<PAGE>
As filed with the Securities and Exchange Commission on February 3, 2000
Registration No. 333-94913
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
RIGHTSTART.COM INC.
(Exact Name of Registrant as Specified in Its Charter)
---------------
<TABLE>
<CAPTION>
Delaware 5945 95-4745350
<S> <C> <C>
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
5388 Sterling Center Drive, Unit C
Westlake Village, CA 91361
(818) 707-7100
</TABLE>
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
---------------
JERRY R. WELCH
Chief Executive Officer and President
RightStart.com Inc.
5388 Sterling Center Drive, Unit C
Westlake Village, California 91361
(818) 707-7100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------
Copies to:
<TABLE>
<S> <C>
KENNETH J. BARONSKY, ESQ. PETER LILLEVAND, ESQ.
Milbank, Tweed, Hadley & McCloy LLP IAIN MICKLE, ESQ.
601 South Figueroa Street, 30th Floor Orrick, Herrington & Sutcliffe LLP
Los Angeles, California 90017 Old Federal Reserve Bank Building
(213) 892-4000 400 Sansome Street
San Francisco, CA 94111-3143
(415) 392-1122
</TABLE>
---------------
Approximate Date Of Commencement Of Proposed Sale To The Public: As Soon As
Practicable After The Effective Date Of This Registration Statement.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
EXPLANATORY NOTE
This Amendment No. 1 is being filed by the registrant in order to file
additional exhibits to the Company Registration Statement on Form S-1, File No.
333-94913 (as amended, the "Registration Statement"). The prospectus that forms
a part of the Registration Statement is incorporated herein by reference.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by RightStart.com in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.
<TABLE>
<CAPTION>
Amount
to be
Paid
-------
<S> <C>
SEC registration fee................................................ $18,216
NASD filing fee..................................................... 7,400
Nasdaq National Market listing fee..................................
Printing and engraving expenses.....................................
Legal fees and expenses.............................................
Accounting fees and expenses........................................
Blue Sky qualification fees and expenses............................
Transfer Agent and Registrar fees...................................
Miscellaneous fees and expenses.....................................
-------
Total.............................................................
=======
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. Article Sixth of our
current Certificate of Incorporation (Exhibit 3.1 hereto) and Section 5.1 of
our current Bylaws (Exhibit 3.3 hereto) provide for indemnification of our
directors, officers, employees and other agents to the maximum extent permitted
by Delaware law. In addition, we have entered into Indemnification Agreements
(Exhibit 10.5 hereto) with our directors. The Underwriting Agreement (Exhibit
1.1) also provides for cross-indemnification among RightStart.com and the
Underwriters with respect to certain matters, including matters arising under
the Securities Act.
Item 15. Recent Sales of Unregistered Securities
Since our incorporation in April 1999, we have sold and issued the following
securities:
1. In April 1999, we issued 5,766,667 shares of common stock to The Right
Start in connection with the transfer of its assets related to its catalog and
online operations.
2. In July 1999, we issued 3,333,333 shares of Series A Convertible Preferred
Stock to affiliates of Sierra Ventures Management Company and Palomar Ventures
I, L.P. for an aggregate consideration of $15 million. The Series A Convertible
Preferred Stock converted into 3,333,333 shares of common stock on October 22,
1999, on a share-for-share basis.
3. In July 1999, we issued warrants to purchase an aggregate of 182,000
shares of common stock to principals of Digital Coast Partners (formerly known
as CEA Montgomery Media, L.L.C.) in consideration for services provided to us.
4. In October 1999, we issued warrants to purchase an aggregate of 165,000
shares of common stock at an exercise price of $4.50 per share to holders of
our Series A Convertible Preferred Stock as consideration for their conversion
thereof to common stock.
II-1
<PAGE>
5. In December 1999, we issued to Oxygen Media, LLC an immediately
exercisable warrant to purchase 136,500 shares of common stock at an exercise
price of $11.25 per share in consideration for online partnering and television
advertising of RightStart.com on the Oxygen network.
