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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Kids Mart, Inc.
(Name of Issuer)
Common Stock, par value $.0001 per share
(Title of Class of Securities)
493932107
(CUSIP Number)
Gary M. Bahler, Esq.
General Counsel
Woolworth Corporation
233 Broadway
New York, NY 10279
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 31, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box ( ).
Check the following box if a fee is being paid with the
statement (X). (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting benefi-
cial ownership of more than five percent of the class of securi-
ties described in Item 1; and (2) has filed no amendment subse-
quent thereto reporting beneficial ownership of five percent or
less of such class.) (See Rule 13D-7.)
NOTE: Six copies of this statement, including all
exhibits, should be filed with the Commission. See Rule 13d-1(a)
for other parties to whom copies are to be sent.
Exhibit Index is on Page 14
13D
CUSIP NO. 493932107 PAGE 2 OF PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Woolworth Corporation
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) ( )
(b) ( )
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
7 SOLE VOTING POWER
1,000,000
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0-
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,000,000
PERSON
WITH 10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,000,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* ( )
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.83%
14 TYPE OF REPORTING PERSON*
CO
ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this
Statement relates is the Common Stock, par value $.0001
per share (the "Common Stock"), of Kids Mart, Inc., a
Florida corporation (the "Issuer"). The principal
executive offices of the Issuer are located at 801 S.
Sentous Avenue, City of Industry, California 91748.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed by Woolworth
Corporation, a New York corporation ("Woolworth"), the
principal executive offices of which are located at 233
Broadway, New York, New York 10279. The principal
business of Woolworth and its subsidiaries is the
operation of a multi-national retailing business
selling a broad range of general merchandise and men's,
women's and children's apparel, footwear and
accessories. The names, citizenship, business
addresses and principal occupations or employments of
each of the executive officers and directors of
Woolworth are set forth in Annex A hereto, which is
incorporated herein by reference.
During the last five years neither Woolworth nor,
to the best of Woolworth's knowledge, any person named
in Annex A hereto has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of
a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or
is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state
securities laws or finding any violation with respect
to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The 1,000,000 shares of Series A Convertible
Preferred Stock, par value $.0001 per share (the
"Preferred Stock"), of the Issuer, to which this
Statement relates, were acquired by Woolworth pursuant
to the Acquisition Agreement (as defined and described
below), in connection with the transactions
contemplated by the Settlement Agreement (as defined
and described below). No funds were used, but as
recited in the Acquisition Agreement, the Preferred
Stock was issued to Woolworth in consideration of the
transactions contemplated by the Settlement Agreement,
including the cancellation of the Note (as defined
below) and the satisfaction of the Advances (as defined
below). No specific allocation of such consideration
as between the Preferred Stock and certain other
benefits received by Woolworth under the Settlement
Agreement was made.
ITEM 4. PURPOSE OF TRANSACTION.
Woolworth acquired the 1,000,000 shares of
Preferred Stock to which this Statement relates (the
"Shares") from the Issuer pursuant to the terms of a
Stock Acquisition Agreement, dated as of May 30, 1996
(the "Acquisition Agreement"), by and between the
Issuer and Woolworth, entered into in connection with
and constituting one of the transactions contemplated
by a Mutual Release and Settlement Agreement, dated as
of May 30, 1996 (the "Settlement Agreement"), by and
among the Issuer, LFS Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Issuer
("LFS"), Woolworth, Kinney Shoe Corporation, a wholly
owned subsidiary of Woolworth ("Kinney"), and Jack Koffman.
Pursuant to the Settlement Agreement, the parties
agreed to execute and file a stipulation of dismissal
with prejudice of an action (the "Action") in
California Superior Court for the County of Los Angeles
entitled LFS Acquisition Corp., et al. v. Woolworth
Corporation, et al., including the complaint and all
cross-claims therein. The Action had arisen out of the
purchase (the "Purchase") by LFS's predecessor, LFS
Acquisition Corp., a California corporation, from
Woolworth of the stock of Holtzman's Little Folk Shop
Inc. and from Kinney of the business and assets of
Kinney's Kids Mart/Little Folk Division). In addition,
pursuant to the Settlement Agreement, among other
things, (i) the Issuer agreed to enter into the
Acquisition Agreement with Woolworth and issue the
Shares to Woolworth pursuant thereto, (ii) Woolworth
agreed to deliver to LFS for cancellation a promissory
note of LFS (the "Note"), in the principal amount of
$5,001,382, delivered to Woolworth in connection with
the Purchase, and to release all amounts owed
thereunder, (iii) Woolworth agreed to release claims
against LFS for amounts, in excess of $4.4 million (the
"Advances"), Woolworth had claimed it paid on behalf of
LFS pursuant to a Transition Services Agreement (the
"Services Agreement") entered into in connection with
the Purchase, (iv) Woolworth agreed to release to LFS
approximately $1.67 million deposited in escrow by LFS
in connection with the Purchase, (v) Woolworth, Kinney
and LFS agreed not to pursue the right to make any
further adjustments to the purchase price paid in the
Purchase and (vi) Woolworth and LFS agreed to extend
the term of the Services Agreement with respect to
certain of the services performed by Woolworth
thereunder.
Pursuant to the Acquisition Agreement, Woolworth
represented that it was acquiring the Shares solely for
its own account for the purpose of investment and not
with a view to the public distribution thereof. In
addition, Woolworth agreed therein that any sale or
other transfer by it of the Shares, or of Common Stock
received upon conversion thereof, would be subject to
certain restrictions set forth in the Acquisition
Agreement. See Item 6 below. Subject to the
foregoing, Woolworth reserves the right, and at any
time or from time to time may, (i) convert the Shares
owned by Woolworth into shares of Common Stock, (ii)
acquire, or agree to acquire, additional shares of
Common Stock or Preferred Stock or other securities of
or relating to the Issuer, (iii) sell, or agree to
sell, some or all such shares of Common Stock or
Preferred Stock or such other securities of or relating
to the Issuer owned by Woolworth, in each such case in
the open market, in negotiated transactions (including
with the Issuer), pursuant to certain registration
rights granted under the Acquisition Agreement or
otherwise, (iv) make or receive proposals and enter
into negotiations with respect to such transactions
and/or (v) surrender such shares of Common Stock or
Preferred Stock or such other securities of or relating
to the Issuer owned by Woolworth in connection with any
merger, tender offer or other acquisition transaction
involving the Issuer. Woolworth's decisions in such
regard will be based upon the prevailing price of the
shares of Common Stock or Preferred Stock or other such
securities in the open market, any underwriting of such
shares and/or in any negotiated transactions, the value
of the consideration being offered in any merger,
tender offer or other acquisition transaction involving
the securities of the Issuer, tax considerations and
any other relevant factors.
Other than as described above, Woolworth has no
plans or proposals that relate to or would result in
any transactions involving the Issuer or any of its
subsidiaries or securities of the type or kind listed
in Item 4 of Schedule 13D adopted by the Securities and
Exchange Commission under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
(a-b) As of the date of this Statement, Woolworth
beneficially owns 1,000,000 shares of the Preferred
Stock, representing the current right to receive upon
conversion thereof 1,000,000 shares of the Common
Stock. Pursuant to the Issuer's Articles of
Incorporation, each share of Preferred Stock is (i)
convertible at any time into a number of shares of
Common Stock equal to (x) $10.00 divided by (y) the
conversion price of $10.00, as it may be adjusted from
time to time, (ii) not redeemable, (iii) non-voting
(except in certain limited circumstances) and (iv) has
a $10.00 per share liquidation preference. Based on
the 4,943,000 shares of Common Stock reported
outstanding in the Issuer's Annual Report on Form 10-K
for its fiscal year ended January 27, 1996, Woolworth
beneficially owns approximately 16.83% of the
outstanding shares of Common Stock (including shares
issuable upon conversion of the Shares).
As of the date of this Statement, Mr. M. Jeffrey
Branman, Senior Vice President - Corporate Development
of Woolworth, held directly 29,362 shares of the Common
Stock. As of such date Mr. Branman also directly held
Class A Warrants of the Issuer entitling him to
acquire, in the aggregate, 9,550 shares of the Common
Stock, at an exercise price of $6.00 per share (the
"Warrants"). According to the description of the
Warrants in the Proxy Statement, dated December 14,
1995, of the Issuer's predecessor, Frost Hanna
Acquisition Group, Inc., the Warrants are not currently
exercisable and will not become exercisable unless and
until the Issuer's earnings per share for the immediately
preceding fiscal year equals or exceeds $.75 per share
(undiluted). Mr. Branman acquired all such shares and
warrants prior to becoming an officer of Woolworth. Woolworth
hereby disclaims beneficial ownership of any such shares or
warrants held by Mr. Branman.
Except as described above, neither Woolworth, nor,
to the best knowledge of Woolworth, any of the persons
listed in Annex A attached hereto, beneficially owned
any shares of Common Stock as of the date of this
Statement.
(c) Except as described above, neither Woolworth,
nor, to the best knowledge of Woolworth, any of the
persons listed in Annex A attached hereto, has effected
any transactions in the Common Stock during the last 60
days.
