Execution Copy
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
between
MEMBERWORKS INCORPORATED
and
XXXXXX BROTHERS INC. and CIBC WORLD MARKETS CORP.
DATED AS OF SEPTEMBER 30 , 2003
TABLE OF CONTENTS
Page
1. Definitions..............................................................................................1
2. Shelf Registration.......................................................................................4
3. Additional Amounts.......................................................................................5
4. Registration Procedures..................................................................................6
5. Registration Expenses...................................................................................12
6. Indemnification and Contribution........................................................................13
7. Underwritten Registrations..............................................................................17
8. Miscellaneous...........................................................................................17
REGISTRATION RIGHTS AGREEMENT, dated as of September 30, 2003, between
MemberWorks Incorporated, a Delaware corporation (together with any successor
entity, herein referred to as the "Company"), and Xxxxxx Brothers Inc. and CIBC
World Markets Corp. (the "Initial Purchasers").
Pursuant to the Purchase Agreement, dated September 24, 2003,
between the Company and the Initial Purchasers (the "Purchase Agreement"), the
Initial Purchasers have agreed to purchase from the Company $75,000,000 (up to
$90,000,000 if the Initial Purchasers exercise in full their option to purchase
additional Notes, as set forth in the Purchase Agreement) aggregate principal
amount of 5.50 % Convertible Senior Subordinated Notes due 2010 (the "Notes").
The Notes initially will be convertible into fully paid, nonassessable common
stock, par value $0.01 per share, of the Company (the "Common Stock") on the
terms, and subject to the conditions, set forth in the Indenture (as defined
herein). To induce the Initial Purchasers to purchase the Notes, the Company has
agreed to provide the registration rights set forth in this Agreement pursuant
to the Purchase Agreement.
The parties hereby agree as follows:
(1) Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:
Additional Amounts: As defined in Section 3(a) hereof.
Additional Amounts Payment Date: Each April 1 and October 1, commencing
April 1, 2004.
Affiliate: As such term is defined in Rule 405 under the Securities Act.
Agreement: This Resale Registration Rights Agreement, as amended, modified
or otherwise supplemented from time to time in accordance with the terms hereof.
Applicable Amount: In respect of shares of Common Stock issued
upon conversion of Notes, an amount equal to $1,000 times the quotient of (x)
the number of such shares divided by (y) the prevailing conversion rate, such
prevailing conversion rate as determined in accordance with the Indenture.
Blue Sky Application: As defined in Section 6(a) hereof.
Business Day: A day other than a Saturday or Sunday or any day
on which banking institutions in The City of New York are authorized or
obligated by law or executive order to close.
Closing Date: The date of this Agreement.
Commission: Securities and Exchange Commission.
Common Stock: As defined in the preamble hereto.
Company: As defined in the preamble hereto.
Effectiveness Period: As defined in Section 2(a)(iii) hereof.
Effectiveness Target Date: As defined in Section 2(a)(ii) hereof.
Exchange Act: Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder.
Holder: A Person who owns, beneficially or otherwise, Transfer Restricted
Securities.
Included Stock: As defined in Section 9(c) hereof.
Indemnified Holder: As defined in Section 6(a) hereof.
Indenture: The Indenture, dated as of September 30, 2003,
between the Company and Deutsche Bank Trust Company Americas, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
amended, modified or supplemented from time to time in accordance with the terms
thereof.
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: Each April 1 and October 1 of each year, commencing
April 1, 2004.
Majority of Holders: Holders holding more than 50% of the
aggregate principal amount at maturity of Notes outstanding; provided that, for
purpose of this definition, a holder of shares of Common Stock which constitute
Transfer Restricted Securities when issued upon conversion of the Notes shall be
deemed to hold an aggregate principal amount at maturity of Notes (in addition
to the principal amount at maturity of Notes held by such holder) equal to
$1,000 times the quotient of (x) the number of such shares of Common Stock
received upon conversion of the Notes and then held by such holder divided by
(y) the prevailing conversion rate, such prevailing conversion rate as
determined in accordance with the Indenture.
NASD: National Association of Securities Dealers, Inc.
