EXHIBIT 4.05
Option to Purchase
60,000 Shares of Common Stock
KIDS STUFF, INC.
UNIT PURCHASE OPTION
Dated: , 1997
THIS CERTIFIES that ________________ (hereinafter sometimes referred to
as the "Holder"), is entitled to purchase from KIDS STUFF, INC., a Delaware
corporation (hereinafter referred to as the "Company"), at the prices and during
the periods as hereinafter specified, up to 50,000 shares of Common Stock,
$.001 par value, (the "Shares" or "Common Stock") at an exercise price of $9.90
per share.
The Units have been registered under a Registration Statement on Form
SB-2 (File No. 333-19423) declared effective by the Securities and Exchange
Commission on __________, 1997 (the "Registration Statement"). This Option (the
"Option") to purchase 60,000 Shares of Common Stock (the "Option") was
originally issued pursuant to an underwriting agreement between the Company and
VTR Capital, Inc., as Representative of the Underwriters (the "Representative"),
in connection with a public offering of up to 300,000 Units (the "Public Units")
through the Underwriter, in consideration of $.0005 per Option.
Except as specifically otherwise provided herein, the Common Stock
issued pursuant to this Option shall bear the same terms and conditions as
described under the caption "Description of Securities" in the Registration
Statement, and except that (i) the holder shall have registration rights under
the Securities Act of 1933, as amended (the "Act"), for the Option, and the
shares of Common Stock underlying the Option, as more fully described in
paragraph 6 of this Option.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with paragraph 8 of this Option, and
during the periods as follows:
(a) Between _____________, 1998 and ____________, 2002,
inclusive, the Holder shall have the option to purchase Shares hereunder at a
price of $9.90 per Share (subject to adjustment pursuant to paragraph 8 hereof)
(the "Exercise Price").
(b) After _____________, 2002 (five (5) years from the Effective
Date), the Holder shall have no right to purchase any Shares hereunder.
2. The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
of the Exercise Price then in effect for the number of Shares specified in the
above-mentioned purchase form together with applicable stock transfer taxes, if
any; and (iii) delivery to the Company of a duly executed agreement signed by
the person(s)' designated in the purchase form to the effect that such person(s)
agree(s) to be bound by the provisions of paragraph 6 and subparagraphs (b), (c)
and (d) of paragraph 7 hereof. This Option shall be deemed to have been
exercised, in whole or in part to the extent specified, immediately prior to the
close of business on the date this Option is surrendered and payment is made in
accordance with the foregoing provisions of this paragraph 2, and the person or
persons in whose name or names the certificates for shares of Common Stock shall
be issuable upon such exercise shall become the holder or holders of record of
such Common Stock at that time and date. The Common Stock and the certificates
for the Common Stock so purchased shall be delivered to the Holder within a
reasonable time, not exceeding ten (10) days, after the rights represented by
this Option shall have been so exercised.
3. For a period of one (1) year from the Effective Date, this Option
shall not be transferred, sold, assigned, or hypothecated, except that it may be
transferred to successors of the Holder, and may be assigned in whole or in part
to any person who is an officer of the Holder during such period. Any such
assignment shall be effected by the Holder (i) executing the form of assignment
at the end hereof and (ii) surrendering this Option for cancellation at the
office or agency of the Company referred to in paragraph 2 hereof, accompanied
by a certificate (signed by an
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officer of the Holder if the Holder is a corporation), stating that each
transferee is a permitted transferee under this paragraph 3 hereof; whereupon
the Company shall issue, in the name or names specified by the Holder
(including the Holder) a new Option or Options of like tenor and representing in
the aggregate rights to purchase the same number of Shares as are purchasable
hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued hereunder will, upon issuance, be duly and validly issued,
fully paid and nonassessable, and no personal liability will attach to the
holder thereof. The Company further covenants and agrees that during the periods
within which this Option may be exercised, the Company will at all times have
authorized and reserved a sufficient number of shares of its Common Stock to
provide for the exercise of this Option.
5. This Option shall not entitle the Holder to any voting, dividend, or
other rights as a stockholder of the Company.
