EXHIBIT 4.2
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STOCK PURCHASE AGREEMENT
by
and
among
BUILD-A-BEAR WORKSHOP, INC.
CATTERTON PARTNERS IV, L.P.
CATTERTON PARTNERS IV OFFSHORE, L.P.
and
CATTERTON PARTNERS IV SPECIAL PURPOSE, L.P.
and the other
PURCHASERS
named herein
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Dated as of April 3, 2000
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ARTICLE 1. DEFINITIONS...................................................................................................1
1.1. Definitions...................................................................................................1
1.2. Accounting Terms; Financial Statements........................................................................7
1.3. Knowledge Standard............................................................................................7
1.4. Other Defined Terms...........................................................................................7
ARTICLE 2. AUTHORIZATION OF PREFERRED STOCK; PURCHASE AND SALE OF PREFERRED STOCK........................................8
2.1. Series A-5 Convertible Preferred Stock and Series B-4 Convertible Preferred Stock.............................8
2.2. Purchase and Sale of Preferred Shares.........................................................................8
2.3. Closing.......................................................................................................8
ARTICLE 3. CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO PURCHASE THE SECURITIES.....................................9
3.1. Representations and Warranties................................................................................9
3.2. Compliance with Terms and Conditions of this Agreement........................................................9
3.3. Delivery of Certificates Evidencing the Preferred Shares......................................................9
3.4. Closing Certificates..........................................................................................9
3.5. Secretary's Certificates......................................................................................9
3.6. Documents.....................................................................................................9
3.7. Purchase Permitted by Applicable Laws........................................................................10
3.8. Opinion of Counsel...........................................................................................10
3.9. Consents and Approvals.......................................................................................10
3.10. Certain Waivers.............................................................................................10
3.11. No Material Adverse Effect..................................................................................10
3.12. No Material Judgment or Order...............................................................................10
3.13. Financial Statements........................................................................................11
3.14. Registration Rights Agreement...............................................................................11
3.15. Stockholders' Agreement.....................................................................................11
3.16. Certificate of Designation..................................................................................11
3.17. Employment Agreements.......................................................................................11
3.18. Board of Directors..........................................................................................11
3.19. Stock Plan..................................................................................................12
3.20. Insurance...................................................................................................12
3.21. Amendment to Bank Loan......................................................................................12
ARTICLE 4. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO CLOSE........................................................12
4.1. Representations and Warranties...............................................................................12
4.2. Compliance with Terms and Conditions of this Agreement.......................................................12
4.3. Issuance Permitted by Applicable Laws........................................................................12
4.4. Payment of Purchase Price....................................................................................13
4.5. Consents and Approvals.......................................................................................13
4.6. No Material Judgment or Order................................................................................13
4.7. Registration Rights Agreement................................................................................13
4.8. Stockholders' Agreement......................................................................................13
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................................13
5.1. Corporate Existence and Authority............................................................................14
TABLE OF CONTENTS-(cont'd)
<Table>
<Caption>
Page
5.2. Corporate Authorization; No Contravention....................................................................14
5.3. Governmental Authorization; Third Party Consents.............................................................14
5.4. Binding Effect...............................................................................................14
5.5. Other Agreements.............................................................................................14
5.6. Capitalization...............................................................................................15
5.7. Subsidiaries.................................................................................................16
5.8. Private Offering.............................................................................................16
5.9. Litigation...................................................................................................16
5.10. Financial Statements........................................................................................16
5.11. Title and Condition of Assets...............................................................................17
5.12. Contractual Obligations.....................................................................................17
5.13. Patents, Trademarks, Etc....................................................................................18
5.14. Tax Matters.................................................................................................18
5.15. Severance Arrangements......................................................................................19
5.16. No Material Adverse Effect..................................................................................20
5.17. Environmental Matters.......................................................................................20
5.18. Investment Company/Government Regulations...................................................................21
5.19. Broker's, Finder's or Similar Fees..........................................................................21
5.20. Labor Relations and Employee Matters........................................................................21
5.21. Employee Benefits Matters...................................................................................21
5.22. Potential Conflicts of Interest.............................................................................22
5.23. Business Relationships......................................................................................22
5.24. Outstanding Borrowings......................................................................................22
5.25. Insurance Schedule..........................................................................................22
5.26. Undisclosed Liabilities.....................................................................................23
5.27. Solvency....................................................................................................23
5.28. Compliance with Law.........................................................................................23
5.29. No Other Agreements to Sell the Assets or Capital Stock of the Company......................................23
5.30. Inventory...................................................................................................23
5.31. Suppliers...................................................................................................24
5.32. Changes.....................................................................................................24
5.33. Certain Payments............................................................................................25
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............................................................26
6.1. Existence and Authority......................................................................................26
6.2. Authorization; No Contravention..............................................................................26
6.3. Binding Effect...............................................................................................26
6.4. Purchase for Own Account.....................................................................................26
6.5. Accredited Investor Status; Institutional Investor Status....................................................27
Exculpation Among Purchasers......................................................................................27
No Public Market..................................................................................................27
6.9 Access to Data................................................................................................27
ARTICLE 7. COVENANTS OF THE COMPANY WITH RESPECT TO THE PERIOD FOLLOWING THE CLOSING...................................28
7.1. Notices......................................................................................................28
</Table>
TABLE OF CONTENTS-(cont'd)
<Table>
<Caption>
Page
7.2. Reservation of Shares........................................................................................28
ARTICLE 8. INDEMNIFICATION..............................................................................................29
8.1. Indemnification..............................................................................................29
8.2. Notification.................................................................................................30
8.3. Registration Rights Agreement................................................................................30
ARTICLE 9. MISCELLANEOUS................................................................................................31
9.1. Survival of Representations and Warranties...................................................................31
9.2. Notices......................................................................................................31
9.3. Successors and Assigns.......................................................................................31
9.4. Amendment and Waiver.........................................................................................32
9.5. Counterparts.................................................................................................32
9.6. Headings.....................................................................................................32
9.7. Governing Law................................................................................................32
9.8. Jurisdiction.................................................................................................32
9.9. Severability.................................................................................................33
9.10. Rules of Construction.......................................................................................33
9.11. Entire Agreement............................................................................................33
9.12. Transaction Expenses........................................................................................33
9.13. Publicity...................................................................................................33
9.14. Further Assurances..........................................................................................33
9.15. Rights of Purchasers Inter Se...............................................................................34
9.16. Severability of the Representations, Warranties and Covenants...............................................34
9.17. Arbitration.................................................................................................34
</Table>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered
into as of the 3rd day of April, 2000 by and among Catterton Partners IV, L.P.,
a Delaware limited partnership, Catterton Partners IV Offshore, L.P. a Cayman
Island limited partnership and Catterton Partners IV Special Purpose, L.P. a
Cayman Island limited partnership (collectively, "Catterton") and those other
Persons named on Schedule 1 hereto (collectively with Catterton, the
"Purchasers") and Build-A-Bear Workshop, Inc., a Delaware corporation (the
"Company").
RECITALS:
A. WHEREAS, upon the terms and subject to the conditions
set forth in this Agreement, the Company proposes to issue and sell shares of
its Series A-5 Convertible Preferred Stock (as defined herein) and Series B-4
Convertible Preferred Stock (as defined herein) to the Purchasers.
B. WHEREAS, upon the terms and subject to the conditions
set forth in this Agreement, the Purchasers desire to contribute capital to the
Company in exchange for the issuance to the Purchasers of shares of the Series
A-5 Convertible Preferred Stock and Series B-4 Convertible Preferred Stock as
set forth herein.
C. WHEREAS, the Company and the Purchasers desire to set
forth the objectives and agreements, that will govern their relations and
responsibilities with respect to each other by entering into concurrently with
the sale and purchase of securities hereunder a Stockholders Agreement (as
defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1.
DEFINITIONS
1.1. Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any specified Person, any
Person that, directly or indirectly, controls, is controlled by, or is under
common control with, such specified Person, whether by contract, through one or
more intermediaries, or otherwise, provided however, that Smart Stuff, Inc., a
Missouri corporation, is not an Affiliate of the Company. Unless otherwise
qualified, all references to a "Affiliate" or to "Affiliates" in this Agreement
shall refer to a Affiliate or Affiliates of the Company.
"Balance Sheet Date" means January 1, 2000.
"Benefit Arrangement"* means any employment, consulting,
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including, without limitation, any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit-sharing bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (A) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into,
maintained, contributed to or required to be contributed to, as the case may be,
by the Company or an ERISA Affiliate or under which the Company or any ERISA
Affiliate may incur any liability, and (C) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the common stock, par value $0.01 per
share, of the Company, or any other capital stock of the Company into which such
stock is reclassified or reconstituted.
"Condition of the Company" means the assets, business,
properties, operations or financial condition of the Company and its
subsidiaries taken as a whole.
"Contractual Obligation" means as to any Person, any provision
of any security issued by such Person or any provision of any agreement, lease
of real or personal property, undertaking, contract, indenture, mortgage, deed
of trust or other instrument to which such Person is a party or by which it or
any of its property is bound.
"Employee Plans" means all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"Employment Agreements" means the Employment Agreements
entered into by the Company with Maxine Clark, Brian Vent and Tina Klocke.
"Environmental Expenses" means any liability, loss, cost or
expense arising from any pre-Closing violation by the Company of any
Environmental Law which proximately causes expenses, including, without
limitation, costs of investigation, cleanup, removal, remedial, corrective or
response action, the costs associated with posting financial assurances for the
completion of investigation, cleanup, removal, remedial, corrective or response
actions, the preparation of any closure or other necessary or required plans or
analyses, or other reports or analyses submitted to or prepared by regulating
agencies, including the cost of health assessments, epidemiological studies and
the like, retention of engineers and other expert consultants, legal counsel,
operation and maintenance testing and monitoring costs, and administrative costs
or damages.
