REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June
12, 2000, by and among eToys Inc., a Delaware corporation, with headquarters
located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "COMPANY"), and the undersigned buyers (each, a "BUYER" and
collectively, the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties hereto of even date herewith (the "SECURITIES PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to the
Buyers (i) shares of the Company's Series D Convertible Preferred Stock (the
"PREFERRED SHARES"), which will be convertible into shares of the Company's
common stock, par value $0.0001 per share (the "COMMON STOCK") (as converted,
the "CONVERSION SHARES") in accordance with the terms of the Company's
Certificate of Designations, Preferences and Rights of the Preferred Stock
(the "CERTIFICATE OF DESIGNATIONS"), and (ii) warrants to purchase shares of
Common Stock (the "WARRANTS;" and as exercised, the "WARRANT SHARES");
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
each of the Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer, any transferee or assignee thereof
to whom a Buyer assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9
and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9.
b. "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental or any department or agency thereof.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("RULE 415"), and the declaration
or ordering of effectiveness of such Registration Statement(s) by the United
States Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means (i) the Conversion Shares
issued or issuable upon conversion of the Preferred Shares, (ii) the Warrant
Shares issued or issuable upon exercise of the Warrants, (iii) the Dividend
Shares (as defined in the Certificate of Designations) issued in relation to
the Preferred Shares and (iv) any shares of capital stock issued or issuable
with respect to the Conversion Shares, the Preferred Shares, the Warrant
Shares, the Warrants or the Dividend Shares issued in relation to the
Preferred Shares as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to
any limitations on conversions of Preferred Shares or exercises of Warrants.
e. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, as
soon as practicable but in no event later than 45 days after the Closing Date
(as defined in the Securities Purchase Agreement) (the "FILING DEADLINE"),
file with the SEC the Registration Statement on Form S-3 covering the resale
of all of the Registrable Securities. In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other form as
is available for such a registration, subject to the provisions of Section
2(d). The Registration Statement prepared pursuant hereto shall register for
resale at least that number of shares of Common Stock equal to the product of
(x) 2.0 and (y) the number of Registrable Securities as of the trading day
immediately preceding the date the Registration Statement is initially filed
with the SEC, subject to adjustment as provided in Section 2(e). The Company
shall use its best efforts to have the Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the
date which is 120 days after the Closing Date (the "EFFECTIVENESS DEADLINE").
b. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and each
increase in the number of Registrable Securities included therein shall be
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement
covering such initial number of Registrable Securities or increase thereof is
declared effective by the SEC.
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In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro
rata portion of the then remaining number of Registrable Securities included
in such Registration Statement for such transferor. Any shares of Common
Stock included in a Registration Statement and which remain allocated to any
Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro
rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement.
c. LEGAL COUNSEL. Subject to Section 5 hereof, the Buyers
holding at least two-thirds (y) of the Registrable Securities shall have the
right to select one legal counsel to review and oversee any offering pursuant
to this Section 2 ("LEGAL COUNSEL"), which shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or
such other counsel as thereafter designated by the holders of at least
two-thirds (y) of Registrable Securities. The Company shall reasonably
cooperate with Legal Counsel in performing the Company's obligations under
this Agreement.
d. INELIGIBILITY FOR FORM S-3. In the event that Form S-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form for the resale of the Registrable
Securities and (ii) undertake to register the Registrable Securities on Form
S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
e. SUFFICIENT NUMBER OF SHARES REGISTERED. Subject to Section
3(s), in the event the number of shares available under a Registration
Statement filed pursuant to Section 2(a) is insufficient to cover all of the
Registrable Securities required to be covered by such Registration Statement
or an Investor's allocated portion of the Registrable Securities pursuant to
Section 2(b), the Company shall amend the Registration Statement, or file a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least 200% of the number of such
Registrable Securities as of the trading day immediately preceding the date
of the filing of such amendment or new Registration Statement, in each case,
as soon as practicable, but in any event not later than fifteen (15) days
after the necessity therefor arises (except if the Company is not able to
file a Registration Statement due to the provision of Rule 3-01 of Regulation
S-X promulgated under the 1933 Act, then forty-five (45) days after the
necessity therefor arises). Subject to Section 3(s), the Company shall use
it best efforts to cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of Registrable Securities
issued or issuable upon conversion of the Preferred Shares and exercise of
the Warrants covered by such Registration Statement is greater than the
quotient determined by dividing (i) the number of shares of Common Stock
available for resale under such Registration Statement by (ii) 1.5. The
calculation set forth in the foregoing sentence shall be made without regard
to any limitations on the conversion of the Preferred Shares or exercise of
the Warrants
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and such calculation shall assume that the Preferred Shares and the Warrants
are then convertible and exercisable, respectively, into shares of Common
Stock at the then prevailing Conversion Rate (as defined in the Certificate
of Designations) and Warrant Exercise Price (as defined in the Warrants),
respectively, if applicable.
f. EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN
EFFECTIVENESS OF REGISTRATION STATEMENT. If (i) a Registration Statement
covering all the Registrable Securities and required to be filed by the
Company pursuant to this Agreement is not (A)filed with the SEC on or before
the Filing Deadline or (B)declared effective by the SEC on or before the
Effectiveness Deadline or (ii) on any day after the Registration Statement
has been declared effective by the SEC sales of all the Registrable
Securities required to be included on such Registration Statement cannot be
made (other than during an Allowable Grace Period (as defined below) pursuant
to the Registration Statement (including, without limitation, because of a
failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement or to register sufficient shares of Common Stock), then, as partial
relief for the damages to any holder by reason of any such delay in or
reduction of its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each holder of Preferred Shares an amount
in cash per Preferred Share held equal to the product of (i) $10,000
multiplied by (ii) the sum of (A) 0.015, if the Registration Statement is not
filed by the Filing Deadline, plus (B) 0.015, if the Registration Statement
is not declared effective by the Effectiveness Deadline, plus, (C) the
product of (I) 0.0005 multiplied by (II) the sum of (x) the number of days
after the Filing Deadline that such Registration Statement is not filed with
the SEC, plus (y) the number of days after the Effectiveness Deadline that
the Registration Statement is not declared effective by the SEC, plus (z) the
number of days after the Registration Statement has been declared effective
by the SEC that such Registration Statement is not available (other than
during an Allowable Grace Period) for the sale of at least all the
Registrable Securities required to be included on such Registration Statement
pursuant to section 2(e). The payments to which a holder shall be entitled
pursuant to this Section 2(f) are referred to herein as "REGISTRATION DELAY
PAYMENTS." Registration Delay Payments shall be paid on the earlier of (I)
the last day of the calendar month during which such Registration Delay
Payments are incurred and (II) the third Business Day after the event or
failure giving rise to the Registration Delayed Payments is cured. In the
event the Company fails to make Registration Delay Payments in a timely
manner, such Registration Delay Payments shall bear interest at the rate of
1.5% per month (prorated for partial months) until paid in full (or if lower,
the maximum amount allowed under applicable law).
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a) or 2(e), the Company will use
its reasonable best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
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a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (but in no
event later than the Filing Deadline) and use its best efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event later
than the Effectiveness Deadline). Subject to Section 3(s), the Company shall
keep each Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of
the Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or successor thereto) promulgated under
the 1933 Act and (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the
"REGISTRATION PERIOD"), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading. The term "best efforts" shall mean, among other things, that
the Company shall submit to the SEC, within two (2) Business Days after the
Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later
than 48 hours after the submission of such request; provided, however, that
if the Company determines, in good faith, that, despite learning that the SEC
has no further comments on the Registration Statement, an amendment to the
Registration Statement is necessary, such amendment shall be filed within
five (5) Business Days after the Company learns that the staff of the SEC
will not be reviewing the Registration Statement or has no further comments,
and when thereafter the Company again learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be,
the Company will again be required, within two Business Days of so learning,
to make a request for acceleration of effectiveness of such Registration
Statement to a time and date no later than 48 hours after the submission of
such request.
b. Subject to Section 3(s), the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company
covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth
in such Registration Statement. In the case of amendments and supplements to
a Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(b)) by reason of the Company
filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report
under the Securities Exchange Act of 1934, as amended (the "1934 ACT"), the
Company shall have incorporated such report by reference into the
Registration Statement, if applicable, or shall
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file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to
amend or supplement the Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) the Registration Statement at least seven (7) days prior to
its filing with the SEC and (ii) all other Registration Statements and all
amendments and supplements to all Registration Statements (except for Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K and any similar or successor reports) within a reasonable number of
days prior to their filing with the SEC, and (B) not file a Registration
Statement or amendment or supplement thereto or any document incorporated by
reference into the foregoing in a form to which Legal Counsel reasonably
objects (which objection shall be limited to the information contained in
such documents relating either to the Buyers or the description of the
transactions contemplated by the Securities Purchase Agreement). The Company
shall furnish to Legal Counsel, without charge, (i) any correspondence from
the SEC or the staff of the SEC to the Company or its representatives
relating to any Registration Statement, (ii) promptly after the same is
prepared and filed with the SEC, one copy of any Registration Statement and
any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits and (iii) upon
the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto. The Company shall reasonably cooperate with Legal Counsel in
performing the Company's obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i) if
requested by such Investor promptly after the same is prepared and filed with
the SEC, at least one copy of such Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference unless filed on the ▇▇▇▇▇ system,
all exhibits and each preliminary prospectus, (ii) upon the effectiveness of
any Registration Statement, ten (10) copies of the prospectus included in
such Registration Statement and all amendments and supplements thereto (or
such other number of copies as such Investor may reasonably request) and
(iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities owned by
such Investor.
