EXHIBIT 10.16
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of June 8, 1999 (the
"Registration Rights Agreement"), by and among xxxxxxxxxx.xxx, Inc., a Delaware
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corporation (the "Company"), Virgin Holdings, Inc., a Delaware corporation,
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including any of its transferees of Registrable Securities (together with any
holder of Virgin Registrable Securities (as hereinafter defined), "Virgin"), Rho
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Management Trust I, a New York trust ("Rho"), The Columbia House Company, a New
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York partnership ("Columbia House"), certain officers and directors of the
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Company who are shareholders of the Company listed on Schedule I ("Officers and
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Directors") and the other shareholder of the Company listed on Schedule II
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(collectively with the Officers and Directors, the "Other Holders"). Virgin,
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Rho, Columbia House and the Other Holders are referred to collectively herein as
the "Registration Rights Holders."
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WHEREAS, pursuant to the Agreement, dated as of June 8, 1999 (the
"Agreement"), between the Company and Virgin, in exchange for the rights granted
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by Virgin to the Company under a License Agreement, the Company will issue to
Virgin shares of common stock of the Company (the "Common Stock").
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WHEREAS, in order to induce Virgin to enter into the Agreement, the Company
has agreed to grant registration rights with respect to Virgin Registrable
Securities as set forth in this Registration Rights Agreement;
WHEREAS, the registration rights of Rho, Columbia House and the Other
Holders under this Registration Rights Agreement replace and supersede existing
registration rights granted by the Company to Rho, Columbia House and the Other
Holders pursuant to those agreements listed on Schedule III hereto (the
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"Existing Registration Rights Agreements") which are being terminated effective
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the date hereof; and
WHEREAS, each Rho, Columbia House and the Other Holders own the shares of
Common Stock set forth beside its name on Schedule IV;
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NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:
Section 1. General; Securities Subject to this Registration Rights
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Agreement.
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(a) Grant of Rights. The Company hereby grants registration rights to
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Virgin, Rho, Columbia House and the Other Holders upon the terms and conditions
set forth in this Registration Rights Agreement.
(b) No Other Rights. The Company hereby represents and warrants
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that, other than those rights granted pursuant to the Existing Registration
Rights Agreements (which are being terminated upon execution of this
Registration Rights Agreement) and the rights granted pursuant to the agreements
listed on Schedule V, the Company has not granted or agreed to grant any
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registration rights to any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind, and shall include any successor (by merger
or otherwise) of any such entity, any of the foregoing herein being referred to
as "Person," and there are no other existing agreements, arrangements or
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understandings between the Company and any other Person relating to registration
rights.
(c) Agreement of Registration Rights Holders. Rho, Columbia House
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and the Other Holders hereby acknowledge and agree that, effective as of the
date hereof, the Existing Registration Rights Agreements are terminated and of
no further force and effect, and that this Registration Rights Agreement
replaces and supersedes any and all agreements, arrangements and understandings
(including the Existing Registration Rights Agreements), whether written or
oral, between the Company and each of Rho, Columbia House and the Other Holders
with respect to registration rights.
(d) Registrable Securities. Registrable Securities means each of the
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following: (a) any and all shares of Common Stock currently held by the
Registration Rights Holders; (b) any and all shares of Common Stock issued to
any of the Registration Rights Holders upon conversion or exercise of
convertible securities of the Company currently held by them; (c) all Common
Stock which Virgin holds at any time ("Virgin Registrable Securities"); and
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(d) any shares of Common Stock issued or issuable to any of the Registration
Rights Holders by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
For the purposes of this Registration Rights Agreement, Registrable
Securities will cease to be Registrable Securities when (i) a registration
statement covering such Registrable Securities has been declared effective under
the Securities Act of 1933, as amended, (the "Securities Act") by the Securities
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and Exchange Commission (the "Commission") and such Registrable Securities have
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been disposed of pursuant to such effective registration statement, (ii) such
Registrable Securities (other than Virgin Registrable Securities) may be
distributed to the public without any limitation as to volume pursuant to Rule
144 (or any successor provision then in effect) under the Securities Act, (iii)
such Registrable Securities are proposed to be sold or distributed by a Person
not entitled to the registration rights granted by this Registration Rights
Agreement or (iv) such Registrable Securities cease to be outstanding. From and
after the date that a Registration Rights Holder no longer owns
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Registrable Securities, such Registration Rights Holder shall not be subject to
the provisions of this Registration Rights Agreement.
