EXHIBIT 10.10
SECOND CONTRIBUTION AND INTEREST PURCHASE AGREEMENT
by and among
ZANY BRAINY, INC.,
ONLINE RETAIL PARTNERS INC.
and
ZB HOLDINGS LLC
As of March 20, 2000
This SECOND CONTRIBUTION AND INTEREST PURCHASE AGREEMENT (this "Agreement")
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is entered into as of this 20/th/ day of March, 2000 by and among Zany Brainy,
Inc., a Pennsylvania corporation ("Zany Brainy"), Online Retail Partners Inc., a
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Delaware corporation f/k/a Online Retail Partners LLC, a Delaware limited
liability company ("ONRP"), and ZB Holdings LLC, a Delaware limited liability
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company (the "Company"). Each of Zany Brainy and ONRP is hereinafter referred
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to as a "Contributor" and together, the "Contributors."
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RECITALS
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WHEREAS, Zany Brainy.com, a Delaware limited liability company
("ZB.com") was formed by its sole member, Zany Brainy on September 7, 1999; and
WHEREAS, Zany Brainy, ONRP, the Company and ZB.com entered into a
series of agreements effective as of October 20, 1999 to form a joint venture
for the purpose of operating an e-commerce site on the World Wide Web. The
establishment of the joint venture shall be referred to herein as the
"Transaction"; and
WHEREAS, as part of the Transaction, Zany Brainy, ONRP and the Company
entered into the ZB Holdings Limited Liability Company Agreement (the "Holdings
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Operating Agreement"); and
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WHEREAS, as part of the Transaction, all interests in ZB.com were
transferred to the Company, pursuant to a Contribution and Interest Purchase
Agreement dated as of October 20, 1999 ("Original Contribution Agreement"); and
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WHEREAS, pursuant to the Original Contribution Agreement, the Company
also (i) received $5 million in cash from each of Zany Brainy and ONRP
(collectively, the "Funds"), (ii) received certain assets (the "Assets") of Zany
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Brainy as set forth in Section 1 of Schedule 1.1(b) thereto, and (iii) assumed
certain rights (the "Rights") and liabilities (the "Liabilities") from Zany
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Brainy as set forth in Schedule 1.1(d) thereto; and
WHEREAS, the Company, entered into an Interim Limited Liability
Operating Agreement as of November 11, 1999 ("Interim Agreement") which set
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forth the preliminary rights, obligations and duties of members of ZB.com; and
WHEREAS, pursuant to the Interim Agreement, the Company also assigned
and transferred to ZB.com, and ZB.com accepted, all of the Funds, Assets
(including all intellectual property rights appurtenant thereto), Rights and
Liabilities received by Company under the Original Contribution Agreement; and
WHEREAS, ONRP contributed an additional $10 million to the Company in
exchange for additional Interests in the Company on November 15, 1999 as part of
the Follow-On Subscription (as defined in the Holdings Operating Agreement)
which funds were contributed to ZB.com; and
WHEREAS, the Members declared a ten-for-one split of the Membership
Interests in the Company on March 17, 2000; and
WHEREAS, the Members executed an Amended and Restated Operating
Agreement for Holdings on March 20, 2000 ("Amended and Restated Operating
Agreement"); and
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WHEREAS, Zany Brainy has agreed to contribute an additional $6,862,242
of cash to the Company in exchange for 7,002,288 Non-Voting Preferred Interests
(as such terms are defined in the Amended and Restated Operating Agreement); and
WHEREAS, ONRP has agreed to contribute an additional $5,137,758 of
cash to the Company in exchange for 5,242,610 Non-Voting Common Interests (as
such term is defined in the Amended and Restated Operating Agreement); and
WHEREAS, The Company has agreed to accept the foregoing contributions
and has agreed to issue Interests of the Company as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants, and agreements herein contained, and for
other good and valuable consideration mutually exchanged by the parties hereto,
the receipt and sufficiency of which are hereby acknowledged, Zany Brainy, ONRP
and the Company agree as follows:
AGREEMENT
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SECTION 1 - CONTRIBUTION OF CAPITAL
SECTION 1.1 Contribution by Zany Brainy. Upon the terms and subject to
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the conditions set forth in this Agreement, Zany Brainy hereby agrees to
transfer and deliver to the Company, as an additional capital contribution, SIX
MILLION EIGHT HUNDRED SIXTY-TWO THOUSAND TWO HUNDRED FORTY-TWO DOLLARS
($6,862,242) of cash (the "Zany Brainy Cash Contribution"). Zany Brainy agrees
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to make the Zany Brainy Cash Contribution by wire transfer of immediately
available funds in three monthly installments, the first of which shall occur on
the Closing Date, the amount of each installment shall be determined by the
Board of the Company, provided that each capital contribution installment made
by ONRP and Retail Sponsor shall be made in the same proportion as the aggregate
total Capital Contribution required by each party pursuant to this Section 1.