(d-e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF
THE ISSUER.
The Shares acquired by Woolworth pursuant to the
Acquisition Agreement have not been registered under
the Securities Act of 1933, as amended (the "Securities
Act"), and neither the Shares, nor shares of Common
Stock received upon conversion thereof (the "Conversion
Shares"), may be sold or transferred in the absence of
such registration or exemption from such Act.
Pursuant to the Acquisition Agreement, the Issuer
has granted Woolworth certain registration rights with
respect to the Conversion Shares. These rights
include: (i) so-called "piggy-back" registration
rights whenever the Issuer proposes to file a
registration statement relating to the Common Stock
under the Securities Act (with certain exceptions),
(ii) an agreement of the Issuer to include the
Conversion Shares in any shelf registration it effects
in connection with certain warrants previously issued
by it, and to use its reasonable best efforts to cause
such registration statement to remain current and
effective for a period of two years, and (iii) one
demand registration right, exercisable at any time
(subject to certain blackout periods) after 180 days
following the issuance of the Shares, by holders of at
least 500,000 of the Shares (or of 500,000 of the
Conversion Shares, as adjusted for stock splits,
combinations, dividends or reclassifications having a
record date after the issuance of the Shares), unless
and until such time as Woolworth is able to sell any
and all Conversion Shares held by it without volume or
other restrictions under Rule 144 promulgated under the
Securities Act. In connection with such registration
rights, the Issuer has agreed to indemnify and hold
harmless Woolworth from certain liabilities arising out
of any such registration.
Pursuant to the Acquisition Agreement, Woolworth
has agreed that in any sale or other transfer by it of
the Shares or the Conversion Shares, it will ensure
that the purchaser or transferee thereof, together with
all other persons or entities with which such purchaser
or transferee forms a "group" (as the term is used in
Section 13(d) of the Exchange Act), does not acquire in
a single transaction or series of transactions from
Woolworth more than 250,000 Shares (or 250,000
Conversion Shares, as adjusted for stock splits,
combinations, dividends or reclassifications having a
record date after the issuance of the Shares);
provided, however, that such restrictions do not apply
to any registered, underwritten resale of the Shares or
of the Conversion Shares involving a public
distribution pursuant to the registration rights
granted to Woolworth under the Acquisition Agreement or
(ii) pledges of the Shares or Conversion Shares (if the
pledgee agrees to be bound by such restrictions if it
subsequently acquires such pledged shares).
The foregoing is a summary of certain provisions
of the Acquisition Agreement, and is qualified in its
entirety by reference to the full text of the
Acquisition Agreement, a copy of which is attached
hereto as Exhibit 1 and incorporated herein by
reference.
Except as described in Item 4 and as described
above, as of the date of this Statement neither
Woolworth, nor, to the best knowledge of Woolworth, any
of the persons listed in Annex A attached hereto, has
any contracts, arrangements, understandings or
relationships (legal or otherwise) with any person with
respect to any securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Stock Acquisition Agreement, dated as of May
30, 1996, by and between Woolworth
Corporation and Kids Mart, Inc. (without exhibits)
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information
set forth in this Statement is true, complete and correct.
Dated: June 10, 1996
WOOLWORTH CORPORATION
By /s/ Gary M. Bahler
___________________________
Name: Gary M. Bahler
Title: Vice President - General
Counsel and Secretary
ANNEX A
EXECUTIVE OFFICERS AND DIRECTORS OF WOOLWORTH CORPORATION
Principal Occuption
Name and Title and Business Address
Roger N. Farah Chairman of the Board and
Chairman of the Board and Chief Executive Officer
Chief Executive Officer Woolworth Corporation
233 Broadway
New York, New York 10279-0003
Dale W. Hilpert President and Chief
President and Chief Operating
Operating Officer; Officer; Director
Director Woolworth Corporation
233 Broadway
New York, New York 10279-0003
M. Jeffrey Branman Senior Vice President -
Senior Vice President - Corporate Development
Corporate Development Woolworth Corporation
233 Broadway
New York, New York 10279-0003
John E. DeWolf III Senior Vice President -
Senior Vice President - Real Estate
Real Estate Woolworth Corporation
233 Broadway
New York, New York 10279-0003
John F. Gilespie Senior Vice President -
Senior Vice President - Human Resources
Human Resources Woolworth Corporation
233 Broadway
New York, New York 10279-0003
Andrew P. Hines Senior Vice President and
Senior Vice President and Chief Financial Officer
Chief Financial Officer Woolworth Corporation
233 Broadway
New York, New York 10279-0003
Gary M. Bahler Vice President,
Vice President, General Counsel and
General Counsel and Secretary
Secretary Woolworth Corporation
233 Broadway
New York, New York 10279-0003
John H. Cannon Vice President and
Vice President and Treasurer
Treasurer Woolworth Corporation
233 Broadway
New York, New York 10279-0003
John A. Wozniak Vice President and
Vice President and Controller
Controller Woolworth Corporation
233 Broadway
New York, New York 10279-0003
J. Carter Bacot Chairman of the Board and
Director Chief Executive Officer
The Bank of New York
Company, Inc.
48 Wall Street
New York, New York 10005-2901
Purdy Crawford Chairman of the Board
Director Imasco Limited (Canada)
600, de Maisonneuve Blvd. W.
19th Floor
Montreal, PQ H3A 3K7,
Canada
Philip Geier, Jr. Chairman of the Board and
Director Chief Executive Officer
Interpublic Group of
Companies, Inc.
1271 Ave. of the Americas
New York, New York 10020
Helen Galland President and Chief
Director Executive Officer
Helen Galland Associates
777 Third Avenue
New York, New York 10017
Jarobin Gilbert, Jr. President and
Director Chief Executive Officer
DBSS Group, Inc.
301 East 57th Street
New York, New York 10022
Margaret P. MacKimm Retired
Director c/o Woolworth Corporation
233 Broadway
New York, New York 10279-
0003
John J. Mackowski Retired
Director c/o Woolworth Corporation
233 Broadway
New York, New York 10279-0003
James E. Preston Chairman of the Board and
Director Chief Executive Officer
Avon Products, Inc.
9 W. 57th Street
New York, New York 10019-2701
Christopher A. Sinclair Chairman and Chief
Director Executive Officer
Pepsi-Cola Company,
a division of Pepsico, Inc.
700 Anderson Hill Road
Purchase, New York 10577-1403
Exhibit Index
Exhibit Description
Page
1 Stock Acquisition Agreement, dated as of 15
May 30, 1996, by and between Woolworth
Corporation and Kids Mart, Inc. (without
exhibits)
STOCK ACQUISITION AGREEMENT
by and between
KIDS MART, INC.