6. (a) During the period set forth in paragraph l(a) hereof, the Company
shall advise the Holder or its transferee, whether the Holder holds the Option
or has exercised the Option and holds Shares, by written notice at least 30 days
prior to the filing of any post-effective amendment to the Registration
Statement or of any new registration statement or post-effective amendment
thereto under the Act covering any securities of the Company, for its own
account or for the account of others (other than a registration statement on
Form S-4 or S-8 or any successor forms thereto), and will for a period of seven
(7) years from the effective date of the Registration Statement, upon the
request of the Holder, include in any such post-effective amendment or
registration statement, such information as may be required to permit a public
offering of the Option, or all or any of the Shares underlying the Option, (the
"Registrable Securities"). The Company shall supply prospectuses and such other
documents as the Holder may request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its reasonable efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates provided that the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or execute a general
consent to service of process in any jurisdiction in any action and do any and
all other acts and things which may be reasonably necessary or desirable to
enable such Holders to consummate the public sale or other disposition of the
Registrable Securities, and furnish indemnification in the manner provided in
paragraph 7 hereof. The Holder shall furnish information and indemnification as
set forth in paragraph 7 except that the maximum
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amount which may be recovered from the Holder shall be limited to the amount of
proceeds received by the Holder from the sale of the Registrable Securities. The
Company shall use its best efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the holders of
Registrable Securities requested to be included in the registration to include
such securities in such underwritten offering on the same terms and conditions
as any similar securities of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such offering advises
the holders of Registrable Securities that the total amount of securities which
they intend to include in such offering is such as to materially and adversely
affect the success of such offering, then the amount of securities to be offered
for the accounts of holders of Registrable Securities shall be eliminated,
reduced, or limited to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount, if any, recommended by
such managing underwriter or underwriters (any such reduction or limitation in
the total amount of Registrable Securities to be included in such offering to be
borne by the holders of Registrable Securities proposed to be included therein
pro rata). The Holder will pay its own legal fees and expenses and any
underwriting discounts and commissions on the securities sold by such Holder and
shall not be responsible for any other expenses of such registration.
(b) If any 50% holder (as defined below) shall give notice to the
Company at any time during the period set forth in paragraph l(a) hereof to the
effect that such holder desires to register under the Act this Option, or any of
the securities underlying the Option under such circumstances that a public
distribution (within the meaning of the Act) of any such securities will be
involved, then the Company will promptly, but no later than 45 days after
receipt of such notice, file a post-effective amendment to the current
Registration Statement or a new registration statement pursuant to the Act, to
the end that the Option, and/or any of the securities underlying the Options may
be publicly sold under the Act as promptly as practicable thereafter and the
Company will use its best efforts to cause such registration to become and
remain effective for a period of 120 days (including the taking of such steps as
are reasonably necessary to obtain the removal of any stop order); provided that
such holder shall furnish the Company with appropriate information in connection
therewith as the Company may reasonably request in writing. The 50% holder
(which for purposes hereof shall mean any direct or indirect transferee of such
holder) may, at its option, request the filing of a post-effective amendment to
the current Registration Statement or a new registration statement under the Act
with respect to the Registrable Securities on only one occasion during the term
of this Option. The Holder may at its option request the registration of the
Option and/or any of the securities underlying the Option in a registration
statement made by the Company as contemplated by Section 6(a) or in connection
with a request made pursuant to this
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Section 6(b) prior to acquisition of the Shares issuable upon exercise of the
Option and even though the Holder has not given notice of exercise of the
Option. The 50% holder may, at its option, request such post-effective amendment
or new registration statement during the described period with respect to the
Option, or separately as to the Shares and such registration rights may be
exercised by the 50% holder prior to or subsequent to the exercise of the
Option. Within ten business days after receiving any such notice pursuant to
this subsection (b) of paragraph 6, the Company shall give notice to the other
holders of the Options, advising that the Company is proceeding with such
post-effective amendment or registration statement and offering to include
therein the securities underlying the Options of the other holders. Each holder
electing to include its Registrable Securities in any such offering shall
provide written notice to the Company within twenty (20) days after receipt of
notice from the Company. The failure to provide such notice to the Company shall
be deemed conclusive evidence of such holder's election not to include its
Registrable Securities in such offering. Each holder electing to include its
Registrable Securities shall furnish the Company with such appropriate
information (relating to the intentions of such holders) in connection therewith
as the Company shall reasonably request in writing. All costs and expenses of
the first such post-effective amendment or new registration statement shall be
borne by the Company, except that the holders shall bear the fees of their own
counsel and any underwriting discounts or commissions applicable to any of the
securities sold by them.
In addition to the rights granted to 50% holders pursuant to this
section 6(b), any holder(s) shall have such rights, however, all expenses shall
be borne by such holder(s).
The Company shall be entitled to postpone the filing of any
registration statement pursuant to this Section 6(b) otherwise required
to be prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
statement would cause a violation of Regulation M under the Securities Exchange
Act of 1934, (iii) the Company is engaged in an underwritten offering and the
managing underwriter has advised the Company in writing that such a registration
statement would have a material adverse effect on the consummation of such
offering or (iv) the Company is subject to an underwriter's lock-up as a result
of an underwritten public offering and such underwriter has refused in writing,
the Company's request to waive such lock-up. In the event of such postponement,
the Company shall be required to file the registration statement pursuant to
this Section 6(b), within 60 days of the consummation of the event requiring
such postponement.
The Company will use its best efforts to maintain such
registration statement or post-effective amendment current
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under the Act for a period of at least six months (and for up to an additional
three months if requested by the Holder) from the effective date thereof. The
Company shall supply prospectuses, and such other documents as the Holder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities, use its best efforts to register and qualify any
of the Registrable Securities for sale in such states as such holder designates,
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or execute a general consent to service of
process in any jurisdiction in any action and furnish indemnification in the
manner provided in paragraph 7 hereof. The demand registration rights granted
hereunder will expire no later than five (5) years from the effective date of
this offering.