SECTION 1.2 Contribution by ONRP. Upon the terms and subject to the
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conditions set forth in this Agreement, ONRP hereby agrees to transfer and
deliver to the Company, as an additional capital contribution, FIVE MILLION ONE
HUNDRED THIRTY-SEVEN THOUSAND SEVEN HUNDRED FIFTY-EIGHT DOLLARS ($5,137,758) of
cash (the "ONRP Cash Contribution"). ONRP agrees to make the ONRP Cash
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Contribution by wire transfer of immediately available funds in three monthly
installments, the first of which shall occur on the Closing Date, the amount of
each installment shall be determined by the Board of the Company, provided that
each capital contribution installment made by ONRP and Retail Sponsor shall be
made in the same proportion as the aggregate total Capital Contribution required
by each party pursuant to this Section 1.
SECTION 1.3 Issuance of Interests by the Company in Consideration for
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Contributions.
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(a) Zany Brainy. In consideration for the Zany Brainy Cash
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Contribution, upon the terms and subject to the conditions set forth in this
Agreement, on the Closing Date, the Company shall issue to Zany Brainy 7,002,288
Non-Voting Preferred Interests.
(b) ONRP. In consideration for the ONRP Cash Contribution, upon the
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terms and subject to the conditions set forth in this Agreement, on the Closing
Date, the Company shall issue to ONRP 5,242,610 Non-Voting Common Interests.
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SECTION 1.4 Time and Place of Closing. The closing of the contributions
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of assets and purchases and sales of the Interests provided for in this
Agreement (the "Closing") shall be held at the offices of Latham & Watkins
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located at 885 Third Avenue, Suite 1000, New York, New York 10022, on March 20,
2000 (the "Closing Date") or at such other place or earlier or later date or
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time as may be fixed by mutual agreement of all parties hereto. For purposes of
interpreting this Agreement, the Closing shall be deemed to have been effective
as of the close of business on the Closing Date.
SECTION 1.5 Further Assurances. Each party hereto shall execute and
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deliver after the date hereof such instruments and take such other actions as
any other party may reasonably request in order to carry the intent of this
Agreement or to better evidence or effectuate the transactions contemplated
herein.
SECTION 2 - CLOSING CONDITIONS
SECTION 2.1 The respective obligations of each party to effect this
Agreement shall be subject to the satisfaction or waiver, where permissible,
prior to or on the Closing Date, of the following conditions:
(a) All representations and warranties of the parties contained in
this Agreement shall be true and correct, in all material respects, as if made
on the Closing Date. In addition, all covenants of the parties contained herein
which are to be performed on or prior to the Closing Date shall have been
complied with in all material respects.
SECTION 3 - EVENTS OCCURRING ON THE CLOSING DATE
SECTION 3.1 Deliveries by Zany Brainy. On the Closing Date, Zany Brainy
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shall deliver the following:
(a) Funds. The Zany Brainy Cash Contribution by wire transfer of
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immediately available funds.
SECTION 3.2 Deliveries by ONRP. On the Closing Date, ONRP shall deliver
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the following:
(a) Funds. The ONRP Cash Contribution by wire transfer of immediately
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available funds.
SECTION 3.3 Deliveries by the Company. On the Closing Date, the Company
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shall not be required to make any delivery.
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF ZANY BRAINY
Zany Brainy represents and warrants to the Company as follows:
SECTION 4.1 Investment Status. Zany Brainy is an "accredited investor" as
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such term is defined in Rule 501 under the Securities Act of 1933, as amended
(the "Securities Act"). Zany Brainy is purchasing the Preferred Interests for
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its own account, for investment only and not with a view to, or any
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present intention of, effecting a distribution of such securities or any part
thereof except pursuant to a registration or an available exemption under
applicable law. Zany Brainy acknowledges that its Preferred Interests have not
been registered under the Securities Act or the securities laws of any state or
other jurisdiction and cannot be disposed of unless they are subsequently
registered under the Securities Act and any applicable state laws or exemption
from such registration is available.