Section 2. Demand Registrations.
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(a) Requests for Registration. At any time after 9 months of an
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initial public offering of shares of Common Stock (an "IPO"), and subject to the
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limitations set forth in Sections 2(c) and (d), Virgin, Rho or Columbia House
may request registration under the Securities Act of all or any portion of their
Registrable Securities on Form S-1 or any similar long-form registration
("Long-Form Registrations") or on Form S-2 or S-3 or any similar short-form
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registration ("Short-Form Registrations"), if available. Subject to the
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limitations set forth in Section 2(g), any Other Holder of Registrable
Securities may participate in registrations under the Securities Act of all or
any portion of its Registrable Securities initiated by Virgin, Rho and/or
Columbia House. All registrations requested pursuant to this Section 2(a) are
referred to herein as "Demand Registrations." The Registration Rights Holder
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initially requesting a registration of Registrable Securities shall be referred
to herein as the "Initiating Holder." Demand Registrations shall be made through
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Short-Form Registrations whenever the Company is permitted to do so. After the
Company has become subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, the Company shall use its reasonable best
efforts to make Short-Form Registrations on Form S-3 available for the sale of
Registrable Securities. Each request for a Demand Registration shall specify the
approximate number of Registrable Securities requested to be registered and the
anticipated per share price range for such offering. Within ten days after
receipt of any such request, the Company shall give written notice of such
requested registration to all Registration Rights Holders and, subject to the
limitations set forth in Section 2(g), shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 days after the receipt of the Company's
notice. Notwithstanding anything herein to the contrary, a Demand Registration
may not be requested pursuant to this Section 2(a) unless the number of
Registrable Securities requested to be included in such Demand Registration is
at least 750,000.
(b) Additional Virgin Rights. In addition to the Demand Registration
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rights granted to Virgin pursuant to Section 2(a), Virgin shall be entitled to
cause the Company to effect an IPO. The Company shall include in any IPO
(whether or not caused by Virgin), without regard to Section 3(c) below, such
number of Virgin Registrable Securities as Virgin may elect, up to a maximum
number of Registrable Securities equal to such number that results in Virgin
receiving proceeds (after deduction of underwriters commissions and discounts)
in the IPO of $40 million. The Registration Expenses of Virgin shall be paid by
the Company. Rho, Columbia House and the Other Holders shall not be entitled to
include any of their Registrable Securities in the IPO.
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(c) Permitted Virgin Demand Registrations. Virgin shall be entitled to
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request four Demand Registrations, two of which may be Long-Form Registrations.
(d) Permitted Rho and Columbia House Demand Registrations. Rho and
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Columbia House each shall be entitled to request, (i) in the case of Rho, one
Long-Form and two Short-Form Registrations, and (ii) in the case of Columbia
House, one Long-Form and one Short-Form Registration; provided that, if Rho
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requests a Long-Form Registration, Columbia House may not request a Long-Form
Registration, and if Columbia House requests a Long-Form Registration, Rho may
not request a Long-Form Registration.
(e) Inclusion in Demand Registrations. In addition to the rights
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granted to the Registration Rights Holders, subject to Sections 2(b) and 2(g),
(i) Virgin, Rho and Columbia House are entitled to participate in a Demand
Registration requested by any one of them and (ii) each Other Holder may
participate in a Demand Registration initiated by Virgin, Rho and/or Columbia
House.
