EXHIBIT 99.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of April
23, 2003 between FAO, Inc., a Delaware corporation (the "Company"), and each of
the undersigned and those who may purchase the Securities (as defined) in the
future (each individually a "Purchaser," and collectively the "Purchasers").
WHEREAS, the Company and certain of the Purchasers have entered into a
Securities Purchase Agreement dated as of April 3, 2003, as amended by a First
Amendment to Securities Purchase Agreement dated as of April 21, 2003 (as so
amended, the "Purchase Agreement"); and
WHEREAS, pursuant to the Purchase Agreement, the Company and such
Purchasers desire to enter into this Agreement to provide such Purchasers with
certain registration rights and to address related matters;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties agree as follows:
1. Registration Rights.
1.1 Demand Registration Rights.
(a) Subject to the provisions of this Section 1.1, at any time
after the date hereof, Purchasers holding (i) shares of the
Company's Common Stock, $.001 par value (the "Common Stock") issued
or issuable upon the conversion of at least $5 million in aggregate
liquidation preference of Class I Convertible Preferred Stock (the
"Class I Preferred Stock") issued by the Company to certain of the
Purchasers pursuant to the Purchase Agreement (the number of such
shares being the "Registration Threshold Number"), or (ii) the
Registration Threshold Number of shares of Common Stock which
holders had the benefit of registration rights prior to the
Company's January 13, 2003 bankruptcy filing and which shares of
Common Stock cannot be resold pursuant to Rule 144(k) promulgated
under the Securities Exchange Act of 1934 (the "Prior Registrable
Common Stock," and collectively with the Common Stock issued or
issuable upon the conversion of Class I Preferred Stock, the
"Securities"), may request registration for sale under the
Securities Act of 1933, as amended (the "Act"), of all or part of
the Securities. In addition, subject to the provisions of this
Section 1.1, at any time after the date hereof if the Company is
then eligible to use Form S-3 for such purpose, a Purchaser or
Purchasers holding at least 40% of the Registration Threshold Number
of shares of Common Stock may request registration for sale under
the Act of all or part of the Securities (a "Special S-3 Demand");
provided that the Company shall not be required to make any
registration under this sentence if Form S-3 is, or becomes,
unavailable for such purpose. Within ten days after receipt of a
demand notice or a Special S-3 Demand pursuant to this Section
1.1(a), the Company shall notify the other holders of Securities
that a registration demand has been made. Within 15 days after such
notification is sent by the Company, any holder of Securities (a
"Joining Holder") may request participation in the registration
demanded. After such fifteenth day, the Company shall, as
expeditiously as practicable, notify the other holders of the
Securities that such registration has been requested and use its
best efforts (i) to file with the Securities and Exchange Commission
(the "SEC") under the Act, a registration statement on the
appropriate form (using Form S-3 or other "short form," if
available) covering all the shares of Common Stock specified in the
demand request and any request made by a Joining Holder and (ii) to
cause such registration statement to be declared effective. The
Company shall use its best efforts to cause each offering pursuant
to this Section 1.1(a) (other than one arising from a Special S-3
Demand) to be managed, on a firm commitment basis, by a recognized
regional or national underwriter. If the managing underwriter
advises the Company or any holder electing to participate in the
demand registration offering, as the case may be, in writing that in
their opinion the amount of common stock requested to be included in
such registration exceeds the amount which can be sold effectively
in such offering, the common stock to be included shall be reduced
pro rata among the electing holders based on the number of shares of
common stock each requested to have included. The Company shall not
be required to comply with (A) more than two requests for demand
registration pursuant to this Section 1.1(a) (other than a Special
S-3 Demand) or (B) in any 12-month period more than one Special S-3
Demand. The Company shall not be required to keep any such
registration statement effective in excess of 60 days after it is
declared effective by the SEC or after completion of the
distribution of the Common Stock so registered, whichever is
earlier. The Company shall not be required to effect a demand
registration under the Act pursuant to this Section 1.1(a) if (i)
the Company receives such request for registration within 120 days
preceding the anticipated effective date of a proposed underwritten
public offering of securities of the Company approved by the
Company's Board of Directors prior to the Company's receipt of such
request; (ii) within 180 days prior to any such request for
registration, a registration of securities of the Company has been
effected in which Purchasers had the right to participate pursuant
to Section 1.2 hereof; or (iii) the Board of Directors of the
Company reasonably determines in good faith that effecting such a
demand registration at such time would have a material adverse
effect upon a proposed sale of all (or substantially all) the assets
of the Company, or a merger, reorganization, recapitalization, or
similar transaction materially affecting the capital structure or
equity ownership of the Company; provided, however, that the Company
may only delay a demand registration pursuant to this Section
1.1(a)(iii) for a period not exceeding 90 days (or until such
earlier time as such transaction is consummated or no longer
proposed). The Company shall promptly notify Purchasers in writing
of any decision not to effect any such request for registration
pursuant to this Section 1.1(a), which notice shall set forth in
reasonable detail the reason for such decision and shall include an
undertaking by the Company promptly to notify Purchasers as soon as
a demand registration may be effected.