e. Subject to Section 3(s), the Company shall use its
reasonable best efforts to (i) register and qualify, unless an exemption from
registration and qualification applies, the resale by Investors of the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of all the states of the United States, (ii)
prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof
during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (iv) ▇▇▇▇
▇
all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a
condition thereto to (x) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(e), (y)
subject itself to general taxation in any such jurisdiction, or (z) file a
general consent to service of process in any such jurisdiction. The Company
shall promptly notify Legal Counsel and each Investor who holds Registrable
Securities of the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after
becoming aware of such event, as a result of which the prospectus included
in a Registration Statement, as then in effect, includes an untrue statement
of a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided that in no
event shall such notice contain any material, nonpublic information), and,
subject to Section 3(s), promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to Legal Counsel and
each Investor (or such other number of copies as Legal Counsel or such
Investor may reasonably request). The Company shall also promptly notify
Legal Counsel and each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and
each Investor by facsimile on the same day of such effectiveness and by
overnight mail), (ii) of any request by the SEC for amendments or supplements
to a Registration Statement or related prospectus or related information, and
(iii) of the Company's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate.
g. Subject to Section 3(s), the Company shall use its
reasonable best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt
of actual notice of the initiation or threat of any proceeding for such
purpose.
h. At the reasonable request of any Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the
Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering,
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addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement,
in form, scope and substance as is customarily given in an underwritten
public offering, addressed to the Investors.
i. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other
agents retained by the Investors (collectively, the "INSPECTORS"), all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "RECORDS"), as shall be
reasonably deemed necessary by each Inspector, and cause the Company's
officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector
shall agree to hold in strict confidence and shall not make any disclosure
(except to an Investor) or use of any Record or other information which the
Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from
a court or government body of competent jurisdiction, or (b) the information
in such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal
or state securities laws, (ii) such Investor provided such information to
the Company expressly for use in connection with the preparation of the
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this Agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by
a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor,
at the Investor's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
k. The Company shall use its reasonable best efforts either to
(i) cause all the Registrable Securities covered by a Registration Statement
to be listed on each securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing
of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) secure designation and quotation of all the Registrable
Securities covered by the Registration Statement on the Nasdaq National
Market, or (iii) if, despite the Company's reasonable best efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in satisfying
the preceding clause (i) or (ii), to secure the inclusion for quotation on
The Nasdaq SmallCap Market
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for such Registrable Securities and, without limiting the generality of the
foregoing, to use its reasonable best efforts to arrange for at least two
market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities.
The Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable,
facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request.
m. The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of the
Registration Statement.
n. Subject to Section 3(s), if requested by an Investor, the
Company shall (i) as soon as practicable incorporate in a prospectus
supplement or post-effective amendment such information as an Investor
reasonably requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being
offered or sold, the purchase price being paid therefor and any other terms
of the offering of the Registrable Securities to be sold in such offering;
(ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to
be incorporated in such prospectus supplement or post-effective amendment;
and (iii) as soon as practicable, supplement or make amendments to any
Registration Statement if reasonably requested by an Investor of such
Registrable Securities.
o. The Company shall use its reasonable best efforts to cause
the Registrable Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
p. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the ▇▇▇▇ ▇▇▇) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
q. The Company shall otherwise use its reasonable best efforts
to comply with all applicable rules and regulations of the SEC in connection
with any registration hereunder.