(c) The term "50% holder" as used in this paragraph 6 shall mean
the holder of more than 50% of the Common Stock underlying the Option
(considered in the aggregate).
7. (a) Whenever pursuant to paragraph 6 a registration statement
relating to the Option or any Shares issued or issuable upon the exercise of any
Options, is filed under the Act, amended or supplemented, the Company will
indemnify and hold harmless each holder of the securities covered by such
registration statement, amendment, or supplement (such holder being hereinafter
called the "Distributing Holder"), and each person, if any, who controls (within
the meaning of the Act) the Distributing Holder, and each underwriter (within
the meaning of the Act) of such securities and each person, if any, who controls
(within the meaning of the Act) any such underwriter, against any losses,
claims, damages, or liabilities, joint or several, to which the Distributing
Holder, any such controlling person or any such underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) which arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any such registration statement or any preliminary prospectus or final
prospectus constituting a part thereof or any amendment or supplement thereto,
or which arise out of or are based upon the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and will reimburse the Distributing Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged
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untrue statement or omission or alleged omission made in said registration
statement, said preliminary prospectus, said final prospectus, or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder or any other Distributing Holder, for use
in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, each person,
if any, who controls the Company (within the meaning of the Act) against any
losses, claims, damages, or liabilities, joint and several, to which the Company
or any such director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in said registration statement, said preliminary prospectus,
said final prospectus, or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing Holder for
use in the preparation thereof; and will reimburse the Company or any such
director, officer, or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Paragraph 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
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8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such action.
(b) In case the Company shall fix a record date for the issuance
of rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in Subsection (e) below) on the record date mentioned below, the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the number of Shares then underlying the Option by
the product of the Exercise Price in effect immediately prior to the date of
such issuance multiplied by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock outstanding on the record date mentioned
below and the number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so offered) would
purchase at such current market price per share of the Common Stock, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding on such record date and the number of additional shares
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of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made upon the basis of delivery of only the number of shares of Common
Stock (or securities convertible into Common Stock) actually delivered.
(c) In case the Company shall hereafter distribute to the holders
of its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and-dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the number of Shares
then comprising an Option by the product of the Exercise Price in effect
immediately prior thereto multiplied by a fraction, the numerator of which shall
be the total number of shares of Common Stock outstanding multiplied by the
current market price per share of Common Stock (as defined in Subsection (e)
below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(d) Whenever the Exercise Price payable upon exercise of this
Option is adjusted pursuant to Subsections (a), (b) or (c) above, the number of
Shares purchasable upon exercise of this Option shall simultaneously be adjusted
by multiplying the number of Shares exercise of this Option by the Exercise
Price in effect on the date hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(e) For the purpose of any computation under Subsections (b) or
(c)above, the current market price per share of Common Stock at any date shall
be deemed to be the average of the daily closing prices for 20 consecutive
business days before such date. The closing price for each day shall be the last
sale price regular way or, in case no such reported sale takes place on such
day, the average of the last reported bid and asked prices regular way, in
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either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest reported
asked prices as reported by NASDAQ, or other similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least ten cents
($0.10) in such price; provided, however, that any adjustments which by reason
of this Subsection (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 8 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 8 to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Common Stock, or any subdivision, reclassification or combination of Common
Stock, hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of Common Stock or securities convertible into Common
Stock (including Warrants issuable upon exercise of this Option).
(g) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly, but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Shares issuable upon exercise of this Option and,
if requested, information describing the transactions giving rise to such
adjustments, to be mailed to the Holder, at the address set forth herein, and
shall cause a certified copy thereof to be mailed to its transfer agent, if any.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(h) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (a) above, the Holder thereafter shall
become entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of this
Option shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in Subsections (a) to (f), inclusive above.
9. This Agreement shall be governed by and in accordance
with the laws of the State of New York.
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IN WITNESS WHEREOF, Kids Stuff, Inc. has caused this Option to be signed
by its duly authorized officers under its corporate seal, and this Option to be
dated _____________________, 1997.
KIDS STUFF, INC.
By: ______________________________
Its
(Corporate Seal)
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PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder,
Shares of Kids Stuff, Inc., Common Stock $.001 par value and herewith
makes payment of $______________ therefor, and requests that the certificates
for shares of Common Stock be issued in the name(s) of, and delivered to
________________________ whose address(es) is
(are)_________________________________________.
Dated:
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and transfers
unto _________________________________ the right to purchase Shares represented
by the foregoing Option to the extent of _____ Shares of Common Stock, $.001 par
value, and appoints _________________________________ attorney to transfer such
rights on the books of Kids Stuff, Inc., with full power of substitution in the
premises.
Dated:
By: ______________________________
Address:
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In the presence of: