XXXXXXX-RS, LLC NOTE
PURCHASE AGREEMENT
This Xxxxxxx-RS, LLC Note Purchase Agreement (the "Agreement"), dated as
of September 5, 2001, is made by and between The Right Start, Inc., a California
corporation (the "Issuer") and Xxxx Xxxxx, an individual, Xxxxxxx Xxxxx, an
individual, ARBCO Associates, L.P., Xxxxx Xxxxxxxx Diversified Capital Partners,
L.P., Xxxxx Xxxxxxxx Non-Traditional Investments, L.P., Xxxxx Xxxxxxxx Offshore
Limited and Xxxxx Xxxxxxxx Capital Partners, L.P., Palomar Ventures I, L.P.,
Marina Corporate LLC, (collectively "Note Sellers"), with reference to the
following facts:
X. Xxxxxxx-RS, LLC, a New York limited liability company ("Xxxxxxx") has
issued to the Note Sellers its Term Notes (the "Notes") in the amounts set forth
on Exhibit A.
B. Issuer has filed a Certificate of Determinations with respect to its
Series F Convertible Preferred Stock, par value $.01 per share ("Series F
Preferred Stock"), with the California Secretary of State.
C. As a condition to the purchase of Xxxxxxx pursuant to the LLC Purchase
Agreement of even date herewith, Issuer has required that Note Sellers sell the
Notes in exchange for not more than 1,690.447 shares of Series F Preferred
Stock.
D. Issuer desires to purchase and Note Sellers desire to sell the Notes for
an aggregate of 1,690.447 shares of Series F Preferred Stock (in the amounts per
Note Seller as agreed among the Note Sellers and set forth on Exhibit A hereto)
convertible, upon approval of Issuer's shareholders, into 1,690,447 shares of
Issuer's common stock, no par value ("Common Stock"), as herein provided.
It is therefore agreed as follows:
1. Purchase and Sale. Subject to and upon the terms and conditions of this
Agreement, at the Closing (as hereinafter defined), Issuer shall purchase the
Notes from Note Sellers in exchange for 1,690.447 shares of the Series F
Preferred Stock.
2. Authorization; Closing.
Issuer has, on or prior to the date of this Agreement, caused the
Certificate of Determination setting forth the rights, preferences and
privileges of the Series F Convertible Preferred Stock ("Series F Preferred"),
in the form attached as Exhibit B (the "Certificate"), to be filed with the
California Secretary of State. Subject to and upon the terms and conditions of
this Agreement, at the Closing, Issuer shall sell to Note Sellers 1,690.447
shares of Series F Preferred (the "Shares"). At the Closing, Issuer shall
deliver to Note Sellers the Shares by delivery to Note Sellers of stock
certificate(s) representing the Shares and Sellers shall deliver the Notes
endorsed in blank.
The consummation of the purchase and sale of the Notes (the
"Closing") shall take place at the Note Sellers' offices located at 1800 Avenue
of the Stars, Xxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 on September 5, 2001
or such other date or at such other time as the parties may mutually agree. At
the Closing, (i) Note Sellers shall deliver the Notes and (ii) Issuer shall
deliver the stock certificate(s) representing the Shares.
3. Representations and Warranties of Note Sellers. Each Note Seller represents
and warrants to Issuer as follows:
3.1 Organization and Authority. Such Note Seller (other than Xxxx Xxxxx) is
a limited partnership or, in the case of Xxxxx Xxxxxxxx Offshore Limited, a
[Caymen Islands limited company], duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.
3.2 Authorization. The execution and delivery of this Agreement, and the
consummation of the transactions called for hereunder, has been duly authorized
by all necessary action on the part of such Note Seller. This Agreement
constitutes a valid and binding obligation of such Note Seller, enforceable
against such Note Seller in accordance with its terms except as limited by
bankruptcy and insolvency laws and other laws affecting the rights of creditors
generally.
3.3 Investment. Such Note Seller is acquiring the Shares in good faith
for his or its own account and for the purpose of investment in Issuer and not
with a view to or for sale in connection with any distribution of such Shares or
any interest therein. Such Note Seller has a preexisting business or personal
relationship with Issuer or its officer, directors or controlling persons and,
by reason of such Note Seller's business and financial experience, has the
capacity to protect its own interest in connection with the acquisition of the
Shares. Such Note Seller represents and warrants that it is an "accredited
investor" within the meaning of paragraph (1), (2), (3), (7) or (8) of Rule
501(a) of the Act. Such Note Seller acknowledges that it has reviewed the
publicly filed information about Issuer, that it has received such other
information (from sources other than Issuer) as it has deemed necessary and
appropriate to make its own investment analysis and decision to acquire
securities of Issuer and that it has independently and without reliance on
Issuer or any oral or written representation or warranty from Issuer, its
officers, shareholders, directors or other representatives (other than
representations or warranties made by Issuer in this Agreement), made its own
decision to acquire such securities and enter into this Agreement. Such Note
Seller shall have no recourse against Issuer, its officers, shareholders,
directors or other representatives, nor shall any such person incur any
liability, for any misstatement (whether material or immaterial) or omission.
