from the 7th
day after such notice until the repurchase price under this Section 4.10 is paid
in full at the rate 15% per annum.
Section 4.11. No Violation of Applicable Law. Notwithstanding any
------------------------------
provision of this Agreement to the contrary, if any repurchase or redemption
otherwise required under this Agreement or the Registration Rights Agreement
would be prohibited by the relevant provisions of Delaware General Corporation
Law, such repurchase shall not be effected unless and until it is permitted
under such law; provided, however, that interest payable by the Company with
-------- -------
respect to any such repurchase or redemption shall continue to accrue in
accordance with Section 4.10.
------------
Section 4.12. Repurchase Restrictions. Notwithstanding any provision of
-----------------------
this Agreement to the contrary, if any repurchase or redemption otherwise
required under this Agreement or the Registration Rights Agreement would be
prohibited in the absence of consent from any lender of the Company or any of
the Subsidiaries, or by the holders of any class of securities of the Company,
the Company shall use its best efforts to obtain such consent as promptly as
practicable after the repurchase or redemption is required and such repurchase
or redemption shall not be effected
-19-
unless and until such consent is obtained. Interest payable by the Company with
respect to any such repurchase or redemption shall continue to accrue until such
consent is obtained and the repurchase price therefor paid. Nothing contained in
this Section 4.12 shall be construed as a waiver by the Purchaser of any rights
------------
it may have by virtue of any breach of any representation or warranty of the
Company herein as to the absence of any requirement to obtain any such consent.
Section 4.13. Legal Opinion. The Company shall cause the legal opinions
-------------
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C. in the form of Exhibit D, to be
delivered at the Closing.
Section 4.14. Notice of Breaches. Each of the Company and each
------------------
Purchaser shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in this Agreement or in
the Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to, with respect to the Closing, which would
reasonably be likely to cause any representation or warranty or other agreement
of such party, as the case may be, contained herein to be incorrect or breached
as of such Closing Date. However, no disclosure by either party pursuant to
this Section 4.14 shall be deemed to cure any breach of any representation,
------------
warranty or other agreement contained herein or in the Registration Rights
Agreement.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify each Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contem plated hereby and by the Registration Rights Agreement
violates or would violate any written agreement or understanding between such
lender and the Company, and the Company shall promptly furnish by facsimile to
the holders of the Convertible Debentures and Shares a copy of any written
statement in support of or relating to such claim or notice.
Section 4.15. The Warrants. At the Closing, the Company will issue
------------
warrants to purchase an aggregate of 300,000 shares of Common Stock as specified
in Schedule 2.1(b) hereto and as follows: (i) to or as directed by Fairway, a
Common Stock purchase warrant, in the form of Exhibit D(1) (the "Fairway
------------ -------
Warrant"), pursuant to which Fairway shall have the right at any time thereafter
through the Expiration Date (as such term is defined in the Warrants) thereof,
to acquire the amount, specified on Schedule 2.1(b) hereto, of shares of Common
Stock at the Warrant Exercise Price and (ii) to or as directed by Infinity, a
Common Stock purchase warrant, in the form of Exhibit D(2) (the "Infinity
------------ --------
Warrant"), pursuant to which Infinity shall have the right at any time
-------
-20-
thereafter through the Expiration Date thereof, to acquire the amount, specified
on Schedule 2.1(b) hereto, of shares of Common Stock at the Warrant Exercise
Price per share. The Infinity Warrant, the Fairway Warrant and any other
warrants specified on Schedule 2.1(b) hereto are each referred to herein as a
"Warrant" and are collectively referred to herein as the "Warrants."
Section 4.16. Conversion Procedures. Exhibit F sets forth the
--------------------- ---------
procedures that are to followed in addition to the tendering of a Conversion
Notice hereunder with respect to the conversion of the Convertible Debentures or
Shares including the form of legal opinion, if necessary, that shall be rendered
to the Transfer Agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to exercise its right of
conversion smoothly and expeditiously.
Section 4.17. Transfer Agent. The First National Bank of Boston and
--------------
State Street Bank shall act as transfer agents (the "Transfer Agent") of the
--------------
Company. The Company may not remove or replace either Transfer Agent as its
transfer agent without written consent of the Purchasers.
Section 4.18. Right of First Refusal. Except for sales of stock to key
----------------------
employees and Company matching contributions pursuant to the Company's 401(k)
plan, for a period of one year commencing the date hereof, the Company may not
enter into any transaction with a Person other than the Purchasers to sell or
otherwise dispose of securities in any transaction intended not to be subject to
the registration requirements of the Securities Act (a "Private Placement"),
-----------------
unless the Company first provides a written notice (the "Private Placement
-----------------
Notice") to each Purchaser describing the terms and conditions of such Private
------
Placement (to which the Company shall attach any written term sheet or other
similar writing with respect thereto). Each Purchaser shall have the right,
exercisable within five (5) Business Days of its receipt of such notice, to
provide the Company with a written notice of its intention to provide the
financing described in the Private Placement Notice on terms no less favorable
to the Company than as set forth in the Private Placement Notice. If the
Purchasers indicate a desire to provide, in the aggregate, in excess of the
financing requested in the Private Placement Notice, each Purchaser shall have
the right to provide up to such portion of the Private Placement as corresponds
to the portion, expressed as a percentage, that the principal amount of
Convertible Debentures and stated values of Preferred Stock, then held by such
Purchaser bears to the aggregate principal amount of Convertible Debentures in
the aggregate, then outstanding. If any Purchaser shall fail to elect to
provide its respective pro rata portion of the Private Placement financing, the
other Purchasers shall be entitled to provide a pro
-21-
rata portion (determined in the manner referenced above) of such shortfall. If
the Purchasers fail to elect to exercise the right of first refusal set forth in
this Section, then the Company (subject to the terms of the engagement letter
agreement between the Company and Xxxxx Xxxxxxx, LLC) may consummate the Private
Placement on the terms and to the Persons (or Affiliates of such Persons) set
forth in the Private Placement Notice; provided, however, that if the Company
-------- -------
shall fail to consummate such Private Placement within forty-five (45) days
after the date of the Private Placement Notice relating thereto, the Company may
not consummate such Private Placement without again complying with the terms of
first refusal set forth in this Section. The provisions of this Section shall
not apply to any issuance of Company securities pursuant to a bona fide employee
stock option, stock purchase or non-employee director plan duly adopted by the
Company.