and
WOOLWORTH CORPORATION
Dated as of May 30, 1996
TABLE OF CONTENTS
Page
I. ISSUANCE AND ACQUISITION OF SHARES . . . . . . . 1
1.1. Issuance and Acquisition of Shares . . . . 1
1.2. Closing . . . . . . . . . . . . . . . . . 2
1.3. Restrictive Legend . . . . . . . . . . . . 3
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . 4
2.1. Due Organization, etc . . . . . . . . . . 4
2.2. Authorization; Execution and Delivery of
Agreement . . . . . . . . . . . . . . . . 4
2.3. No Conflict; No Consent . . . . . . . . . 5
2.4. Capital Stock . . . . . . . . . . . . . . 6
2.5. Certain Financial Information . . . . . . 6
2.6. No Brokers . . . . . . . . . . . . . . . . 7
2.7. Litigation and Claims . . . . . . . . . . 7
III. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER . . . . . . . . . . . . . . . . . . 8
3.1. Due Organization, etc . . . . . . . . . . 8
3.2. Authorization; Execution and Delivery of
Agreement . . . . . . . . . . . . . . . 8
3.3. No Conflict; No Consent . . . . . . . . . 8
3.4. No Brokers . . . . . . . . . . . . . . . . 9
3.5. Investment Purposes . . . . . . . . . . . 9
3.6. Litigation and Claims . . . . . . . . . . 10
IV. REGISTRATION RIGHTS . . . . . . . . . . . . . . 10
4.1. "Piggyback" Registration; Shelf
Registration . . . . . . . . . . . . . 10
4.2. Demand Registration . . . . . . . . . . . 12
4.3. General Provisions . . . . . . . . . . . . 13
4.4. Information, Documents, etc . . . . . . . 13
4.5. Expenses . . . . . . . . . . . . . . . . . 14
4.6. Cooperation . . . . . . . . . . . . . . . 14
4.7. Action to Suspend Effectiveness; Supple-
ment to Registration Statement . . . . . 15
4.8. Indemnification . . . . . . . . . . . . . 16
4.9. Registration Rights of Transferees . . . . 20
4.10. Changes in Common Stock . . . . . . . . . 21
4.11. Standstill . . . . . . . . . . . . . . . 21
V. COVENANTS OF THE COMPANY . . . . . . . . . . . . 21
5.1. Financial Statements and Other Reports . . 21
5.2. Operation of Business . . . . . . . . . . 22
5.3. Cooperation in Sale Transactions . . . . . 23
5.4. Hart-Scott-Rodino Filings . . . . . . . . 23
VI. COVENANTS OF THE PURCHASER . . . . . . . . . . . 23
6.1. Transfer Restrictions . . . . . . . . . . 24
VII. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . 24
7.1. Conditions With Respect to Both Parties . 24
7.2. Conditions With Respect to the Purchaser . 25
7.3. Condition With Respect to the Company . . 25
VIII. TERMINATION . . . . . . . . . . . . . . . . . 25
8.1. Termination . . . . . . . . . . . . . . . 26
8.2. Effect of Termination . . . . . . . . . . 26
IX. GENERAL PROVISIONS . . . . . . . . . . . . . . . 26
9.1. Public Disclosure and Confidentiality . . 26
9.2. Certain Definitions . . . . . . . . . . . 27
9.3. Survival of Representations, Warranties
and Agreements . . . . . . . . . . . . . 28
9.4. Notices . . . . . . . . . . . . . . . . . 28
9.5. Entire Agreement; Counterparts; Assign-
ment . . . . . . . . . . . . . . . . . 29
9.6. Governing Law . . . . . . . . . . . . . . 29
9.7. Severability of Provisions . . . . . . . . 30
9.8. Modification; Waiver . . . . . . . . . . . 30
9.9. Expenses . . . . . . . . . . . . . . . . . 30
9.10. Equitable Relief . . . . . . . . . . . . 30
9.11. Joint Drafting . . . . . . . . . . . . . 30
Exhibit A - Articles of Amendment designating terms,
rights and preferences of Series A Con-
vertible Preferred Stock
Exhibit B - Opinion of Rosenberg, Reisman & Stein
Exhibit C - Opinion of Kaye, Scholer, Fierman, Hays &
Handler, LLP
Exhibit D - Opinion of General Counsel of the Purchaser
Exhibit E - Opinion of Skadden, Arps, Slate, Meagher & Flom
STOCK ACQUISITION AGREEMENT
STOCK ACQUISITION AGREEMENT (this "Agreement")
dated as of May 30, 1996 by and between KIDS MART, INC.,
a Florida corporation (the "Company"), and WOOLWORTH
CORPORATION, a New York corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Purchaser and the Company are
concurrently herewith entering into a Mutual Release and
Settlement Agreement dated as of the date hereof (the
"Settlement Agreement");
WHEREAS, in connection with entering into the
Settlement Agreement, the Company wishes to issue to the
Purchaser, and the Purchaser wishes to acquire from the
Company, an aggregate of 1,000,000 shares of a new series
of the Preferred Stock, $.0001 par value, of the Company,
designated as "Series A Convertible Preferred Stock" and
having the terms, rights and preferences specified in
Exhibit A hereto (the "Preferred Stock");
WHEREAS, the Purchaser and the Company are
entering into this Agreement to provide for such issuance
and acquisition and to establish various rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of these
premises and other good and valuable consideration, the
parties hereto hereby agree as follows:
I. ISSUANCE AND ACQUISITION OF SHARES
1.1. Issuance and Acquisition of Shares. Upon
the terms and subject to the conditions set forth in this
Agreement, and for good and valuable consideration re-
ceived in connection with the transactions contemplated
by the Settlement Agreement, the Company agrees to issue,
sell and deliver to the Purchaser, and the Purchaser
agrees to acquire and purchase from the Company,
1,000,000 previously unissued shares of the Preferred
Stock (the "Shares"), free and clear of all liens, secu-
rity interests, pledges, voting agreements, claims,
options and encumbrances of every kind, character and
description whatsoever other than the transfer restric-
tions created by this Agreement ("Encumbrances").
1.2. Closing. (a) The closing of the acqui-
sition by the Purchaser of the Shares (the "Closing")
shall take place at the offices of Skadden, Arps, Slate,
Meagher & Flom, 919 Third Avenue, New York, NY at 3:00
p.m. (i) on May 30, 1996 or (ii) in the event that all of
the conditions set forth in Article VII of this Agreement
shall not have been satisfied or waived on or prior to
such time on May 30, 1996, as soon as practicable after
all such conditions shall have been satisfied or waived
(the date of the Closing being referred to herein as the
"Closing Date").
(b) At the Closing, the Company will
deliver to the Purchaser the following:
(i) a fully-executed copy of the
Articles of Amendment attached as Exhibit A hereto
(the "Articles of Amendment"), and an officer's or
director's certificate of the Company certifying
that the Articles of Amendment have been duly filed
with the Department of State, State of Florida and
are fully effective; and
(ii) an opinion of Rosenberg,
Reisman & Stein, outside counsel to the Company,
substantially in the form of Exhibit B hereto;
(iii) an opinion of Kaye, Scholer,
Fierman, Hays & Handler, LLP, special counsel to the
Company, substantially in the form of Exhibit C
hereto; and
(iv) the other documents and instru-
ments contemplated by the Settlement Agreement to be
delivered (or caused to be delivered) by the Company.
(c) At the Closing, the Purchaser will
deliver to the Company
(i) the documents and instruments
contemplated by the Settlement Agreement to be
delivered (or caused to be delivered) by the Purchaser;
(ii) an opinion of the Purchaser's
General Counsel, substantially in the form of Exhibit D
hereto; and
(iii) an opinion of Skadden, Arps,
Slate, Meagher & Flom, special counsel to the Pur-
chaser, substantially in the form of Exhibit E
hereto.
(d) Within five business days of the
Closing, the Company will deliver one or more stock
certificates representing the Shares bearing the legends
described in Section 1.3 hereof.
1.3. Restrictive Legend. Any certificate
evidencing the Shares, or shares of Common Stock issuable
upon conversion of the Shares, shall bear legends sub-
stantially in the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFI-
CATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW AND MAY NOT BE SOLD OR TRANS-
FERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW.
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFI-
CATE ARE SUBJECT TO RESTRICTIONS PURSUANT TO
THAT CERTAIN STOCK ACQUISITION AGREEMENT DATED
AS OF MAY 23, 1996 BY AND BETWEEN KIDS MART,
INC. (THE "COMPANY") AND WOOLWORTH CORPORATION,
ON FILE AT THE COMPANY'S OFFICES.
At such time as any of the Shares or of the
Common Stock (as hereinafter defined) issuable upon
conversion of the Shares shall no longer be subject to
one or both of the restrictions referred to in such
legends, and upon receipt of an opinion of counsel rea-
sonably acceptable to the Company to such effect, the
Company shall take and cause to be taken, at the request
of any holder of such Shares, such action as shall be
necessary so that such holder shall be issued certifi-
cates representing such Shares that do not refer to such
restriction(s).
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the
Purchaser as of the date hereof and as of the Closing
Date as follows:
2.1. Due Organization, etc. The Company and
each of its Subsidiaries (as hereinafter defined) is a
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incor-
poration, and each has all requisite corporate power and
authority to own, operate and lease its respective prop-
erties and assets and to conduct its respective business-
es as now conducted. "Subsidiary" means a corporation or
other business arrangement a majority of the outstanding
voting securities or ownership interests of which is
owned, directly or indirectly, by the Company, by one or
more other Subsidiaries or by the Company and one or more
other Subsidiaries.
2.2. Authorization; Execution and Delivery of
Agreement. (a) The execution and delivery of this Agree-
ment and the Settlement Agreement and the consummation of
the transactions contemplated hereby (including the
issuance of the Shares to the Purchaser) and thereby (i)
are within the corporate power and authority of the
Company (and in the case of the Settlement Agreement, LFS
Acquisition Corp., a Delaware corporation ("LFS")), (ii)
do not require the approval or consent of any stockhold-
ers of the Company or LFS and (iii) have been duly autho-
rized by all necessary corporate action on the part of
the Company and LFS. Each of this Agreement and the
Settlement Agreement has been duly executed and delivered
by the Company (and in the case of the Settlement Agree-
ment, LFS) and each of this Agreement and the Settlement
Agreement constitutes the legal, valid, binding and
enforceable obligation of the Company (and in the case of
the Settlement Agreement, LFS).
(b) The Shares have been duly authorized
by all necessary corporate action on the part of the
Company, and, when issued and delivered by the Company
pursuant to this Agreement, the Shares will be validly
issued, fully paid and non-assessable, and the Purchaser
will at such time acquire valid title to the Shares, free
and clear of any Encumbrances.
(c) The Company has taken and will con-
tinue to take all necessary action to reserve in connec-
tion with the possible conversion of the Shares a suffi-
cient number of shares of authorized but unissued Common
Stock.