6. In June, September, October and December of 1999, we issued an aggregate
of 1,769,500 options to purchase common stock to employees and directors.
The issuances of the above securities except for Item 5 were deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act as transactions by an issuer not involving any public
offering. In addition, certain issuances described in Item 7 were deemed exempt
from registration under the Securities Act in reliance upon Rule 701
promulgated under the Securities Act. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates, warrants and options issued in such transactions. All recipients
had adequate access, through their relationships with us, to information about
us.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of RightStart.com**
3.2 Certificate of Amendment of Certificate of Incorporation of
RightStart.com**
3.3 Bylaws*
4.1 Specimen Common Stock Certificate*
4.2 Warrant to purchase 54,600 shares of common stock issued to Jonathan
Davidson(1)*
4.3 Warrant to purchase 119,700 shares of common stock issued to Sierra
Ventures VII, L.P.(2)*
4.4 Warrant to purchase 136,500 shares of common stock issued to Oxygen
Media, LLC
5.1 Opinion of Milbank, Tweed, Hadley & McCloy LLP regarding the legality
of the Common Stock being registered*
10.1 Management Services Agreement dated July 9, 1999 between The Right
Start and RightStart.com**
10.2 Intellectual Property Agreement dated July 9, 1999 between The Right
Start and RightStart.com**
10.3 Series A Preferred Stock Purchase Agreement dated July 9, 1999*
10.4 Investors' Rights Agreement dated July 9, 1999 among RightStart.com,
Sierra Ventures VII, L.P., Sierra Ventures Associates VII, L.L.C., Ajit
Shah, Robert Simon and Palomar Ventures I, L.P.*
10.5 Form of Directors' Indemnification Agreement*
10.6 1999 RightStart.com Stock Option Plan*
10.7 Subscription Agreement dated July 9, 1999 between RightStart.com and
Jonathan Davidson(3)*
10.8 Term Sheet dated October 28, 1999 among RightStart.com, The Right Start
and Oxygen Media, LLC+
10.9 Subscription Agreement dated December 30, 1999 between RightStart.com
and Oxygen Media, LLC
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ ----------------------------------------------------------------------
<C> <S>
10.10 Services Agreement dated February 15, 1999 between The Right Start and
Guidance Solutions+
10.11 Stock Grant Agreement dated October 30, 1999 between The Right Start,
RightStart.com and Guidance Solutions
10.12 Registration Rights Agreement dated October 30, 1999 between
RightStart.com and Guidance Solutions
10.13 Side Letter Agreement dated October 30, 1999 between The Right Start
and Guidance Solutions
23.1 Consent of Accountants**
23.3 Consent of Attorneys (see Exhibit 5.1)*
24.1 Power of Attorney*
27.1 Financial Data Schedule**
</TABLE>
- --------
* To be filed by amendment.
** Filed as an Exhibit to the Registration Statement on Form S-1 dated January
18, 2000.
+ Confidential treatment requested as to certain portions of this Exhibit.
(1) Substantially identical warrants have been granted to each of Janus W.
Montgomery (for 58,240 shares of common stock), Kim Enterprises, L.L.C.
(for 49,140 shares of common stock), Michael Holton (for 5,460 shares of
common stock), David P. Michaels (for 5,460 shares of common stock) and
David A Burns (for 9,100 shares of common stock).
(2) Substantially identical subscription agreements with respect to warrants
issued by RightStart.com exist for James W. Montgomery, Kim Enterprises,
L.L.C., Michael Holton, David P. Michaels and David A. Burns.
(3) Substantially identical warrants have been granted to Sierra Ventures
Associates VII, L.L.C. (for 11,970 shares of common stock), Ajit Shah (for
165 shares of common stock), Robert Simon (for 165 shares of common stock)
and Palomar Ventures I, L.P. (for 33,000 shares of common stock).
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court
II-3
<PAGE>
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized, in Westlake Village, California on
February 1, 2000.
RightStart.com Inc.
