EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of ______________, 1998, by and
among uBid, Inc., a Delaware corporation ("uBid"), and Creative Computers, Inc.,
a Delaware corporation ("CCI").
WHEREAS, uBid is currently a wholly-owned subsidiary of CCI;
WHEREAS, uBid is considering an initial public offering of its Common Stock
("IPO");
WHEREAS, after the IPO, CCI will own approximately 82.3% of the outstanding
shares of uBid's Common Stock (80.1% if the underwriters' over-allotment option
is exercised in full) (the "Retained Shares");
WHEREAS, subject to the conditions set forth in the Separation and
Distribution Agreement, dated as of _________________, 1998, by and between CCI
and uBid (the "Separation and Distribution Agreement"), CCI will distribute to
its stockholders, not earlier than six months following the IPO, all of the
Retained Shares in a tax-free distribution (the "Distribution"); and
WHEREAS, uBid and CCI desire to establish terms and conditions for the
registration for public resale of the Retained Shares (a) after the IPO and
prior to the Distribution and (b) in the event that the Separation and
Distribution Agreement is terminated prior to the Distribution.
NOW, THEREFORE, in consideration of the premises and mutual promises and
representations contained herein, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto do mutually
covenant, stipulate and agree as follows:
Section 1. Definitions.
-----------
The following terms shall have the following meanings unless the context
otherwise indicates:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Business Day" means a day on which the New York Stock Exchange is open for
business.
"Demand Registration" means registration under the Act pursuant to a
Registration Request given under Section 2 hereof.
"Indemnified Persons" shall have the meaning given in Section 9 hereof.
"NASDAQ" means the Nasdaq National Market of The Nasdaq Stock Market.
"Piggyback Registration" means registration under the Act pursuant to
Section 3 hereof.
1
"Piggyback Request" means a written request to uBid pursuant to Section 3
hereof for the registration of Registerable Shares pursuant to the Act.
"Priority" shall have the meaning given in Section 6 hereof.
"Registration Expenses" shall have the meaning given in Section 5 hereof.
"Registration Request" means a written request to uBid pursuant to Section
2 hereof for Demand Registration of Registerable Shares pursuant to the Act.
"Registerable Shares" means the approximately [7,329,883] Shares covered by
this Agreement which will be owned by CCI after the IPO and prior to the
Distribution, such number to be equitably adjusted in the event of a stock
split, stock dividend, combination or reclassification of Shares.
"Selling Expenses" shall have the meaning given in Section 5 hereof.
"Shares" means shares of the Common Stock, $.001 par value, of uBid.
"SEC" means the Securities and Exchange Commission.
Section 2. Demand Registration.
-------------------
(a) At any time during the period beginning one hundred eighty (180) days
following the IPO and prior to the Distribution or, should the Separation and
Distribution Agreement be terminated prior to the Distribution, at any time
thereafter, CCI may submit a Registration Request for Demand Registration
covering all or part of the Registerable Shares, which request must request
registration of at least the Minimum Amount. The Registration Request shall
state the number of Registerable Shares to be registered and the intended plan
of distribution thereof. uBid shall be obligated to register Registerable
Shares pursuant to this Section 2 on a total of only two (2) occasions. A
request withdrawn pursuant to Subsection 2(c) hereof or deemed to be a Piggyback
Registration pursuant to Subsection 2(d) hereof shall be ignored for this
purpose. uBid shall be deemed to have satisfied its obligation under this
Section 2 with respect to a Registration Request if a registration statement
filed pursuant to a Registration Request becomes effective under the Act and
remains effective for the period required hereby, or if the failure of such a
registration statement to become or remain effective results primarily from any
action or inaction of CCI.
Subject to the conditions and limitations of Section 4 hereof, uBid will
use its best efforts to file a registration statement under the Act registering
the Registerable Shares covered by a Registration Request within forty-five (45)
days after it receives such Registration Request unless such Registration
Request is withdrawn as permitted by Subsection 2(c) hereof.