2.3. No Conflict; No Consent. The execution
and delivery of this Agreement and the Settlement Agree-
ment and the consummation of the transactions contemplat-
ed hereby (including the issuance of the Shares to the
Purchaser) and thereby do not conflict with, or result in
any violation of or default under, or permit the acceler-
ation of any obligation under or the creation or imposi-
tion of any Encumbrance on any of the properties or
assets of the Company or any Subsidiary under, (i) any
provision of the articles of incorporation or by-laws of
the Company or any Subsidiary, (ii) any indenture, lease,
mortgage, deed of trust, loan agreement or other agree-
ment or instrument, or any permit, of the Company or any
Subsidiary or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation of any federal, state,
local or regulatory authority (each, an "Authority") to
which the Company or any of its Subsidiaries is a party
or by which any of them is bound, other than, in the case
of clauses (ii) and (iii), where such conflict, viola-
tion, default, acceleration or Encumbrance would not,
individually or in the aggregate, have a material adverse
effect on the condition, financial or otherwise, of the
business, operations, affairs, properties or assets
(collectively, the "Condition") of the Company and its
Subsidiaries taken as a whole or on the benefits intended
to be afforded to the Purchaser under this Agreement or
the Settlement Agreement. No consent, approval, order or
authorization of, or registration, declaration, filing
with or notice to, any Authority or third party is re-
quired to be made or obtained by the Company or any
Subsidiary in order to execute or deliver this Agreement
or the Settlement Agreement or to consummate the transac-
tions contemplated hereby or thereby, other than (v) such
as may be required under Article IV hereof in connection
with certain registration rights, (w) the filing of a
Form D pursuant to Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"), (x) as a result
of the periodic reporting requirements under the Securi-
ties Exchange Act of 1934, as amended (the "Exchange
Act"), (y) filing of the Articles of Amendment with the
Department of State, State of Florida and (z) filing of a
stipulation of discontinuance and dismissal with preju-
dice as contemplated by the Settlement Agreement.
2.4. Capital Stock. (a) The authorized capi-
tal stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.0001 per share ("Common
Stock"), of which 4,943,000 shares are issued and out-
standing, and 100,000,000 shares of Preferred Stock,
$.0001 par value, of which no shares are issued and
outstanding. All of the issued and outstanding shares of
Common Stock have been validly issued and are fully paid
and non-assessable. All of the outstanding shares of
capital stock of LFS, consisting solely of shares of
common stock, are owned directly by the Company. All
outstanding capital stock of each other Subsidiary of the
Company is owned directly or indirectly by the Company.
(b) There are not authorized or outstand-
ing any subscriptions, options, conversion rights, war-
rants or other agreements, securities or commitments of
any nature whatsoever (whether oral or written and wheth-
er firm or conditional) obligating the Company or any
Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, to any person any shares of
Common Stock or any other shares of the capital stock of
the Company or any shares of the capital stock of any
Subsidiary, or any securities convertible into or ex-
changeable for any such shares, or obligating the Company
or any Subsidiary to grant, extend or enter into any such
agreement or commitment, except for as of May 23, 1996:
(i) warrants to purchase 110,000 shares of Common Stock
at $6.60 per share; (ii) warrants to purchase 600,000
shares of Common Stock at $6.00 per share; and (iii)
warrants to purchase 494,300 shares of Common Stock at
$6.00 per share. There are no outstanding options under
the Company's 1995 Stock Option Plan. No class of capi-
tal stock or stockholder of the Company or any Subsidiary
of the Company is entitled to preemptive rights, rights
of first refusal, rights of first offer or similar rights
with respect to any issuance by the Company or such
Subsidiary of its capital stock.
2.5. Certain Financial Information. The
financial information as set forth below, provided by the
Company and LFS to representatives of the Purchaser in
May 1996, in contemplation of entry into settlement of
claims among the Company, LFS, Jack Koffman, the Purchas-
er and Kinney Shoe Corporation ("Kinney"), was prepared
and provided in good faith by the Company and LFS and was
based upon assumptions believed by management to reason-
able: (i) Quarterly Projected Cash Flow 1996, (ii)
Projected Income Statement, Balance Sheet and Cash Flow
on an Annual Basis for Fiscal 1996, 1997 and 1998, (iii)
Quarterly Balance Sheet for Fiscal 1996 with and without
settlement, (iv) Quarterly Income Statement for 1996 and
Balance Sheet for 1997 and 1998, (v) Inventory Aging
Schedule 4/27/96 as adjusted, (vi) Monthly Income State-
ments for 1996, 1997 and 1998 and Operating Summary of 3-
year plan, including store closings, (vii) Comp Store
Sales Analysis and (viii) Analysis of clearance liquida-
tion. The parties to this Agreement recognize that the
preceding preliminary financial information constitutes
forward looking information and that actual results could
differ materially from current expectations. Among the
factors that could impact actual results are the follow-
ing: adjustments in the Company's accounts as the result
of the year-end audit and of closing the Company's books,
for both the fourth quarter and the fiscal year, includ-
ing adjustments related to reconciliations of supplier
accounts, and any charges associated with potential
restructurings and/or asset dispositions.
2.6. No Brokers. No broker, finder or invest-
ment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transac-
tions contemplated hereby based upon arrangements made by
or on behalf of the Company.
2.7. Litigation and Claims. There is no
claim, prosecution, suit, action, arbitration, proceed-
ing, investigation or review pending or, to the knowledge
of the Company, threatened against the Company, any of
its Subsidiaries or any of their respective properties or
assets which questions the validity of this Agreement,
the Settlement Agreement, the Shares or any action taken
or to be taken pursuant hereto or thereto, seeks to
prohibit or impose any limitations on the Purchaser's
ownership of the Shares, seeks to prohibit or make ille-
gal the acceptance for payment, purchase of or payment
for the Shares or which is reasonably likely to have a
material adverse effect on the transactions contemplated
by this Agreement or the Settlement Agreement or on the
Condition of the Company and its Subsidiaries taken as a
whole.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the
Company as of the date hereof and as of the Closing Date
as follows:
3.1. Due Organization, etc. Each of the
Purchaser and Kinney is a corporation duly organized,
validly existing and in good standing under the laws of
the jurisdiction of its incorporation.
3.2. Authorization; Execution and Delivery of
Agreement. The Purchaser (and Kinney, in the case of the
Settlement Agreement) has all requisite corporate power
and authority to execute this Agreement and the Settle-
ment Agreement and to consummate the transactions contem-
plated hereby and thereby. The execution and delivery of
this Agreement and the Settlement Agreement and the
consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corpo-
rate action on the part of the Purchaser (and in the case
of the Settlement Agreement, Kinney). Each of this
Agreement and the Settlement Agreement has been duly
executed and delivered by the Purchaser (and in the case
of the Settlement Agreement, Kinney) and constitutes the
legal, valid, binding and enforceable obligation of the
Purchaser (and in the case of the Settlement Agreement,
Kinney).
3.3. No Conflict; No Consent. The execution
and delivery of this Agreement and the Settlement Agree-
ment and the compliance by the Purchaser (and in the case
of the Settlement Agreement, Kinney) with its obligations
hereunder and thereunder do not conflict with, or result
in any violation of or default under, or permit the
acceleration of any obligation under, or the creation or
imposition of any Encumbrance on any of the properties or
assets of the Purchaser (or in the case of the Settlement
Agreement, Kinney) under, (i) any provision of the cer-
tificate of incorporation or bylaws of the Purchaser or
Kinney, (ii) any indenture, lease, mortgage, deed of
trust, loan agreement or other agreement or instrument,
or any permit, of the Purchaser or Kinney or (iii) any
judgment, order, decree, statute, law, ordinance, rule or
regulation of any Authority to which the Purchaser or
Kinney is a party or by which either is bound, other
than, in the case of clauses (ii) and (iii), where such
conflict, violation, default, acceleration or Encumbrance
would not, individually or in the aggregate, have a
material adverse effect on the acquisition of the Shares
by the Purchaser, the benefits intended to be afforded to
the Company hereunder or under the Settlement Agreement
or the compliance by the Purchaser (or in the case of the
Settlement Agreement, Kinney) with its obligations here-
under or under the Settlement Agreement. No consent,
approval, order or authorization of, or registration,
declaration, filing with or notice to, any Authority or
third party is required to be made or obtained by the
Purchaser or Kinney in order to execute or deliver this
Agreement or the Settlement Agreement or for the Purchas-
er (or in the case of the Settlement Agreement, Kinney)
to comply with its obligations hereunder or thereunder,
other than (w) filings pursuant to the Securities Act in
connection with the acquisition of the Shares and any
conversion thereof and any sale thereof or of the Common
Stock received upon conversion, (x) as may be required as
a result of reporting requirements under the Exchange
Act, including pursuant to Sections 13(d) and 16 thereof,
(y) any filings that may be required under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), in connection with any conver-
sion of the Preferred Stock into Common Stock and (z)
filing of a stipulation of discontinuance and dismissal
with prejudice as contemplated by the Settlement Agreement.
3.4. No Brokers. No broker, finder or invest-
ment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transac-
tions contemplated hereby based upon arrangements made by
or on behalf of the Purchaser. Morgan Stanley & Co.
Incorporated has acted as financial advisor to the Pur-
chaser in connection with a review of the Company's
business plan.