Notes: As defined in the preamble hereto.
Notice Holder: As defined in Section 2(a)(i) hereto.
Person: An individual, partnership, corporation,
unincorporated organization, limited liability company, trust, joint venture or
a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Shelf Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
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Purchase Agreement: As defined in the preamble hereto.
Questionnaire: As defined in Section 2(b) hereof.
Record Holder: With respect to any Additional Amounts Payment
Date, each Person who is a Holder on the record date with respect to the
Interest Payment Date on which such Additional Amounts Payment Date shall occur.
In the case of a Holder of shares of Common Stock issued upon conversion of the
Notes, "Record Holder" shall mean each Person who is a Holder of shares of
Common Stock that constitute Transfer Restricted Securities on the 15th day
preceding the relevant Additional Amounts Payment Date.
Registration Default: As defined in Section 3(a) hereof.
Securities Act: Securities Act of 1933, as amended, and the rules and
resolutions of the Commission thereunder.
Shelf Filing Deadline: As defined in Section 2(a)(i) hereof.
Shelf Registration Statement: As defined in Section 2(a)(i)
hereof.
Suspension Period. As defined in Section 4(b)(i) hereof.
TIA: Trust Indenture Act of 1939, as amended, and the rules
and regulations of the Commission thereunder, in each case, as in effect on the
date the Indenture is qualified under the TIA.
Transfer Restricted Securities: Each Note and each share of Common Stock
issued upon conversion of Notes until the earliest of:
(1) the date on which such Note or such share of Common Stock issued upon
conversion thereof has been effectively registered under the Securities Act and
sold or otherwise disposed of in accordance with the Shelf Registration
Statement;
(ii) the date on which such Note or such share of Common Stock issued upon
conversion thereof is transferred in compliance with Rule 144 under the
Securities Act or may be sold or transferred by a person who is not an Affiliate
of the Company pursuant to Rule 144 under the Securities Act (or any other
similar provision then in force) without any volume or manner of sale
restrictions thereunder; or
(iii) the date on which such Note or such share of Common Stock issued upon
conversion ceases to be outstanding (whether as a result of redemption,
repurchase and cancellation, conversion or otherwise); provided that any Note
and any Common Stock issued upon conversion of such Note that is redeemed or
repurchased by the Company shall not be deemed Transfer Restricted Securities
for purposes of this Agreement upon resale by the Company.
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Underwriter: The managing underwriter in an Underwritten Registration or
Underwritten Offering.
Underwritten Registration or Underwritten Offering: A
registration in which Notes or shares of our Common Stock issued upon conversion
of Notes are sold by a Majority of Holders to an Underwriter for reoffering to
the public.
(2) Shelf Registration.
(a) The Company shall:
(i) not later than 90 days after the date hereof (the "Shelf Filing
Deadline"), cause to be filed a registration statement pursuant to Rule 415
under the Securities Act (together with any amendments thereto, and including
any documents incorporated by reference therein, the "Shelf Registration
Statement"), which Shelf Registration Statement shall provide for resales of all
Transfer Restricted Securities held by Holders that have provided the
information required pursuant to the terms of Section 2(b) hereof (each such
holder a "Notice Holder");
(ii) use its reasonable best efforts to cause the Shelf Registration
Statement to be declared effective by the Commission not later than 210 days
after the date hereof (the "Effectiveness Target Date"); and
(iii) use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Section 4(b) hereof to the extent necessary to ensure that (A) it
is available for resales by the Notice Holders of Transfer Restricted Securities
entitled to the benefit of this Agreement and (B) it conforms with the
requirements of this Agreement and the Securities Act for a period (the
"Effectiveness Period") of:
(1) two years following the last date of original issuance of Notes; or
(2) such shorter period that will terminate when (x) all of the Holders of
Transfer Restricted Securities are able to sell all Transfer Restricted
Securities immediately without restriction pursuant to Rule 144(k) under the
Securities Act or any successor rule thereto, (y) when all Transfer Restricted
Securities have ceased to be outstanding (whether as a result of redemption,
repurchase and cancellation, conversion or otherwise) or (z) all Transfer
Restricted Securities registered under the Shelf Registration Statement have
been sold.