(b) The right to Demand Registration is subject to the procedures in
Section 4 hereof and the following additional conditions and limitations:
(i) CCI may withdraw the Registerable Shares from a Registration
Request at any time prior to the time the registration statement becomes
effective, provided that uBid may ignore a notice of withdrawal made within 24
hours of the time the registration statement becomes
2
effective. Following such a withdrawal, uBid shall not take any further action
to register the withdrawn Registerable Shares, and shall not be obligated to
register any Registerable Shares if the number of non-withdrawn Registerable
Shares is less than the Minimum Amount. However, except as otherwise provided in
Subsection 2(c) or (d) hereof, a Registration Request, once made, shall count as
having been made for purposes of Subsection 2(a), unless it is withdrawn by CCI
within fifteen (15) days after having been made or it is withdrawn before uBid
devotes any significant efforts to the preparation of the registration
statement.
(ii) No Registration Request may be made within ninety (90) days after
the effective date of a registration statement filed by uBid under the Act
covering an underwritten public offering of its equity securities (except for
the registration statement relating to the IPO);
(iii) Unless otherwise agreed to by uBid, any Demand Registration must
relate to a firm commitment underwriting for which the managing underwriter
shall be reasonably satisfactory to uBid (such satisfaction not to be withheld
unreasonably) or a non-underwritten offering on a "shelf" basis in accordance
with Rule 415 under the Act.
(iv) uBid shall be permitted to use any registration form available to
it for the registration of Registerable Shares, and shall not be obligated to
include in the prospectus any information that may be incorporated by reference
or that is not required to be included therein by the applicable registration
form.
(v) No Registration Request may be made by CCI if the amount of
shares proposed to be sold could be sold by CCI without limitation under Rule
144 under the Act.
(c) Notwithstanding the foregoing, if uBid is aware at the time it receives
a Registration Request that a registered public sale of Shares is being
contemplated or is in the process of being prepared (except as provided in
Section 7 hereof), it will notify CCI of the relevant facts, and CCI shall have
the right to withdraw the Registration Request by written notice given to uBid
within ten (10) days after uBid's notice under this Subsection 2(c), in which
case such Registration Request will be deemed not to have been made for purposes
of Subsection 2(a).
(d) For an additional 120 days following the date on which CCI may first
submit a Registration Request for Demand Registration, uBid will be entitled to
include Shares in any Demand Registration and to reduce the number of Shares to
be sold by CCI thereunder to a minimum of 20%, collectively, of the total
offering plus any underwriters' over-allotment option. If, as a result of this
cutback procedure, the number of Shares sold by uBid in such offering
constitutes more than one-half of the total shares sold in the offering, the
registration would be treated as a Piggyback Registration under Section 3 below,
and a Registration Request will be deemed not to have been made for purposes of
Subsection 2(a) hereof.
Section 3. Piggyback Registration. If at any time following one hundred
----------------------
eighty (180) days after the IPO uBid proposes to register any Shares under the
Act for sale to the public by uBid or any other person (except as provided in
Section 7 hereof), uBid shall, not less than fifteen (15) days prior to the
proposed date of filing of a registration statement under the Act, give written
notice to CCI of its intention to do so. A Piggyback Request from CCI shall
state the number of Registerable Shares to be registered and the intended plan
of distribution thereof. If uBid receives a
3
Piggyback Request from CCI given within fifteen (15) days after uBid's notice
under this Section 3, uBid, subject to the conditions and limitations of Section
4 hereof, will use its best efforts to cause the Registerable Shares covered by
Piggyback Request to be so registered under the Act in the proposed registration
statement if the proposed registration statement becomes effective, but uBid
shall have no obligation to cause, or use any efforts to cause, any such
registration statement to become effective. Registerable Shares covered by a
Piggyback Request shall be sold pursuant to the same plan of distribution that
applies to the majority of the other Shares covered by such registration
statement, except to the extent that uBid otherwise agrees in writing. The
rights to Piggyback Registration granted by this Section 3 may be exercised an
unlimited number of occasions during the 60-day period following the
Distribution. No Piggyback Request may be made by CCI if the amount of Shares
proposed to be sold could be sold by CCI without limitation under Rule 144 under
the Act.
Section 4. Registration Procedures.
-----------------------
(a) If uBid is required by the provisions of Section 2 to effect Demand
Registration of any Registerable Shares, uBid will promptly:
(i) To the extent required by Section 2, prepare and file with the
SEC a registration statement (which shall be on Form S-3, unless uBid does not
qualify for use of Form S-3 in such registration, in which case such
registration statement shall be on any other available form selected by uBid)
with respect to such Registerable Shares and thereafter use its best efforts to
cause such registration statement to become effective promptly.