3.5. Investment Purposes. The Purchaser is
acquiring the Shares solely for its own account for the
purpose of investment and not with a view to the public
distribution thereof. The Purchaser acknowledges the
Purchaser's understanding that the offering and sale of
the Shares hereunder are intended to be exempt from
registration under the Securities Act by virtue of Sec-
tion 4(2) of the Securities Act and the provisions of
Regulation D promulgated thereunder and represents that
it is an "accredited investor" (as defined in such regu-
lation). The Purchaser has not relied upon any represen-
tations, warranties or statements other than those set
forth in this Agreement, the Settlement Agreement and/or
any certificates, opinions or other documents to be
delivered pursuant hereto or thereto.
3.6. Litigation and Claims. There is no
claim, prosecution, suit, action, arbitration, proceed-
ing, investigation or review pending or, to the knowledge
of the Purchaser, threatened against the Purchaser, any
of its Subsidiaries or any of their respective properties
or assets which questions the validity of this Agreement,
the Settlement Agreement or any action taken or to be
taken pursuant hereto or thereto, or which is reasonably
likely to have a material adverse effect on the transac-
tions contemplated by this Agreement or the Settlement
Agreement.
IV. REGISTRATION RIGHTS
The Company covenants and agrees to provide the
following registration rights at any time from and after
the date hereof:
4.1. "Piggyback" Registration; Shelf Registra-
tion. (a) Whenever the Company proposes to file a
registration statement relating to Common Stock under the
Securities Act, other than (i) a registration statement
required to be filed in respect of employee benefit plans
of the Company on Form S-8 or any similar form from time
to time in effect, (ii) any registration statement on
Form S-4 or similar successor form relating to securities
issued in connection with a reorganization, (iii) any
form that does not permit the inclusion of Purchaser's
Stock (as defined below) or (iv) any other form of regis-
tration statement filed in connection with an exchange
offer or an offering of securities solely to the
Company's existing stockholders, the Company shall, at
least 15 days prior to such filing, give written notice
of such proposed filing to the Purchaser. Upon receipt
by the Company not more than seven days after such notice
of a written request from the Purchaser for registration
of Purchaser's Stock, the Company shall include such
Purchaser's Stock in such registration statement or in a
separate registration statement concurrently filed, and
shall use all reasonable efforts to cause such registra-
tion statement to become effective with respect to such
Purchaser's Stock, unless the managing underwriter there-
for concludes in its reasonable judgment that compliance
with this Section 4.1 would materially adversely affect
such offering. If such registration involves an under-
written offering, the Purchaser shall, as a condition to
the inclusion of such Purchaser's Stock in such regis-
tration, agree to sell Purchaser's Stock to the under-
writers selected by the Company at the same price and on
the same terms of underwriting applicable to the Company
and any other persons selling Common Stock pursuant
thereto. Notwithstanding the foregoing, at any time
after giving written notice of its intention to register
Common Stock, the Company may, at its election, by the
delivery of written notice to the Purchaser, (1) in the
case of a determination not to effect registration,
relieve itself of its obligation to register Purchaser's
Stock in connection with such registration, or (2) in the
case of a determination to delay such registration, delay
the registration of such Purchaser's Stock for the same
period as the delay in the registration of such other
Common Stock. "Purchaser's Stock" means any shares of
Common Stock to be issued upon conversion of the Pre-
ferred Stock and for which the Purchaser requests regis-
tration pursuant to this Section 4.1 or Section 4.2
hereof, it being understood that (i) the Purchaser may
request such registration with respect to such shares of
Common Stock prior to effecting any conversion of the
Shares and (ii) any such conversion need not be effected
until immediately prior to the sale of shares pursuant to
the applicable registration statement.
(b) Without limiting the generality of
Section 4.1(a), if the Company files any shelf registra-
tion statement for the Common Stock or warrants issued in
connection with the January 1996 acquisition of LFS, or
for the underwriter's warrants issued in connection with
the Company's initial public offering, it will include in
such registration statement all shares of Common Stock
issuable upon conversion of the Shares and use its rea-
sonable best efforts to cause such registration statement
to remain current and effective for a period of two years
following its effectiveness.
4.2. Demand Registration. (a) If at any time
following the date occurring 180 days after the Closing
Date the Company shall receive a written request from the
holders of more than 500,000 Shares (or more than 500,000
shares of Common Stock issued upon conversion of the
Shares, as adjusted for stock dividends, subdivisions or
reclassifications having a record date after the Closing
Date) requesting the Company to register Purchaser's
Stock under the Securities Act on Form S-1, S-2 or S-3 or
any other similar form then in effect and applicable to
the Company, the Company agrees that it will use all
reasonable efforts to cause the prompt registration of
such Purchaser's Stock; it being understood that the
Company currently can provide no assurance as to its
ability to provide the financial statements that would be
required in connection with such registration. The
Company may postpone for a limited time, which in no
event shall in the aggregate be longer than 90 days,
compliance with a request for registration pursuant to
this Section 4.2 if (i) such compliance would materially
adversely affect (including, without limitation, through
the premature disclosure thereof) a proposed financing,
reorganization, recapitalization, merger, consolidation
or similar transaction or (ii) the Company is conducting
a public offering of capital stock and the managing
underwriter concludes in its reasonable judgment that
such compliance would materially adversely affect such
offering. Notwithstanding anything in this Section 4.2
to the contrary, the Company shall not be required to:
(x) comply with more than one request pursuant to this
Section 4.2, (y) comply with this Section 4.2 during any
period in which transfer of securities is restricted
pursuant to Section 4.11 or (z) prepare or cause to be
prepared audited financial statements of the Company
other than those prepared in the normal course of the
Company's business at its fiscal year end. Any under-
writer selected by Purchaser to act as such in connection
with a registration pursuant to this Section 4.2 shall
require the prior approval of the Company, which approval
shall not be unreasonably withheld.
(b) The registration rights set forth in
this Section 4.2 shall not be available to the Purchaser
at any time (the "Holding Period Date") that, in the
unqualified written opinion of counsel for the Company
(which counsel must be reasonably acceptable to the
Purchaser), the Purchaser is able to sell any and all
shares of Common Stock held by it pursuant to paragraph
(k) of Rule 144 under the Securities Act or otherwise
without restriction (including, without limitation, any
restriction with respect to current public information
regarding the Company, amount of securities sold, manner
of sale or provision of notice of proposed sale) while
being deemed not to be engaged in a distribution of such
shares and therefore not to be an underwriter thereof
within the meaning of Section 2(11) of the Securities
Act.
4.3. General Provisions. The Company will use
all reasonable efforts to cause any registration state-
ment referred to in Section 4.2 to become effective and
to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the
earlier of 180 days from the effective date of the regis-
tration statement and the date on which the Purchaser
completes its distribution of Purchaser's Stock. A
request under Section 4.2(b) shall not be deemed utilized
unless a registration statement with respect thereto
becomes effective. The Company will use all reasonable
efforts to effect such qualifications under applicable
blue sky or other state securities laws as may be reason-
ably requested by the Purchaser (provided that the Compa-
ny shall not be obligated to file a general consent to
service of process or qualify to do business as a foreign
corporation or otherwise subject itself to taxation in
any jurisdiction solely for the purpose of any such
qualification) to permit or facilitate such sale or other
distribution. The Company will cause the Purchaser's
Stock to be listed on any national securities exchange or
quoted on any stock quotation system on which the shares
of Common Stock are listed or quoted.
4.4. Information, Documents, etc. Upon making
a request for registration pursuant to Sections 4.1 or
4.2, the Purchaser shall furnish to the Company such
information as the Company may reasonably request and as
shall be required in connection with any registration,
qualification or compliance referred to in this Article
IV. The Company agrees that it will furnish to the
Purchaser the number of prospectuses, offering circulars
or other documents, or any amendments or supplements
thereto, incident to any registration, qualification or
compliance referred to in this Article IV as the Purchas-
er from time to time may reasonably request.
4.5. Expenses. The Company will bear all
expenses of registrations pursuant to this Article IV
(other than underwriting discounts and commissions and
brokerage commissions and fees, if any, payable with
respect to shares of Purchaser's Stock sold by the Pur-
chaser and legal and audit fees incurred by the Purchaser
in connection with such registration, it being under-
stood, however, that legal fees reimbursable pursuant to
Section 4.8 shall remain the responsibility of the Compa-
ny), including, without limitation, registration fees,
printing expenses, expenses of compliance with blue sky
or other state securities laws, and legal and audit fees
incurred by the Company in connection with such registra-
tion and amendments or supplements in connection there-
with.