SECTION 4.2 Authority. Zany Brainy has full legal right, authority and
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power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by or on behalf of Zany Brainy pursuant to or as
contemplated by this Agreement and to carry out the transactions and perform
fully its obligations contemplated hereby and thereby, and the execution,
delivery and performance by Zany Brainy of this Agreement and each such other
agreement, document and instrument have been duly authorized by all necessary
action under Zany Brainy's articles of incorporation, as amended, and by-laws.
This Agreement, when executed and delivered, will constitute a valid and binding
obligation of Zany Brainy enforceable against it, in accordance with its terms
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and general principles of equity.
SECTION 4.3 Investment Banking; Brokerage Fees. Zany Brainy has not
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incurred or become liable for any broker's or finder's fee, banking fees or
similar compensation relating to or in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4.4 Non-Contravention. The execution, delivery and performance by
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Zany Brainy of this Agreement and the related documents to be executed and
delivered by Zany Brainy, do not: (i) violate or result in a default (whether
after the giving of notice, lapse of time or both) under any contract or
obligation to which Zany Brainy is a party or by which Zany Brainy is bound
(including, without limitation, any contracts, or any provision of Zany Brainy's
articles of incorporation, as amended, or by-laws or; (ii) violate or result in
a violation of, or constitute a default under, any provision of any law,
regulation or rule, or any order of, or any restriction imposed by, any court or
governmental agency applicable to Zany Brainy; (iii) require from Zany Brainy
any notice to, declaration or filing with, or consent or approval of, any
governmental authority or other third party; or (iv) accelerate any obligation
under or give rise to a right of termination or result in the loss of benefit
under any indenture or loan or credit agreement or any other material agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to which Zany
Brainy or is a party or by which the property of Zany Brainy is bound or
affected or result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the assets or
properties of Zany Brainy.
SECTION 4.5 Organization and Good Standing. Zany Brainy is a corporation
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duly organized, validly existing under the corporate laws of the Commonwealth of
Pennsylvania. Zany Brainy is duly licensed or qualified to transact business as
a foreign corporation and is in good standing in each jurisdiction in which the
nature of the business or the character of the properties owned or leased by
Zany Brainy requires such licensing or qualification, except where the failure
to so qualify would not have a material adverse effect on Zany Brainy or the
Company.
SECTION 5 - REPRESENTATIONS AND WARRANTIES OF ONRP
ONRP represents and warrants to the Company as follows:
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SECTION 5.1 Investment Status. ONRP is an "accredited investor" as such
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term is defined in Rule 501 under the Securities Act. ONRP is purchasing the
Non-Voting Common Interests for its own account, for investment only and not
with a view to, or any present intention of, effecting a distribution of such
securities or any part thereof except pursuant to a registration or an available
exemption under applicable law. ONRP acknowledges that its Non-Voting Common
Interests have not been registered under the Securities Act or the securities
laws of any state or other jurisdiction and cannot be disposed of unless they
are subsequently registered under the Securities Act and any applicable state
laws or exemption from such registration is available.
SECTION 5.2 Authority. ONRP has full legal right, authority and power to
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enter into this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of ONRP pursuant to or as contemplated by
this Agreement and to carry out the transactions and to perform fully its
obligations contemplated hereby and thereby, and the execution, delivery and
performance by ONRP of this Agreement and each such other agreement, document
and instrument have been duly authorized by all necessary action under ONRP's
Certificate of Incorporation as filed with the Secretary of State of the State
of Delaware on February 7, 2000, as amended on March 9, 2000, and Bylaws
(together, the "ONRP Governing Documents"). This Agreement and each agreement,
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document and instrument executed and delivered by ONRP pursuant to or as
contemplated by this Agreement constitute, or when executed and delivered will
constitute, valid and binding obligations of ONRP enforceable in accordance with
their respective terms subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally, and general principles of equity.
SECTION 5.3 Investment Banking; Brokerage Fees. ONRP has not incurred or
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become liable for any broker's or finder's fee, banking fees or similar
compensation relating to or in connection with this Agreement or the
transactions contemplated hereby.