2
"Environmental Laws" means any federal, state or local law,
common law doctrine, rule, order, decree, judgment, injunction, license, permit
or regulation relating to environmental matters, including those pertaining to
land use, air, soil, surface water, ground water (including the protection,
cleanup, removal, remediation or damage thereof), public or employee health or
safety or any other environmental matter, together with any other laws (federal,
state or local) relating to emissions, discharges, releases or threatened
releases of any pollutant or contaminant including, without limitation, medical,
chemical, biological, biohazardous or radioactive waste and materials, into
ambient air, land, surface water, groundwater, personal property or structures,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, discharge or handling of any
contaminant, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C.
ss. 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.),
as such laws have been, or are, amended, modified or supplemented heretofore or
from time to time hereafter and any analogous future federal, or present or
future state or local laws, statutes and regulations promulgated thereunder.
"Equipment" means all of the tangible personal property owned
or leased by the Company or any of its Affiliates and used in or held for use in
the operations of the business of the Company or any of its Affiliates.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any Person that is (or at any relevant
time was) a member of a "controlled group of corporations" with or under "common
control" with the Company as defined in Section 414(b),(c),(m) or (o) of the
Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Facilities" means the buildings, plants, offices and all
other improvements on any real property (including fixtures affixed thereto)
which are owned or leased by the Company or any of its Affiliates and used or
held for use in the operation of the business of the Company or any of its
Affiliates.
"GAAP" means United States generally accepted accounting
principles, in effect from time to time, consistently applied.
"Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision of any thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
exercising public functions owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
3
"Hazardous Materials" means those substances which are
regulated by or form the basis of liability under any Environmental Laws,
including, without limitation, petroleum products, radon and asbestos.
"Indebtedness" means, as to any Person: (a) all obligations,
whether or not contingent, of such Person for borrowed money (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured), (b)
all obligations of such Person evidenced by notes, bonds, debentures or similar
instruments, (c) all obligations of such Person representing the balance of
deferred purchase price of property or services, except trade accounts payable
and accrued commercial or trade liabilities arising in the ordinary course of
business, (d) all interest rate and currency swaps, caps, collars and similar
agreements or hedging devices under which payments are obligated to be made by
such Person, whether periodically or upon the happening of a contingency, (e)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (f)
all obligations of such Person under leases recorded as capital leases in
accordance with GAAP, , (g) all indebtedness secured by any Lien (other than
Liens in favor of lessors under leases other than leases included in clause (f))
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of that Person, and (h) all Indebtedness of any other
Person referred to in clauses (a) through (f) above, guaranteed, directly or
indirectly, by that Person.
"Initial Issue Date" shall mean the date that shares of
Preferred Stock are first issued by the Company to the Purchasers.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or other
security interest of any kind or nature whatsoever (excluding preferred stock or
equity related preferences) including, without limitation, those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease obligation, or any
financing lease having substantially the same economic effect as any of the
foregoing.
"Material Adverse Effect" means any material adverse change in
Condition of the Company.
"Multiemployer Plan" means any "multiemployer plan," as
defined in Section 4001(a)(3) or Section 3(37) of ERISA, (A) which the Company
or any ERISA Affiliate maintains, administered, contributed to or is required to
contribute to, or, after September 25, 1980, maintained, administered,
contributed to or was required to contribute to, or under which the Company or
any ERISA Affiliate may incur any liability and (B) which covers any employee or
former employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"Outstanding Borrowings" means all Indebtedness of the Company
and/or its Affiliates for borrowed money (including without limitation,
reimbursement and all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured), excluding obligations
with respect to trade payables incurred in the ordinary course of business.
4
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (A) which the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the five years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability and (B)
which covers any employee or former employee of the Company or any ERISA
Affiliate (with respect to their relationship with such entities).
"Permitted Liens" means (i) Liens for taxes, governmental
charges or levies which (a) are not yet due and payable, or (b) are being
diligently contested in good faith by appropriate proceedings; provided, that
for any such taxes being diligently contested in good faith, the Company has set
aside adequate reserves, (ii) Liens imposed by law, such as mechanic's,
materialman's, landlord's, warehouseman's and carrier's liens, securing
obligations incurred in the ordinary course of business which are not yet
overdue or which are being diligently contested in good faith by appropriate
proceeding and, with respect to such obligations which are being contested, for
which the Company has set aside adequate reserves, (iii) Liens which (x) in each
case, secure obligations of less than $10,000, and (y) do not in the aggregate
interfere with the use and enjoyment of the property subject thereto and (iv)
Liens with respect to the Firstar Loan Agreement by and among the Company, the
Subsidiary and Firstar Bank, N.A. dated March 1, 2000 and the agreements
contemplated thereby, including, without limitation, the Security Agreement, for
up to an aggregate principal amount of $10,000,000.
"Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" means, collectively, the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock.
"Qualified Initial Public Offering" shall mean a public
offering, underwritten on a firm commitment basis pursuant to an effective
registration statement under the Securities Act of shares of the Common Stock
the aggregate gross proceeds (prior to underwriting discounts and commissions
and other expenses of issuance) of which equal or exceed $15,000,000 and (i) at
any time prior to the third anniversary of the date hereof, the offering is
managed by a nationally recognized underwriter, (ii) between the third and
fourth anniversary hereof, the price per share is at least $15 (appropriately
adjusted for stock splits, recapitalizations and the like), and (iii) thereafter
the price per share is at least $20.
"Registration Rights Agreement" means the Registration Rights
Agreement substantially in the form attached hereto as Exhibit A.
"Requirements of Law" means, as to any Person, the provisions
of the Certificate of Incorporation and By-laws or other organizational or
governing documents of such Person, and any law, treaty, rule, regulation,
right, privilege, qualification, license or franchise, order, judgment, or
determination, in each case, of an arbitrator or a court or other Governmental
Authority, in each case, applicable to or binding upon such Person or any of its
property (or to which such Person or any of its property is subject) or
applicable to any or all of the transactions contemplated by or referred to in
the Transaction Agreements.
5
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Stockholders' Agreement" means the Stockholders' Agreement
substantially in the form attached hereto as Exhibit B.
"Shares" means the Common Stock and the Preferred Stock.
"Series A Convertible Preferred Stock" means the Series A-1,
A-2, A-3, A-4 and A-5 Convertible Preferred Stock, par value $0.01 per share, of
the Company, or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Series A-5 Convertible Preferred Stock" means the Series A-5
Convertible Preferred Stock, par value $0.01 per share, of the Company, or any
other capital stock of the Company into which such stock is reclassified or
reconstituted.
"Series B Convertible Preferred Stock" means the Series B-1,
B-2, B-3, and B-4 Convertible Preferred Stock, par value $0.01 per share, of the
Company, or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Series B-4 Convertible Preferred Stock" means the Series B-4
Convertible Preferred Stock, par value $0.01 per share, of the Company, or any
other capital stock of the Company into which such stock is reclassified or
reconstituted.
"Subsidiary" means Shirts Illustrated, L.L.C., a Missouri
limited liability company and wholly-owned subsidiary of the Company.
"Tax" or "Taxes" shall mean all federal, state, local foreign
and other taxes, assessments or other government charges, including, without
limitation, income, estimated income, business, occupation, franchise, property
sales, transfer, use, employment, commercial rent or withholding taxes,
including interest, penalties and additions in connection therewith for which
the Company may be liable.
"Transaction Agreements" means collectively, this Agreement,
the Registration Rights Agreement and the Stockholders' Agreement.
"Transaction Expenses" means up to $100,000 in legal fees and
reasonable out-of-pocket expenses incurred by the Purchasers in connection with
the negotiation and preparation of the Transaction Agreements, the consummation
of the transactions contemplated thereby and preparation for any of the
foregoing, including, without limitation, travel expenses, fees, charges and
disbursements of the Purchasers' legal counsel and any similar or related costs
and expenses.
"Welfare Plan" means any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability
6
and (B) which covers any employee or former employee of the Company or any ERISA
Affiliate (with respect to their relationship with such entities).
1.2. Accounting Terms; Financial Statements. All accounting
terms used herein not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with GAAP.
1.3. Knowledge Standard. When used herein, the phrase "to the
knowledge of" any Person, "to the best knowledge of" any Person or any similar
phrase shall mean, (i) with respect to any individual, the actual knowledge of
such Person after reasonable inquiry, (ii) with respect to any corporation, the
actual knowledge of officers and directors, or Persons acting in similar
capacities, of such corporation after reasonable inquiry, (iii) with respect to
any limited liability company, the actual knowledge of the Manager or Persons
acting in similar capacities, of such entity after reasonable inquiry, and (iv)
with respect to a partnership, the actual knowledge of the officers and
directors of the general partner of such partnership after reasonable inquiry.
Notwithstanding the foregoing, "to the best knowledge of" or "to the knowledge
of" either BABW or the Company shall mean the actual knowledge of Maxine Clark,
Tina Klocke and Brian Vent, after due inquiry. When used herein, the phrase "to
the knowledge of the Company," "to the best knowledge of the Company" or any
similar phrase shall mean "to the best knowledge of the Company and each
Affiliate" using the standards set forth in the previous sentence.
1.4. Other Defined Terms. The following terms shall have the
meanings specified in the Sections set forth below:
Term Section
- ---- -------
Actions 5.9
Certificate 2.1
Closing 2.3
Closing Date 2.3
Indemnified Party 9.1
Indemnifying Party 9.1
Intellectual Property 5.13
Liability (and Liabilities) 9.1
Preferred Shares 2.2
Purchase Price 2.2
Taxpayers 5.14
Audited Financial Statements 5.10
ARTICLE 2.
AUTHORIZATION OF PREFERRED STOCK;
PURCHASE AND SALE OF PREFERRED STOCK
2.1. Series A-5 Convertible Preferred Stock and Series B-4
Convertible Preferred Stock. The Company has authorized (a) the issuance and
sale to the Purchasers of an aggregate of 1,061,988 shares of Series A-5
Convertible Preferred Stock and an aggregate of 1,604,678 shares of Series B-4
Convertible Preferred Stock and (b) has filed the Certificate (as hereinafter
defined)
7
establishing the rights, preferences, privileges and restrictions of
the Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock. The Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock will have the respective rights, preferences and privileges set
forth in the Company's Certificate of Designation substantially in the form
attached hereto as Exhibit C (the "Certificate").