4.6. Cooperation. In connection with any
registration of Purchaser's Stock pursuant to this Arti-
cle IV, the Company agrees to:
(a) enter into such customary agreements
(including an underwriting agreement containing such
representations and warranties by the Company and such
other terms and provisions, including indemnification
provisions, as are customarily contained in underwriting
agreements for comparable offerings and, if no underwrit-
ing agreement is entered into, an indemnification agree-
ment on such terms as is customary in transactions of
such nature) and take all such other actions as the
Purchaser or the underwriters, if any, participating in
such offering and sale may reasonably request in order to
expedite or facilitate such offering and sale;
(b) use its best efforts to furnish, at
the request of any underwriters participating in such
offering and sale, (i) a comfort letter or letters, dated
the date of the final prospectus with respect to the
Purchaser's Stock and/or the date of the closing for the
sale of the Purchaser's Stock from the independent certi-
fied public accountants of the Company and addressed to
any underwriters participating in such offering and sale,
which letter or letters shall state that such accountants
are independent with respect to the Company within the
meaning of Rule 1.01 of the Code of Professional Ethics
of the American Institute of Certified Public Accountants
and shall address such matters as the underwriters may
reasonably request and as may be customary in transac-
tions of a similar nature for similar entities and (ii)
an opinion, dated the date of the closing for the sale of
the Purchaser's Stock, of the counsel representing the
Company with respect to such offering and sale (which
counsel may be the General Counsel of the Company or
other counsel reasonably satisfactory to the Purchaser),
addressed to any such underwriters, which opinion shall
address such matters as they may reasonably request and
as may be customary in transactions of a similar nature
for similar entities; and
(c) make available for inspection by the
Purchaser, the underwriters, if any, participating in
such offering and sale (which inspecting underwriters
shall, if reasonably possible, be limited to any manager
or managers for such participating underwriters), counsel
for the Purchaser, one accountant or accounting firm
retained by the Purchaser and any such underwriters, or
any other agent retained by the Purchaser or such under-
writers, all financial and other records, corporate
documents and properties of the Company, and supply such
additional information, as they shall reasonably request,
provided that the Company may condition any such access
upon execution of appropriate confidentiality provisions.
4.7. Action to Suspend Effectiveness; Supple-
ment to Registration Statement. (a) The Company will
notify the Purchaser promptly of (i) any action by the
Commission to suspend the effectiveness of the registra-
tion statement covering the Purchaser's Stock or the
institution or threatening of any proceeding for such
purpose (a "stop order") or (ii) the receipt by the
Company of any notification with respect to the suspen-
sion of the qualification of the Purchaser's Stock for
sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose. Immediately upon
receipt of any such notice, the Purchaser shall cease to
offer or sell any Purchaser's Stock pursuant to the
registration statement in the jurisdiction to which such
stop order or suspension relates. The Company will use
all reasonable efforts to prevent the issuance of any
such stop order or the suspension of any such qualifica-
tion and, if any such stop order is issued or any such
qualification is suspended, to obtain as soon as possible
the withdrawal or revocation thereof, and will notify the
Purchaser and its counsel at the earliest practicable
date of the date on which the Purchaser may offer and
sell Purchaser's Stock pursuant to the registration
statement.
(b) Within the applicable period referred
to in Section 4.3 following the effectiveness of a regis-
tration statement filed pursuant to this Article IV, the
Company will notify the Purchaser promptly of the occur-
rence of any event or the existence of any state of facts
that, in the judgment of the Company, should be set forth
in such registration statement. Immediately upon receipt
of such notice, the Purchaser shall cease to offer or
sell any Purchaser's Stock pursuant to such registration
statement, cease to deliver or use such registration
statement and, if so requested by the Company, return to
the Company, at its expense, all copies (other than
permanent file copies) of such registration statement, in
each case until such registration statement has been
amended or supplemented as hereinafter provided. The
Company will, as promptly as practicable, take such
action as may be necessary to amend or supplement such
registration statement in order to set forth or reflect
such event or state of facts. The Company will furnish
copies of such proposed amendment or supplement to the
Purchaser and its counsel and will not file or distribute
such amendment or supplement without the prior consent of
the Purchaser, which consent shall not be unreasonably
withheld.
4.8. Indemnification. (a) In the event of the
registration of any of Purchaser's Stock under the Secu-
rities Act pursuant to the provisions of this Article IV,
the Company will, to the extent permitted by law, indem-
nify and hold harmless the Purchaser, its Affiliates and
Associates and each other person, if any, who controls
the Purchaser for purposes of the Securities Act (each,
an "indemnified person") against any losses, claims,
damages or liabilities, joint or several, to which such
indemnified person may become subject under the Securi-
ties Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or
alleged untrue statement of material fact contained or
incorporated by reference in any registration statement
under which such Purchaser's Stock was registered under
the Securities Act, any final prospectus contained there-
in (as such may be amended or supplemented) or any docu-
ment incorporated by reference therein, or arise out of
or are based upon the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements made therein
not misleading in light of the circumstances in which
made, and will reimburse each such indemnified person for
any legal or any other expenses reasonably incurred by
such indemnified person 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 (i) arises out of or is based
upon an untrue statement or alleged untrue statement or
omission or alleged omission made or incorporated by
reference in such registration statement or such final
prospectus (as such may be amended or supplemented) in
reliance upon and in conformity with written information
furnished to the Company by such indemnified person
specifically for use in the preparation thereof, (ii)
arises in connection with a sale of Purchaser's Stock by
such indemnified person in contravention of Section
4.7(b) hereof or (iii) financial information provided to
the Company by the Purchaser or Kinney in connection with
the transactions contemplated by the Purchase Agreement,
dated as of February 3, 1995, as amended, by and among
LFS, Kinney and the Purchaser. Such indemnity shall
remain in full force and effect regardless of any inves-
tigation made by or on behalf of such indemnified person
and shall survive any transfer of such Purchaser's Stock
by the Purchaser.
(b) In the event of the registration of
any Purchaser's Stock under the Securities Act pursuant
to the provisions hereof, the Purchaser will, to the
extent permitted by law, indemnify and hold harmless the
Company, each director of the Company, each officer of
the Company who signs the registration statement and each
other person, if any, who controls the Company for pur-
poses of the Securities Act against losses, claims,
damages or liabilities, joint or several, to which the
Company or such director, officer or controlling person
may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of
material fact contained in any registration statement
under which such Purchaser's Stock was registered under
the Securities Act, any final prospectus contained there-
in (as such may be amended or supplemented) or any docu-
ment incorporated by reference therein, or arise out of
or are based upon the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements made therein
not misleading in light of the circumstances in which
made, which untrue statement or alleged untrue statement
or omission or alleged omission has been made in reliance
upon and in conformity with written information furnished
to the Company by the Purchaser specifically for use in
the preparation thereof, and will reimburse the Company
and each such director, officer or controlling person for
any legal or any other expenses reasonably incurred by
the Company or such director, officer or controlling
person in connection with investigating or defending any
such loss, claim, damage, liability or action.
(c) If the indemnification provided for
in this Section 4.8 is unavailable to a party that would
have been an indemnified party hereunder in respect of
any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each party
that would have been an indemnifying party thereunder
shall, in lieu of indemnifying such indemnified party,
contribute to the extent permitted by law to the amount
paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party
on the one hand and such indemnified party on the other
hand in connection with the statement or omission which
resulted in such losses, claims, damages or liabilities
(or actions in respect thereof). The relative fault
shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to
state a material fact relates to information supplied by
the indemnifying party or such indemnified party and the
parties' relative intent, knowledge, access to informa-
tion and opportunity to correct or prevent such statement
or omission. Both parties acknowledge and agree that it
would not be just and equitable if contribution pursuant
to this Section 4.8(c) were determined by pro rata allo-
cation or by any other method of allocation which does
not take account of the equitable considerations referred
to above in this Section 4.8(c). The amount paid or
payable by an indemnified party as a result of the loss-
es, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 4.8(c) shall
include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigat-
ing or defending any such action or claim (which shall be
limited as provided in Section 4.8(f) if the indemnifying
party has assumed the defense of any such action in
accordance with the provisions thereof). No person
guilty of fraudulent misrepresentation (within the mean-
ing of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(d) Indemnification or, if appropriate,
contribution similar to that specified in the preceding
provisions of this Section 4.8 (with appropriate modifi-
cations) shall be given by the Company and the Purchaser
with respect to statements or omissions contained in
applications or other written information filed in any
state or other jurisdiction in connection with the regis-
tration or other qualification of such Shares under
applicable state securities or blue sky laws or regula-
tions.
(e) In the event of any underwritten
offering of Purchaser's Stock under the Securities Act
pursuant to this Article IV, the Company and the Purchas-
er agree, to the extent practicable, to enter into an
underwriting agreement, in customary form (or, in the
case of a registration statement pursuant to Section 4.1
in such form as the Company may determine), with the
underwriters thereof, which underwriting agreement may
contain additional provisions with respect to indemnifi-
cation and contribution.