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r. Within two (2) Business Days after a Registration Statement
which covers Registrable Securities is ordered effective by the SEC, the
Company shall use its reasonable best efforts to cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are included in
such Registration Statement) confirmation that such Registration Statement
has been declared effective by the SEC in the form attached hereto as EXHIBIT
A.
s. Notwithstanding anything to the contrary herein, at any time
after the Registration Statement has been declared effective by the SEC, the
Company may delay the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the
good faith opinion of the Board of Directors of the Company and its counsel,
in the best interest of the Company and, in the opinion of counsel to the
Company, otherwise required (a "GRACE PERIOD"); provided, that the Company
shall promptly (i) notify the Investors in writing of the existence of
material non-public information giving rise to a Grace Period (provided that
in each notice the Company will not disclose the content of such material
non-public information to the Investors) and the date on which the Grace
Period will begin, and (ii) notify the Investors in writing of the date on
which the Grace Period ends; and, provided further, that no Grace Period
shall exceed 15 consecutive days and during any 365 day period such Grace
Periods shall not exceed an aggregate of 30 days and the first day of any
Grace Period must be at least two trading days after the last day of any
prior Grace Period (an "ALLOWABLE GRACE PERIOD"). For purposes of
determining the length of a Grace Period above, the Grace Period shall begin
on and include the date the holders receive the notice referred to in clause
(i) and shall end on and include the later of the date the holders receive
the notice referred to in clause (ii) and the date referred to in such
notice. The second sentence of Section 3(a), the provisions of Sections
3(b), 3(e), 3(g), and 3(n) hereof shall not be applicable during the period
of any Allowable Grace Period. Upon expiration of the Grace Period, the
Company shall again be bound by the second sentence of Section 3(a), the
provisions of Sections 3(b), 3(e), 3(g), and 3(n) hereof with respect to the
information giving rise to such Grace Period unless such material non-public
information is no longer applicable.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) Business Days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each
such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in such Registration Statement. It shall be
a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held
by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably request.
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b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) or receipt of
notice that no supplement or amendment is required. Notwithstanding anything
to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor has
entered into a contract for sale prior to the Investor's receipt of a notice
from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled; provided that such Investor has delivered a prospectus in
connection with such sale prior to receiving such notice from the Company.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation,
all registration, listing and qualifications fees, printers and accounting
fees, and reasonable fees and disbursements of counsel for the Company shall
be paid by the Company. The Company shall also reimburse the Investors for
the reasonable fees and disbursements of Legal Counsel in connection with
registration, filing or qualification pursuant to Sections 2 and 3 of this
Agreement which amount shall be limited to $10,000.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees, agents, representatives of, and
each Person, if any, who controls any Investor within the meaning of the 1933
Act or the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys' fees, amounts paid in settlement or expenses, joint or
several, (collectively, "CLAIMS") incurred in
11
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which Registrable
Securities are offered ("BLUE SKY FILING"), or the omission or alleged
omission to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
any other law, including, without limitation, any state securities law, or
any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement or (iv) any
material violation of this Agreement (the matters in the foregoing clauses
(i) through (iv) being, collectively, "VIOLATIONS"). Subject to Section
6(c), the Company shall reimburse the Indemnified Persons, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees
or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by such
Indemnified Person for such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(d); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person
from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use
giving rise to a violation and such Indemnified Person, notwithstanding such
advice, used it; (iii) shall not be available to the extent such Claim is
based on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company, including a corrected prospectus,
if such prospectus or such corrected prospectus was timely made available by
the Company pursuant to Section 3(d); and (iv) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall
12
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the
same manner as is set forth in Section 6(a), the Company, each of its
directors, each of its officers who signs the Registration Statement each
Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (each an "INDEMNIFIED PARTY"), against any Claim or
Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and,
subject to Section 6(c), such Investor will reimburse any reasonable legal or
other expenses reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses of not more
than one counsel for such Indemnified Person or Indemnified Party to be paid
by the indemnifying party, if, in the reasonable opinion of counsel retained
by the
13
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified
Person or Indemnified Party and any other party represented by such counsel
in such proceeding. In the case of an Indemnified Person, legal counsel
referred to in the immediately preceding sentence shall be selected by the
Investors holding at least two-thirds (2/3) in interest of the Registrable
Securities included in the Registration Statement to which the Claim relates.
The Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified
Party or Indemnified Person which relates to such action or Claim. The
indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprized as to the status of the defense or any settlement negotiations
with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified
Party or Indemnified Person of a release from all liability in respect to
such Claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties,
firms or corporations relating to the matter for which indemnification has
been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified
Damages are incurred.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (i) no person involved in the sale of Registrable Securities
which person is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933
14
Act) in connection with such sale, shall be entitled to contribution from any
person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to such Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"),
the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement, if
true, by the Company that it has complied with the reporting requirements of
Rule 144 and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to
the Company within ten (10) days of such transfer or assignment; (ii) the
Company is, within ten (10) days of such transfer or assignment, furnished
with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration
rights are being transferred or assigned; (iii) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein; and (v)
15
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and Investors who then hold at least two-thirds (y) of the
Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all
of the holders of the Registrable Securities. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification
of any provision of any of this Agreement unless the same consideration also
is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit
with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. If notice is to be sent
to the Company, the Buyer shall use its reasonable best efforts to provide
additional copies to the individuals listed below; provided, however, that
the failure of such Buyer to send such additional copies shall in no way
limit the effectiveness of any notice sent to the Company to the attention of
the General Counsel as provided for below. The addresses and facsimile
numbers for such communications shall be:
If to the Company (such correspondence identified as "URGENT" to):
eToys Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
16
With additional copies of any written notice to:
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Vice President, Administration
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Legal Counsel:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 312-902-1061
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule
of Buyers attached hereto, with copies to such Buyer's representatives as set
forth on the Schedule of Buyers, or to such other address and/or facsimile
number and/or to the attention of such other person as the recipient party
has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and
an image of the first page of such transmission or (C) provided by a courier
or overnight courier service
17
shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (other than Section 5-1401 of the
New York General Obligations Law and whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. If any provision
of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
e. This Agreement, the Securities Purchase Agreement, the
Warrants and the Certificate of Designations constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein. This
Agreement, the Securities Purchase Agreement, the Warrants and the
Certificate of Designations supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and
thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors
and assigns of each of the parties hereto.
18
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. All consents and other determinations required to be made by
the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding at least two-thirds (y) of
the Registrable Securities, determined as if all of the Preferred Shares and
the Warrants then outstanding have been converted into or exercised for
Registrable Securities without regard to any limitations on conversion of the
Preferred Shares or the exercise of the Warrants.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
19
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
ETOYS INC.
By:
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
BUYERS:
HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By:
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Managing Member
▇▇▇▇▇▇▇▇, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
Its: General Partner
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Operating Officer
20
[PAGE 2 OF 2 OF THE SIGNATURE PAGES TO THE REGISTRATION RIGHTS AGREEMENT]
▇▇▇▇▇▇ CAPITAL LTD.
By:
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Authorized Signatory
▇▇▇▇▇▇▇ CAPITAL LTD.
By:
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Authorized Signatory
21
SCHEDULE OF BUYERS
Investor Address Investor's Legal Representatives'
Investor's Name and Facsimile Number Address and Facsimile Number
---------------------- ----------------------------------- ------------------------------------------
HFTP Investment L.L.C. c/o Promethean Asset Management L.L.C. Promethean Investment Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: New York
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇, L.P. c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26th Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇ Attention: ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. Chill ▇▇▇▇ ▇. Chill
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Cayman Islands
▇▇▇▇▇▇ Capital Ltd. c/o Citadel Investment Group, L.L.C. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. Simpler Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Cayman Islands
▇▇▇▇▇▇▇ Capital Ltd. c/o Citadel Investment Group, L.L.C. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. Simpler Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Cayman Islands
22
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:
---------------------------
RE: ETOYS, INC.
Ladies and Gentlemen:
We are counsel to eToys, Inc., a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "PURCHASE AGREEMENT") entered into by and
among the Company and the buyers named therein (collectively, the "HOLDERS")
pursuant to which the Company issued to the Holders shares of its Series D
Convertible Preferred Stock, par value $0.0001 per share, (the "PREFERRED
SHARES") convertible into shares of the Company's common stock, par value
$0.0001 per share (the "COMMON STOCK"), and related warrants to purchase
shares of the Common Stock (the "WARRANTS"). Pursuant to the Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Holders (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the
Company agreed, among other things, to register the Registrable Securities
(as defined in the Registration Rights Agreement), including the shares of
Common Stock issuable upon conversion of the Preferred Shares and exercise of
the Warrants, under the Securities Act of 1933, as amended (the "1933 ACT").
In connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 2000, the Company filed a Registration
Statement on Form S-3 (File No. 333-_____________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating
to the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or to our knowledge
threatened by, the SEC and the Registrable Securities are available for
resale under the 1933 Act pursuant to the Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
---------------------------------
cc: [LIST NAMES OF HOLDERS]