Section 4.19. Restriction on Debt. The Company covenants and agrees
-------------------
that from and after the date hereof and so long as any of the Convertible
Debentures remain outstanding, or the Company shall have any obligation to the
Purchasers hereunder or pursuant hereto, the Company shall not, and shall not
permit any Subsidiary to, without the prior written consent of the Purchasers in
each instance incur, create, assume, guarantee or suffer to exist, or become or
remain liable directly or indirectly, for or on account of any indebtedness,
obligations or liabilities that rank pari passu with or senior to the
---- -----
indebtedness, obligations and liabilities represented by the Convertible
Debentures, except under the BNY Bank Obligations.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1. Fees and Expenses. Each party shall pay the fees and
-----------------
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, except as
set forth in the Registration Rights Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the
Convertible Debentures and Shares pursuant hereto. Each Purchaser shall be
responsible for such Purchaser's own tax liability that may arise as a result of
the investment hereunder or the transactions contemplated by this Agreement.
Section 5.2. Entire Agreement; Amendments. This Agreement, together
----------------------------
with the Exhibits and Schedules hereto, the definitive Convertible Debentures,
the Certificate of Designation, the Registration Rights Agreement and the
Warrants contain the
-22-
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
Section 5.3. Notices. Any and all notices or other communications
-------
or deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 4:30 p.m. (Eastern
Standard Time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 4:30
p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern
Standard time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be:
If to the Company: YES! Entertainment Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxxxxx
Facsimile No.: (000) 000-0000
With copies to: Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxx
Facsimile No.: (000) 000-0000
If to any Purchaser:
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
Attn: X. X. Xxxxxxxx
Facsimile No.: 011-44-171-355-4975
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxx
Facsimile No.: (000) 000-0000
and
-23-
Xx. Xxxxxx Xxxxxxxxx
c/o HW Finance
000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
and
Xxxxx Xxxxxxx, LLC
Carnegie Hall Tower
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 5.4. Amendments; Waivers. No provision of this Agreement may
-------------------
be waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers, or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 5.5. Headings. The headings herein are for convenience
--------
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 5.6. Successors and Assigns. This Agreement shall be
----------------------
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. Neither the Company nor the Purchasers may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other, except that each Purchaser may assign its rights hereunder
and under the Registration Rights Agreement to an Affiliate thereof, provided,
that such assignee demonstrates to the reasonable satisfaction of the Company
its satisfaction of the representations and warranties set forth in Section 3.2
-----------
herein. The assignment by a party of this Agreement or any rights hereunder
shall not affect the obligations of such party under this Agreement.
-24-
Section 5.7. No Third-Party Beneficiaries. This Agreement is
----------------------------
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person, except that the representations,
warranties and other agreements contained herein of the Company are intended for
the benefit of and may be relied upon and enforced by Xxxxx Xxxxxxx, LLC to the
extent such representations, warranties and agreements relate to the Warrant to
be delivered to Xxxxx Xxxxxxx, LLC.
Section 5.8. Governing Law. This Agreement shall be governed by and
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construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
Section 5.9. Survival. Each of (i) the representations and
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warranties of the Company and the Purchaser contained in Article III and the
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agreements and covenants of the parties contained in Article IV and this Article
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V shall survive until a date that is three years after the last Closing date.
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Section 5.10. Counterpart Signatures. This Agreement may be executed in
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two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
Section 5.11. Publicity. The Company and the Purchasers shall consult
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with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except for such releases or public
statements that are required by law.
Section 5.12. Severability. In case any one or more of the
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provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall be a
reasonable
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substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 5.13. Remedies. In addition to being entitled to exercise all
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rights provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations of the
Company under this Agreement and the Company will be entitled to specific
performance of the obligations of the Purchasers hereunder with respect to the
subsequent transfer of Convertible Debentures, Shares and the Underlying Shares.
Each of the Company and the Purchasers agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first indicated above.
YES! ENTERTAINMENT CORPORATION
/s/XXXXXX X. XXXXXXXXXXXX
By: _______________________________________
Name: Xxxxxx X. Xxxxxxxxxxxx
Title: Chief Executive Officer
[PURCHASERS' SIGNATURE PAGE FOLLOWS]
INFINITY INVESTORS LIMITED
/s/X. X. XXXXXXXX
By: _________________________________________
Name: X. X. Xxxxxxxx
Title: Director
FAIRWAY CAPITAL LIMITED
/s/XXXXX X. XXXXXX
By: _________________________________________
Name: Xxxxx X. Xxxxxx
Title: President
Schedule 2.1(b)
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Entity to Receive Securities to be
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Securities Purchased and Issued
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Infinity Investors Limited Convertible Debentures in a
Principal Amount of $1,410,000
76,500 shares of Preferred Stock
Warrants to Purchase 202,500 shares
of Common Stock
Fairway Capital Limited Convertible Debentures in a
Principal Amount of $156,667
8,500 shares of Preferred Stock
Warrants to Purchase 22,500 shares
of Common Stock
Xxxxx Xxxxxxx, LLC Warrants to Purchase 75,000 shares
of Common Stock