(f) Any person entitled to indemnifica-
tion hereunder shall (1) give prompt written notice to
the indemnifying party after the receipt by such person
of any written notice of the commencement of any action,
suit, proceeding or investigation or threat thereof made
in writing for which such person intends to claim indem-
nification or contribution pursuant to this Agreement and
(2) permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the
indemnified party; provided, however, that any person
entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in
the defense of such claim, but the fees and expenses of
such counsel shall be the responsibility of such person
unless (i) the indemnifying party has agreed in writing
to pay such fees or expenses or (ii) the defendants in
any such action include both the indemnified party and
the indemnifying party and the indemnified party has
reasonably concluded that there may be a conflict of
interest between the indemnifying party and the indemni-
fied party with respect to such claim or that defenses
are available to the indemnified party or the indemnify-
ing party with respect to such claim that are not avail-
able to the other, and if the person notifies the indem-
nifying party in writing that such person elects to
employ separate counsel at the expense of the indemnify-
ing party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of
such person. Whether or not such defense is assumed by
the indemnifying party, the indemnifying party will not
be subject to any liability for any settlement made
without its consent (but such consent will not be unrea-
sonably withheld). No indemnifying party will consent to
the entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to each indemni-
fied party of a release from all liability in respect of
such claim or litigation. If the indemnifying party is
not entitled to, or elects not to, assume the defense of
a claim, it will not be obligated to pay the fees and
expenses of more than one counsel (plus one local coun-
sel) for all indemnified parties.
4.9. Registration Rights of Transferees.
Notwithstanding anything to the contrary contained here-
in, the Purchaser may assign its rights under this Arti-
cle IV with respect to any shares of Preferred Stock (or
Common Stock issued upon conversion of the Preferred
Stock) sold or otherwise transferred by the Purchaser to
the transferee thereof, provided that such transferee, as
a condition of such assignment, executes and delivers to
the Company an agreement to be bound by the provisions of
this Article IV as if it were the Purchaser. In the
event of any such assignment, (x) references in this
Article IV to the Purchaser shall be deemed to include
any and all such transferees and (y) any actions, demands
or consents to be made or given by the Purchaser shall be
deemed made or given if made or given by holders of 50%
or more in economic interest of the Shares (including,
for these purposes, Shares that have been converted).
4.10. Changes in Common Stock. If, and as
often as, there are any changes in or exchanges of the
Common Stock by way of stock split, stock dividend,
combination or reclassification, or through merger,
consolidation, reorganization or recapitalization, or by
any other means, appropriate adjustment shall be made in
the provisions of this Article IV (including, but not
limited to, the definition of "Purchaser's Stock"), as
may be required, so that the rights and privileges grant-
ed hereby shall continue with respect to the Common Stock
as so changed or exchanged and shall apply to any securi-
ties of the Company or another issuer received in any
such transaction.
4.11. Standstill. If so requested by the
managing underwriter in an underwritten public offering
of the Company's shares, the Purchaser shall not effect
any public sale or distribution of the issue being regis-
tered or a similar security of the Corporation or any
securities convertible into or exchangeable or exercis-
able for such securities, including a sale pursuant to
Rule 144 or Rule 144A (or any similar provisions then in
force) of the Securities Act, during the 10 days prior
to, and during the 180-day period beginning on, the
effective date of such registration statement (except as
part of such registration).
V. COVENANTS OF THE COMPANY
The Company covenants and agrees that:
5.1. Financial Statements and Other Reports.
For so long as the Purchaser owns Preferred Stock or
Common Stock representing more than five percent of the
equity of the Company,
(a) the Company will, as soon as practi-
cable and in any event within 50 days after the end of
each quarterly period (other than the last quarterly
period) in each fiscal year, furnish to the Purchaser
statements of consolidated net income and cash flows and
a statement of changes in consolidated stockholders'
equity of the Company and its Subsidiaries for the period
from the beginning of the then current fiscal year to the
end of such quarterly period, and a consolidated balance
sheet of the Company and its Subsidiaries as of the end
of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period or
date in the preceding fiscal year, all in reasonable
detail and certified by an authorized financial officer
of the Company, subject to changes resulting from year-
end adjustments; provided, however, that delivery pursu-
ant to paragraph (c) below of a copy of the Quarterly
Report on Form 10-Q (without exhibits unless requested by
the Purchaser) of the Company for such quarterly period
filed with the Commission shall be deemed to satisfy the
requirements of this paragraph (a);
(b) the Company will, as soon as practi-
cable and in any event within 120 days after the end of
each fiscal year, furnish to the Purchaser statements of
consolidated net income and cash flows and a statement of
changes in consolidated stockholders' equity of the
Company and its Subsidiaries for such year, and a consol-
idated balance sheet of the Company and its Subsidiaries
as of the end of such year, setting forth in each case in
comparative form the corresponding figures from the
preceding fiscal year, all in reasonable detail and
examined and reported on by independent public accoun-
tants of recognized standing selected by the Company;
provided, however, that delivery pursuant to paragraph
(c) below of a copy of the Annual Report on Form 10-K
(without exhibits unless requested by the Purchaser) of
the Company for such fiscal year filed with the Commis-
sion shall be deemed to satisfy the requirements of this
paragraph (b); and
(c) the Company will furnish to the
Purchaser copies of all such financial statements, proxy
statements, notices and reports as it shall send to its
stockholders (promptly upon transmission to stockholders)
and copies of all such registration statements (without
exhibits), other than registration statements relating to
employee benefit or dividend reinvestment plans, and all
such regular and periodic reports as it shall file with
the Commission (promptly upon filing with the Commis-
sion).
5.2. Operation of Business. Until the Closing
Date, the Company will not:
(a) enter into or become bound by any
indenture, lease, mortgage, deed of trust, loan agreement
or other agreement or instrument that would restrict,
limit or impose conditions on the Company's compliance
with the provisions of this Agreement;
(b) declare, pay or set aside for payment
any dividend or other distribution (whether in cash,
stock, property or otherwise) in respect of any shares of
its capital stock;
(c) subdivide or reclassify the outstand-
ing shares of Common Stock;
(d) issue any shares of capital stock of
the Company or of any Subsidiary; or
(e) redeem, purchase or otherwise acquire
any shares of its capital stock or any options, warrants
or other rights to purchase or subscribe to any of the
foregoing.
5.3. Cooperation in Sale Transactions. In the
event that the Purchaser wishes to sell any shares of
Preferred Stock or Common Stock in accordance with the
terms and conditions of this Agreement, the Company shall
reasonably cooperate with the Purchaser by providing
publicly available information regarding the Company to
the Purchaser so as to enable such sales to be made in
accordance with applicable laws, rules and regulations
(including, without limitation, Rule 144 or any similar
rule promulgated under the Securities Act), and, if such
sale is being made pursuant to Rule 144, by using its
reasonable efforts to comply with the current information
requirements under Rule 144 (provided that the Company
can give no assurances as to the availability of finan-
cial statements).
5.4. Hart-Scott-Rodino Filings. If a filing
under the HSR Act is required in connection with the
acquisition of the Shares or any conversion of the
Shares, the Company agrees, upon request of the Purchas-
er, to take all actions necessary to make, and to assist
the Purchaser in making, any and all such filings.
VI. COVENANTS OF THE PURCHASER
The Purchaser covenants and agrees that:
6.1. Transfer Restrictions. In any sale or
transfer by the Purchaser of Shares, or of the shares of
Common Stock received upon conversion of the Shares, the
Purchaser will ensure that the purchaser or transferee
thereof, together with all other persons or entities with
which such purchaser or transferee forms a "group" (as
such term is used in Section 13(d) of the Exchange Act),
do not acquire in a single transaction or series of
transactions from the Purchaser more than 250,000 Shares
(or 250,000 shares of the Common Stock received upon
conversion of the Shares, as adjusted for stock splits,
combinations, dividends or reclassifications having a
record date after the Closing Date). The Purchaser shall
not engage in any transaction designed to evade the
provisions of this Section 6.1. The restrictions of this
Section 6.1, however, shall not apply to the following
transactions: (i) any registered, underwritten resale of
the Shares (or of the Common Stock received upon conver-
sion of the Shares) involving a public distribution
pursuant to the registration rights granted in Article IV
hereof or (ii) any pledge of the Shares (or the Common
Stock received upon conversion of the Shares) provided
that the pledgee agrees to be bound by the restrictions
of this Section 6.1 if and when it acquires the pledged
Shares or shares as if it were the Purchaser. In any
transaction subject to the restrictions of this Section
6.1 that occurs prior to the Holding Period Date, the
Purchaser agrees that as a condition of such sale or
transfer, the purchaser or transferee (and any subsequent
purchaser or transferee) must execute and deliver to the
Company an agreement to be bound by the provisions of
this Section 6.1 as if it were the Purchaser.
VII. CONDITIONS PRECEDENT TO CLOSING
7.1. Conditions With Respect to Both Parties.
The obligations of both parties to consummate the Closing
are subject to the following conditions:
(a) there shall not have been issued or
be in effect (i) any judgment, decree or order issued by
any federal, state, local or foreign court of competent
jurisdiction or (ii) any statute, rule or regulation
enacted or promulgated by any federal, state, local or
foreign legislative, administrative or regulatory body of
competent jurisdiction that, in either of cases (i) or
(ii), prohibits the consummation of the transactions
contemplated hereby or makes such consummation illegal;
and
(b) the Settlement Agreement shall have
been entered into by the Purchaser and the Company and be
in full force and effect.