SECTION 5.4 Non-Contravention. The execution, delivery and performance by
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ONRP of this Agreement and the related documents to be executed and delivered by
ONRP do not: (i) violate or result in a default (whether after the giving of
notice, lapse of time or both) under any contract or obligation to which ONRP is
a party or by which ONRP is bound, or any provision of the ONRP Governing
Documents; (ii) violate or result in a violation of, or constitute a default
under, any provision of any law, regulation or rule, or any order of, or any
restriction imposed by, any court or governmental agency applicable to ONRP;
(iii) require from ONRP any notice to, declaration or filing with, or consent or
approval of, any governmental authority or other third party; or (iv) accelerate
any obligation under or give rise to a right of termination or result in the
loss of benefit under any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which ONRP is a party or by which the property of ONRP is
bound or affected, or result in the creation or imposition of any mortgage,
pledge, lien, security interest or other charge or encumbrance on any of the
assets or properties of ONRP, in each of clauses (i) through (iv) except as
would not, individually or in the aggregate, have a material adverse effect on
ONRP or the Company.
SECTION 5.5 Organization and Good Standing. ONRP is a corporation duly
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formed, validly existing and in good standing under the laws of the State of
Delaware. ONRP is duly licensed or qualified to transact business in each
jurisdiction in which the nature of the business or the character of the
properties owned or leased by ONRP requires such licensing or qualification,
except where the failure to so qualify would not have a material adverse impact
on ONRP or the Company.
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SECTION 6 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Contributors as follows:
SECTION 6.1 Organization and Good Standing. The Company is a limited
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liability company duly formed and validly existing under the laws of the State
of Delaware. The Company is duly licensed or qualified to transact business in
each jurisdiction in which the nature of the business or the character of the
properties owned or leased by the Company requires such licensing or
qualification, except where the failure to so qualify would not have a material
adverse impact on the Company.
SECTION 6.2 Authorization and Enforceability. The Company has full, legal
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right, authority and power to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by or on behalf of the
Company pursuant to or as contemplated by this Agreement and to carry out the
transactions and to perform fully its obligations contemplated hereby and
thereby, and the execution, delivery and performance by the Company of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary action under the Company's certificate of formation
and the Operating Agreement. This Agreement and each agreement, document and
instrument executed and delivered by the Company pursuant to or as contemplated
by this Agreement constitute, or when executed and delivered will constitute,
valid and binding obligations of the Company enforceable in accordance with
their respective terms subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally, and general principles of equity.
Upon consummation of the transactions contemplated hereby, all of the Interests
issued pursuant to this Agreement (i) will have been duly authorized and validly
issued to each of the Contributors, (ii) will be fully paid and nonassessable,
and (iii) will have been issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
SECTION 6.3 Investment Banking; Brokerage. The Company has not incurred
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or become liable for any broker's or finder's fee, banking fees or similar
compensation relating to or in connection with this Agreement or the
transactions contemplated hereby.
SECTION 6.4 Capital Structure. As of the date hereof, the Board of
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Directors of the Company has authorized the issuance of 14,000,136 Common
Interests, (of which 5,000,000 are Voting Common Interests and 9,000,136 are
Non-Voting Common Interests) and 18,646,262 Preferred Interests (of which
5,000,000 are Voting Preferred Interests, and 13,646,260 are Non-Voting
Preferred).
SECTION 7 - RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
SECTION 7.1 Survival of Warranties. Each of the representations,
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warranties, agreements, covenants and obligations herein or certificate
delivered by any party to the other party incident to the transactions
contemplated hereby are material, shall be deemed to have been relied upon by
the other party and shall survive the Closing for the applicable surviving
period set forth below regardless of any investigation and shall not merge in
the performance of any obligation by either party hereto. Each of the
representations and warranties set forth in this Agreement shall survive the
Closing for a period of two (2) years.
SECTION 7.2 Expenses. Each party shall pay its own costs and expenses
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incurred or to be incurred by it in negotiating and preparing this Agreement and
the other documents contemplated hereby, and in carrying out and completing the
transactions contemplated by this Agreement and such other documents.