2.2. Purchase and Sale of Preferred Shares. Upon the terms and
subject to the conditions herein contained, at the Closing (as defined herein)
on the Closing Date (as defined herein), the Company agrees that it will issue
and sell to each of the Purchasers, and each Purchaser agrees that it will
acquire and purchase from the Company, the number of shares of Series A-5
Convertible Preferred Stock and Series B-4 Convertible Preferred Stock listed
next to such Purchaser's name on Schedule 1 hereto (collectively, the "Preferred
Shares"). The purchase price of the Series A-5 Convertible Preferred Stock shall
be $5.649780 per share and the Series B-4 Convertible Preferred Stock shall be
$3.739067 per share.
2.3. Closing. The closing of the sale to and purchase by the
Purchasers of the Preferred Shares referred to in Section 2.2 hereof (the
"Closing") shall occur at the offices of Bryan Cave, LLP 1 Metropolitan Square,
Suite 3600, St. Louis, MO 63102 at 10:00 a.m. Central Standard Time on April 3,
2000, or at such other date, place or time of day as the Purchasers and the
Company shall agree to in writing (the "Closing Date"). At the Closing, (i) the
Company shall deliver to each Purchaser certificates evidencing the Preferred
Shares being purchased by such Purchaser, free and clear of any Liens of any
nature whatsoever, other than those created by the Certificate, registered in
such Purchaser's name, and (ii) each Purchaser shall deliver to the Company the
portion of the Purchase Price listed next to such Purchaser's name on Schedule 1
hereto, by cashier's check, wire transfer of immediately available funds, or in
the case of Clark/Fox, L.L.C., by a note in the form as attached hereto as
Exhibit D.
ARTICLE 3.
CONDITIONS TO THE OBLIGATION OF THE
PURCHASERS TO PURCHASE THE SECURITIES
The obligation of each Purchaser to purchase the Preferred
Shares, to pay the purchase prices therefor and to perform any obligations
hereunder on the Closing Date (unless otherwise specified) shall be subject to
the satisfaction as determined by, or waiver by, such Purchaser of the following
conditions on or before the Closing Date:
3.1. Representations and Warranties. The representations and
warranties of the Company contained in Article 5 hereof shall be true and
correct at and as of the Closing Date (both before and after giving effect to
the transactions contemplated under this Agreement) as if made at and as of such
date.
3.2. Compliance with Terms and Conditions of this Agreement.
The Company shall have duly and properly performed and complied with all of the
agreements, covenants, obligations and conditions set forth herein that are
required to be performed or complied with by the Company on or before the
Closing Date.
8
3.3. Delivery of Certificates Evidencing the Preferred Shares.
The Company shall have delivered to each Purchaser the certificates evidencing
the Preferred Shares as set forth in Section 2.3.
3.4. Closing Certificates. The Company shall have delivered to
each Purchaser a certificate executed by an authorized officer of the Company
certifying to such matters as the Purchasers may reasonably request, including
that the representations and warranties of the Company contained in the
Agreement are true and correct on and as of the Closing Date, and that the
conditions set forth in this Section 3 to be satisfied by the Company have been
satisfied on and as of the Closing Date.
3.5. Secretary's Certificates. Each Purchaser shall have
received a certificate from the Company, dated as of the Closing Date and signed
by the Secretary or an Assistant Secretary of the Company, certifying that the
attached copies of the Certificate of Incorporation, the Certificate, By-laws of
the Company, and resolutions of the Board of Directors of the Company approving
the Transaction Agreements and the transactions contemplated thereby, are all
true, complete and correct and remain unamended and in full force and effect.
3.6. Documents. Each Purchaser or one Purchaser on behalf of
all Purchasers shall have received true, complete and correct copies of such
documents and such other information as it may have reasonably requested in
connection with or relating to the sale of the Preferred Shares and the
transactions contemplated by the Transaction Agreements, all in form and
substance reasonably satisfactory to the Purchasers prior to the Closing.
3.7. Purchase Permitted by Applicable Laws. The acquisition of
and payment for the Preferred Shares to be acquired by the Purchasers hereunder
and the consummation of the transactions contemplated by the Transaction
Agreements shall not (a) violate any Requirements of Law, (b) result in a breach
or default (i) under any of the Contractual Obligations of the Company or (ii)
under any order, writ, judgment, injunction, decree, determination or award of
any court, arbitrator, or commission, board, bureau, agency or other
governmental instrumentality, (c) result in, or require, the creation or
imposition of any Lien, or the obligation to make any payment with respect to
any Lien, upon or with respect to any of the property of the Company or (d)
require any consents, approvals, exemptions, authorizations, registrations,
declarations or filings by the Company.
3.8. Opinion of Counsel. Each Purchaser shall have received an
opinion of counsel to the Company, dated as of the Closing Date substantially in
the form of Exhibit E hereto.
3.9. Consents and Approvals. All agreements, approvals,
consents, exemptions, authorizations, or other actions by, or notices to, or
filings with, Governmental Authorities and other Persons in respect of all
Requirements of Law and with respect to those material Contractual Obligations
of the Company, necessary or required in connection with the execution, delivery
or performance of the Transaction Agreements (including, without limitation, the
issuance of the Preferred Shares, and issuance of the Common Stock upon
conversion of the Preferred Shares) by the Company, shall have been obtained and
be in full force and effect, and the Purchasers shall have been furnished with
appropriate evidence thereof, and all waiting periods shall have lapsed without
extension or the imposition of any conditions or restrictions.
3.10. Certain Waivers. Each holder of the shares of the
capital stock of the Company (or any other party who may possess such rights)
shall have waived any and all preemptive rights, rights
9
of first refusal, "tag along" rights, rights of co-sale and any similar rights
with respect to the issuance of the Preferred Shares contemplated hereby.
3.11. No Material Adverse Effect. Since the Balance Sheet
Date, there shall have been no Material Adverse Effect.
3.12. No Material Judgment or Order. There shall not be on the
Closing Date any judgment or order of a court of competent jurisdiction or any
ruling of any Governmental Authority or any condition imposed under any
Requirement of Law which, in the reasonable judgment of the Purchasers, would
(i) prohibit the purchase of the Preferred Shares or the consummation of the
other transactions contemplated hereunder, (ii) subject the Purchasers to any
penalty if the Preferred Shares were to be purchased hereunder, (iii) question
the validity or legality of the transactions contemplated hereby, or (iv) be
reasonably expected to adversely affect the value of the capital stock of the
Company, the Preferred Shares or the Condition of the Company.
3.13. Financial Statements. The Company shall have delivered
to the Purchasers a copy of the audited balance sheet of the Company (or its
predecessor, Build-A-Bear Workshop, L.L.C. ("BABW"), as applicable) as of
January 1, 2000 and the related consolidated statements of operations and cash
flows for the fiscal year then ended, accompanied by the report of an
independent auditor, together with a copy of the unaudited balance sheet of the
Company (or BABW, as applicable) as of January 29, 2000 and February 26, 2000
and the related consolidated statements of operations and cash flows for the
periods then ended. Such financial statements fairly present the financial
condition and results of operations in accordance with GAAP as of the dates and
for the periods set forth in the balance sheet included therein and the results
of operations of the Company for the period covered.
3.14. Registration Rights Agreement. The Company shall have
duly executed and delivered to the Purchasers the Registration Rights Agreement.
3.15. Stockholders' Agreement. The Company and the
shareholders of the Company shall have duly executed and delivered to the
Purchasers the Stockholders' Agreement.
3.16. Certificate of Designation. The Company shall have duly
executed and filed the Secretary of State of the State of Delaware the
Certificate substantially in the form attached hereto as Exhibit C.
3.17. Employment Agreements. The Company shall have entered
into the Employment Agreements reasonably satisfactory to Catterton.
3.18. Board of Directors. As of the Closing, the Company's
Board of Directors shall consist of the persons set forth in the Shareholders
Agreement.
3.19. Stock Plan. The Company shall have adopted and the
Shareholders shall have approved the Stock Plan in the form attached hereto as
Exhibit F , and the Common Stock reserved under the Stock Plan shall be no
greater than 1,374,074 shares of common stock.
3.20. Insurance.
BABW shall have transferred to the Company its
comprehensive general liability insurance policies.
10
3.21. Amendment to Bank Loan.
The Company shall have amended its Loan Agreement with Firstar
Bank, N.A. dated March 1, 2000, in a manner reasonably satisfactory to
Catterton.
ARTICLE 4.
CONDITIONS TO THE
OBLIGATIONS OF THE COMPANY TO CLOSE
The obligation of the Company to issue and sell the Preferred
Shares and the other obligations of the Company hereunder, shall be subject to
the satisfaction as determined by, or waiver by, the Company of the following
conditions on or before the Closing Date, provided however, that the
non-fulfillment of a condition by a Purchaser will not relieve the Company of
its obligation to each other fulfilling Purchaser:
4.1. Representations and Warranties. The representations and
warranties of the Purchasers contained in Section 6 hereof shall be true and
correct at and as of the Closing Date (both before and after giving effect to
the transactions contemplated under this Agreement) as if made at and as of such
date.
4.2. Compliance with Terms and Conditions of this Agreement.
The Purchasers shall have performed and complied with all of the obligations and
conditions set forth herein that are required to be performed or complied with
by the Purchasers on or before the Closing Date.
4.3. Issuance Permitted by Applicable Laws. The issuance of
the Preferred Shares by the Company hereunder and the consummation of the
transactions contemplated by the Transaction Agreements shall not (a) violate
any Requirements of Law, or (b) result in a breach or default (i) under any of
the Contractual Obligations of the Purchasers, or (ii) under any order, writ,
judgment, injunction, decree, determination or award of any court, arbitrator,
or commission, board, bureau, agency or other governmental instrumentality, or
(c) require any consents, approvals, exemptions, authorizations, registrations,
declarations or filings by the Purchasers.