7.2. Conditions With Respect to the Purchaser.
The obligation of the Purchaser to consummate the Closing
shall be subject to the condition (unless such condition
is expressly waived in writing by the Purchaser) that at
the Closing the representations and warranties of the
Company herein shall have been true and correct in all
material respects as of the date hereof and shall be true
and correct in all material respects as of the Closing
Date as if made on and as of such date; the Company shall
have performed in all material respects all of its cove-
nants and obligations under this Agreement to be per-
formed at or prior to the Closing; and the Purchaser
shall have received at the time of the Closing certifi-
cates from the Company reasonably satisfactory in form to
the Purchaser certifying to the satisfaction of all of
the conditions set forth in this Section 7.2.
7.3. Condition With Respect to the Company.
The obligation of the Company to consummate the Closing
shall be subject to the condition (unless such condition
is expressly waived in writing by the Company) that at
the Closing the representations and warranties of the
Purchaser herein shall have been true and correct in all
material respects as of the date hereof and shall be true
and correct in all material respects as of the Closing
Date as if made on and as of such date; the Purchaser
shall have performed in all material respects all of its
covenants and obligations under this Agreement to be
performed at or prior to the Closing; and the Company
shall have received at the time of the Closing certifi-
cates from the Purchaser reasonably satisfactory in form
to the Company certifying to the satisfaction of all of
the conditions set forth in this Section 7.3.
VIII. TERMINATION
8.1. Termination. This Agreement may be termi-
nated:
(a) at any time prior to the Closing Date
by the mutual consent of the Purchaser and the Company;
(b) by either the Purchaser or the Compa-
ny if the Closing shall not have occurred on or before
May 31, 1996 (unless such failure of the Closing to occur
is by reason of a breach of this Agreement or the Settle-
ment Agreement by the party seeking to terminate); or
(c) at any time prior to the Closing Date
(i) by the Purchaser if there has been a breach in any
material respect on the part of the Company in or of any
of the representations and warranties of the Company set
forth herein, which breach cannot be or has not been
promptly cured after notice by the Purchaser of such
breach, or if there has been any failure on the part of
the Company to comply in any material respect with any of
its obligations or to perform in any material respect any
of its covenants hereunder, or (ii) by the Company if
there has been a breach in any material respect on the
part of the Purchaser set forth herein, which breach
cannot be or has not been promptly cured after notice by
the Purchaser of such breach, or if there has been any
failure on the part of the Purchaser to comply in any
material respect with any of its obligations or perform
in any material respect any of its covenants hereunder.
8.2. Effect of Termination. In the event of
termination of this Agreement as provided above, this
Agreement shall forthwith become void and there shall be
no liability on the part of either the Purchaser or the
Company (or their respective officers or directors),
except for liability arising from a breach of this Agreement.
IX. GENERAL PROVISIONS
9.1. Public Disclosure and Confidentiality.
Each party hereby agrees that, except as may be reason-
ably viewed by the disclosing party as appropriate in
view of the requirements of applicable law or regulations
of any national securities exchange on which their secu-
rities may be listed, no press release or public an-
nouncement or communication will be made or caused to be
made concerning the execution or performance of this
Agreement or the Settlement Agreement or the terms hereof
or thereof unless specifically approved in advance by
both parties. In the event that a party reasonably views
disclosure as appropriate as contemplated by the previous
sentence, such disclosing party shall use its reasonable
efforts to provide a copy of such disclosure to the other
party within a reasonable period of time prior to such
disclosure.
9.2. Certain Definitions. For purposes of
this Agreement, the following terms shall have the mean-
ings indicated:
"Affiliate" has the meaning ascribed to it in
Rule 12b-2 promulgated under the Exchange Act, as in
effect on the date hereof; provided, however, that the
Purchaser shall not be deemed to be an Affiliate of the
Company.
"Associate" has the meaning ascribed to it in
Rule 12b-2 promulgated under the Exchange Act, as in
effect on the date hereof; provided, however, that the
Purchaser shall not be deemed to be an Associate of the
Company.
The terms set forth below are defined in the
Sections indicated adjacent thereto:
Term Section
Agreement Preamble
Authority 2.3
Closing 1.2(a)
Closing Date 1.2(a)
Common Stock 2.4
Company Preamble
Condition 2.3
Encumbrances 1.1
Exchange Act 2.3
Holding Period Date 4.2(b)
indemnified person 4.8(a)
Kinney 2.5
LFS 2.2
Preferred Stock Recitals
Purchaser Preamble
Purchaser's Stock 4.1
Securities Act 2.3
Settlement Agreement Recitals
Shares 1.1
stop order 4.7(a)
Subsidiary 2.1
9.3. Survival of Representations, Warranties
and Agreements. Each representation and warranty in this
Agreement and each agreement or covenant in this Agree-
ment which does not by its own terms expire on or prior
to the Closing Date shall survive the Closing.
9.4. Notices. All notices and other communica-
tions hereunder shall be in writing and shall be deemed
given if delivered personally or sent by certified mail,
telex or telecopy (and promptly confirmed by certified
mail, return receipt requested) to the parties at the
following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to the Purchaser, to it at:
Woolworth Corporation
233 Broadway
New York, NY 10279
Attention: General Counsel
Telecopier: (212) 553-2152
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Attention: Peter J. Neckles
Telecopier: (212) 735-2000
(b) if to the Company, to it at:
Kids Mart, Inc.
801 S. Sentous Avenue
City of Industry, CA 91748
Attention: Bernard Tessler
Telecopier: (818) 854-3832
with a copy to:
Kaye, Scholer, Fierman, Hays
& Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Mitchel H. Perkiel
Telecopier: (212) 836-8689
9.5. Entire Agreement; Counterparts; Assign-
ment. (a) This Agreement (including the documents and
instruments referred to or incorporated herein), together
with the Settlement Agreement (and the exhibits and
documents referred to therein), constitutes the entire
agreement, and supersedes all of the prior agreements and
undertakings, both written and oral, between the parties
with respect to the subject matter hereof.
(b) This Agreement may be executed in two
or more counterparts which together shall constitute a
single agreement.
(c) This Agreement shall be binding upon
and inure to the benefit of the parties and their respec-
tive successors, heirs and permitted assigns, but other-
wise (except for transferees of Preferred Stock and/or
Common Stock under Article IV) is not intended to confer
upon any person other than the parties hereto any rights
or remedies hereunder. This Agreement is not assignable
except (i) to transferees of Preferred Stock and/or
Common Stock from the Purchaser to the extent contemplat-
ed by Section 4.9 hereof, (ii) by consent of each of the
parties hereto or (iii) by operation of law; provided,
however, that the Purchaser may assign its rights and
obligations hereunder to any Affiliate or Associate of
the Purchaser; and provided further that any transferee
to whom this Agreement is assigned must, as a condition
to such assignment, execute and deliver to the Company an
agreement to be bound by the terms of this Agreement.
Any purported assignment of this Agreement in violation
of this Section 9.5(c) shall be null and void.
9.6. Governing Law. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES CREATED HEREBY
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW RULES
THEREOF.
9.7. Severability of Provisions. If any
provision or any portion of any provision of this Agree-
ment or the application of any such provision or any
portion thereof to any person or circumstance, shall be
held invalid or unenforceable, to the extent permitted by
law, the remaining portion of such provision and the
remaining provisions of this Agreement, or the applica-
tion of such provision or portion of such provision as is
held invalid or unenforceable to persons or circumstances
other than those as to which it is held invalid or unen-
forceable, shall not be affected thereby.
9.8. Modification; Waiver. No modification of
or amendment to this Agreement shall be valid unless in a
writing signed by the parties hereto referring specifi-
cally to this Agreement and stating the parties' inten-
tion to modify or amend the same. Any waiver of any term
or condition of this Agreement must be in a writing
signed by the party or parties sought to be charged with
such waiver referring specifically to the term or condi-
tion to be waived, and no such waiver shall be deemed to
constitute the waiver of any other breach of the same or
of any other term or condition of this Agreement.
9.9. Expenses. Except as otherwise expressly
provided in this Agreement, each party hereto shall pay
its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions hereof and
the consummation of the transactions contemplated hereby.
9.10. Equitable Relief. Each party acknowl-
edges that, in the event of any breach of this Agreement
by a party, the other party would be irreparably and
immediately harmed and could not be made whole by mone-
tary damages. It is accordingly agreed that such other
party, in addition to any other remedy to which it may be
entitled, shall be entitled to an injunction or injunc-
tions to prevent breaches of the provisions of this
Agreement and to compel specific performance of this
Agreement.
9.11. Joint Drafting. The parties have joint-
ly drafted this Agreement, and this Agreement shall not
be interpreted against or in favor of any of the parties
on the basis that any of the parties participated in the
drafting of this Agreement.
IN WITNESS WHEREOF, the parties have caused
this Agreement to be executed by their respective offi-
cers duly authorized hereunto, all as of the date first
written above.
KIDS MART, INC.
By: /s/ Bernard Tessler
_________________________
Name: Bernard Tessler
Title: President
WOOLWORTH CORPORATION
By: /s/ John H. Cannon
______________________
Name: John H. Cannon
Title: Vice President and
Treasurer