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(b) To have its Transfer Restricted Securities included in the Shelf
Registration Statement pursuant to this Agreement, each Holder shall complete
the Selling Securityholder Notice and Questionnaire, the form of which is
contained in Annex A to the Offering Memorandum relating to the Notes (the
"Questionnaire"). The Company shall mail the Questionnaire to all Holders of
Transfer Restricted Securities at least 20 Business Days (but not more than 40
Business Days) prior to the time the Company intends in good faith to have the
Shelf Registration Statement declared effective by the Commission. Upon receipt
of a written request for additional information from the Company, each Holder
who intends to be named as a selling securityholder in the Shelf Registration
Statement shall furnish to the Company in writing, within 20 Business Days after
such Holder's receipt of such request, such additional information regarding
such Holder and the proposed distribution by such Holder of its Transfer
Restricted Securities, in connection with the Shelf Registration Statement or
Prospectus or Preliminary Prospectus included therein and in any application to
be filed with or under state securities law, as the Company may reasonably
request. In connection with all such requests for information from Holders of
Transfer Restricted Securities, the Company shall notify such Holders of the
requirements set forth in this paragraph regarding their obligation to provide
the information requested pursuant to this Section. Holders who have not
delivered a Questionnaire prior to the effectiveness of the Shelf Registration
Statement may receive a Questionnaire from the Company upon request. Upon
receipt of such a completed Questionnaire from a Holder following the
effectiveness of the Shelf Registration Statement, the Company shall, as
promptly as reasonably practicable, file such amendments to the Shelf
Registration Statement or supplements to a related Prospectus as are necessary
to permit such Holder to transfer its Transfer Restricted Securities pursuant to
the Shelf Registration Statement. Each Holder as to which the Shelf Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make information previously
furnished to the Company by such Holder not materially misleading.
(3) Additional Amounts.
(a) If:
(i) the Shelf Registration Statement is not filed with the Commission prior
to or on the Shelf Filing Deadline;
(ii) the Shelf Registration Statement has not been declared effective by
the Commission prior to or on the Effectiveness Target Date;
(iii) except as provided in Section 4(b)(i) hereof, the Shelf Registration
Statement is filed and declared effective but, during the Effectiveness Period,
shall thereafter cease to be effective without being succeeded within five
Business Days by a post-effective amendment to the Shelf Registration Statement,
a supplement to the Prospectus or a report filed with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures such failure
and, in the case of a post-effective amendment, is itself immediately declared
effective; or
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(iv) (A) prior to or on the 60th or 90th day, as the case may be, of any
Suspension Period, such suspension has not been terminated or (B) Suspension
Periods exceed an aggregate of 120 days in any 360 day period,
(each such event referred to in foregoing clauses (i) through (iv), a
"Registration Default"), the Company hereby agrees to pay additional amounts
("Additional Amounts") with respect to the Transfer Restricted Securities from
and including the day following the Registration Default to but excluding the
day on which the Registration Default has been cured, accruing at a rate:
(A) in respect of the Notes, to each holder of Notes, (x) with respect to
the first 90-day period during which a Registration Default shall have occurred
and be continuing, equal to 0.25% per annum of the principal amount of the
Notes, and (y) with respect to the period commencing on the 91st day following
the day the Registration Default shall have occurred and be continuing, equal to
0.50% per annum of the principal amount of the Notes; provided that in no event
shall Additional Amounts accrue at a rate per year exceeding 0.50% of the
Applicable Amount of the Notes; and
(B) in respect of any shares of Common Stock, to each holder of shares of
Common Stock issued upon conversion of Notes, (x) with respect to the first
90-day period in which a Registration Default shall have occurred and be
continuing, equal to 0.25% per annum of the Applicable Amount of the converted
Notes, and (y) with respect to the period commencing the 91st day following the
day the Registration Default shall have occurred and be continuing, equal to
0.50% per annum of the Applicable Amount of the converted Notes; provided that
in no event shall Additional Amounts accrue at a rate per year exceeding 0.50%
of the Applicable Amount of the converted Notes.