/s/ Jerry R. Welch
By: ____________________________________
Jerry R. Welch
Chairman, President, and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, jointly and severally, Jerry R. Welch
and Raymond Springer, and each of them, as his attorney-in-fact, with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this registration statement (including post-effective
amendments), and any and all registration statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this registration statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said registration statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jerry R. Welch Chairman, President, and February 1, 2000
______________________________________ Chief Executive Officer
Jerry R. Welch
* Executive Vice President February 1, 2000
______________________________________ and Chief Financial
Raymond P. Springer Officer (Principal
Financial and
Accounting Officer)
/s/ Richard A. Kayne Director February 1, 2000
______________________________________
Richard A. Kayne
* Director February 1, 2000
______________________________________
Fred Kayne
* Director February 1, 2000
______________________________________
</TABLE> David Schwab
/s/ Jerry R. Welch
*By: ______________________
Jerry R. Welch
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT 4.4
No. of Stock Units: 136,500 Warrant No. B-1
---
WARRANT
to Purchase Common Stock of
RightStart.com Inc.
THIS IS TO CERTIFY THAT Oxygen Media, LLC, a Delaware limited liability company,
or its registered assigns, is entitled to purchase from RightStart.com Inc., a
Delaware corporation (hereinbelow called the "Company"), at any time on and
-------
after the Closing Date, but not later than 5:00 p.m., Pacific Standard time, on
December 30, 2004 (the "Expiration Date"), One Hundred Thirty-six Thousand Five
---------------
Hundred (136,500) Stock Units, in whole or in part, at a purchase price per
Stock Unit of $11.25, adjusted as provided below, all on the terms and
conditions hereinbelow provided.
This Warrant has been issued in accordance with a Subscription Agreement dated
as of the date hereof between the Company and Oxygen Media, LLC (the
"Subscription Agreement").
- -----------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY REQUIRED
REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES LAWS, OR THE PROPOSED
TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR
STATE SECURITIES LAWS.
Section 1. Certain Definitions. As used in this Warrant, unless the context
-------------------
otherwise requires:
"Affiliate" of any Person means a Person (1) that directly or indirectly
---------
controls, or is controlled by, or is under common control with, such other
Person, (2) that beneficially owns ten percent (10%) or more of the Voting Stock
of such other Person, or (3) ten percent (10%) or more of the Voting Stock (or
in the case of a Person which is not a corporation, ten percent (10%) or more of
the equity interest) of which is owned by such other Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the
<PAGE>
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Appraised Value" shall mean the fair market value of all outstanding shares
---------------
of Common Stock (on a fully diluted basis including any fractional shares and
assuming the exercise in full of all then-outstanding options, warrants or other
rights to purchase shares of Common Stock that are then currently exercisable at
exercise prices less than the Current Market Price), as determined by a written
appraisal prepared by an appraiser acceptable to the Company and the holders of
Warrants evidencing a majority in number of the total number of Stock Units at
the time purchasable upon the exercise of all then outstanding Warrants. "Fair
market value" is defined for this purpose as the price in a single transaction
determined on a going-concern basis that would be agreed upon by the most likely
hypothetical buyer for a 100% controlling interest in the equity capital of the
Company (on a fully diluted basis including any fractional shares and assuming
the exercise in full of all then-outstanding options, warrants or other rights
to purchase shares of Common Stock that are then currently exercisable at
exercise prices less than the Current Market Price), with consideration given to
the effect of a noncompete covenant signed by the seller and employment
agreements signed by key management personnel of the Company (and of its
subsidiaries), each extending for a period of time considered sufficient by all
parties to effect the transfer of goodwill from the seller to the buyer and
disregarding any discounts for nonmarketability of Common Stock of the Company.
In the event that the Company and said holders cannot, in good faith, agree upon
an appraiser, then the Company, on the one hand, and said holders, on the other
hand, shall each select an appraiser, the two appraisers so selected shall
select a third appraiser who shall be directed to prepare such a written
appraisal (the "Appraisal") and the term Appraised Value shall mean the
---------
appraised value set forth in the Appraisal prepared in accordance with this
definition. The fees and expenses of any appraisers shall be paid by the
Company, except in the case where the valuation of any appraiser who renders an
Appraisal is within ten percent (10%) of the value originally determined by the
Board of Directors, in which case the holders shall pay the fees and expenses of
any appraisers. In the event that the Company bears the cost of the appraisal
process, such cost shall be deemed an account payable of the Company and shall
be considered in the determination of the Appraised Value.