(f) Effective Registration Statement. A registration requested
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pursuant to this Section 2 shall not be deemed to have been effected:
(i) unless a registration statement with respect thereto has
become effective and remained effective in compliance with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement until the earlier of (x) such time as all
of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement or (y) 180 days after the effective date of such
registration statement, except with respect to any registration statement filed
pursuant to Rule 415 under the Securities Act, in which case the Company shall
use its best efforts to keep such registration statement effective until such
time as all of the Registrable Securities cease to be Registrable Securities;
(ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason not
attributable to the Registration Rights Holders and has not thereafter become
effective; or
(iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are not
satisfied or waived, other than by reason of a failure on the part of the
Registration Rights Holders.
(g) Priority on Demand Registrations. The Company shall not include
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in any Demand Registration any securities which are not Registrable
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Securities without the prior written consent of the Registration Rights Holders
holding a majority of the Registrable Securities included in such registration.
If a Demand Registration is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the number of
Registrable Securities and, if permitted hereunder, other securities requested
to be included in such offering exceeds the number of Registrable Securities and
other securities, if any, which can be sold in an orderly manner in such
offering within a price range acceptable to the Registration Rights Holders
holding a majority of the Registrable Securities to be included in such
registration without adversely affecting the marketability of the offering, the
Company shall only include Registrable Securities in such registration and shall
include Registrable Securities in such registration in the following priority,
(i) first, the number of Registrable Securities requested to be included by
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Virgin, Rho and Columbia House which in the opinion of such underwriters can be
sold in an orderly manner within the price range of such offering, pro rata
among the respective holders thereof on the basis of their respective percentage
ownership of Registrable Securities, and (ii) second, all securities requested
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to be registered by the Other Holders which in the opinion of such underwriters
can be sold in an orderly manner within the price range of such offering, pro
rata among the respective holders thereof on the basis of their respective
percentage ownership of Registrable Securities. If the total number of
Registrable Securities requested to be included in such registration cannot be
included as provided in the preceding sentence, the Initiating Holder of such
registration shall have the right to withdraw the request for registration by
giving written notice to the Company within 20 days after receipt of such notice
by the Company and, in the event of such withdrawal, such request shall be
counted for purposes of the requests for registration to which such Initiating
Holder is entitled pursuant to Section 2, unless such Initiating Holder pays the
expenses of such registration.
(h) Listing. The Company shall list the Registrable Securities
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subject to Section 2(a) on The Nasdaq Stock Market or another of the national
securities exchanges or automated quotation system.
(i) Expenses. The Company will pay all Registration Expenses (except
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for any underwriting commissions or discounts) in connection with the IPO and
any Demand Registration requested pursuant to this Section 2.
(j) Limitations, Conditions and Qualifications to Obligations Under
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Registration Covenants. The Company shall not be obligated to effect any
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Demand Registration within 180 days after the effective date of a previous
Demand Registration. Anything in this Registration Rights Agreement to the
contrary notwithstanding, it is understood and agreed that the Company shall not
be required to file a registration statement, amendment or post-effective
amendment thereto or prospectus supplement or to supplement or amend any
registration statement if the Company is then involved in discussions
concerning, or otherwise engaged in, an acquisition, disposition, financing or
other material transaction if the Board of Directors
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of the Company determines in good faith that the making of such a filing,
supplement or amendment at such time would materially adversely effect or
interfere with such transaction (a "Valid Business Reason"); provided that the
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Company shall not postpone making filings, supplements or amendments for more
than an aggregate of 90 days in any 12-month period. The Company shall promptly
give the Registration Rights Holders written notice of such postponement,
containing a general statement of the reasons for such postponement and an
approximation of the anticipated delay. Upon receipt by a Registration Rights
Holder of notice of an event of the kind described in this Section 2(j), such
Registration Rights Holder will discontinue its disposition of Registrable
Securities until it receives a notice from the Company that such disposition may
continue and of any supplemented or amended prospectus indicated in such notice.