Except for the foregoing representations and warranties, there are not
representations or warranties of any kind being given by any Note Seller to
Issuer in connection with this Agreement or the transactions contemplated by
this Agreement.
4. Representations and Warranties of Issuer. Issuer represents and warrants to
Note Sellers as follows:
4.1 Organization and Authority. Issuer is a corporation duly organized,
validly existing and in good standing under the laws of California, and has all
necessary power to enter into and perform this Agreement.
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4.2 Authorization. The execution and delivery of this Agreement, and the
consummation of the transactions called for hereunder, has been duly authorized
by all necessary corporate and, subject to Section 5.1 hereof, shareholder
action on the part of Issuer, will not conflict with or result in a breach of
the articles of incorporation or bylaws of Issuer. This Agreement constitutes a
valid and binding obligation of Issuer, enforceable against Issuer in accordance
with its terms except as limited by bankruptcy and insolvency laws and other
laws affecting the rights of creditors generally.
4.3 Offering. Subject in part to the truth and accuracy of the
representations of Note Sellers set forth in this Agreement, the offer, sale and
issuance of the Shares and the shares of Common Stock issuable upon conversion
of the Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act of 1933, as amended, and applicable state
securities laws.
4.4 Validity of Shares. Upon issuance, the Shares will be duly and
validly issued, fully paid, non-assessable and free and clear of all Liens.
Subject to Section 5.1 hereof, the shares of Common Stock issuable upon
conversion of the Shares will be duly and validly reserved and, upon issuance in
accordance with the conversion provisions of the Shares, will be duly and
validly issued, fully paid, non-assessable and free and clear of all Liens.
5. Covenants of Issuer. Following the Closing, Issuer hereby covenants with each
Note Seller as follows:
5.1 Shareholder Approval. As promptly as practicable after the Closing
and in any event prior to the earlier of January 15, 2001 and such date as
Issuer clears its proxy statement (filed prior to November 15, 2001) with the
Securities and Exchange Commission (the "SEC"), Issuer shall convene a meeting
of its shareholders at which such shareholders will be asked to approve, among
other matters: (a) an amendment to Issuer's Articles of Incorporation to
increase the authorized number of shares of Common Stock to allow for the
issuance of shares of Common Stock upon conversion of the Shares pursuant to the
Certificate; (b) the conversion feature of the Series F Preferred set forth in
Article IV of the Certificate; and (c) the issuance of shares of Common Stock to
Note Sellers upon conversion of the Shares pursuant to the Certificate. Issuer
shall promptly prepare and file with the SEC pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and as promptly as practicable
after receipt of comments from the SEC staff with respect thereto and any
required or appropriate amendments thereto shall mail to stockholders of Issuer,
a proxy statement (as amended or supplemented from time to time the "Proxy
Statement") in connection with such special meeting of shareholders
("Shareholders' Meeting"). Issuer shall notify Note Sellers promptly of the
receipt by it of any comments from the SEC or its staff and of any request by
the SEC for amendments or supplements to the Proxy Statement or for additional
information, and will supply Note Sellers with copies of all correspondence
between it and its representatives, on the one hand, and the SEC or the members
of its staff or any other governmental officials, on the other hand, with
respect to the Proxy Statement.
5.2 Registration Rights Agreement. As promptly as practicable after the
Closing and in any event prior to filing the preliminary Proxy Statement with
the SEC, Issuer will enter into a written registration rights agreement with
each Note Seller (the "Registration Rights Agreement") (i) granting demand and
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piggyback rights to cause the registration for resale of the Common Stock
issuable upon conversion of the Shares and (ii) confirming such rights with
respect to all other Common Stock now held, or available upon exercise or
conversion of other securities now held, by the Note Sellers or their
affiliates. Any registration rights so granted shall, with respect to
registrations on Form S-3, also provide that if Form S-3 is not available at the
time, Issuer will use Form S-1 and agree to file post-effective amendments to
such registration statement until all shares covered by the registration
statement have been distributed.