(b) All accrued Additional Amounts shall be paid in arrears to Record
Holders by the Company on each Additional Amounts Payment Date by wire transfer
of immediately available funds or by federal funds check. Following the cure of
all Registration Defaults relating to any particular Note or share of Common
Stock, the accrual of Additional Amounts with respect to such Note or share of
Common Stock will cease. The Company agrees to deliver all notices, certificates
and other documents contemplated by the Indenture in connection with the payment
of Additional Amounts. Additional Amounts shall not be payable under, or in
respect of, more than one of clauses (a)(i) through (a)(iv) at any given time.
All obligations of the Company set forth in this Section 3
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Transfer Restricted
Security shall have been satisfied in full.
The Additional Amounts set forth above shall be the exclusive
monetary remedy available to the Holders of Transfer Restricted Securities for
such Registration Default.
4. Registration Procedures.
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(a) In connection with the Shelf Registration Statement, the Company shall
comply with all the provisions of Section 4(b) hereof and shall use its
reasonable best efforts to effect such registration to permit the sale of the
Transfer Restricted Securities being sold in accordance with the intended method
or methods of distribution thereof, and pursuant thereto, shall prepare and file
with the Commission a Shelf Registration Statement relating to the registration
on any appropriate form under the Securities Act; provided, however, that no
Holder shall be entitled to be named in the Shelf Registration Statement as of
the date it is declared effective, or to the Prospectus forming part thereof,
for offers and sales of the Transfer Restricted Securities unless such Holder is
a Notice Holder.
(b) In connection with the Shelf Registration Statement and any Prospectus
required by this Agreement to permit the sale or resale of Transfer Restricted
Securities, the Company shall:
(i) Use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective during the Effectiveness Period; upon the
occurrence of any event or the existence of any fact that would cause the Shelf
Registration Statement or the Prospectus contained therein, in either case
including any document incorporated by reference therein, (A) to contain a
material misstatement or omission or (B) not be effective and usable for resale
of Transfer Restricted Securities during the Effectiveness Period, the Company
shall file promptly an appropriate amendment to the Shelf Registration
Statement, a supplement to the Prospectus or a report filed with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case
of clause (A), correcting any such misstatement or omission, and, in the case of
either clause (A) or (B), use its reasonable best efforts to cause such
amendment to be declared effective and the Shelf Registration Statement and the
related Prospectus to become usable for their intended purposes as soon as
practicable thereafter. Notwithstanding the foregoing, the Company may suspend
the effectiveness of the Shelf Registration Statement by written notice to the
Holders for a period not to exceed an aggregate of 60 days in any 90-day period
(each such period, a "Suspension Period") if an event occurs and is continuing
as a result of which it is necessary, in the reasonable judgment of the Company,
to suspend the use of the Shelf Registration Statement pending public
announcement of such event and, if necessary, amend the Shelf Registration
Statement in order that such document not include an untrue statement of fact or
omit to state a material fact necessary to make the statements therein not
misleading or amend or supplement any Prospectus in order that such document not
include an untrue statement of fact or omit to state a material fact necessary
to make the statements therein not misleading in light of the circumstances
under which they were made; provided that in the event the disclosure relates to
a previously undisclosed proposed or pending material business transaction, the
disclosure of which would impede the Company's ability to consummate such
transaction, the Company may extend a Suspension Period from 60 days to 90 days;
provided, however, that Suspension Periods shall not exceed an aggregate of 120
days in any 360-day period.
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(iii) Prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective during the
Effectiveness Period; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by the Shelf Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by the
sellers thereof set forth in the Shelf Registration Statement or supplement to
the Prospectus.