4.4. Payment of Purchase Price. The Purchasers shall tender to
the Company the Purchase Price set forth in Section 2.2 in the respective
amounts specified on Schedule 1 hereto.
4.5. Consents and Approvals. All agreements, approvals
consents, exemptions, authorizations, or other actions by, or notices to, or
filings with, Governmental Authorities and other Persons in respect of all
Requirements of Law and with respect to those material Contractual Obligations
of the Purchasers; necessary or required in connection with the execution,
delivery or performance of the Transaction Agreements by each Purchaser, shall
have been obtained and be in full force and effect, and the Company shall have
been furnished with appropriate evidence thereof as requested by the Company and
all waiting periods shall have lapsed without extension or imposition of any
conditions or restrictions.
4.6. No Material Judgment or Order. There shall not be on the
Closing Date any judgment or order of a court of competent jurisdiction or any
ruling of any Governmental Authority or any condition imposed under any
Requirements of Law which, in the reasonable judgment of the Company would (i)
prohibit the sale of the Preferred Shares or the consummation of the other
11
transactions contemplated hereunder, (ii) subject the Company to any penalty if
the Preferred Shares were to be sold hereunder, or (iii) question the validity
or legality of the transactions contemplated hereby.
4.7. Registration Rights Agreement. The Purchasers shall have
duly executed and delivered to the Company the Registration Rights Agreement.
4.8. Stockholders' Agreement. The Purchasers shall have duly
executed and delivered to the Company the Stockholders' Agreement.
ARTICLE 5.
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers
as of the date hereof as follows:
5.1. Corporate Existence and Authority. The Company (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, (b) has all requisite corporate power and authority to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently, or is currently proposed to be
engaged, (c) is duly qualified as a foreign corporation, licensed and in good
standing in each jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of its business or the ownership of
its properties except where the failure to qualify would not have a Material
Adverse Effect, and (d) has the corporate power and authority to execute,
deliver and perform its obligations under each Transaction Agreement to which it
is or will be a party.
5.2. Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of each of the Transaction Agreements
and the consummation of the transactions contemplated thereby, including without
limitation, the issuance of the Preferred Shares (a) has been duly authorized by
all necessary corporate action, including, if required, stockholder action, (b)
does not and will not conflict with or contravene the terms of the Certificate
of Incorporation or the By-Laws of the Company, or any amendment thereof; and
(c) does not and will not violate, conflict with or result in any material
breach or contravention of (i) any Contractual Obligation of the Company or the
Subsidiary, or (ii) any Requirements of Law applicable to the Company or the
Subsidiary.
5.3. Governmental Authorization; Third Party Consents. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person in
respect of any applicable Requirements of Law, and no lapse of a waiting period
under any applicable Requirements of Law, is necessary or required in connection
with the execution, delivery or performance (including, without limitation, the
issuance of the Preferred Shares, the issuance of the Common Stock upon the
conversion or exercise of the Preferred Shares) by the Company or the
enforcement against the Company of the Transaction Agreements, or the
transactions contemplated thereby.
12
5.4. Binding Effect. The Transaction Agreements have been duly
executed and delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability.
5.5. Other Agreements. None of the Company, BABW or the
Subsidiary has previously entered into any agreement which is currently in
effect or to which the Company or the Subsidiary is currently bound, granting
any registration or other material rights to any Person, the provision or
performance of which would render the provision or performance (including,
without limitation, the issuance of the Preferred Shares and the issuance of the
Common Stock upon the conversion of the Preferred Shares) of the material rights
to be granted to the Purchasers by the Company in the Transaction Agreements
impracticable.
5.6. Capitalization.
(a) As of the date hereof, the capital stock of the Company
consists solely of (i) 15,000,000 authorized shares of Common Stock (of which
492,335 are issued and outstanding, 3,506,954 are reserved for issuance upon the
exercise of outstanding shares of Series A Convertible Preferred Stock,
3,644,104 are reserved for issuance upon the exercise of outstanding shares of
Series B Convertible Preferred Stock, 4,998,088 are reserved for issuance upon
the exercise of the outstanding shares of Series C Convertible Preferred Stock
and 574,815 are reserved for issuance upon the exercise of outstanding options);
(ii) 3,506,954 authorized shares of Series A Convertible Preferred Stock (of
which 2,444,966 are issued and outstanding); (iii) 3,644,104 authorized shares
of Series B Convertible Preferred Stock (of which 2,039,426 are issued and
outstanding); and (iv) 4,998,088 authorized shares of Series C Convertible
Preferred (of which 4,998,088 are issued and outstanding). Immediately following
the Closing, the capital stock of the Company will consist solely of (i)
15,000,000 authorized shares of Common Stock (of which 492,335 will be issued
and outstanding, 3,506,954 will be reserved for issuance upon the exercise of
outstanding shares of Series A Convertible Preferred Stock, 4,998,088 will be
reserved for issuance upon the exercise of outstanding shares of Series B
Convertible Preferred Stock, and 581,481 will be reserved for issuance upon the
exercise of outstanding options); (ii) 3,506,954 authorized shares of Series A
Convertible Preferred Stock (of which 3,506,954 will be issued and outstanding);
(iii) 3,644,104 authorized shares of Series B Convertible Preferred Stock (of
which 3,644,104 will be issued and outstanding) and (iv) 4,998,088 authorized
shares of Series C Convertible Preferred (of which 4,998,088 are issued and
outstanding). A total of 13,216,296 fully diluted shares of Common Stock will be
outstanding immediately following the Closing, assuming the conversion of all
outstanding shares of Preferred Stock and the exercise of all outstanding
options. All outstanding shares of capital stock of the Company are, and the
Preferred Shares (when issued, sold and delivered against payment therefor) will
be, duly authorized and validly issued, fully paid, nonassessable and free and
clear of any Liens, preferential rights, priorities, claims, options, charges or
other encumbrances or restrictions, other than those created by the Certificate
and the Stockholders' Agreement.
(b) Schedule 5.6 sets forth the name of each holder of the
issued and outstanding capital stock of the Company, the number of shares of
such capital stock held of record by each such holder, the name of each Person
holding any options, warrants or other rights to purchase any capital stock of
the Company, the number, class and series of shares of capital stock subject to
each such option, warrant or right and the exercise price of each such option,
warrant or right. Except as set forth on Schedule 5.6, and except for the stock
options and rights referred to in Section 5.6(a) and the Preferred Stock, there
are no outstanding securities convertible into or exchangeable for capital stock
of the
13
Company or options, warrants or other rights to purchase or subscribe to capital
stock of the Company or contracts, commitments, agreements, understandings or
arrangements of any kind to which the Company or any such holder of capital
stock is a party relating to the issuance of any capital stock of the Company,
any such convertible or exchangeable securities or any such options, warrants or
rights.
(c) Except as set forth on Schedule 5.6 or as contained in any
of the Transaction Documents, no Person has any preemptive rights, rights of
first refusal, "tag along" rights, rights of co-sale or any similar rights with
respect to the issuance of the Preferred Shares contemplated hereby. Schedule
5.6 identifies all Persons holding any such rights and describes the material
terms of all such rights and as of the Closing Date, except for such rights
contained in the Transaction Documents.
5.7. Subsidiaries. The Subsidiary is the only subsidiary of
the Company. The Subsidiary is a limited liability company is duly organized,
validly existing and in good standing under the laws of the State of Missouri,
with the requisite power and authority to own its properties and conduct its
business. The Subsidiary is qualified and licensed to transact business in each
jurisdiction where such qualification is necessary under applicable law as a
result of the conduct of its business and ownership of its properties except
where failure to qualify would not have a Material Adverse Effect. All of the
outstanding ownership interests of the Subsidiary have been duly authorized and
validly issued and are fully paid and nonassessable. All of the outstanding
ownership interests in the Subsidiary are owned by the Company free and clear of
any Liens, claims, options, charges or other encumbrances other than Permitted
Liens. The Subsidiary has no outstanding options, warrants, subscriptions,
calls, rights, convertible securities or other agreements or commitments
obligating the Subsidiary to issue, transfer or sell any securities of the
Subsidiary.
5.8. Private Offering. No form of general solicitation or
general advertising was used by the Company or its representatives in connection
with the offer or sale of the Preferred Shares. No registration of the Preferred
Shares pursuant to the provisions of the Securities Act will be required by the
offer, sale or issuance of the Preferred Shares pursuant to this Agreement. The
Company agrees that neither it, nor anyone acting on its behalf, will offer or
sell the Preferred Shares or any other security so as to require the issuance
and sale of the Preferred Shares pursuant to the provisions of the Securities
Act or any state securities or "blue sky" laws, unless such shares are so
registered.
5.9. Litigation. Except as set forth in Schedule 5.9 hereto,
there is no complaint, action, order, writ, injunction, judgment or decree
outstanding, or claim, suit, litigation, proceeding, labor dispute, arbitral
action or investigation (collectively, "Actions") pending or, to the knowledge
of the Company, threatened against or relating to (i) the assets of the Company
or the Subsidiary which would have a Material Adverse Effect, or (ii) the
transactions required to be performed under this Agreement or by the Transaction
Agreements. Neither the Company, BABW nor the Subsidiary are in default with
respect to any judgment, order, writ, injunction or decree of any court or
governmental agency, and there are no unsatisfied judgments against the Company,
BABW or the Subsidiary.
5.10. Financial Statements. The Company has furnished the
Purchasers with the audited balance sheet of the Company (or BABW, as
applicable) as of January 1, 2000 and the related statements of operations and
cash flows for the fiscal year then ended, accompanied by the report of an
independent auditor (collectively, the "Audited Financial Statements"), together
with a copy of the unaudited balance sheet of the Company (or BABW, as
applicable) as of January 29, 2000 and February 26, 2000 and the related
consolidated statements of operations and cash flows for the periods then ended
(collectively, together with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements fairly present the financial condition
and results of operations in accordance with GAAP as of
14
the dates and for the periods set forth in the balance sheet included therein
and the results of operations of the Company (or BABW, as applicable) for the
periods covered.