(ii) Prepare and file with the SEC 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 for the period of
ninety (90) days (excluding any days during which the right to sell shares is
suspended pursuant to Subsection 4(b) hereof) or such lesser period as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all Registerable Shares covered by such registration statement in
accordance with the plan of distribution set forth in such registration
statement;
(iii) Comply with Rule 424 under the Act relating to filing of
prospectuses and furnish to each seller and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale of the Registerable Shares covered by
such registration statement;
(iv) If the offering is to be underwritten, uBid and CCI shall enter
into a written agreement with any managing underwriter selected in the manner
herein provided in such form and containing such provisions as are satisfactory
to uBid and CCI (such satisfaction not to be withheld unreasonably), and as are
customary in the securities business for such an arrangement between such
underwriter, such seller and corporations of uBid's size and investment stature
and uBid shall take such other actions as CCI shall reasonably request in order
to expedite or facilitate the disposition of such Registerable Shares;
4
(v) Furnish, at the request of CCI, on the date that the
underwriting agreement is signed and on the date that Registerable Shares are
delivered to the underwriters for sale pursuant to such registration: (A) an
opinion of counsel representing uBid for the purposes of such registration,
dated such dates, respectively, addressed to the underwriters and to CCI,
stating that such registration statement has become effective under the Act and
that (I) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Act, and (II) the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of the
Act (except that such counsel need not express any opinion as to the financial
statements or any other financial statements, notes thereto and related
schedules and other financial and statistical data contained or incorporated by
reference therein, and (III) to such other effects as reasonably may be
requested by counsel for the underwriters or by CCI or its counsel, and (B) a
"comfort letter" in customary form dated such dates from the independent public
accountants retained by uBid, addressed to the underwriters and to CCI, stating
that they are independent public accountants within the meaning of the Act and
that, in the opinion of such accountants, the financial statements of uBid
included or incorporated by reference in the registration statement or the
prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Act, and
such letter shall additionally cover such other financial matters as are
customary to cover in such a letter (including information as to the period
ending no more than five business days prior to the date of such letter) with
respect to the registration statement in respect of which such letter is being
given as such underwriters reasonably may request;
(vi) Upon receipt of such confidentiality agreements as uBid may
reasonably request, make available for inspection by CCI, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by CCI or underwriter, all
financial and other records, pertinent corporate documents and properties of
uBid, and cause uBid officers, directors and employees to supply all information
reasonably requested by CCI or any underwriter, attorney, accountant or agent in
connection with such registration statement, in each case in order to confirm
disclosures contained in the registration statement or incorporated therein by
reference;
(vii) Give CCI two (2) days' advance notice of its anticipated filing
date of the registration statement and amendments thereto;
(viii) Use its best efforts to cause the Registerable Shares covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable CCI thereof
to consummate the disposition of such Registerable Shares;
(ix) Comply with all applicable rules and regulations of the SEC, and
make generally available to its security holders, as soon as reasonably
practicable no later than the date the Form 10-Q or Form 10-K, as the case may
be, covering the fourth fiscal quarter of uBid commencing after the effective
date of the registration statement, is required to be filed with the SEC], an
earnings statement covering the period of at least twelve (12) consecutive
months beginning with the first day of uBid's first calendar quarter commencing
after the effective date of
5
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder;
(x) Provide a transfer agent and registrar, which may be the same
entity as the transfer agent, for all the Registerable Shares covered by such
registration statement not later than the effective date of such registration
statement;
(xi) Permit CCI to participate through counsel reasonably acceptable
to uBid in the preparation of such registration statement and, if specifically
requested by such counsel, in discussions between uBid and the SEC or its staff
with respect to such registration statement, and to include in such registration
statement material, furnished to uBid in writing, which in the written opinion
of such counsel is necessary to include in order to avoid potential liability
for CCI;
(xii) Use its best efforts to cause all such Registerable Shares
covered by such registration statement to be listed or quoted on the principal
securities exchange (including NASDAQ) on which similar securities issued by
uBid are then listed or quoted, if the listing or quoting of such Registerable
Shares is then permitted under the rules of such exchange;
(xiii) If there is a stop order relating to or suspension of the
effectiveness of the registration statement, use its best efforts to have the
stop order or suspension of effectiveness withdrawn as promptly as practicable;
(xiv) Use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to its security holders an
earnings statement satisfying the provisions of Section 11(a) of the Act, no
later than forty-five (45) days after the end of any twelve-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at the end of
any fiscal quarter in which the Registerable Shares are sold to underwriters in
a firm or best efforts underwritten offering, or (B) if not sold to underwriters
in such an offering, beginning with the first month of the first fiscal quarter
of uBid commencing after the effective date of the registration statement, which
statements shall cover such twelve-month period; and
(xv) Use its best efforts to register or qualify the Registerable
Shares covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the sellers of Registerable Shares or the managing
underwriter reasonably shall request; provided, however, that uBid shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process or taxation in any such jurisdiction.