"Board of Directors" shall mean either the board of directors of the Company
------------------
or any duly authorized committee of that board.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
------------
which banks in the States of New York or California are required or permitted to
close.
"Commission" shall mean the Securities and Exchange Commission and any other
----------
similar or successor agency of the federal government administering the
Securities Act and the Exchange Act.
"Common Stock" shall mean the Company's authorized Common Stock, $.01 par
------------
value per share, irrespective of class unless otherwise specified, as
constituted on the date of original issuance of this Warrant, and any stock into
which such Common Stock may thereafter
<PAGE>
be changed, and shall also include stock of the Company of any other class,
which is not preferred as to dividends or assets over any other class of stock
of the Company issued to the holders of shares of stock upon any
reclassification thereof.
"Company" shall mean RightStart.com Inc., a Delaware corporation.
-------
"Current Market Price" per share of Common Stock for the purposes of any
--------------------
provision of this Warrant at the date herein specified, shall be deemed to be
the price determined pursuant to the first applicable of the following methods:
(i) If the Common Stock is traded on a national securities exchange or
is traded in the over-the-counter market, the Current Market Price per
share of Common Stock shall be deemed to be the average of the daily market
prices for 20 consecutive Business Days commencing 20 Business Days before
such date. The market price for each such Business Day shall be (a) if the
Common Stock is traded on a national securities exchange or in the over
-the-counter market, its last sale price on the preceding Business Day on
such national securities exchange or over-the-counter market or, if there
was no sale on that day, the last sale price on the next preceding Business
Day on which there was a sale, all as made available over the Consolidated
Last Sale Reporting System of the CTA Plan (the "CLSRS") or, if the Common
-----
Stock is not then eligible for reporting over the CLSRS, its last reported
sale price on the preceding Business Day on such national securities
exchange or, if there was no sale on that day, on the next preceding
Business Day on which there was a sale reported on such exchange or (b) if
the principal market for the Common Stock is the over-the-counter market,
but the Common Stock is not then eligible for reporting over the CLSRS, but
the Common Stock is quoted on The Nasdaq Stock Market, Inc. ("Nasdaq"), the
------
last sale price reported on Nasdaq on the preceding Business Day or, if the
Common Stock is an issue for which last sale prices are not reported on
Nasdaq, the closing bid quotation on such day, but, in each of the next
preceding two cases, if the relevant Nasdaq price or quotation did not
exist on such day, then the price or quotation on the next preceding
Business Day in which there was such a price or quotation.
(ii) If the Current Market Price per share of Common Stock cannot be
ascertained by any of the methods set forth in paragraph (i) immediately
above, the Current Market Price per share of Common Stock shall be deemed
to be the price equal to the quotient determined by dividing the Appraised
Value by the number of outstanding shares of Common Stock (on a fully
diluted basis including any fractional shares and assuming the exercise in
full of all then-outstanding options, warrants or other rights to purchase
shares of Common Stock that are then currently exercisable at exercise
prices equal to or less than the Current Market Price).
"Current Warrant Price" per share of Common Stock, for the purpose of any
---------------------
provision of this Warrant at the date herein specified, shall mean the amount
equal to the quotient resulting from dividing the Exercise Price in effect on
such date by the number of shares (including any fractional share) of Common
Stock comprising a Stock Unit on such date.
<PAGE>
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended,
------------
and any similar or successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at any applicable
time.
"Exercise Price" shall mean the purchase price per Stock Unit as set forth on
--------------
the first page of this Warrant on the Closing Date and thereafter shall mean
such dollar amount as shall result from the adjustments specified in Section 4.
"Holder" means, initially, Oxygen Media, LLC, a Delaware limited liability
------
company, and thereafter any Person that is or Persons that are the registered
holder(s) of the Warrant or Warrant Stock as registered on the books of the
Company.