Attached hereto as Schedule 5.10 is the Company's pro forma
balance sheet at February 26, 2000 showing (i) the balance sheet information pro
forma for the reorganization of BABW into the Company, (ii) the pro forma
adjustments and (iii) the pro forma balance sheet information adjusted for the
transaction contemplated by this Agreement. The balance sheet attached hereto as
Schedule 5.10 has been prepared in a manner consistent with the Financial
Statements.
5.11. Title and Condition of Assets.
(a) The Company has good, and with respect to real property,
marketable, title to all of the real and personal property reflected on the
balance sheets included in the Financial Statements or acquired by the Company
and the Subsidiary since the Balance Sheet Date, free and clear of any Liens or
defects of title, other than Permitted Liens. All real property which is leased
by the Company is listed on Schedule 5.11(a) hereto. Except as set forth on
Schedule 5.11(a), the Company has a valid and enforceable leasehold interest in
all real property leased by it pursuant to the terms of the respective lease
agreements. With respect to the leases listed on Schedule 5.11(a) hereto, the
Company is in compliance with the leases except to the extent, either
individually or in the aggregate, such non-compliance would not have a Material
Adverse Effect, and such leases are sufficient for the conduct of the Company's
business as now being conducted.
(b) The Facilities and Equipment are in good operating
condition and repair (except for ordinary wear and tear and any defect the cost
of repairing which would not be material), are sufficient for the operation of
the Company's business and are in conformity in all material respects with
applicable laws, ordinances, orders, regulations and other requirements
(including applicable zoning, environmental, motor vehicle safety standards,
occupational safety and health laws and regulations) relating thereto, except
where such failure to conform would not have a Material Adverse Effect. The
Company enjoys peaceful and undisturbed possession of all Facilities owned or
leased by the Company, and, to the knowledge of the Company, such Facilities are
not subject to any encroachments, building or use restrictions, exceptions,
reservations or limitations which in any material respect interfere with or
impair the present and continued use thereof in the usual and normal conduct of
the business of the Company. There are no pending or, to the knowledge of the
Company, threatened, condemnation proceedings relating to any of the Facilities.
The Facilities and the Equipment are insured.
(c) Assets are valued on the books of the Company at or below
actual cost less adequate and proper depreciation charges. The Company has not
depreciated any of its assets for tax purposes on an accelerated basis or in any
other manner inconsistent with the Code or the rules, regulations, or guidelines
of the Internal Revenue Service.
5.12. Contractual Obligations.
(a) Except as set forth on Schedule 5.12, the Company is not
in default or breach under or with respect to any Contractual Obligation to
which it is a party (and to the best knowledge of the Company, no other party to
any such Contractual Obligation is in default or breach thereunder), except any
such default which, individually or together with all such defaults, would not
have a Material Adverse Effect or which would not materially affect the ability
of the Company to perform its obligations
15
under the Transaction Agreements. Neither the Company nor the Subsidiary has
received notice that any party to any such Contractual Obligation intends to
cancel, amend or terminate any such agreement.
(b) Schedule 5.12 lists all of the contracts, leases,
agreements, indentures, letters of intent or offers with respect to real estate
leasing activities, letters of credit, foreign bills of lading and undertakings
governing or relating to the Contractual Obligations of the Company other than
(i) the Transaction Agreements, (ii) domestic purchase orders entered into in
the ordinary course of business, and (iii) any such contracts, leases,
agreements, indentures or undertaking that (x) do not involve the receipt or
payment of more than $50,000 each, (y) do not involve employment or labor
matters and (z) do not contain covenants restricting the Company from engaging
in any line of business. The Company has provided the Purchaser with true,
correct and complete copies of all contracts, leases, agreements, indentures and
undertakings listed on Schedule 5.12. Every contract listed on Schedule 5.12 is
legal, valid, binding and enforceable in accordance with its terms with respect
to the Company and, to the knowledge of the Company, with respect to any other
parties bound thereby.
5.13. Patents, Trademarks, Etc. As of the Closing, the Company
owns or has applied for or is licensed or otherwise have the right to use all
patents, trademarks, service marks, trade names, copyrights, licenses,
franchises and other intellectual property rights that are material to the
operation of the businesses of the Company (the "Intellectual Property").
Schedule 5.13 hereto contains a list of all pending applications related to such
Intellectual Property, registered rights in such Intellectual Property and
executed agreements related to such Intellectual Property. All domestic
registered patents, copyrights, trademarks and service marks listed on Schedule
5.13 are in full force and effect and are not subject to any taxes or other fees
except for annual filing and maintenance fees. To the best of the Company's
knowledge, no product, process, method, substance or other material presently
sold by or employed by the Company, or which the Company contemplates selling or
employing, infringes upon the patents, trademarks, service marks, trade names,
copyrights, licenses or other intellectual property rights that are owned by
others. Except as set forth on Schedule 5.13 hereto, no litigation is pending
and no claim has been made against the Company or any Affiliate or, to the best
knowledge of the Company, is threatened, contesting the right of the Company to
sell or use any product, process, method, substance or other material presently
sold by or employed by the Company.
5.14. Tax Matters.
(a) Filing of Tax Returns. Except as set forth on Schedule
5.14, the Company and BABW (each such entity hereinafter a "Taxpayer" or
collectively the "Taxpayers") have timely filed with the appropriate taxing
authorities all returns (including without limitation information returns and
other material information) in respect of Taxes required to be filed through the
date hereof and will timely file any such returns required to be filed on or
prior to the Closing Date. The returns and other information filed (or to be
filed) are complete and accurate in all material respects. No Taxpayer has
requested any extension of time within which to file returns (including without
limitation information returns) in respect of any Taxes that have not been
filed.
(b) Payment of Taxes. Except as set forth on Schedule 5.14,
all Taxes due and payable of each of the Taxpayers in respect of periods
beginning before the Closing Date have been timely paid, or will be timely paid
prior to the Closing Date, and no Taxpayer has any material liability for Taxes
in excess of the amounts so paid. All Taxes that each Taxpayer has been required
to collect or withhold have been duly collected or withheld and, to the extent
required when due, have been or will be (prior to the Closing Date) paid if due
and payable to the proper taxing authority.
16
(c) Audits, Investigations or Claims. The federal income tax
returns of each of the Taxpayers have not been examined by the Internal Revenue
Service, and no material deficiencies for Taxes of any of the Taxpayers have
been claimed, proposed or assessed by any taxing or other governmental authority
against any of the Taxpayers. There are no pending or, to the best knowledge of
the Taxpayers, threatened audits, investigations or claims for or relating to
any material additional liability to any of them in respect of Taxes, and there
are no matters under discussion with any governmental authorities with respect
to Taxes that in the reasonable judgment of any of the Taxpayers, or its or
their counsel, is likely to result in a material additional liability to any of
them for Taxes. No audits of any of the Taxpayers' federal, state, and local
returns for Taxes by the relevant taxing authorities have occurred. None of the
Taxpayers have been notified that any taxing authority intends to audit a return
for any period. No extension of a statute of limitations relating to Taxes is in
effect with respect to any of the Taxpayers.
(d) Lien. There are no liens for Taxes on any assets of any
Taxpayer other than Permitted Liens.
(e) Tax Elections; Tax Sharing Arrangements.
(i) None of the Taxpayers have made an election, and none
of them are required, to treat any asset as owned by another person or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of section 168 of the Code or under any comparable state or local income tax or
other tax provision.
(ii) None of the Taxpayers are a party to or bound by any
binding tax sharing, tax indemnity or tax allocation agreement or other similar
arrangement with any other party.
(iii) None of the Taxpayers have filed a consent pursuant
to the collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state or local law) or agreed to have Section
341(f)(2) of the Code (or any corresponding provision of state or local law)
apply to any disposition of any asset owned by it.
(f) Affiliated Group. None of the Taxpayers have ever been a
member of an affiliated group of corporations, within the meaning of Section
1504 of the Code.
(g) Section 481(a). None of the Taxpayers have agreed to make,
or are required to make, any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise.
(h) Excess Parachute Payments. Except as set forth on Schedule
5.14, none of the Taxpayers are a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
5.15. Severance Arrangements. Except as set forth on Schedule
5.15, neither the Company nor the Subsidiary has entered into any severance or
similar arrangement in respect of any present or former employee of the Company
that will result in any obligation (absolute or contingent) of the Purchasers or
the Company to make any payment to any present or former employee following
termination of employment.
17
5.16. No Material Adverse Effect. Since the Balance Sheet
Date, there has not been any Material Adverse Effect.
5.17. Environmental Matters.
(a) Except as set forth on Schedule 5.17, to the best
knowledge of the Company, the property, assets and operations of the Company,
BABW and the Subsidiary are and have been in compliance in all material respects
with all applicable Environmental Laws; to the best knowledge of the Company
there are and have been no Hazardous Materials stored, handled or otherwise
located in, on or under any of the property or assets of the Company and the
Subsidiary, including the groundwater other than in compliance with any
Environmental Law; and, to the best knowledge of the Company, there have been no
reportable releases of Hazardous Materials in, on or under any property
adjoining any of the property or assets of the Company and the Subsidiary.
Neither the Company, BABW nor the Subsidiary has stored or caused to be stored
any Hazardous Materials on or under any of the property or assets of the
Company, including the groundwater, other than in compliance with Environmental
Laws; and the neither the Company nor BABW has generated, released or discharged
any Hazardous Materials other than in compliance with Environmental Laws.
(b) To the best knowledge of the Company, none of the
property, assets or operations of the Company, BABW or the Subsidiary is or has
been the subject of any federal, state or local investigation evaluating whether
(i) any remedial action is needed to respond to a release or threatened release
of any Hazardous Materials into the environment or (ii) any release or
threatened release of any Hazardous Materials into the environment is in
contravention of any Environmental Law.