(b) Notwithstanding the foregoing, uBid may delay filing a registration
statement otherwise required to be filed pursuant to this Agreement, and may
withhold efforts to cause a registration statement covering Registerable Shares
to become effective for a period of up to ninety (90) days, if uBid determines
in good faith that such registration statement might (1) interfere with or
affect the negotiation or completion of any transaction that is being
contemplated by uBid (whether or not a final decision has been made to undertake
such transaction) at the time the right to delay is exercised, or (2) involve
initial or continuing disclosure obligations that might not be in the best
interest of uBid's stockholders. If, after a registration statement becomes
effective, uBid notifies the holders of Registerable Shares covered by such
registration statement that uBid
6
considers it appropriate for the registration statement to be amended or
supplemented, the holders of such Registerable Shares shall suspend any further
sales of their Registerable Shares until uBid advises them that the registration
statement has been amended or supplemented. uBid may give such advice if there
exists at any time material non-public information relating to uBid that, in the
reasonable opinion of uBid's Board of Directors, would be prejudicial to uBid or
its stockholders to disclosed at that time. uBid agrees with CCI that it will
use its best efforts to amend or supplement the registration statement, as
required to permit sales of the Registerable Shares covered thereby to resume
within ninety (90) days as promptly as is practicable after it has given the
notice referred to in the preceding sentence. The ninety (90)-day time period
referred to in Subsection 4(a)(ii) hereof during which the registration
statement must be kept current after its effective date shall be extended for an
additional number of Business Days equal to the number of Business Days during
which the rights to sell shares was suspended pursuant to the preceding
sentence, but in no event will uBid be required to update the registration
statement after the date that its obligation to register Registerable Shares
terminates pursuant to Section 8 hereof.
(c) The provisions of Subsections 4(a)(iii), (iv) and (vii) and 4(b)
(except that uBid will have no obligation to amend or supplement the
registration statement), and 4(d) hereof shall also apply to Piggyback
Registrations pursuant to Section 3 hereof.
(d) In connection with each registration hereunder, CCI will (i) furnish
promptly to uBid in writing such information with respect to themselves and the
proposed distribution by CCI as reasonably shall be requested by uBid in order
to assure compliance with federal and applicable state securities laws, and (ii)
comply with all applicable rules promulgated by the SEC or any securities
exchange (including NASDAQ).
(e) Before filing a registration statement covering Registerable Shares, a
prospectus constituting a part thereof or amendments or supplements thereto,
furnish to counsel for CCI included in such registration statement copies of all
such documents proposed to be filed, all of which shall be subject to the
approval of such counsel in the exercise of such counsels' reasonable judgment.
(f) If any registration statement covering Registerable Shares refers to
CCI by name or otherwise as the holder of any securities of uBid, then CCI shall
have the right to require (i) the insertion therein of language, in form and
substance satisfactory to uBid (such satisfaction not to be withheld
unreasonably), to the effect that CCI's holding of Shares is not to be construed
as a recommendation by CCI of the investment quality of the Shares covered
thereby and that such holding does not imply that CCI will assist in meeting any
future financial requirements of uBid, or (ii) in the event that such reference
to CCI by name or otherwise is not in the judgment of uBid, as advised by
counsel, required by the Act or any similar federal statute or any state "blue
sky" or securities law then in force, the deletion of the reference to CCI.
Section 5. Expenses.