If the Company postpones the filing of a registration statement, the Initiating
Holder of such registration shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which such Initiating Holder is entitled pursuant to Section 2. If the Company
shall give any notice of postponement or withdrawal of a registration statement,
the Company shall, at such time as the Valid Business Reason that caused such
postponement or withdrawal no longer exists (but in no event later than 90 days
after the date of the postponement) and upon notification by the Initiating
Holder that it wishes to proceed, use its best efforts to promptly effect the
registration under the Securities Act of the Registrable Securities covered by
such postponed or withdrawn registration statement. Notwithstanding anything to
the contrary contained herein, the Company may not postpone or withdraw a filing
pursuant to this paragraph more than once in any 12-month period.
(k) Underwriting Procedures. If the Initiating Holder so elects, the
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offering of Registrable Securities pursuant to a Demand Registration shall be in
the form of a firm commitment underwritten offering and the managing underwriter
shall be selected in accordance with Section 2(l).
(l) Selection of Underwriters. The Registration Rights Holders
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holding a majority of the Registrable Securities included in any underwritten
Demand Registration shall have the right to select the managing underwriters of
such underwritten offering. The Company shall have the right to approve such
managing underwriters, which approval shall not be unreasonably withheld.
(m) Other Registration Rights. Except as provided in this
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Registration Rights Agreement, (i) the Company shall not grant to any Person the
right to request the Company to register any equity securities of the Company,
or any securities convertible or exchangeable into or exercisable for such
securities, without the prior written consent of the Registration Rights Holders
holding a majority of the Registrable Securities, and (ii) the Company shall not
grant to any Person the right to request the Company to register any equity
securities of the Company, or any securities
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convertible or exchangeable into or exercisable for such securities, on terms
which are more favorable (e.g., rights which are other than pari passu) to such
Person than those granted to Virgin hereunder without the prior written consent
of the Registration Rights Holders holding a majority of the Registrable
Securities.
Section 3. Piggyback Registrations.
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(a) Right to Piggyback. Whenever the Company proposes to register
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any of its securities under the Securities Act at any time after an IPO (other
than pursuant to a Demand Registration (which is addressed under Section 2 above
rather than under this Section 3)) and the registration form to be used may be
used for the registration of Registrable Securities (a "Piggyback
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Registration"), the Company shall give prompt written notice to all Registration
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Rights Holders of its intention to effect such a registration and, subject to
Section 3(c), shall include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion therein
within 20 days after the receipt of the Company's notice; provided, that if,
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at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each Registration
Rights Holder requesting inclusion in such registration and (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
any obligation of the Company to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any Registration Rights
Holder entitled to cause a registration to be effected as a registration under
Section 2, and (ii) in the case of a determination to delay registering, shall
be permitted to delay registering any Registrable Securities for the same period
as the delay in registering such Company securities.
(b) Piggyback Expenses. The Registration Expenses of the
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Registration Rights Holders shall be paid by the Company in all Piggyback
Registrations, whether or not such Piggyback Registration becomes effective.
(c) Priority on Piggyback Registrations. If a Piggyback Registration
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is an underwritten registration and the managing underwriters advise the Company
in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in an orderly
manner in such offering within a price range acceptable to the Company, the
Company shall include in such registration (i) first, the securities the
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Company proposes to sell for its own account, (ii) second, the Registrable
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Securities requested to be included in such registration, pro rata among the
Registration Rights Holders on the basis of their respective ownership of
Registrable Securities, and (iii) third, other securities requested to be
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included in such registration; provided, however, that for purposes of this
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Section
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3(c), all holders of Virgin Registrable Securities shall be considered one
Registration Rights Holder. The Company shall not limit the number of
Registrable Securities to be included in a Piggyback Registration pursuant to
this Registration Rights Agreement in order to include shares held by
stockholders with no registration rights or to include any shares of stock
issued to employees, officers, directors or consultants pursuant to any stock
option plan unless such employees, officers, directors or consultants have
registration rights.