(c) There are no pending, or, to the best knowledge of the
Company, threatened lawsuits or proceedings against the Company, BABW or the
Subsidiary, with respect to violations of an Environmental Law or in connection
with the presence of or exposure to any Hazardous Materials in the environment
or any release or threatened release of any Hazardous Materials into the
environment, and neither the Company nor the Subsidiary is or was the owner or
operator of any property which (i) pursuant to any Environmental Law has been
placed on any list of Hazardous Materials disposal sites, including without
limitation, the "National Priorities List" or "CERCLIS List," (ii) has or, to
the best knowledge of the Company, had any subsurface storage tanks located
thereon; or (iii) to the knowledge of the Company, has ever been used as or for
a waste disposal facility, a mine, a gasoline service station or a petroleum
products storage facility.
(d) To the best knowledge of the Company, neither the Company,
BABW nor the Subsidiary has any present or contingent liability in connection
which the presence either on or off the property or assets of the Company or any
Affiliate of any Hazardous Materials in the environment or any release or
threatened release of any Hazardous Materials into the environment, except for
any such liability that would not have a Material Adverse Effect on the
Condition of the Company.
5.18. Investment Company/Government Regulations. Immediately
following the Closing, after giving effect to the transactions contemplated by
the Transaction Agreements, neither the Company nor any Person controlling,
controlled by or under common control with the Company will be an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
5.19. Broker's, Finder's or Similar Fees. There are no
brokerage commissions, finder's fees or similar fees or commissions payable in
connection with the transactions contemplated
18
hereby based on any agreement, arrangement or understanding with the Company or
any officer, director, shareholder, or Affiliate of the Company, or any action
taken by any such person.
5.20. Labor Relations and Employee Matters.
(a) The Company is not engaged in any unfair labor practice.
There is (i) no unfair labor practice complaint pending or, to the best
knowledge of the Company, threatened against the Company or BABW before the
National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under collective bargaining agreements is so pending or, to
the best knowledge of the Company, threatened against the Company, (ii) no
strike, labor dispute, slowdown or stoppage pending or, to the best knowledge of
the Company, threatened against the Company, and (iii) no union representation
question existing with respect to the employees of the Company and, to the
knowledge of the Company, no union organizing activities are taking place.
(b) Except as set forth on Schedule 5.12, the Company is not a
party to any employment agreement (other than "at will" employment
relationships), collective bargaining agreement or covenant not to compete.
5.21. Employee Benefits Matters.
(a) Except as set forth on Schedule 5.21, neither the Company
nor the Subsidiary maintains or contributes to any Employee Plans which cover or
have covered employees of the Company or a Affiliate (with respect to their
relationship with such entities).
(b) Except as set forth in Schedule 5.21, the Company
represents as follows:
(1) Deductibility of Payments. There is no contract,
agreement, plan or arrangement covering any employee or former employee of the
Company or the Subsidiary (with respect to their relationship with such
entities) that, individually or collectively, provides for the payment by the
Company of any amount (i) that is not deductible under Section 162(a)(1) or 404
of the Code or (ii) that is an "excess parachute payment" pursuant to Section
280G of the Code.
(2) No Amendments. Neither the Company nor the Subsidiary
has any announced plan or legally binding commitment to create any additional
Employee Plans which are intended to cover employees or former employees of the
Company or the Subsidiary(with respect to their relationship with such entities)
or to amend or modify any existing Employee Plan which covers or has covered
employees or former employees of the Company or the Subsidiary(with respect to
their relationship with such entities).
(3) No Other Material Liability. No event has occurred in
connection with which the Company or any ERISA Affiliate or any Employee Plan,
directly or indirectly, could be subject to any material liability (i) under any
statute, regulation or governmental order relating to any Employee Plans or (ii)
pursuant to any obligation of the Company or the Subsidiary to indemnify any
person against liability incurred under, any such statute, regulation or order
as they relate to the Employee Plans.
5.22. Potential Conflicts of Interest. Except as set forth on
Schedule 5.22, no officer, director, or stockholder of five percent (5%) or more
of the aggregate number of shares of Common Stock then outstanding on a fully
diluted basis of the Company or the Subsidiary, no spouse of any such
19
officer, director or stockholder: (a) owns, directly or indirectly, any interest
in, or is an officer, director, employee or consultant of, any Person which is,
or is engaged in business as, a competitor, lessor, lessee, supplier,
distributor, sales agent or customer of, or lender to or borrower from, the
Company; (b) owns, directly or indirectly, in whole or in part, any tangible or
intangible property that the Company uses in the conduct of business; or (c) has
any cause of action or other claim whatsoever against, or owes any amount to,
the Company, except for claims in the ordinary course of business such as for
accrued vacation pay, accrued benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof and described in Schedule
5.22.
5.23. Business Relationships. There exists no actual or, to
the best of the Company's knowledge, threatened, termination, cancellation or
limitation of, or any adverse modification or change in, the business
relationship of the Company with any customer, supplier or any group of
customers or suppliers whose purchases or sales, as the case may be, are
individually or in the aggregate are material to the Condition of the Company,
and there exists no present condition or state of facts or circumstances that
would have a Materially Adverse Effect or prevent the Company from conducting
its business after the consummation of this Agreement, in substantially the same
manner in which it has been heretofore conducted by BABW and the Company.
5.24. Outstanding Borrowings. Schedule 5.24 lists the amount
of all Outstanding Borrowings as of the date hereof and the name of each lender
thereof.
5.25. Insurance Schedule. Schedule 5.25 accurately summarizes
all of the insurance policies or programs of the Company in effect as of the
date hereof, including key-person insurance, (true and correct copies of which
have been provided to the Purchasers), and indicates the insurer's name, policy
number, expiration date, amount of coverage, type of coverage, annual premiums
and deductibles, and also indicates any self-insurance program that is in
effect. The insurance policies summarized on Schedule 5.25 are in full force and
effect and are adequate to protect the Company's assets, and businesses and to
cover property damage by fire, business interruption or other casualty,
sufficient in amount to allow it to replace any of its properties damaged or
destroyed and are adequate to protect against all liabilities, claims, and risks
against which it is customary to insure.
5.26. Undisclosed Liabilities. The Company has no liabilities
or obligations (absolute, accrued, contingent or otherwise) except (i)
liabilities that are reflected and reserved against on the balance sheets
included in the Financial Statements (including the notes thereto), (ii)
liabilities incurred in the ordinary course of business since the Balance Sheet
Date, and which are reflected and reserved for in the balance sheets included in
the Financial Statements, and (iii) liabilities arising under Contractual
Obligations described on Schedule 5.12.
5.27. Solvency. Neither the Company nor any Affiliate has (i)
made a general assignment for the benefit of its creditors, (ii) filed any
voluntary petition in bankruptcy or suffered the filing of any involuntary
petition in bankruptcy by its creditors, (iii) suffered the appointment of a
receiver to take possession of all or substantially all of its assets or
properties, (iv) suffered the attachment or other judicial seizure of all or
substantially all of its assets or (v) admitted in writing its inability to pay
its debts as they come due.
5.28. Compliance with Law. The Company and the conduct of its
business is in compliance with all applicable laws, statutes, ordinances and
regulations, whether federal, state or local, except where the failure to comply
would not have a Material Adverse Effect. Neither the Company nor the Subsidiary
has received any written notice to the effect that it is not in compliance with
any of such
20
statutes, regulations, orders, ordinances or other laws where the failure to
comply would have a Material Adverse Effect.
5.29. No Other Agreements to Sell the Assets or Capital Stock
of the Company.
Except as set forth on Schedule 5.29, neither the Company nor
any Affiliate has any legal obligation, absolute or contingent, other than the
obligations under the Transaction Agreements, to any person or firm to (i) sell
the assets other than in the ordinary course of business consistent with past
practices, (ii) sell any capital stock of the Company (other than as set forth
in Section 5.6) or effect any merger, consolidation or other reorganization of
the Company or (iii) enter into any agreement with respect any of the foregoing,
other than agreements related to the merger of BABW with and into the Company
and the Transaction Documents.
5.30. Inventory. The inventory of the Company is reflected in
the Financial Statements in a manner consistent with GAAP, except for obsolete
items and items of below-standard quality, all of which have been written off or
written down to net realizable value in the Financial Statements or on the
accounting records of the Company, as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or net
realizable value on a average cost basis. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
5.31. Suppliers. Except as disclosed in Schedule 5.31, the
Company has not received any actual notice that any current supplier that sold
goods or merchandise to the Company or BABW in an aggregate amount in excess of
$50,000 during the preceding twelve months will not sell raw materials,
supplies, merchandise and other goods to the Company at any time after the
Closing Date on terms and conditions substantially similar to those currently in
effect, subject only to general and customary price increases.
5.32. Changes.
Since the Balance Sheet Date, except for the merger of BABW
with and into the Company and as set forth on Schedule 5.32, there has not been
(for purposes of this Section 5.32, all references to the "Company" include
BABW):
(a) any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not been
materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
21
(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(f) any material change in any compensation arrangement or
agreement with any employee;
(g) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any key
officer of the Company; and to the knowledge of the Company, there is no
impending resignation or termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company;
(j) receipt of notice that any material supplier or
third-party outsourcing provider will no longer supply products or services to
the Company;
(k) any mortgage, pledge, transfer of a security interest in,
or lien, created by the Company, with respect to any of its material properties
or assets, except liens for taxes not yet due or payable;
(l) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(m) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(n) to the Company's knowledge, any other event or condition
of any character that would reasonably be expected to materially and adversely
affect the assets, properties, financial condition, operating results or
business of the Company (as such business is presently conducted); or
(o) any agreement or commitment by the Company to do any of
the things described in this Section 5.31.