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SECTION 7.3 Notice of Default. Promptly upon the occurrence of, or
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promptly upon any party hereto becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach or default, or
would have caused or constituted a breach or default had such event occurred or
been known to such party prior to the date hereof, of any of the
representations, warranties or covenants of such party contained in or referred
to in this Agreement, such party shall give detailed written notice thereof to
each of the other parties hereto and shall use its best efforts to prevent or
promptly remedy the same.
SECTION 8 - INDEMNIFICATION.
SECTION 8.1 Indemnification by Zany Brainy. Zany Brainy agrees to
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indemnify and hold the Company and its subsidiaries and affiliates and persons
serving as officers, directors, partners or employees thereof (individually, a
"Zany Brainy Indemnified Party" and, collectively, the "Zany Brainy Indemnified
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Parties") harmless from and against any damages, liabilities, losses, taxes,
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fines, penalties, costs, and expenses (including, without limitation, reasonable
fees of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon any of the following matters:
(a) any breach of any representation or warranty of Zany Brainy under
this Agreement or in any certificate delivered pursuant hereto, or by reason of
any claim, action or proceeding asserted or instituted growing out of any matter
or thing constituting a breach of such representations or warranties; or
(b) any other breach of any covenant of Zany Brainy under this
Agreement or in any certificate delivered pursuant hereto, or by reason of any
claim, action or proceeding asserted or instituted growing out of any matter or
thing constituting a breach of such covenants.
SECTION 8.2 Limitations on Indemnification by Zany Brainy.
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Notwithstanding the foregoing, the right of the Zany Brainy Indemnified Parties
to indemnification under Section 8.1 shall be subject to the following
provisions:
(a) No indemnification shall be payable pursuant to Section 8.1 above
to any Zany Brainy Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 8.3 shall exceed $500,000 in the aggregate,
whereupon the full amount of such claims shall be recoverable in accordance with
the terms hereof; and
(b) The maximum aggregate liability of Zany Brainy, and the maximum
amount of damages which may be recovered by the Zany Brainy Indemnified Parties
from Zany Brainy pursuant to Section 8.1 shall not exceed FIVE MILLION DOLLARS
($5,000,000).
SECTION 8.3 Indemnification by ONRP. ONRP agrees to indemnify and hold
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the Company and its subsidiaries and affiliates and persons serving as officers,
directors, partners or employees thereof (individually, an "ONRP Indemnified
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Party" and, collectively, the "ONRP Indemnified Parties") harmless from and
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against any damages, liabilities, losses, taxes, fines, penalties, costs, and
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in
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investigation, defense or settlement of the foregoing) which may be sustained or
suffered by any of them arising out of or based upon any of the following
matters:
(a) any other breach of any representation or warranty of ONRP under
this Agreement or in any certificate, delivered pursuant hereto, or by reason of
any claim, action or proceeding asserted or instituted growing out of any matter
or thing constituting a breach of such representations or warranties; or
(b) any other breach of any covenant of ONRP under this Agreement or
in any certificate delivered pursuant hereto, or by reason of any claim, action
or proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such covenants.
SECTION 8.4 Limitations on Indemnification by ONRP. Notwithstanding the
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foregoing, the right of the ONRP Indemnified Parties to indemnification under
Section 8.3 shall be subject to the following provisions:
(a) No indemnification shall be payable pursuant to Subsection 8.3
above to any ONRP Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 8.3 shall exceed $500,000 in the aggregate,
whereupon the full amount of such claims shall be recoverable in accordance with
the terms hereof; and
(b) The maximum aggregate liability of ONRP, and the maximum amount
of damages which may be recovered by the ONRP Indemnified Parties from ONRP
pursuant to Section 8.3 shall not exceed FIVE MILLION DOLLARS ($5,000,000).
SECTION 8.5 Indemnification by the Company. The Company agrees to
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indemnify and hold each of the Contributors and their respective subsidiaries
and affiliates and persons serving as officers, directors, partners or employees
thereof (individually, a "Company Indemnified Party" and, collectively, the
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"Company Indemnified Parties") harmless from and against any damages,
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liabilities, losses, taxes, fines, penalties, costs, and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) any breach of any representation or warranty of the Company under
this Agreement or in any certificate delivered pursuant hereto, or by reason of
any claim, action or proceeding asserted or instituted growing out of any matter
or thing constituting a breach of such representations or warranties; or
(b) any breach of any other covenant of the Company under this
Agreement or in any certificate delivered pursuant hereto, or by reason of any
claim, action or proceeding asserted or instituted growing out of any matter or
thing constituting a breach of such covenants.
