REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of
September 1, 2000 between The Right Start, Inc., a California corporation (the
"Company"), and ARBCO Associates, L.P., a California limited partnership, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Non-Traditional Investments, L.P., a California limited partnership,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Diversified Capital Partners, L.P., a California limited
partnership, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Capital Partners, L.P., a California limited
partnership and each assignee of a Note and each purchaser of a Remainder Note
as defined in the Purchase Agreement referenced below (each individually a
"Purchaser," and collectively the "Purchasers").
WHEREAS, the Company and Purchasers have entered into a Securities Purchase
Agreement dated as of September 1, 2000 (the "Purchase Agreement"; capitalized
terms used in this Agreement without definition shall have the meanings ascribed
to such terms in the Purchase Agreement).
WHEREAS, pursuant to the Purchase Agreement, the Company and Purchasers
desire to enter into this Agreement to provide 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, or entitled to hold
upon conversion, not less than 50% of the Company's Common Stock,
no par value ("Common Stock"), issued or issuable upon conversion
of the Senior Subordinated Convertible Pay-in-Kind Notes due
September 1, 2005 (including such notes issued as PIK Notes and
Remainder Notes, the "Notes"), issued by the Company to
Purchasers pursuant to the Purchase Agreement may request
registration for sale under the Securities Act of 1933 as amended
(the "Act") of all or part of such Common Stock. The Company
shall thereafter, as expeditiously as practicable, 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 (ii) to cause such registration statement
to be declared effective. The Company shall not be required to
comply with more than two (2) requests by Purchasers for demand
registration pursuant to this Section 1.1(a). The Company shall
not be required to effect a demand registration under the Act
pursuant to Section 1.1(a) above 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.
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 (other than an offering pursuant to a demand
registration under Section 1.1(a) hereof or an offering
registered on Form ▇-▇, ▇▇▇▇ ▇-▇, 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 the written request
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'
request.
(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 Purchaser) 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. 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
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), until Purchasers have completed the
distribution described in such registration statement or 180 days
if such filing is required to be made on Form S-1, whichever
occurs first;
(c) furnish to 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
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
Purchasers request (and to maintain such registrations and
qualifications effective for a period of nine months or until
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 Purchasers
to consummate the disposition in such jurisdictions of such
shares; provided that the Company 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 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
the NASDAQ National Market), on which similar securities issued
by the Company are then listed if any,;
(g) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
actions as Purchasers reasonably request (and subject to
Purchasers' reasonable approval) in order to expedite or
facilitate the disposition of such shares; and
(h) make reasonably available for inspection by Purchasers, by
any underwriter participating in any distribution pursuant to
such registration statement, and by any attorney, accountant or
other agent retained by Purchasers or by any such underwriter,
all relevant financial and other records, pertinent corporate
documents, and properties (other than confidential information
and 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 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 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 Purchasers elect not to have such registration counted as a
registration requested under Section 1.1, 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 Purchasers to represent it, 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.
1.5 Indemnity.
(a) In the event that any shares of Common Stock owned by
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 its 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 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 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 (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
▇-▇, ▇-▇, 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 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 Notes or the shares of Common Stock issuable upon exercise
thereof.
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.
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 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:
The Right Start, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to 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.
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.
THE RIGHT START, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
THE PURCHASERS:
ARBCO ASSOCIATES, L.P.
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL ADVISORS, L.P.,
its general partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL INVESTMENT
MANAGEMENT, INC., its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ NON-TRADITIONAL
INVESTMENTS, L.P.
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL ADVISORS, L.P.,
its general partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL INVESTMENT
MANAGEMENT, INC., its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Diversified Capital Partners, L.P.
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL ADVISORS, L.P.,
its general partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL INVESTMENT
MANAGEMENT, INC., its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Capital Partners, L.P.
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL ADVISORS, L.P.,
its general partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ CAPITAL INVESTMENT
MANAGEMENT, INC., its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President