5.33. Certain Payments. Neither the Company nor any director,
officer, agent, or employee of the Company, or any other Person associated with
or acting for or on behalf of the Company has directly or indirectly (a) made
any contribution, gift, bribe, payoff, influence payment, kickback, or other
payment to any person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
22
respect of the Company, or (iv) in violation of any law, (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Company.
ARTICLE 6.
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Catterton and each other Purchaser, severally but not jointly,
hereby represents and warrants to the Company as of the date hereof as follows:
6.1. Existence and Authority. Such Purchaser who is not a
natural person: (a) is a corporation, limited liability company, or limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, (b) has all requisite partnership or
corporate power and authority to own its assets and operate its business, and
(c) has all requisite corporate or partnership power and authority to execute,
deliver and perform its obligations under each of the Transaction Agreements to
which it is or will be a party.
6.2. Authorization; No Contravention. The execution, delivery
and performance by such Purchaser of the Transaction Agreements to which it is a
party and the consummation of the transactions contemplated thereby, including,
without limitation, the acquisition of the Preferred Shares: (a) is within such
Purchaser's partnership or corporate power and authority and has been duly
authorized by all necessary partnership or corporate action on the part of such
Purchaser; (b) does not conflict with or contravene the terms of such
Purchaser's partnership agreement or certificate of limited partnership or
certificate of incorporation or bylaws or any amendment thereof; and (c) will
not violate, conflict with or result in any material breach or contravention of
(i) any Contractual Obligation of such Purchaser, or (ii) the Requirements of
Law or any order or decree applicable to such Purchaser.
6.3. Binding Effect. This Agreement has been duly executed and
delivered by such Purchaser, and this Agreement constitutes the legal, valid and
binding obligation of such Purchaser, enforceable against it in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
6.4. Purchase for Own Account. The Preferred Shares and the
Common Stock to be issued upon conversion of the Preferred Shares, are being or
will be acquired by such Purchaser for its own account and with no intention of
distributing or reselling such securities or any part thereof in any transaction
that would be in violation of the securities laws of the United States of
America, or any state. Such Purchaser agrees to the imprinting, so long as
required by law, of legends on certificates representing all of the Preferred
Shares or the shares of Common Stock to be issued upon conversion of the
Preferred Shares to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH
23
ACT OR SUCH LAWS."
"THE SALE, TRANSFER OR ENCUMBRANCE OF THIS CERTIFICATE IS
SUBJECT TO A STOCKHOLDERS' AGREEMENT DATE AS OF APRIL 3, 2000 BETWEEN THE
CORPORATION AND CERTAIN HOLDERS OF SHARES OF THE CAPITAL STOCK OF THE
CORPORATION. A COPY OF THIS AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY
OF THE CORPORATION AND MAY BE OBTAINED FROM THE COMPANY UPON REQUEST. THE
AGREEMENT PROVIDES, AMONG OTHER THINGS, FOR CERTAIN OBLIGATIONS TO SELL AND TO
PURCHASE THE SHARES EVIDENCED BY THIS CERTIFICATE, FOR A DESIGNATED PURCHASE
PRICE. BY ACCEPTING THE SHARES EVIDENCED BY THIS CERTIFICATE THE HOLDER AGREES
TO BE BOUND BY SAID AGREEMENT."
6.5. Accredited Investor Status; Institutional Investor
Status. Such Purchaser is an "accredited investor" as such term is defined in
Rule 501(a) of Regulation D, promulgated under the Securities Act.
Broker's, Finder's or Similar Fees. There are no
brokerage commissions, finder's fees or similar fees or commissions payable by
the Company in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Purchasers.
Exculpation Among Purchasers.
Each Purchaser acknowledges that in making its decision to
invest in the Company, it is not relying on any other Purchaser or upon any
person, firm or company, other than the Company and its officers, employees
and/or directors. Each Purchaser agrees that no other Purchaser, nor the
partners, employees, officers or controlling persons of any other Purchaser
shall be liable for any actions taken by such Purchaser, or omitted to be taken
by such Purchaser, in connection with such investment.
No Public Market. Each Purchaser acknowledges and understands
that no public market now exists for any securities of the Company and that the
Company has made no assurances that a public market will ever exist for any
securities of the Company.
6.9 Access to Data. Each Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with the
Company's officers and management.
6.10 Tax-Free Contribution. Each Purchaser hereby represents
and warrants that such the Purchaser, individually or with any other Purchaser
or group of Purchasers, does not have a plan, intention or agreement to dispose
of any or all of their shares of stock of the Company and hereby covenants not
to take any action which would cause the transactions contemplated by the
Transaction Documents and the merger of BABW into the Company not to be treated
as a tax-free transfer to a controlled corporation within the meaning of Section
351 of the Code.
24
ARTICLE 7.
COVENANTS OF THE COMPANY WITH
RESPECT TO THE PERIOD FOLLOWING THE CLOSING
Until (i) all shares of Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock and Common Stock are no longer outstanding
due to conversion, redemption or otherwise, and (ii) the Company has paid to the
Purchasers all other amounts due to them under the Transaction Agreements or the
Certificate, the Company hereby covenants and agrees with the Purchasers as
follows, except with respect to the obligations of the Company set forth in
paragraph 8.1 which shall terminate upon the earlier of either (a) a Qualified
Initial Public Offering or (b) the date on which the Purchasers or their
Affiliates hold less than 15% of the Preferred Shares (or Common Stock issued
upon conversion of such Preferred Shares) issued hereunder:
7.1. Notices. Within 5 business days of obtaining knowledge of
any of the events described below, the Company shall give written notice to the
Purchasers:
(a) any of the following: (i) default or event of default
under any material Contractual Obligation of the Company or any Affiliate, (ii)
initiation or resolution of any material dispute, litigation, investigation, or
proceeding which may exist at any time between the Company or any Affiliate and
any private third party or Governmental Authority, and (iii) any default or
breach of the terms of any of the Transaction Agreements by the Company; and
(b) any other matter that has resulted in a Material Adverse
Effect in the Condition of the Company.
Each notice pursuant to this Section 7.1 shall be accompanied
by a statement on behalf of the Company by the Chief Executive Officer,
President or Chief Financial Officer of the Company setting forth details of the
occurrence referred to therein, stating what action the Company proposes to take
with respect thereto, the Company officer responsible for such action and the
timetable with respect to such action.
7.2. Reservation of Shares. The Company shall at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issue or delivery upon conversion of the Preferred Shares as provided
in the Certificate, the maximum number of shares of Common Stock that may be
issuable or deliverable upon such conversion, as well as the number of shares of
Common Stock that may be issuable or deliverable upon conversion of the
Preferred Shares issued to the Purchasers as dividends. Such shares of Common
Stock shall, when issued or delivered in accordance with the provisions of the
Certificate, be duly authorized, validly issued and fully paid and
non-assessable. The Company shall issue such Common Stock in accordance with the
provisions of the Certificate and shall otherwise comply with the terms thereof.
7.3 Directors and Officers Insurance. The Company will use its
reasonable best efforts to have in full force and effect no later than 60 days
from the date of the Closing a directors and officers insurance policy in a
commercially reasonable amount.
25
7.4 Use of Proceeds. The Company shall not use the proceeds of
the sale of the Preferred Shares hereunder for the redemption of any of its
capital stock, the payment of dividends on shares of its capital stock or any
purpose other than working capital in the ordinary course of business.
ARTICLE 8.
INDEMNIFICATION
8.1. Indemnification. The Company with respect to the
Purchasers or the Purchasers, severally and not jointly, with respect to the
Company (the "Indemnifying Party") agrees to indemnify and hold harmless each
Purchaser or the Company, as the case may be, and its Affiliates and its
respective officers, directors, agents, employees, Affiliates, partners,
shareholders and assigns (each, an "Indemnified Party") to the fullest extent
permitted by law from and against any and all (i) Environmental Expenses that
are the proximate cause of the Company's violation of any Environmental Law and
(ii) tax liabilities, losses, costs, claims, damages, expenses (including
reasonable fees, disbursements and other charges of counsel) (collectively,
"Liabilities") based upon, relating to or arising out of any breach of any
representation or warranty, covenant or agreement of such Indemnifying Party in
this Agreement or any legal, administrative or other actions (including actions
brought by any of the Purchasers or any Indemnifying Party or any equity holders
of the Company or derivative actions brought by any Person claiming through or
in the Company's name), proceedings or investigations (whether formal or
informal), based upon, relating to or arising out of (A) the status of the
Purchasers as shareholders of the Company and the existence or exercise of the
rights and powers of the Purchasers relating (including without limitation, any
claim against any Indemnified Party relating to Environmental Matters), (B)
violations of applicable securities laws by the Company in connection with the
offering of the Shares, or (C) third party claims that the Preferred Shares
hereunder violate preexisting understandings or arrangements with the Company
upon the settlement or final judicial determination of (A) through (C) above;
provided, however, that no Indemnifying Party shall be liable under this Section
8.1 to an Indemnified Party: (a) for any amount paid in settlement of claims
without such Indemnifying Party's consent (which consent shall not be
unreasonably withheld), (b) to the extent that it is finally judicially
determined that such Liabilities resulted solely from the willful misconduct or
gross negligence of such Indemnified Party, or (c) to the extent that it is
finally judicially determined that such Liabilities resulted solely from the
breach by such Indemnified Party of any representation, warranty, covenant or
other agreement of such Indemnified Party contained in this Agreement; provided,
further, that if and to the extent that such indemnification is unenforceable
for any reason, the Indemnifying Party shall make the maximum contribution to
the payment and satisfaction of such indemnified liability which shall be
permissible under applicable laws. In connection with the obligation of the
Indemnifying Party to indemnify for expenses as set forth above, the
Indemnifying Party further agrees to reimburse each Indemnified Party for all
such expenses (including reasonable fees, disbursements and other charges of
counsel) as they are incurred by such Indemnified Party.
8.2. Notification. Each Indemnified Party under this Article 8
will, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from any Indemnifying Party under this
Article 9, notify the Indemnifying Party in writing of the commencement thereof.