SECTION 8.6 Limitations on Indemnification by the Company.
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Notwithstanding the foregoing, the right of the Company Indemnified Parties to
indemnification under Section 8.5 shall be subject to the following provisions:
(a) no indemnification shall be payable pursuant to Section 8.5 above
to any Company Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 8.5
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shall exceed $500,000 in the aggregate, whereupon the full amount of such claims
shall be recoverable in accordance with the terms hereof; and
(b) the maximum aggregate liability of the Company, and the maximum
amount of damages which may be recovered by the Company Indemnified Parties from
the Company pursuant to Section 8.5 shall not exceed FIVE MILLION DOLLARS
($5,000,000).
SECTION 8.7 Notice; Defense of Claims. An indemnified party may make
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claims for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted (and in any event within 15 calendar days after the service of
the citation or sermons), but the failure to do so shall not relieve the
indemnifying party from any liability except to the extent that it is prejudiced
by the failure or delay in giving such notice. Such notice shall summarize the
bases for the claim for indemnification and any claim or liability being
asserted by a third party. Within 20 days after receiving such notice the
indemnifying party shall give written notice to the indemnified party stating
whether it disputes the claim for indemnification and whether it will defend
against any third party claim or liability at its own cost and expense. The
indemnifying party shall be entitled to direct the defense against a third party
claim or liability with counsel selected by it (subject to the consent of the
indemnified party, which consent shall not be unreasonably withheld) as long as
the indemnifying party is conducting a good faith and diligent defense. The
indemnified party shall at all times have the right to fully participate in the
defense of a third party claim or liability at its own expense directly or
through counsel; provided, however, that if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised in writing by the indemnifying party's counsel that
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the indemnified party may engage
separate counsel at the expense of the indemnifying party. If no such notice of
intent to dispute and defend a third party claim or liability is given by the
indemnifying party, or if such good faith and diligent defense is not being or
ceases to be conducted by the indemnifying party, the indemnified party shall
have the right, at the expense of the indemnifying party, to undertake the
defense of such claim or liability (with counsel selected by the indemnified
party), provided, however, that such claim or liability shall not be compromised
or settled without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld. If the indemnified party settles or
compromises such claim or liability without the prior written consent of the
indemnifying party, the indemnifying party will bear no liability hereunder for
or with respect to such claim or liability. In the event the indemnified party
assumes the defense of the claim or liability, the indemnified party will keep
the indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement. If the third party claim or liability is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
SECTION 9 - CERTAIN DEFINITIONS
"Assets" shall have the meaning set forth in the Recitals.
"Agreement" shall have the meaning set forth in the Preamble.
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"Amended and Restated Operating Agreement" shall have the meaning set forth
in the Recitals.
"Non-Voting Preferred Interests" shall have the meaning set forth in the
Amended and Restated Operating Agreement.
"Closing" shall have the meaning set forth in Section 1.4.
"Closing Date" shall have the meaning set forth in Section 1.4.
"Common Interests" shall have the meaning set forth in the Amended and
Restated Operating Agreement.
"Company" shall have the meaning set forth in the Preamble.
"Company Indemnified Party" shall have the meaning set forth in Section
8.5.
"Contributor" shall have the meaning set forth in the Preamble.
"Funds" shall have the meaning set forth in the Recitals.
"Interests" shall have the meaning set forth in the Amended and Restated
Operating Agreement.
"Interim Agreement" shall have the meaning set forth in the Recitals.
"Liabilities" shall have the meaning set forth in the Recitals.
"Non-Voting Common Interests" is defined in the Amended and Restated
Operating Agreement.
"ONRP" shall have the meaning set forth in the Preamble.
"ONRP Cash Contribution" shall have the meaning set forth in Section 1.2.
"ONRP Governing Documents" shall have the meaning set forth in Section 5.2.
"ONRP Indemnified Party" shall have the meaning set forth in Section 8.3.
"Original Contribution Agreement" shall have the meaning set forth in the
Recitals.
"Participating Ownership Percentage" is defined in the Amended and Restated
Operating Agreement.
"Preferred Interests" shall have the meaning set forth in the Amended and
Restated Operating Agreement.
"Rights" shall have the meaning set forth in the Recitals.