6. Agreements of the Parties.
6.1 Conditions to Closing.
(a) The obligation of Issuer to sell and of Note Sellers to acquire the
Shares at the Closing pursuant to this Agreement shall be subject to there being
no order of any court or administrative agency in effect which restrains or
prohibits the transactions contemplated hereby, and no suit, action,
investigation, inquiry or other legal or administrative proceeding having been
instituted and remaining pending on the date of the Closing, or threatened on
that date, which challenges the validity or legality of the transactions
contemplated hereby and which (i) has a reasonable likelihood of success on the
merits and (ii) if adversely determined, would render it unlawful, as of such
date, to effect the transactions contemplated by this Agreement substantially in
accordance with its terms.
(b) The obligations of Note Sellers to purchase the Shares at the
Closing pursuant to the terms of this Agreement shall be subject to the
performance by Issuer in all material respects of its covenants and obligations
hereunder to be performed at or prior to the Closing and to all of Issuer's
representations and warranties hereunder being true and correct in all material
respects as if made on and, except if some other date is specifically set forth
therein, as of the date of the Closing.
(c) The obligations of Issuer to sell the Shares at the Closing pursuant
to the terms of this Agreement shall be subject to the performance by Note
Sellers in all material respects of its covenants and obligations hereunder to
be performed at or prior to the Closing and to all of Note Sellers'
representations and warranties hereunder being true and correct in all material
respects as if made on and, except if some other date is specifically set forth
therein, as of the date of the Closing.
6.2 Amendment to Certificate of Determinations. The Note Sellers hereby
agree that Issuer may, to the file an amendment to the Certificate of
Determinations which sets forth the rights, privileges and preferences of the
Shares to correct errors therein; provided such amendment does not materially
adversely affect the rights, privileges or preferences pertaining to the Shares.
7. Termination of Agreement. This Agreement may be terminated:
(a) at any time by mutual agreement of the parties;
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(b) by either party, without prejudice to any other rights or remedies
it may have, if the Closing does not occur on or before October 15, 2001;
provided that the terminating party shall not be entitled to terminate this
Agreement if it is then in breach of this Agreement;
(c) Note Sellers may terminate this Agreement at any time prior to the
Closing, without prejudice to any other rights or remedies it may have, if
Issuer shall have failed to comply with any of Issuer's covenants or obligations
contained in or contemplated by this Agreement or failed to deliver in a timely
manner any of the items to be delivered by Issuer pursuant to this Agreement in
form and substance reasonably satisfactory to Note Sellers and their counsel or
if any of the conditions to Closing to be satisfied by Issuer has not been
satisfied; or
(d) Issuer may terminate this Agreement at any time prior to the
Closing, without prejudice to any other rights or remedies it may have, if Note
Sellers shall have failed to comply with any of Note Sellers' covenants or
obligations contained in or contemplated by this Agreement or failed to deliver
in a timely manner any of the items to be delivered by Note Sellers pursuant to
this Agreement in form and substance reasonably satisfactory to Issuer and its
counsel or if any of the conditions to Closing to be satisfied by Note Sellers
has not been satisfied.
8. Miscellaneous.
8.1 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, or by fax (and if by fax, sent concurrently by one of the other
methods provided herein), addressed to the parties at the addresses shown below,
or at any other address designated in writing by one party to the other party.
All notices shall be deemed to have been given upon delivery in the case of
notices personally delivered, or at the expiration of one business day following
delivery to the private delivery service, or two business days following the
deposit thereof in the United States mail, with postage prepaid or on the first
business day of receipt in the case of notices sent by fax.
If to Note Sellers: Xxxxx Xxxxxxxx Investment Management, Inc.
and Xxxx Xxxxx
1800 Avenue of the Stars, Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
With a copy to:
Xxxx Xxxxx
Fortune Fashions
1800 Avenue of the Stars, Xxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
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If to Issuer: The Right Start, Inc.
00000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Fax: 000.000.0000
8.2 Integration: Amendment. This Agreement and the Registration Rights
Agreement sets forth in full the terms of the agreement between Note Sellers and
Issuer with respect to the subject matter hereof and is intended as the full,
complete and exclusive contract governing the agreement between Note Sellers and
Issuer regarding the subject hereof. This Agreement supersedes all prior
discussions, promises, representations, warranties, agreements and
understandings between Note Sellers and Issuer regarding the subject hereof.
This Agreement may not be modified or amended, nor may any rights hereunder be
waived, except in a writing signed by the party against whom enforcement of the
modification, amendment or waiver is sought. No course of dealing between the
parties, no usage of trade, and no parol or extrinsic evidence of any nature
shall be used or be relevant to supplement, explain or modify any term or
provision of this Agreement or any supplement or amendment thereto.
8.3 General. Any waiver of any breach of this Agreement in a particular
instance shall not operate as a waiver of subsequent breaches of the same or a
different kind. Any party's exercise or failure to exercise any rights under
this Agreement in a particular instance shall not operate as a waiver of the
party's right to exercise the same or different rights in subsequent instances.