The omission of any Indemnified Party to so notify the Indemnifying Party of any
such action shall not relieve the Indemnifying Party from any liability which it
may have to such Indemnified Party under this Article 8 except to the extent
that such failure to notify results in a loss of a material defense of such
Indemnified Party. In case any such action, claim or other proceeding shall be
brought against any Indemnified Party and such Indemnified Party shall notify
the Indemnifying Party of the commencement thereof, the Indemnifying Party shall
be entitled to assume the defense thereof at its own expense, with counsel
26
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense. Notwithstanding the foregoing, in any
action, claim or proceeding in which both the Indemnifying Party, on the one
hand, and an Indemnified Party, on the other hand, is, or is reasonably likely
to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the Indemnifying Party's expense and to control its own
defense of such action, claim or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or potential conflict exists
between the Indemnifying Party, on the one hand, and such Indemnified Party, on
the other hand, that would make such separate representation advisable. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Purchasers (such consent not to be unreasonably withheld), settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of the Purchasers (and each other Indemnified Party) from
all liability arising or that may arise out of such claim, action or proceeding.
The rights accorded to Indemnified Parties hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement
or otherwise.
8.3. Registration Rights Agreement. Notwithstanding anything
to the contrary in this Article 8, the indemnification and contribution
provisions of the Registration Rights Agreement shall govern any claim made with
respect to registration statements filed pursuant thereto or sales made
thereunder.
ARTICLE 9.
MISCELLANEOUS
9.1. Survival of Representations and Warranties. All of the
representations and warranties made herein shall survive the Closing Date of
this Agreement for a period of two (2) years from the date hereof except the
representations and warranties in (i) Section 5.17 shall survive until the
statute of limitations period has expired for such representations and
warranties and (ii) Section 5.14 and Section 6.10 shall survive until thirty
days after the expiration of the statute of limitations period has expired for
such representations and warranties.
9.2. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, courier
service or personal delivery:
(a) if to the Company:
Build-A-Bear Workshop, Inc.
1964 Innerbelt Business Center Drive
St. Louis, Missouri 63114-5760
Attention: Maxine Clark
Facsimile (not to be deemed notice): 314-423-8188
with a copy to:
27
Bryan Cave LLP
211 N. Broadway, Suite 3600
St. Louis, Missouri 63102
Attention: James H. Erlinger III
Facsimile (not to be deemed notice): 314-259-2020
(b) if to a Purchaser, to the last recorded address on the
books and records of the Company with a copy to the last
known counsel of such Purchaser.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; when mailed,
five business days after being deposited in the mail, postage prepaid.
9.3. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Neither the Company nor any of the Purchasers may assign any of
its rights under this Agreement without the written consent of each of the other
Parties hereto provided however that any Purchaser may assign its rights and
obligations to one or more Affiliates or wholly-owned corporations, which shall
agree to be bound by the terms hereof. Except as provided in Article 9, no
Person other than the parties hereto and their successors and permitted assigns
is intended to be a beneficiary of any of the Transaction Agreements.
9.4. Amendment and Waiver.
(a) No failure or delay on the part of the Company, or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Purchasers at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by any party from the terms of any provision of
this Agreement, shall be effective (i) only if it is made or given in writing
and signed by the Company and Catterton or by the party or parties to be bound
hereby, and (ii) only in the specific instance and for the specific purpose for
which made or given. Except where notice is specifically required by this
Agreement, no notice to or demand on any party in any case shall entitle any
party hereto to any other or further notice or demand in similar or other
circumstances.
9.5. Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
9.6. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
9.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law of such state.
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9.8. Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
shall be brought in the courts of the United States of America for the Eastern
District of Missouri and hereby expressly submits to the personal jurisdiction
and venue of such courts for the purposes thereof and expressly waives any claim
of improper venue and any claim that such courts are an inconvenient forum. Each
party hereby irrevocably consents to the service of process of any of the
aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the address
set forth in Section 10.3, such service to become effective 10 days after such
mailing.
9.9. Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provision or provisions held invalid, illegal or unenforceable shall
substantially impair the remaining provisions hereof.
9.10. Rules of Construction. Unless the context otherwise
requires, "or" is not exclusive, and references to sections or subsections refer
to sections or subsections of this Agreement.
9.11. Entire Agreement. This Agreement, together with the
exhibits and schedules hereto and the other Transaction Agreements is intended
by the parties as a final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth herein or therein. This Agreement, together with the exhibits
and schedules hereto, the other Transaction Agreements, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
9.12. Transaction Expenses. The Company will pay all
Transaction Expenses of the Purchasers with payments to each Purchaser being
made pro rata in proportion to the number of shares of Preferred Stock purchased
by such Purchaser hereunder.
9.13. Publicity. Except as may be required by applicable law,
none of the parties hereto shall issue a publicity release or announcement or
otherwise make any public disclosure concerning this Agreement or the
transactions contemplated hereby, without prior approval by the other parties
hereto. If any announcement is required by law to be made by any party hereto,
prior to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
9.14. Further Assurances. Upon the terms and subject to the
conditions contained herein, each of the parties hereto agrees, both before and
after the Closing, (i) to use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement, (ii) to execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective best efforts (A)
to obtain all necessary waivers, consents and approvals from other parties that
may be required; (B) to obtain all necessary permits as are required to be
obtained under any federal, state, local or foreign law or regulations, and (C)
to fulfill all conditions to this Agreement.
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9.15. Rights of Purchasers Inter Se. Each Purchaser shall have
the absolute right to exercise or refrain from exercising any right or rights
which such Purchaser may have by reason of this Agreement or any security,
including, without limitation, the right to consent to the waiver of any
obligation of the Company under this Agreement and to enter into an agreement
with the Company for the purpose of modifying this Agreement or any agreement
effecting any such modification, and such Purchasers shall not incur any
liability to any other or with respect to exercising or remaining from
exercising any such right or rights.
9.16. Severability of the Representations, Warranties and
Covenants.
No Purchaser shall be liable to the Company for the breach or
violation, if any, of any representation, warranty or covenant made or to be
complied with by any of the other Purchasers, but each such Purchaser shall be
liable to the Company solely for its own breaches or violations, if any, of any
representation, warranty or covenant made or to be complied with by such
Purchasers. For purposes of this Section 9.16, Catterton shall be deemed to be
one Purchaser.
9.17. Arbitration. If any controversy or dispute shall arise
between the parties hereto in connection with, arising from or in respect to
this Agreement, any provision hereof, or any provision of any instrument,
document, agreement, certification or other writing delivered pursuant hereto,
or with respect to the validity of this Agreement or any such document,
agreement, certification or other writing, and if such controversy or dispute
shall not be resolved within thirty (30) days after the same shall arise, then
such dispute or controversy shall be submitted for arbitration to the St. Louis,
Missouri office of the American Arbitration Association in accordance with its
commercial arbitration rules then in effect. Such proceeding shall be conducted
in St. Louis, Missouri. Any such dispute or controversy shall be determined by
one (1) arbitrator. Such arbitrator may award any relief which he shall deem
proper in the circumstances, without regard to the relief which would otherwise
be available to either party hereto in a court of law or equity, including
without limitation an award of money damages (including interest on unpaid
amounts, calculated from the due date of any such amount, at a rate per annum
determined by said arbitrator), specific performance and injunctive relief. The
award and findings of such arbitrator shall be conclusive and binding upon the
parties thereto, and judgment upon such award may be entered in any court of
competent jurisdiction. Any party against whom an arbitrator's award shall be
issued shall not, in any manner, oppose or defend against any suit to confirm
such award, or any enforcement proceedings brought against such party, whether
within or outside of the United States of America, with respect to any judgment
entered upon the award, or any enforcement proceedings brought against such
party, whether within or outside of the United States of America, with respect
to any judgment entered upon the award, and such party hereby consents to the
entry of a judgment against it, in the full amount thereof, or other relief
granted therein, in any jurisdiction in which such enforcement is sought. The
party against whom the arbitrator award is issued shall pay the fees of the
arbitrator.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement or caused this Agreement to be executed and delivered
by their authorized representatives as of the date first above written.
BUILD-A-BEAR WORKSHOP, INC.
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By: /s/ Maxene Clark
-----------------------
Name:
Title:
CATTERTON PARTNERS IV, L.P.
By: CATTERTON MANAGING PARTNER IV,
L.L.C., its General Partner
By: CP4 PRINCIPALS, L.L.C., its Managing Member
By: /s/ Frank Vest
--------------------------------
Name:
Title: Authorized Person
CATTERTON PARTNERS IV OFFSHORE, L.P.
By: CATTERTON MANAGING PARTNER IV,
L.L.C., its Managing General Partner
By: CP4 PRINCIPALS, L.L.C., its Managing Member
By: /s/ Frank Vest
--------------------------------
Name:
Title: Authorized Person
CATTERTON PARTNERS IV SPECIAL PURPOSE, L.P.
By: CATTERTON MANAGING PARTNER IV,
L.L.C., its Managing General Partner
By: CP4 PRINCIPALS, L.L.C., its Managing Member
By: /s/ Frank Vest
--------------------------------
Name:
Title: Authorized Person
CLARK/FOX, L.L.C.
31
a Missouri limited liability company
/s/ Maxine Clark
----------------------------
By: Maxine Clark, its Manager
/s/ Barney A. Ebsworth
----------------------------
BARNEY A. EBSWORTH
/s/ Wayne L. Smith, II
----------------------------
Wayne L. Smith, II
/s/ Brian Vent
----------------------------
Brian Vent
HYCEL PARTNERS V, L.L.C.,
a Missouri limited liability company
/s/ Mark H. Zorensky
--------------------------
By: Mark H. Zorensky, Manager
KCEP VENTURES II, L.P.,
a Missouri limited partnership
KCEP Ventures II, L.C., its General Partner
By: /s/ William Reisler, Managing Director
----------------------------------------
/s/ Adrienne Weiss
------------------------------------------
Adrienne Weiss
32