"Liquidity Event" shall mean (i) the sale of all or substantially all the
---------------
assets of the Company for cash, (ii) a merger, acquisition, sale or
recapitalization of the Company whereby the Holder of this Warrant is entitled
by the terms of such transaction to receive cash in lieu of this Warrant or its
exercise or (iii) the initial firm-commitment public offering by the Company of
its Common Stock.
"Nonpreferred Stock" shall mean the Common Stock and shall also include stock
------------------
of the Company of any other class which is not preferred as to dividends or
assets over any other class of stock of the Company and which is not subject to
redemption.
"Person" shall include an individual, a corporation, an association, a
------
partnership, a limited liability company, a trust or estate, a government,
foreign or domestic, and any agency or political subdivision thereof, or any
other entity.
"Restricted Certificate" shall mean a certificate for Common Stock or a
----------------------
Warrant bearing the restrictive legend set forth in the preamble.
"Restricted Securities" shall mean Restricted Stock and the Restricted
---------------------
Warrant.
"Restricted Stock" shall mean Common Stock evidenced by a Restricted
----------------
Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a Restricted
------------------
Certificate.
"Securities" shall mean the Warrant issued to the Holder, and the certificates
----------
and other instruments from time to time evidencing the same.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
--------------
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at any applicable
time.
<PAGE>
"Stock Unit" shall constitute one share of Common Stock, as such Common Stock
----------
was constituted on the date hereof and thereafter shall constitute such number
of shares (including any fractional shares) of Common Stock as shall result from
the adjustments specified in Section 4.
"Subscription Agreement" has the meaning assigned to such term in the second
----------------------
paragraph of this Warrant.
"Voting Stock" shall mean any equity security entitling the holder of such
------------
security to vote at meetings of shareholders except an equity security which
entitles the holder of such security to vote only upon the occurrence of some
contingency, unless that contingency shall have occurred and be continuing.
"Warrant" shall mean this Warrant to purchase up to an aggregate of 136,500
-------
Stock Units initially issued to Oxygen Media, LLC, a Delaware limited liability
company, and all Warrants issued upon transfer, division or combination of, or
in substitution therefor.
"Warrant Stock" shall mean the shares of Common Stock purchasable by the
-------------
holder of any Warrants upon the exercise thereof.
Section 2. Exercise of Warrant. The holder of this Warrant may, at any time
-------------------
on and after the date hereof, but not later than the Expiration Date, exercise
this Warrant in whole at any time or in part from time to time for the number of
Stock Units which such holder is then entitled to purchase hereunder. The
Holder may exercise this Warrant, in whole or in part, by either of the
following methods (or a combination thereof or as otherwise determined by the
Company's Board of Directors):
(a) the Holder may deliver to the Company at its office maintained
pursuant to Section 13 for such purpose (i) a written notice of such
Holder's election to exercise this Warrant, which notice shall specify the
number of Stock Units to be purchased, (ii) this Warrant and (iii) a sum
equal to the aggregate Exercise Price therefor in immediately available
funds; or
(b) on or after the occurrence of a Liquidity Event, the Holder may
also exercise this Warrant, in whole or in part, in a "cashless" or "net
issue" exercise by delivering to the Company at its office maintained
pursuant to Section 13 for such purpose (i) a written notice of such
Holder's election to exercise this Warrant, which notice shall specify the
number of Stock Units to be delivered to such Holder and the number of
Stock Units with respect to which this Warrant is being surrendered in
payment of the aggregate Exercise Price for the Stock Units to be delivered
to the Holder, and (ii) this Warrant. For purposes of this subparagraph
(b), each Stock Unit as to which this Warrant is surrendered will be
attributed a value equal to the product of (x) the Current Market Price per
share of Common Stock minus the Current Warrant Price per share of Common
Stock,
<PAGE>
multiplied by (y) the number of shares of Common Stock then
comprising a Stock Unit.