(b) Purchasers may withdraw a request for demand registration at
any time before a registration statement is declared effective, in
which event the Company shall withdraw such registration statement.
If the Company withdraws a registration statement under this Section
1.1(b) in respect of a registration for which the Company would
otherwise be required to pay expenses under Section 1.4 hereof,
Purchasers shall be liable to the Company for all expenses of such
registration specified in Section 1.4 hereof in proportion to the
number of shares each of the Purchasers shall have requested to be
registered, and Purchasers shall not be deemed to have requested a
demand registration for purposes of Section 1.1(a) hereof unless
Purchasers fail to pay such expenses.
1.2 Piggyback Registration Rights.
(a) If at any time or times after the date hereof, the Company
proposes to make a registered public offering of any of its
securities under the Act, whether to be sold by it or by one or more
third parties (including an offering pursuant to a demand
registration under Section 1.1(a) hereof but excluding an offering
registered on Form X-0, Xxxx X-0, or comparable forms), the Company
shall, not less than 45 days prior to the proposed filing date of
the registration form, give written notice of the proposed
registration to Purchasers, and at
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the written requests of Purchasers delivered to the Company within
20 days after the receipt of such notice, shall include in such
registration and offering, and in any underwriting of such offering,
all shares of Common Stock that may have been designated in
Purchasers' requests.
(b) If a registration in which Purchasers have the right to
participate pursuant to this Section 1.2 is an underwritten offering
for the account of the Company or for the account of a security
holder (other than Purchasers) pursuant to the exercise of a demand
registration right, and the managing underwriters advise the Company
or such security holder, as the case may be, in writing that in
their opinion the number of securities requested to be included in
such registration, together with the securities being offered by the
Company or such security holder, as the case may be, exceeds the
number which can be effectively sold in such offering, the Company
shall include in such registration (i) first, the securities of the
Company or such security holder proposed to be sold, and (ii)
second, to the extent possible, the Common Stock proposed to be sold
by each of the Purchasers and any other selling shareholders, in
proportion to the number of shares of Common Stock with respect to
which they have requested registration.