(d) Selection of Underwriters. Registration Rights Holders holding a
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majority of the Registrable Securities included in any underwritten Piggyback
Registration shall have the right to approve the managing underwriters selected
for such offering, which approval shall not be unreasonably withheld.
Section 4. Holdback Agreements.
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(a) No Registration Rights Holder shall effect any public sale or
distribution (including sales pursuant to Rule 144, except in the case of
Columbia House, which shall be entitled to effect sales pursuant to Rule 144;
provided, that Columbia House shall not effect any public sale or distribution,
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including pursuant to Rule 144, during the seven days prior to and the 180-day
period beginning on the effective date of an IPO, unless the underwriters
managing the IPO otherwise agree) of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 180-day period beginning on the effective
date of any underwritten registration (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (ii) shall use reasonable best efforts to cause each holder
of at least 5% (on a fully-diluted basis) of its shares of Common Stock, or any
securities convertible into or exchangeable or exercisable for shares of Common
Stock, purchased from the Company at any time after the date of this
Registration Rights Agreement (other than in a registered public offering) to
agree not to effect any public sale or distribution (including sales pursuant to
Rule 144) of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the underwriters
managing the registered public offering otherwise agree.
Section 5. Registration Procedures. Whenever the Registration Rights
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Holders have requested that any Registrable Securities be registered pursuant to
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this Registration Rights Agreement, the Company shall use its best efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and pursuant thereto
the Company shall as expeditiously as possible:
(a) prepare and (within 90 days after the end of the period within
which requests for registration may be given to the Company or in any event as
soon thereafter as practicable) file with the Commission a registration
statement with respect to such Registrable Securities and use its reasonable
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the counsel selected by a
majority of the Registration Rights Holders covered by such registration
statement copies of all such documents proposed to be filed, which documents
shall be subject to the prompt review and comment of such counsel);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration statement
until the earlier of (x) such time as all of such Registrable Securities have
been disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement or (y) 180
days after the effective date of such registration statement, except with
respect to any registration statement filed pursuant to Rule 415 under the
Securities Act, in which case the Company shall use its best efforts to keep the
registration statement effective and updated, from the date such registration
statement is declared effective until such time as all of the Registrable
Securities cease to be Registrable Securities;
(c) furnish to each seller of Registrable Securities covered by such
registration statement, such number of copies of such registration statement,
each amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(d) use its reasonable best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of the
United States of America where an exemption is not available and as the sellers
of Registrable Securities covered by such registration statement shall
reasonably request, (y) to keep such registration or qualification in effect for
so long as such registration statement remains in effect and (z) to take any
other action that may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities to
be sold by
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such sellers, except that the Company shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this paragraph (d) be obligated
to be so qualified or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary in the
opinion of counsel to the Company and counsel to the seller or sellers of
Registrable Securities to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(f) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(g) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the National Association of
Securities Dealers, Inc. (the "NASD") automated quotation system and, if
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listed on the NASD automated quotation system, use its best efforts to secure
designation of all such Registrable Securities covered by such registration
statement as a "national market system security" on The Nasdaq Stock Market
within the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure
authorization of The Nasdaq Stock Market for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(h) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(i) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions (including,
without limitation, causing representatives of the Company to participate in any
"road show" or "road shows") as the Registration Rights Holders holding a
majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
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(j) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement, in each case
subject to confidentiality restrictions reasonably imposed by the Company;
(k) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first day of the Company's
first full calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;
(l) permit any Registration Rights Holder which holder, in its sole and
exclusive judgment, might be deemed to be an underwriter or a controlling Person
of the Company, to participate in the preparation of such registration or
comparable statement and to require the insertion therein of material, furnished
to the Company in writing, which in the reasonable judgment of such holder and
its counsel should be included;
(m) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order; and
(n) in the case of an underwritten or "best efforts" offering, at
the request of any seller or sellers of Registrable Securities, furnish at the
effective date of such registration statement to such sellers of Registrable
Securities, and such sellers' underwriters, if any, a signed counterpart of:
(x) an opinion of counsel for the Company, dated the effective
date of such registration statement or, if applicable, the date of the closing
under the underwriting agreement, and
(y) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial statements included or
incorporated by reference in such registration statement,
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covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of the accountants'
comfort letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as the underwriters may reasonably request.