--------
(a) All expenses incurred by uBid in complying with Section 2 hereof,
including without limitation all registration and filing fees, printing expense,
fees and disbursements of counsel and independent public accountants for uBid,
fees and expenses (including counsel fees) incurred in connection with complying
with state securities or "blue sky" laws (other than those
7
which by law must be paid by the selling security holders), fees of securities
exchanges or the National Association of Securities Dealers, Inc., fees of
transfer agents and registrars, but excluding any Selling Expenses, are called
"Registration Expenses." All underwriting discounts, selling commissions and
transfer taxes applicable to the sale of outstanding shares and any legal fees
and expenses of counsel or other advisers and agents of the holders of
Registerable Shares being registered are called "Selling Expenses." CCI will pay
all Registration Expenses and all Selling Expenses.
(b) All expenses incurred by uBid in complying with Section 3 hereof,
including without limitation all registration and filing fees, printing expense,
fees and disbursements of counsel and independent public accountants for uBid,
fees and expenses (including counsel fees) incurred in connection with complying
with state securities or "blue sky" laws (other than those which by law must be
paid by the selling security holders), fees of securities exchanges or the
National Association of Securities Dealers, Inc., fees of transfer agents and
registrars, but excluding any Selling Expenses, are called "Registration
Expenses." All underwriting discounts, selling commissions and transfer taxes
applicable to the sale of outstanding shares and any legal fees and expenses of
counsel or other advisers and agents of the holders of Registerable Shares being
registered are called "Selling Expenses." uBid will pay all Registration
Expenses. All Selling Expenses shall be borne by CCI.
Section 6. Marketing Arrangements
----------------------
(a) Except as otherwise provided in Section 2(d), if (i) CCI requests
registration of Registerable Shares, (ii) the offering proposed to be made is to
be an underwritten public offering, and (iii) the managing underwriter of such
public offering furnishes a written opinion that the total amount of securities
to be included in such offering would exceed the maximum amount of securities
(the "Maximum Amount") (as specified in such opinion) which can be marketed at a
price reasonably related to the then-current market value of such securities (or
the anticipated market price, if no trading market then exists) and without
materially and adversely affecting such offering or the trading market for
Shares, then uBid and CCI shall have a right to participate in such offering in
the following order of priority (a "Priority") until the number of Shares
included in the offering reaches the Maximum Amount, and no additional Shares
will be included in the registration statement:
First Priority shall be to uBid for Shares to be sold for the account of
uBid except to the extent that Shares are registered pursuant to a Registration
Request for Demand Registration pursuant to Section 2 hereof.
Second Priority shall be to CCI pursuant to a Registration Request for
Demand Registration pursuant to Section 2 hereof.
Third Priority shall be to uBid for Shares to be sold for the account of
uBid that do not qualify for First Priority.
Fourth Priority shall be to holders of Shares who have a contractual right
granted to such holders prior to the date hereof to have Shares registered
pursuant to a registration statement initiated on their request or demand on
terms comparable to Section 2 hereof.
8
Fifth Priority shall be to holders of Shares who have a contractual right
granted to such holder on or prior to the date hereof to have their Shares
registered pursuant to piggyback or incidental rights on terms comparable to
Section 3 hereof (in a registration statement that such holders do not have a
right to initiate), including CCI's Piggyback Rights under this Agreement.
Sixth Priority shall be to all other holders of Shares in any sequence that
may be agreed upon among the holders of such Shares and/or uBid.
To the extent that some but not all of the Shares owned by persons within
any of the Priorities listed above are not included within the Maximum Amount,
the Shares to be included in the registration statement shall be allocated pro
rata to holders in such Priority in proportion to the respective numbers of
Shares each such person in such Priority wishes to include in the registration
statement.
(b) uBid represents and warrants that it has not granted any registration
rights or entered into any agreements obligating it to register any of its
securities under the Act that are inconsistent with the foregoing priorities.
(c) In connection with any underwritten public offering of uBid's equity
securities that is anticipated to commence prior to two (2) years from the date
of the Distribution, CCI agrees that it will agree in writing to any
restrictions on the sale of Registerable Shares owned by CCI that is requested
by the managing underwriter, for a period not to exceed one hundred eighty (180)
days, commencing fifteen (15) days prior to the anticipated commencement date of
the underwritten public offering; provided, however, that such restrictions
shall not relate to Registerable Shares being registered, nor shall such
restrictions be imposed unless restrictions at least as burdensome are imposed
on each executive officer (as defined under the Securities Exchange Act of 1934)
or director of uBid).