1.3 Registration Procedures. The Company shall have no obligation to
file a registration statement pursuant to Section 1.1 hereof, or to include
shares of Common Stock owned by or issuable to any Purchaser in a registration
statement pursuant to Section 1.2 hereof, unless and until such Purchaser shall
have furnished the Company with all information and statements about or
pertaining to such Purchaser in such reasonable detail and on such timely basis
as is reasonably required by the Company in connection with the preparation of
the registration statement and, in the case of a registration statement pursuant
to Section 1.2 hereof, shall have entered into any underwriting agreement in
connection with such registration. Whenever Purchasers have requested that any
shares of Common Stock be registered pursuant to Section 1.1 or 1.2 hereof, the
Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such
registration statement to become effective as soon as reasonably
practicable thereafter (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto,
the Company shall furnish counsel for the Purchasers with copies of
all such documents proposed to be filed);
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than nine months (or two years,
if the provisions of Rule 415 under the Act are available with
respect thereto) or until the Purchasers have completed the
distribution described in such registration statement, whichever
occurs first;
(c) furnish to the Purchasers 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 document as the Purchasers
may reasonably request;
(d) use its best efforts to register or qualify such shares under
such other securities or blue sky laws of such jurisdictions as the
Purchasers request (and to maintain such registrations and
qualifications effective for a period of nine months or until the
Purchasers have completed the distribution of such shares, whichever
occurs first), and to do any and all other acts and things which may
be necessary or advisable to enable the Purchasers to consummate the
disposition in such jurisdictions of such shares; provided that the
Company
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will not be required to (i) qualify generally to do business in any
jurisdiction where it would not be required but for this Section
1.3(d); (ii) subject itself to taxation in any such jurisdiction; or
(iii) file any general consent to service of process in any such
jurisdiction;
(e) notify the Purchasers, at any time during which a prospectus
relating thereto is required to be delivered under the Act within
the period that the Company is required to keep a registration
statement effective, 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 prepare
a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such shares, such prospectus will not
contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) use its best efforts to cause all such shares to be listed on
securities exchanges or interdealer quotation systems (including
Nasdaq National Market), if any, on which similar securities issued
by the Company are then listed;
(g) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
actions as the Purchasers reasonably request (and subject to the
Purchasers' reasonable approval) in order to expedite or facilitate
the disposition of such shares; and
(h) make reasonably available for inspection by the Purchasers, by
any underwriter participating in any distribution pursuant to such
registration statement, and by any attorney, accountant or other
agent retained by the Purchasers or by any such underwriter, all
relevant financial and other records, pertinent corporate documents,
and properties (other than confidential intellectual property) of
the Company; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential
at the time of delivery of such information shall be kept
confidential by the Purchasers or any such underwriter, attorney,
accountant or agent, unless such disclosure is made in connection
with a court proceeding or required by law, or such information
becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality.
1.4 Registration Expenses.
The Company will pay all Registration Expenses of all registrations
under this Agreement, provided, however, that if a registration under Section
1.1 is withdrawn at the request of the Purchasers (other than as a result of
information concerning the business or financial condition of the Company that
is made known to the Purchasers after the date on which such registration was
requested) and if the requesting the Purchasers elect not to have such
registration counted as a registration requested under Section 1.1, the
Purchasers shall pay the Registration Expenses of such registration. For
purposes of this Section, the term "Registration Expenses" means all expenses
incurred by the Company in complying with this Section, including, without
limitation, all registration and filing fees (other than National Association of
Securities Dealers, Inc. filing fees pursuant to an underwritten offering),
exchange listing fees, printing expenses, fees, and expenses of counsel for the
Company and the reasonable fees and expenses of one firm or counsel selected by
the Purchasers to represent them, state Blue Sky fees and expenses, and the
expense of any special audits incident to or required by any such registration,
but excluding underwriting discounts and selling commissions.
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1.5 Indemnity.
(a) In the event that any shares of Common Stock owned by the
Purchasers are sold by means of a registration statement pursuant to
Section 1.1 or 1.2 hereof, the Company agrees to indemnify and hold
harmless such Purchasers, each of their partners and their officers
and directors, and each person, if any, who controls such Purchasers
within the meaning of the Act (each such Purchaser, its partners and
their officers and directors, and any such other persons
individually an "Indemnified Person" and collectively "Indemnified
Persons") from and against all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs, and
expenses, including, without limitation, interest, penalties, and
reasonable attorneys' fees and disbursements, asserted against,
resulting to, imposed upon or incurred by such Indemnified Person,
directly or indirectly (in this Section 1.5 in the singular a
"claim" and in the plural "claims"), based upon, arising out of or
resulting from any untrue statement of a material fact contained in
the registration statement or any omission to state therein a
material fact necessary to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading, except insofar as such claim is based upon, arises out
of or results from information furnished to the Company in writing
by such Purchaser for use in connection with the registration
statement.
(b) Each Purchaser agrees to indemnify and hold harmless the
Company, its officers and directors, and each person, if any, who
controls the Company within the meaning of the Act (each of the
Company, its officers and directors, and any such other persons
individually as an "Indemnified Person" and collectively
"Indemnified Persons") from and against all claims based upon,
arising out of or resulting from any untrue statement of a material
fact contained in the registration statement or any omission to
state therein a material fact necessary in order to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading, to the extent that such claim
is based upon, arises out of or results from information furnished
to the Company in writing by such Purchaser for use in connection
with the registration statement.
(c) The indemnification set forth herein shall be in addition to
any liability the Company or a Purchaser may otherwise have to the
Indemnified Persons. Promptly after actually receiving definitive
notice of any claim in respect of which an Indemnified Person may
seek indemnification under this Section 1.5, such Indemnified Person
shall submit written notice thereof to either the Company or a
Purchaser, as the case may be (an "Indemnifying Person"). The
failure of the Indemnified Person so to notify the Indemnifying
Person of any such claim shall not relieve the Indemnifying Person
from any liability it may have hereunder except to the extent that
(a) such liability was caused or materially increased by such
failure, or (b) the ability of the Indemnifying Person to reduce
such liability was materially adversely affected by such failure. In
addition, the failure of the Indemnified Person so to notify the
Indemnifying Person of any such claim shall not relieve the
Indemnifying Person from any liability it may have otherwise than
hereunder. The Indemnifying Person shall have the right to
undertake, by counsel or representatives of its own choosing, the
defense, compromise or settlement (without admitting liability of
the Indemnified Person) of any such claim asserted, such defense,
compromise or settlement to be undertaken at the expense and risk of
the Indemnifying Person, and the Indemnified Person shall have the
right to engage separate counsel, at such Indemnified Person's own
expense, whom counsel for the Indemnifying Person shall keep
informed and consult with in a reasonable manner. In the event the
Indemnifying Person shall elect not to undertake such defense by its
own representatives, the Indemnifying Person shall give prompt
written notice of such election to the Indemnified Person, and the
Indemnified Person may undertake the defense, compromise or
settlement
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(without admitting liability of the Indemnified Person) thereof on
behalf of and for the account and risk of the Indemnifying Person by
counsel or other representatives designated by the Indemnified
Person. Notwithstanding the foregoing, no Indemnifying Person shall
be obligated hereunder with respect to amounts paid in settlement of
any claim if such settlement is effected without the consent of such
Indemnifying Person, which consent shall not be unreasonably
withheld.
(d) If for any reason the foregoing indemnity is unavailable to,
or is insufficient to hold harmless, an Indemnified Person, then the
Indemnifying Person shall contribute to the amount paid or payable
by the Indemnified Person as a result of such claims, in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Person and the Indemnified Person as well as any other
relevant equitable considerations. 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.
1.6 Subsequent Registration Statements. The Company shall not cause or
permit any new registration statements (except registration statements on Form
X-0, X-0, or comparable forms) to become effective during the 90 days after the
effective date of a registration statement covering shares of Common Stock owned
by the Purchasers.
2. Miscellaneous.
2.1 Additional Actions and Documents. Each of the parties hereto hereby
agrees to use its good faith best efforts to take or cause to be taken such
further actions, to execute, deliver and file or cause to be executed, delivered
and filed such further documents and instruments, and to obtain such consents,
as may be necessary or as may be reasonably requested in order to fully
effectuate the purposes, terms and conditions of this Agreement.
2.2 Assignment. Any Purchaser may assign its rights under this Agreement
to any assignee of the Securities (including any assignee of the Common Stock
issued upon conversion of the Class I Preferred Stock); provided that no such
assignment shall be effective unless and until the Company shall have received
written notice thereof from such Purchaser.