Section 6. Registration Expenses. "Registration Expenses" means all
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expenses incident to the Company's performance of or compliance with Section 2,
including, without limitation, all registration and filing fees, all fees of The
Nasdaq Stock Market, other national securities exchanges or the NASD, all fees
and expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters required by or
incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (excluding any
underwriting discounts or commissions with respect to the Registrable
Securities). The reasonable fees and expenses of one counsel to the
Registration Rights Holders (selected by Registration Rights Holders
representing at least 50% of the Registrable Securities covered by such
registration) and the reasonable fees and disbursements of each additional
counsel retained by any Registration Rights Holder for the purpose of rendering
a legal opinion to the underwriter on behalf of such Registration Rights Holder
in connection with any underwritten Demand Registration or Piggyback
Registration. Notwithstanding the foregoing, in the event the Company shall
determine, in accordance with Section 3(a) or Section 2(j), not to register any
securities with respect to which it had given written notice of its intention to
so register to Registration Rights Holders, all of the costs of the type (and
subject to any limitation to the extent) set forth in this definition and
incurred by Registration Rights Holders in connection with such registration on
or prior to the date the Company notifies the Registration Rights Holders of
such determination shall be deemed Registration Expenses.
Section 7. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law,
each Registration Rights Holder, its officers, directors, partners, members,
affiliates and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses,
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the
12
Company by such holder expressly for use therein or caused by the failure of
such holder to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished such holder
with a sufficient number of copies of the same and such holder was legally
obligated to make such delivery. In connection with an underwritten offering,
the Company shall indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the Registration Rights Holders. 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 such securities by any Registration
Rights Holder.
(b) In connection with any registration statement in which a
Registration Rights Holder is participating, each such holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such holder specifically stating that it is for use in the
preparation of such registration statement, prospectus or preliminary
prospectus, amendment or supplement; provided that the obligation to
--------
indemnify shall be individual, not joint and several, for each holder and shall
be limited to the net amount of proceeds received by such holder from the sale
of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder unless and only
to the extent that such failure results in the indemnifying party's forfeiture
of substantive rights or defenses) and (ii) unless such indemnified party has
been advised in writing by counsel that a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however, that any
indemnified party may, at its own expense, retain separate counsel to
participate in such defense. If such defense is assumed, the indemnifying party
shall not be subject to any liability for any settlement made by the indemnified
party without its consent (but such consent shall not be unreasonably withheld).
No indemnifying
13
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of an unconditional release from all liability in respect to
such claim or litigation or which requires action other than the payment of
money by the indemnifying party. An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim shall not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless an indemnified party
has been advised in writing by counsel that a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(d) Contribution. If the indemnification provided for in this
------------
Section 7 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 7(a) or 7(b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Section 7(a) or 7(b), the indemnified party and
the indemnifying party under Section 7(a) or 7(b) shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same,
including those incurred in connection with any claim for indemnity hereunder),
(i) in such proportion as is appropriate to reflect the relative fault of the
Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action or proceeding in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and such prospective
sellers from the offering of the securities covered by such registration
statement; provided, however, that for purposes of this clause (ii), the
-------- -------
relative benefits received by the prospective sellers shall be deemed not to
exceed the amount of proceeds received by such prospective sellers. 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. Such prospective sellers'
obligations to contribute as provided in this Section 7(d) are several in
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and contribution similar
---------------------
to that specified in the preceding subdivisions of this Section 7 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities
14
with respect to any required registration or other qualification of securities
under any federal or state law or regulation of any governmental authority
other than the Securities Act.