"Securities Act" shall have the meaning set forth in Section 4.1.
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"Zany Brainy" shall have the meaning set forth in the Preamble.
"Zany Brainy Cash Contribution" shall have the meaning set forth in Section
1.1(a).
"Zany Brainy Indemnified Party" shall have the meaning set forth in Section
8.1.
"ZB.com" shall have the meaning set forth in the Recitals.
SECTION 10 - MISCELLANEOUS
SECTION 10.1 Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of Delaware (without regard
to its conflicts of law doctrines).
SECTION 10.2 Dispute Resolution. All disputes, claims, or controversies
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arising out of or relating to this Agreement or the negotiation, validity or
performance hereof that are not resolved by mutual agreement shall be resolved
solely and exclusively by binding arbitration to be held in Delaware before a
single arbitrator who is reasonably acceptable to each of the parties. Each of
the parties hereto irrevocably and unconditionally consents to the exclusive
jurisdiction of Delaware to resolve all disputes, claims or controversies
arising out of or relating to this Agreement or the negotiation, validity or
performance hereof, and further consents to the jurisdiction of the courts of
Delaware for the purposes of enforcing the arbitration provisions of Section
10.2 of this Agreement
The parties covenant and agree that they will participate in the
arbitration in good faith and that they will share equally its costs, except as
otherwise provided below. The arbitrator may in his or her discretion assess
costs and expenses (including the reasonable legal fees and expenses of the
prevailing party) against any party to a proceeding. Any party unsuccessfully
refusing to comply with an order of the arbitrators shall be liable for costs
and expenses, including attorneys' fees, incurred by the other party in
enforcing the award. The provisions of this Section 10.2 shall be enforceable in
any court of competent jurisdiction.
SECTION 10.3 Counterparts. This Agreement may be executed in counterparts,
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each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument and shall become a binding Agreement when
the counterparts have been signed by each of the parties and delivered to the
other party.
SECTION 10.4 Headings. The section headings contained in this Agreement
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are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.5 Entire Agreement. This Agreement, including the other
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documents and instruments referred to herein, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
SECTION 10.6 Severability. If any one or more provisions contained in this
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Agreement shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal, or unenforceable provision had never
been contained herein.
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SECTION 10.7 Modifications and Amendments. The terms and provisions of
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this Agreement may be modified or amended only by written agreement executed by
all parties hereto.
SECTION 10.8 [Intentionally left blank]
SECTION 10.9 No Reliance on Other Information. Except for the
--------------------------------
representations and warranties contained in this Agreement and in the other
documents executed and delivered in connection with the execution and delivery
of this Agreement, no party or other person acting for any of them makes any
other representation or warranty, express or implied, with respect to the
transactions contemplated hereby, and the parties hereby disclaim any such
representation or warranty, whether oral or written, whether by a party to this
Agreement or any of their respective representatives or affiliates or any other
person.
SECTION 10.10 Notices. Any notice, request, demand or other communication
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required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when received if personally delivered; when transmitted, if
transmitted by telecopy, electronic or digital transmission method; the day
after it is sent if sent for next day delivery to a domestic address by a
recognized overnight delivery service. All notices to a party will be sent to
the addresses set forth below or to such other address or person as such party
may designate by notice to each other party hereunder:
TO ZANY BRAINY: Zany Brainy, Inc.
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2520 Renaissance Boulevard
King of Prussia, PA 19406
Attn.: Legal Department
Facsimile No.: (610) 278-7804
With a copy to: Morgan, Lewis & Bockius LLP
One Oxford Centre
301 Grand Street, 32/nd/ Floor
Pittsburgh, PA 15219
Attn.: Peter Watt-Morse, Esq.
Facsimile No.: (412) 560-3399
TO ONRP: Online Retail Partners Inc.
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47 East 11/th/ Street, 10/th/ Floor
New York, NY 10003
Attn.: Henry Nasella
Facsimile No.: (212) 331-1106
With a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attn.: Thomas C. Sadler, Esq.
Facsimile No.: (213) 891-8763
TO COMPANY: At such address as the Company may
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specify in writing to the other parties
from time to time.
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Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ZANY BRAINY, INC.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
ONLINE RETAIL PARTNERS INC.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
ZB HOLDINGS LLC
By:__________________________________________
Name:________________________________________
Title:_______________________________________