Nothing herein constitutes a waiver of any of Note Sellers' rights and remedies
against Xxxxxxxxxx.xxx Inc. or any other person, firm or corporation. In the
event of any litigation between the parties based upon or arising out of this
Agreement, the prevailing party shall be entitled to recover all of its
reasonable costs and expenses (including without limitation reasonable attorneys
fees) from the non-prevailing party. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person other than Note Sellers and
Issuer. There are no third party beneficiaries of this Agreement. If any
provision of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal or unenforceable, the remaining provisions of this Agreement
shall nevertheless remain in full force and effect. The headings in this
Agreement are solely for convenience and shall be given no effect in the
construction or interpretation of this Agreement. This Agreement may be executed
in any number of counterparts, which together shall constitute one and the same
agreement. Time is of the essence in the performance of the obligations of the
parties hereunder. The Recitals at the beginning of this Agreement are hereby
incorporated herein and are part of this Agreement.
8.4 WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
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8.5 Governing Law. This Agreement is being entered into in the State of
California. This Agreement shall be governed by the internal laws (and not the
conflict of laws rules) of the State of California.
8.6 Expenses. Each of the parties shall bear its own legal and other
expenses in connection with this Agreement and the transactions contemplated
hereby.
8.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Note Sellers:
/s/ Xxxxxxx Xxxxx
-------------------------
Xxxxxxx Xxxxx,
/s/ Xxxx Xxxxx
------------------------
Xxxx Xxxxx
Palomar Ventures I, L.P.,
By: Palomar Management Partners I,
LLP
Its: General Partner
By: /s/ Xxx Xxxxx
-----------------
Its: Managing Member
Marina Corporate LLC,
/s/ Xxxxxx Xxxx
---------------
By: Xxxxxx Xxxx
Its: President
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ARBCO ASSOCIATIONS, L.P.
/s/ Xxxxx Xxxxxxxxxx
--------------------
By: Xxxxx Xxxxxxxxxx
Its: General Counsel
XXXXX XXXXXXXX DIVERSIFIED
CAPITAL PARTNERS, L.P.
/s/ Xxxxx Xxxxxxxxxx
--------------------
By: Xxxxx Xxxxxxxxxx
Its: General Counsel
XXXXX XXXXXXXX NON-TRADITIONAL
INVESTMENTS, L.P.
/s/ Xxxxx Xxxxxxxxxx
--------------------
By: Xxxxx Xxxxxxxxxx
Its: General Counsel
XXXXX XXXXXXXX OFFSHORE LIMITED
/s/ Xxxxx Xxxxxxxxxx
--------------------
By: Xxxxx Xxxxxxxxxx
Its: General Counsel
XXXXX XXXXXXXX CAPITAL PARTNERS,
L.P.
/s/ Xxxxx Xxxxxxxxxx
--------------------
By: Xxxxx Xxxxxxxxxx
Its: General Counsel
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Issuer:
THE RIGHT START, INC.
By:/s/ Xxxxx X. Xxxxx
-------------------------
Xxxxx X. Xxxxx
Chairman and Chief Executive Officer
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EXHIBIT A
Amounts of Xxxxxxx-RS, LLC Notes per Note Seller
---------------------------------------- ------------- ----------------- -----------------
Name No. of No of Aggregate
Preferred underlying Principal Amount
Shares Common Shares
---------------------------------------- ------------- ----------------- -----------------
Xxxxxxx Xxxxx 498.038 498,038 $1,000,000
---------------------------------------- ------------- ----------------- -----------------
Xxxx Xxxxx 580.322 580,322 $1,200,000
---------------------------------------- ------------- ----------------- -----------------
ARBCO Associates, L.P. 82.284 82,284 $200,000
---------------------------------------- ------------- ----------------- -----------------
Xxxxx Xxxxxxxx Diversified Capital 41.142 41,142 $100,000
Partners, L.P.
---------------------------------------- ------------- ----------------- -----------------
Xxxxx Xxxxxxxx Non-Traditional 41.142 41,142 $100,000
Investments, L.P.
---------------------------------------- ------------- ----------------- -----------------
Xxxxx Xxxxxxxx Offshore Limited 30.857 30,857 $75,000
---------------------------------------- ------------- ----------------- -----------------
Xxxxx Xxxxxxxx Capital Partners, L.P. 133.712 133,712 $325,000
---------------------------------------- ------------- ----------------- -----------------
Palomar Ventures I, L.P. 132.954 132,954 $180,000
---------------------------------------- ------------- ----------------- -----------------
Marina Corporate LLC 68.995 68,995 $95,055
---------------------------------------- ------------- ----------------- -----------------
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EXHIBIT B
Certificate of Determinations of the Series F Convertible Preferred Stock
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