(d) uBid agrees that it will not incur any future obligations to register
Shares under the Act that are inconsistent with the Priorities in this Section
6.
Section 7. Exceptions to uBid's Obligations. The right to Demand
--------------------------------
Registration and Piggyback Registration shall not apply if, in the opinion of
counsel for uBid, such registration would jeopardize the tax-free status of the
Distribution. In addition, the right to Piggyback Registration and the
provisions of Subsection 2(c) hereof shall not apply, unless uBid otherwise
agrees in writing, to any registration statement:
(a) To be filed on a registration form which is unavailable for the
registration of Registerable Shares;
(b) Relating primarily to Shares to be offered pursuant to (i) an employee
benefit plan, or (ii) a dividend or interest reinvestment plan (including such a
plan that has an open enrollment or cash investment feature);
(c) Relating to Shares to be issued in the acquisition of another business,
through a merger, consolidation, exchange of securities or otherwise;
9
(d) Relating to uBid securities to be issued for a consideration other than
solely cash;
(e) Relating to uBid securities to be offered primarily to existing
security holders of uBid, through a "rights offering" or otherwise;
(f) Relating primarily to uBid securities to be issued on the exercise of
options, warrants and similar rights, or on the conversion or exchange of other
securities, issued by uBid or any other person;
(g) Relating primarily to debt securities of uBid, including debt
securities that are convertible or exchangeable for equity securities of uBid;
or
(h) That may become effective automatically upon filing with the SEC
pursuant to Rule 462 under the Act or otherwise.
Section 8. Termination of Registration Rights. Notwithstanding the
----------------------------------
foregoing provisions, uBid's obligation to register Registerable Shares under
this Agreement shall terminate as to any particular Registerable Shares (a) on
the date of the Distribution, (b) when such Registerable Shares have been sold
in an offering registered under the Act or in a sale exempt from registration
under the Act, (c) when such Registerable Shares shall have been effectively
registered under the Act for a period of at least ninety (90) days, or (d) when
a written opinion, to the effect that such Registerable Shares may be sold
without registration under the Act or applicable state law and without
restriction as to the quantity and manner of such sales, shall have been
received from counsel for uBid which counsel is reasonably acceptable to the
owner of such Registerable Shares (which satisfaction shall not be withheld
unreasonably).
Section 9. Indemnification.
---------------
(a) In the event of any registration of Registerable Shares under the Act
pursuant to this Agreement, uBid will, and hereby does, indemnify and hold
harmless, to the fullest extent permitted by law, the seller of any Registerable
Shares covered by such registration statement, each person or entity that
participates as an underwriter or qualified independent underwriter/pricer
("independent underwriter"), if any, in the offering or sale of such securities,
each officer, director or partner of such underwriter or independent
underwriter, and each other person, if any, who controls such seller or any such
underwriter within the meaning of the Act (collectively, the "Indemnified
Persons"), against any and all losses, claims, damages or liabilities, joint or
several, and expenses (including fees of counsel and any amounts paid in any
settlement effected with uBid's consent, which consent shall not be unreasonably
withheld) to which such Indemnified Persons may become subject under the Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect
thereof), or expenses arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which Registerable Shares were registered under the Act or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if
10
uBid shall have filed with the SEC any amendment thereof or supplement thereto),
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or (iii)
any violation by uBid of any federal or state rule or regulation applicable to
uBid and relating to action required of or inaction by uBid in connection with
any such registration. uBid will reimburse Indemnified Persons for any
reasonable legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding. Notwithstanding the foregoing, uBid shall not
be liable to any Indemnified Person to the extent that any such loss, claim,
damage, liability (or action or proceeding, whether commenced or threatened, in
respect thereof) or expense arises out of or is based upon (i) any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to uBid by or
on behalf of any such Indemnified Person, for use in the preparation of the
registration statement or (ii) the failure of any such Indemnified Person to
comply with any legal requirement applicable to any such Indemnified Person to
deliver a copy of a prospectus or any supplements or amendments thereto after
uBid has made such documents available to such persons, and it is established
that delivery of such prospectus, supplement or amendment would have cured the
defect giving rise to such loss, claim, damage, liability or expense. Such
indemnity and reimbursement of expenses shall remain in full force and effect
following the transfer of Registerable Shares by such seller.