(f) Indemnification Payments. The indemnification and contribution
------------------------
required by this Section 7 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 expense, loss, damage or liability is incurred.
Section 8. Rule 144. The Company covenants that, after the IPO, it shall
--------
file (a) any reports required to be filed by it under the Exchange Act of 1934,
as amended, and (b) take such further action as each holder of Registrable
Securities may reasonably request (including providing any information necessary
to comply with Rule 144 under the Securities Act), all to the extent required
from time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rules or regulations hereafter adopted by
the Commission. The Company shall, upon the request of any holder of
Registrable Securities, deliver to such holder a written statement as to whether
it has complied with such requirements.
Section 9. Participation in Underwritten Registrations. No Person may
-------------------------------------------
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided, that no
--------
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in Section 7 hereof.
Section 10. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall not hereafter
--------------------------
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the Registration Rights Holders in this
Registration Rights Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall
--------------------------------------------
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the Registration Rights
Holders to
15
include their Registrable Securities in a registration undertaken pursuant to
this Registration Rights Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration.
(c) Remedies. Any Person having rights under any provision of this
--------
Registration Rights Agreement shall be entitled to enforce such rights
specifically and to recover damages caused by reason of any breach of any
provision of this Registration Rights Agreement and to exercise all other rights
granted by law. The parties hereto agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Registration
Rights Agreement and that any party may in its sole discretion apply to any
court of law or equity of competent jurisdiction (without posting any bond or
other security) for specific performance and for other injunctive relief in
order to enforce or prevent violation of the provisions of this Registration
Rights Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Registration Rights Agreement may be amended or waived only
upon the prior written consent of the Company and the Registration Rights
Holders holding a majority of the Registrable Securities; provided
--------
that (i) no such amendment or action which adversely affects any one
Registration Rights Holder or group of Registration Rights Holders, as such,
vis-a-vis the other Registration Rights Holders, as such, shall be effective
against such Registration Rights Holder or Registration Rights Holders without
the prior written consent of such Registration Rights Holder or Registration
Rights Holders and (ii) no such amendment or action which adversely affects the
unique rights of Virgin, Rho and Columbia House hereunder (e.g., a reduction in
the number of their Demand Registrations) shall be effective against Virgin, Rho
or Columbia House without the prior written consent of Virgin, Rho and Columbia
House, as the case may be.
(e) Successors and Assigns. All covenants and agreements in this
----------------------
Registration Rights Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and permitted assigns
of the parties hereto. Except by operation of law, this Agreement may not be
assigned by the Company or any other party without the prior written consent of
a majority of the Registrable Securities outstanding at the time consent is
requested. In addition and notwithstanding the foregoing, Virgin may assign this
Agreement to any holder of Virgin Registrable Securities and, whether or not any
express assignment has been made, the provisions of this Registration Rights
Agreement which are for the benefit of Virgin are also for the benefit of, and
enforceable by, any subsequent holder of Virgin Registrable Securities.
(f) Severability. Whenever possible, each provision of this
------------
Registration Rights Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Registration Rights
16
Agreement is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Registration Rights
Agreement.
(g) Counterparts. This Registration Rights Agreement may be executed
------------
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Registration Rights Agreement.
(h) Descriptive Headings. The descriptive headings of this
--------------------
Registration Rights Agreement are inserted for convenience only and do not
constitute a part of this Registration Rights Agreement.
(i) Governing Law. The corporate law of the State of Delaware shall
-------------
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforcement of this Registration
Rights Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
(j) Notices. All notices, demands or other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first class mail, return receipt requested, telecopier, e-mail,
courier service, overnight mail or personal delivery:
(i) if to Virgin, addressed to it in the manner set forth in
the Agreement, or at such other address as it shall have furnished to the
Company in writing in the manner set forth herein;
(ii) if to Rho, Columbia House or the Other Holders, at the
address that such holder shall have furnished to the Company in writing; or
(iii) if to the Company, addressed to it in the manner set
forth in the Agreement, or at such other address as the Company shall have
furnished to each Registration Rights Holder at the time outstanding in the
manner set forth herein.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered to a
courier, if delivered by overnight courier service; five Business Days after
being deposited in the
17
mail, postage prepaid, if mailed; and when receipt is acknowledged, if
telecopied or transmitted by e-mail.