(iii) Advise the underwriter(s), if any, and selling Holders promptly (but
in any event within two Business Days) and, if requested by such Persons, to
confirm such advice in writing:
(A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Shelf Registration Statement
or any post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Shelf
Registration Statement or amendments or supplements to the Prospectus or for
additional information relating thereto,
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Shelf Registration Statement under the Securities Act or of
the suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, or
(D) of the existence of any fact or the happening of any event, during the
Effectiveness Period, that makes any statement of a material fact made in the
Shelf Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Shelf Registration
Statement or the Prospectus in order to make the statements therein not
misleading.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company shall use its
reasonable best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time and will provide to the Initial Purchasers and each
Holder who is named in the Shelf Registration Statement prompt notice of the
withdrawal of any such order.
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(iv) If reasonably requested by any Notice Holder or the Underwriters, if
any, reflect promptly as reasonably practicable in the Shelf Registration
Statement, the Prospectus or any amendment or supplement thereto (i) such
information provided in regard to the "Selling Securityholder" section and (ii)
such other information as such Notice Holder or the Underwriters, if any, shall,
on the basis of an opinion of nationally-recognized counsel experienced in such
matters, determine to be required to be included therein by applicable law, and
make any required filings of the Shelf Registration Statement, the Prospectus or
any amendment or supplement thereto; provided that the Company shall not be
required to take any actions under this Section 4(b)(iv) that are not, in the
reasonable opinion of counsel for the Company, in compliance with applicable
law. A Notice Holder or Underwriter, if any, shall be deemed to have reasonably
objected to such filing if the Shelf Registration Statement, Prospectus or any
amendment or supplement thereto, as applicable, as so filed, contains a material
misstatement or omission (other than such misstatement or omission made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Notice Holder or Underwriter).
(v) Make available at reasonable times for inspection by the selling
Holders, any underwriter participating in any distribution pursuant to the Shelf
Registration Statement, and any attorney or accountant retained by such selling
Holders or any of the underwriter(s), all financial and other records, pertinent
corporate documents and properties of the Company as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the Company's officers, directors, managers and
employees to supply all information reasonably requested by any such selling
Holders, underwriter, attorney or accountant in connection with the Shelf
Registration Statement after the filing thereof and before its effectiveness,
provided, however, that any information designated by the Company as
confidential at the time of delivery of such information shall be kept
confidential by the recipient thereof.
(vi) If requested by any selling Holders or the Underwriter(s), if any,
promptly incorporate in the Shelf Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information as
such selling Holders and Underwriter(s), if any, may reasonably request to have
included therein, including, without limitation: (1) information relating to the
"Plan of Distribution" of the Transfer Restricted Securities, (2) information
with respect to the principal amount of Notes or number of shares of Common
Stock being sold to such underwriter(s), (3) the purchase price being paid
therefor and (4) any other terms of the offering of the Transfer Restricted
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as reasonably
practicable after the Company is notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment.
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(ix) Furnish to each selling Holder and each of the Underwriter(s), if any,
without charge, at least one copy of the Shelf Registration Statement, as first
filed with the Commission, and of each amendment thereto (and any documents
incorporated by reference therein or exhibits thereto (or exhibits incorporated
in such exhibits by reference) as such Person may request).
(vii) Deliver to each selling Holder and each of the Underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such Persons
reasonably may request; subject to any notice by the Company in accordance with
this Section 4(b) of the existence of any fact or event of the kind described in
Section 4(b)(iii)(D), the Company hereby consents to the use of the Prospectus
and any amendment or supplement thereto by each of the selling Holders and each
of the underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any amendment or
supplement thereto.
(ix) In the case of an Underwritten Offering, the Company shall:
(A) upon request, furnish to each selling Holder and
each Underwriter, if any, in such substance and scope as they
may reasonably request and as are customarily made by issuers
to underwriters in primary underwritten offerings for selling
security holders, upon the date of closing of any sale of
Transfer Restricted Securities in an Underwritten
Registration:
(1) a certificate, dated the date of such closing, signed by the Chief
Financial Officer of the Company confirming, as of the date thereof, matters of
the type set forth in Section 5(g) of the Purchase Agreement and such other
matters as such parties may reasonably request;
(2) opinions, each dated the date of such closing, of counsel to the
Company covering such of the matters as are customarily covered in legal
opinions to underwriters in connection with underwritten offerings of
securities; and
(3) customary comfort letters, dated the date of such closing, from the
Company's independent accountants in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in connection
with underwritten offerings of securities;
(B) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the selling Holders pursuant to this
clause (ix).