(b) uBid, as a condition to including any Registerable Shares in any
registration statement filed in accordance with this Agreement, shall have
received an undertaking reasonably satisfactory to it from the prospective
seller of such Registerable Shares and any underwriter or independent
underwriter, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Subsection 9(a)) uBid and its directors and officers and
each person controlling uBid within the meaning of the Act and all other
prospective sellers and their directors, officers, general and limited partners
and respective controlling persons with respect to any statement or alleged
statement in or omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement
thereto, if such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to uBid or its representatives by or on behalf of such seller or underwriter for
use in the preparation of such registration statement; provided, however, that
-------- -------
the aggregate amount which any such seller or prospective seller shall be
required to pay pursuant to such undertaking shall be limited to the amount of
the net proceeds received by such person upon the sale of the Registerable
Shares pursuant to the registration statement giving rise to such claim.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding with respect to which a
claim for indemnification may be made pursuant to this Section 9, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
-------- -------
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 9, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. 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
11
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party; and provided, further that the indemnifying party shall not be entitled
-------- -------
to so participate or so assume the defense if, in the indemnified party's
reasonable judgment, a conflict of interest between the indemnified party and
the indemnifying party exists in respect of such claim. After notice from the
indemnifying party to such 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 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof unless the indemnifying party has failed to assume the defense of such
claim or to employ counsel reasonably satisfactory to such indemnified party;
and provided, further, that the indemnified parties shall have the right to
-------- -------
employ one counsel to represent such indemnified parties if, in such indemnified
parties' reasonable judgment, a conflict of interest between the indemnified
parties and the indemnifying parties exists in respect of such claim, and in
that event the fees and expenses of such separate counsel shall be paid by the
indemnifying party; and provided, further, that if, in the reasonable judgment
-------- -------
of any of the indemnified parties, a conflict of interest between such
indemnified parties and any other indemnified parties exists in respect of such
claims, such indemnified parties shall be entitled to additional counsel or
counsels and the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels. No indemnified party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimants or
plaintiffs to such indemnified party of a release from all liability in respect
to such claim or litigation. No indemnifying party will be liable for any
settlement effected without its prior written consent.
(d) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under Subsections 9(a) and
(b), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in Subsections 9(a) and (b) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other hand in connection with statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 9 were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the first sentence of this Section
9. The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this Section 9 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim (which shall be limited as provided in Subsection 9(c) if the indemnifying
party has assumed the defense of any such action in accordance with the
provisions thereof which is the subject of this Section 9). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding anything in this Section 9 to the
contrary, no indemnifying party (other than uBid)
12
shall be required pursuant to this Section 9 to contribute any amount in excess
of the proceeds received by such indemnifying party from the sale of
Registerable Shares in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate.
(e) The provisions of this Section 9 shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract and shall remain in full force and effect following
the transfer of the Registerable Shares by any such party.
Section 10. Compliance with Rule 144. At the request of CCI and if CCI
------------------------
proposes to sell Registerable Shares in compliance with Rule 144 under the Act,
or any similar Rule, uBid shall (a) forthwith furnish to CCI a written statement
as to its compliance with the filing requirements of the SEC as set forth in
such Rule and (b) make such additional filings with the SEC as will enable the
Stockholder to make sales of Registerable Shares pursuant to such Rule.
Section 11. Miscellaneous
-------------
(a) Binding and Benefit. This Agreement shall be binding upon and inure to
-------------------
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns, except that no party may assign or
transfer its rights or obligations under this Agreement without the prior
written consent of the other parties hereto; provided, however, that the
-------- -------
obligation to register Registerable Shares shall be enforceable by direct or
remote transferees of Registerable Shares now owned by CCI only if the transfer
results from the death of any person, a gift made without consideration or the
transfer of all or substantially all of the assets of an entity, by merger,
consolidation, asset sale or otherwise. Without limiting the foregoing, any
transferee of Registerable Shares must agree in writing to be bound by the
provisions of Subsection 6(c) hereof.
13
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
uBid, Inc.
By:
---------------------------------------
Xxxxxxx X. Xxxxx
Chairman of the Board,
President and Chief Executive Officer
Creative Computers, Inc.
By:
---------------------------------------
Xxxxx X. Xxxxxxx
Chairman of the Board,
President and Chief Executive Officer
14