(k) Entire Agreement. This Registration Rights 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. This Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter, including the Existing Registration Rights Agreements.
(l) Further Assurances. Each of the parties shall execute such
------------------
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Registration Rights
Agreement.
* * * * *
18
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
XXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxx Xxxxxxxx
______________________________
Name: Xxxxxx Xxxxxxxx
Title: Chairman and Co-CEO
By: /s/ Devarajan S. Puthukarai
______________________________
Name: Devarajan S. Puthukarai
Title: President and Co-CEO
VIRGIN HOLDINGS, INC.
By: /s/ Xxxxx Xxxxxxxx
______________________________
Name: Xxxxx Xxxxxxxx
Title: Secretary
RHO MANAGEMENT TRUST I
By: /s/ Xxxxxx Xxxx
______________________________
Name: Xxxxxx Xxxx
Title: Chairman and CEO
THE COLUMBIA HOUSE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
______________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chairman and C.E.O.
/s/ Xxxxxx X. Xxxxxxxx
_________________________________
Xxxxxx X. Xxxxxxxx
19
/s/ Devarajan S. Puthukarai
_________________________________
Devarajan S. Puthukarai
/s/ Xxxxx X. Xxxxxxxxx
_________________________________
Xxxxx X. Xxxxxxxxx
RHL VENTURES LLC
By: /s/ Xxxxxx Xxxxxx
______________________________
Name:
Title:
20
Schedule I
Officers and Directors
----------------------
1. Xxxxxx X. Xxxxxxxx, Co-Chief Executive Officer and Chairman of the Board of
Directors.
2. Devarajan S. Puthukarai, President, Co-Chief Executive Officer, Chief
Operating Officer and Director.
3. Xxxxx X. Xxxxxxxxx, Vice Chairman of the Board of Directors and Consultant.
Schedule II
Other Shareholder
-----------------
1. RHL Ventures LLC c/o Xxxxxx Xxxxxx.
Schedule III
Existing Registration Rights Agreements
---------------------------------------
1. Rho Management Trust I, pursuant to a Securities Purchase Agreement dated
as of December 9, 1997, between the Company and Rho Management Trust I, RHL
Ventures LLC, Xxxxxx X. Xxxxxxxx, and Xxxxxxxxx X. Puthukarai.
2. The Columbia House Company, pursuant to Section 4 of the Warrant Agreement
dated as of June 11, 1998 between the Company and The Columbia House
Company. Nothing in this Registration Rights Agreement shall affect the
provisions of the Warrant Agreement other than Section 4 thereof.
3. Xxxxxx X. Xxxxxxxx, pursuant to a Securities Purchase Agreement dated as of
December 9, 1997, between the Company and Rho Management Trust I, RHL
Ventures LLC, Xxxxxx X. Xxxxxxxx, and Xxxxxxxxx X. Puthukarai.
4. Devarajan S. Puthukarai, pursuant to a Securities Purchase Agreement dated
as of December 9, 1997, between the Company and Rho Management Trust I, RHL
Ventures LLC, Xxxxxx X. Xxxxxxxx, and Xxxxxxxxx X. Puthukarai.
5. Xxxxx X. Xxxxxxxxx, pursuant to a Letter Agreement between the Company and
Xxxxx X. Xxxxxxxxx, dated January 23, 1997.
6. RHL Ventures LLC c/o Xxxxxx Xxxxxx, pursuant to a Securities Purchase
Agreement dated as of December 9, 1997, between the Company and Rho
Management Trust I, RHL Ventures LLC, Xxxxxx X. Xxxxxxxx, and Xxxxxxxxx X.
Puthukarai.