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(x) Before any public offering of Transfer Restricted Securities, cooperate
with the selling Holders, the Underwriter(s), if any, and their respective
counsel in connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions in the United States as the selling Holders or Underwriter(s), if
any, may reasonably request in writing and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Transfer Restricted Securities covered by the Shelf Registration Statement;
provided that the Company will not be required to qualify to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(xi) Cooperate with the selling Holders and the Underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends (unless required by applicable securities laws); and enable such
Transfer Restricted Securities to be in such denominations and registered in
such names as the selling Holders or the Underwriter(s), if any, may request at
least two Business Days before any sale of Transfer Restricted Securities made
by such underwriter(s).
(xii) Use its reasonable best efforts to cause the Transfer Restricted
Securities covered by the Shelf Registration Statement to be registered with or
approved by such other U.S. governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the Underwriter(s), if any,
to consummate the disposition of such Transfer Restricted Securities.
(xiii) Provide CUSIP numbers for all Transfer Restricted Securities not
later than the effective date of the Shelf Registration Statement and provide
the Trustee under the Indenture with certificates for the Notes that are in a
form eligible for deposit with The Depository Trust Company.
(xiv) Cooperate and assist in any filings required to be made with the NASD
and in the performance of any due diligence investigation by any Underwriter
that is required to be retained in accordance with the rules and regulations of
the NASD.
(xv) Otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and all reporting
requirements under the Exchange Act.
(xvi) Cause the Indenture to be qualified under the TIA not later than the
effective date of the Shelf Registration Statement required by this Agreement,
and, in connection therewith, cooperate with the Trustee and the holders of
Notes to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use its reasonable best efforts to cause the Trustee thereunder to
execute all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner.
(xvii) Cause all shares of Common Stock covered by the Shelf Registration
Statement to be listed or quoted, as the case may be, on each securities
exchange or automated quotation system on which similar securities issued by the
Company are then listed or quoted.
(xviii) If requested by the Underwriter(s), make appropriate officers of
the Company available to the Underwriter(s) for meetings with prospective
purchasers of the Transfer Restricted Securities and prepare and present to
potential investors customary "road show" or marketing materials in a manner
consistent with other new issuances of other securities similar to the Transfer
Restricted Securities.
(c) Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 4(b)(iii)(D) hereof, such Holder will, and will
use its reasonable best efforts to cause any underwriter(s) in an Underwritten
Offering to, forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the Shelf Registration Statement until:
(i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 4(b)(i) and 4(b)(viii) hereof; or
(ii) such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus.
If so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice of suspension.
(5) Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement shall be borne by the Company
regardless of whether a Shelf Registration Statement becomes effective,
including, without limitation:
(i) all registration and filing fees and expenses (including filings made
by any Initial Purchasers or Holders with the NASD);
(ii) all fees and expenses of compliance with federal securities and state
Blue Sky or securities laws;
(iii) all expenses of printing (including printing of Prospectuses and
certificates for the Common Stock to be issued upon conversion of the Notes) and
the Company's expenses for messenger and delivery services and telephone;
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(iv) all fees and disbursements of counsel to the Company and, subject to
Section 5(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing (or
authorizing for quotation) the Common Stock on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants
of the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company shall bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal, accounting or other duties), the expenses of any annual audit
and the fees and expenses of any Person, including special experts, retained by
the Company.
(b) In connection with the Shelf Registration Statement required by this
Agreement, including any amendment or supplement thereto, and any other
documents delivered to any Holders, the Company shall reimburse the Initial
Purchasers and the Holders of Transfer Restricted Securities being registered
pursuant to the Shelf Registration Statement, as applicable, for the reasonable
fees and disbursements of not more than one counsel, which shall be chosen by a
Majority of Holders for whose benefit the Shelf Registration Statement is being
prepared.
6. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Holder named in the
Shelf Registration Statement or any Prospectus, including any amendment or
supplement thereto, filed pursuant to this Agreement, such Holder's officers,
directors, partners and employees and each person, if any, who controls such
Holder within the meaning of the Securities Act (each, an "Indemnified Holder"),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to resales of the Transfer Restricted
Securities), to which such Indemnified Holder may become subject, under the Act
or otherwise, insofar as any such loss, claim, damage, liability or action
arises out of, or is based upon:
(i) any untrue statement or alleged untrue statement of a material fact
contained in (A) the Shelf Registration Statement or Prospectus or any amendment
or supplement thereto in which the Indemnified Holder is named, or (B) any blue
sky application or other document or any amendment or supplement thereto
prepared or executed by the Company (or based upon written information furnished
by or on behalf of the Company expressly for use in such blue sky application or
other document or amendment or supplement) filed in any jurisdiction
specifically for the purpose of qualifying any or all of the Transfer Restricted
Securities under the securities law of any state or other jurisdiction (such
application or document being hereinafter called a "Blue Sky Application"), or
(C) in any written materials or information provided to investors by, or with
the approval of, the Company in connection with the marketing of the offering of
the Transfer Restricted Securities ("Marketing Materials"), including any
roadshow or investor presentations made to investors by the Company (whether in
person or electronically); or
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(ii) the omission or alleged omission to state therein any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading,
and shall reimburse each Indemnified Holder promptly upon demand for any legal
or other expenses reasonably incurred by such Indemnified Holder in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in the Shelf Registration Statement or Prospectus or
amendment or supplement thereto or in any Blue Sky Application or Marketing
Materials in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Indemnified Holder specifically for
inclusion therein; provided, further, that as to any Prospectus or any amendment
or supplement thereto, this indemnity agreement shall not inure to the benefit
of any Indemnified Holder on account of any loss, claim, damage, liability or
action arising from the sale of Transfer Restricted Securities to any person by
that Indemnified Holder if that Indemnified Holder failed to send or give a copy
of the Prospectus or any amendment or supplement thereto, to that person, and
the untrue statement or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact in such Prospectus or any amendment
or supplement thereto was corrected in the Prospectus or any amendment or
supplement thereto, unless such failure resulted from non-compliance by the
Company with Section 4(b)(viii); provided, further, that the indemnity agreement
contained in this Section 5(a) shall not inure to the benefit of any Holder to
the extent that any loss, claim, damage, liability or action results from the
use by such Holder of a prospectus otherwise than connection with an offer or
sale of Notes. Each Holder acknowledges that the indemnity agreement in this
subsection (a) does not extend to any liability which such holder might have
under Section 5(b) of the Securities Act by reason of the fact that such Holder
sold Notes or Common Shares to a person to whom there was not sent or given, at
or prior to written confirmation of such sale, a copy of the prospectus. The
foregoing indemnity agreement is in addition to any liability which the Company
may otherwise have to any Indemnified Holder.
(b) Each Holder, severally and not jointly, shall indemnify and hold
harmless, the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of the Securities Act, from and against
any loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company or any such director, officer, or controlling
person may become subject, insofar as any such loss, claim, damage or liability
or action arises out of, or is based upon:
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Shelf Registration Statement or Prospectus or any amendment or
supplement thereto, or in any Blue Sky Application or Marketing Materials; or
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(ii) the omission or the alleged omission to state therein any material
fact necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder (or its related Indemnified Holder), and shall reimburse the Company
and any such officer or controlling person promptly upon demand for any legal or
other expenses reasonably incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Holder may otherwise have to the Company and any such
director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 6 except to the extent it has been materially
prejudiced (including, without limitation, the forfeiture of substantial rights
and defenses) by such failure and, provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under this Section 6. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that a
Majority of Holders shall have the right to employ separate counsel to represent
jointly a Majority of Holders and their respective officers, directors,
partners, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by a
Majority of Holders against the Company under this Section 6, if, (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party), and in any such event the fees and expenses
of such separate counsel shall be paid by the Company. It is understood that,
other than as described in the last proviso of the preceding sentence, the
indemnifying party or parties shall not, in connection with any proceeding or
related proceeding in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. No indemnifying party shall:
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(i) without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld or delayed) settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding
and does not contain any statement as to or admission of fault, culpability or a
failure to act by or on behalf of any indemnified party, or
(ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with a written consent from the indemnifying party or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement.