2.3 Entire Agreement; Amendment. This Agreement, including the other
writings referred to herein or delivered pursuant hereto, constitutes the entire
agreement among the parties hereto with respect to the transactions contemplated
herein, and it supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein. No amendment,
modification or discharge of this Agreement shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, or discharge is sought.
2.4 Limitation on Benefits. It is the explicit intention of the parties
hereto that no person or entity other than the parties hereto (and their
respective successors and assigns) is or shall be entitled to bring any action
to enforce any provision of this Agreement against any of the parties hereto,
and the covenants, undertakings and agreements set forth in this Agreement shall
be solely for the benefit of, and shall be enforceable only by, the parties
hereto or their respective successors and assigns.
2.5 Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns.
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2.6 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of New York (without
regard to conflicts of laws principles).
2.7 Notices. All notices, demands, requests, or other communications
which may be or are required to be given, served, or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, including delivery by courier,
telegram, telex, or facsimile transmission, addressed as follows:
(a) If to the Company:
FAO, Inc.
0000 Xxxxxxxxxxx Xxxxxxxxx
Xxxx xx Xxxxxxx, XX 00000
Attention: Legal
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Fulbright & Xxxxxxxx L.L.P.
000 X. Xxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxx, Esq.
Facsimile: (000) 000-0000
(b) If to a Purchaser, to the address set forth in the Securities
Purchase Agreement for such Purchaser.
Each party may designate by notice in writing a new address to which
any notice, demand, request or communication may thereafter be so given, served
or sent. Each notice, demand, request, or communication which shall be mailed,
delivered or transmitted in the manner described above shall be deemed
sufficiently given, served, sent and received for all purposes at such time as
it is delivered to the addressee (with the return receipt, the delivery receipt,
the affidavit of messenger or (with respect to a telex) the answer back being
deemed conclusive (but not exclusive) evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
2.8 Headings. Section headings contained in this Agreement are inserted
for convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
2.9 Execution in Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of each party appear on each counterpart; but it
shall be sufficient that the signature of each party appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of all of the parties hereto.
[Remainder of page intentionally blank]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
FAO, INC.,
a Delaware corporation
By /s/ Xxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxx
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
SAKS INCORPORATED,
a Tennessee corporation
By /s/ Xxxxxx Xxxxxx
----------------------------------
Name: Xxxxxx Xxxxxx
-------------------------------
Title: Vice President
------------------------------
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
XXXX XXXXX,
an Individual
By /s/ Xxxx Xxxxx
------------------------------
Xxxx Xxxxx
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
XXXXX XXXXXXXX CAPITAL ADVISORS, L.P.
a California limited partnership
By Xxxxx Xxxxxxxx Investment Management, Inc.
a Nevada corporation
By /s/ Xxxxxxx Xxxxx
------------------------------------------
Name: Xxxxxxx Xxxxx
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
XXXXXXX XXXXX,
an Individual
By /s/ Xxxxxxx Xxxxx
-----------------------------------
Xxxxxxx Xxxxx
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
XXXXXXX PARK CAPITAL II, L.P.
a Delaware limited partnership
By Xxxxxxx Park Associates III, LLC
a Delaware limited partnership
By /s/ Xxxxx XxXxxxxxx
-----------------------------------
Name: Xxxxx XxXxxxxxx
--------------------------------
Title: Partner
-------------------------------
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
WOODACRES LLC
By /s/Xxxxx Xxxxxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxxxxx
----------------------------------
Title: General Counsel of Manager
---------------------------------
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
XXXXXXX XXXXXX,
an Individual
By /s/ Xxxxxxx Xxxxxx
------------------------------
Xxxxxxx Xxxxxx
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
XXX XXXXXX, as Trustee
Amended and Restated Les and Xxxxx Xxxxxx
Revocable Trust U/A Dated June 5, 2002
By /s/ Xxx Xxxxxx
--------------------------------------
Xxx Xxxxxx