(d) If the indemnification provided for in this Section 6 shall for any
reason be unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability,
or action in respect thereof, referred to therein, each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof:
(i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Transfer
Restricted Securities on the one hand and a Holder with respect to the sale by
such Holder of the Transfer Restricted Securities on the other, or
(ii) if the allocation provided by clause (6)(d)(i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 6(d)(i) but also the relative fault of
the Company on the one hand and the Holders on the other with respect to the
statements or omissions or alleged statements or alleged omissions that resulted
in such loss, claim, damage or liability (or action in respect thereof), as well
as any other relevant equitable considerations.
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The relative benefits received by the Company on the one hand and a Holder on
the other with respect to such offering and such sale shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Notes
purchased under the Purchase Agreement (before deducting expenses) received by
the Company on the one hand, bear to the total proceeds received by such Holder
with respect to its sale of Transfer Restricted Securities on the other. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Holders, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and each Holder agree that it would not be just and equitable if the
amount of contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 6(d) shall be
deemed to include, for purposes of this Section 6(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no Holder shall be required to contribute any
amount in excess of the amount by which the total price at which the Transfer
Restricted Securities purchased by it were resold exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute as provided in this Section 6(d) are several and not joint.
7. Underwritten Registrations.
(a) No Holder may participate in any Underwritten Registration hereunder
unless such Holder:
(i) agrees to sell such Holder's Transfer Restricted Securities on the
basis provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements;
(ii) completes and executes all reasonable questionnaires, powers of
attorney, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such underwriting arrangements; and
(iii) shall be responsible for all underwriting commissions and discounts
in connection therewith.
(b) Notwithstanding anything to the contrary provided in this Agreement, no
underwritten offering shall take place without the consent of the Company.
8. Miscellaneous.
(a) Actions Affecting Transfer Restricted Securities. The Company shall
not, directly or indirectly, take any action with respect to the Transfer
Restricted Securities as a class that would adversely affect the ability of the
Holders of Transfer Restricted Securities to include such Transfer Restricted
Securities in a registration undertaken pursuant to this Agreement.
(b) No Inconsistent Agreements. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. In addition, the Company shall
not grant to any of its security holders (other than the Holders of Transfer
Restricted Securities in such capacity) the right to include any of its
securities in the Shelf Registration Statement provided for in this Agreement
other than the Transfer Restricted Securities. The Company has not previously
entered into any agreement (which has not expired or been terminated) granting
any registration rights with respect to its securities to any Person which
rights conflict with the provisions hereof.
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(c) Amendments and Waivers. This Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
a Majority of Holders or such greater percentage of the Holders as required by
the Indenture. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions of this Agreement with respect to a matter that relates
exclusively to the rights of Holders whose Notes or Common Shares are being sold
pursuant to the Shelf Registration Statement and thereby does not directly or
indirectly affect the rights of other Holders may be given by a Majority of
Holders of the Transfer Restricted Securities being sold pursuant to such Shelf
Registration Statement.
(d) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, facsimile
transmission, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
registrar under the Indenture or the transfer agent of the Common Stock, as the
case may be; and
(ii) if to the Company:
Member Works Incorporated
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X.X. Xxxxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if transmitted by
facsimile; and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that (i) this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder and (ii) nothing contained
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities, in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement.
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(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Securities Held by the Company or Its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Transfer Restricted Securities held by the
Company or its Affiliates shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.
(j) Severability. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
MEMBERWORKS INCORPORATED
By /s/ Xxxxx Xxxxx
-------------------
Name: Xxxxx Xxxxx
Title: Executive Vice President and CFO
XXXXXX BROTHERS INC.
CIBC WORLD MARKETS CORP.
BY: XXXXXX BROTHERS INC.
By /s/ Xxxxxx Xxxxxxxxx
-------------------------
Authorized Representative
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