Any notice required under this Section 2 may be in the form of a subscription
set out at the end of this Warrant. Upon delivery thereof, the Company shall as
promptly as practicable cause to be executed and delivered to such holder a
certificate or certificates representing the aggregate number of fully-paid and
nonassessable shares of Common Stock issuable upon such exercise.
The stock certificate or certificates for Warrant Stock so delivered shall be
in such denominations as may be specified in said notice and shall be registered
in the name of such Holder or, subject to Section 9, such other name or names as
shall be designated in said notice. Such certificate or certificates shall be
deemed to have been issued and such Holder or any other Person so designated to
be named therein shall be deemed to have become a holder of record of such
shares, including to the extent permitted by law the right to vote such shares
or to consent or to receive notice as a stockholder, as of the time said notice
is delivered to the Company as aforesaid. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said
certificate or certificates, deliver to such Holder a new Warrant dated the date
it is issued, evidencing the rights of such Holder to purchase the remaining
Stock Units called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2.
All shares of Common Stock issuable upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable, and free from all liens and other
encumbrances thereon. The Company will from time to time take all such action
as may be necessary to assure that the par value per share of the unissued
Common Stock acquirable upon exercise of this Warrant is at all times equal to
or less than the Exercise Price then in effect.
The Company shall not issue certificates for fractional shares of stock upon
any exercise of this Warrant whenever, in order to implement the provisions of
this Warrant, the issuance of such fractional shares is required. Instead, the
Company shall pay cash in lieu of such fractional share upon such exercise.
Section 3. Transfer, Division and Combination. Subject to Section 9, this
----------------------------------
Warrant and all rights hereunder are transferable, in whole or in part, on the
books of the Company to be maintained for such purpose, upon surrender of this
Warrant at the office of the Company maintained for such purpose pursuant to
Section 13, together with (a) a written assignment in the form set out at the
end of this Warrant duly executed by the Holder hereof or its agent or attorney,
(b) a copy of the Subscription Agreement duly executed by an authorized
representative of the transferee (substantially in the form executed by the
Holder or in such other form as reasonably acceptable to counsel to the Company)
and (c) payment of funds sufficient to pay any stock transfer taxes payable upon
the making of such transfer. Upon such surrender, execution and payment, the
Company shall, subject to Section 9, execute and deliver a new
6
<PAGE>
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. If and when this Warrant is assigned in blank (in case the
restrictions on transferability in Section 9 shall have been terminated), the
Company may (but shall not be obliged to) treat the bearer hereof as the
absolute owner of this Warrant for all purposes and the Company shall not be
affected by any notice to the contrary. This Warrant, if properly assigned in
compliance with this Section 3 and Section 9, may be exercised by an assignee
for the purchase of shares of Common Stock without having a new Warrant issued.
This Warrant may, subject to Section 9, be divided upon presentation at the
aforesaid office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
holder hereof or its agent or attorney. Subject to compliance with the
preceding paragraph and with Section 9, as to any transfer which may be involved
in such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant to be divided or combined in
accordance with such notice.
The Company shall pay all expenses, taxes and other charges incurred by the
Company in the performance of its obligations in connection with the
preparation, issue and delivery of Warrants under this Section 3.
The Company agrees to maintain at its aforesaid office books for the
registration and transfer of the Warrants.
Section 4. Adjustment of Stock Unit or Exercise Price. The number of shares
------------------------------------------
of Common Stock comprising a Stock Unit, and the Exercise Price per Stock Unit,
shall be subject to adjustment from time to time as set forth in this Section 4
and in Section 5. The Company will not take any action with respect to its
Nonpreferred Stock of any class requiring an adjustment pursuant to any of the
following Subsections 4.1 or 4.3 without at the same time taking like action
with respect to its Nonpreferred Stock of each other class.
4.1. Stock Dividends, Subdivisions and Combinations. In case at any time or
----------------------------------------------
from time to time the Company shall
(a) take a record of the holders of its Nonpreferred Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Nonpreferred Stock, or
(b) subdivide its outstanding shares of Nonpreferred Stock into a larger
number of shares of Nonpreferred Stock, or
(c) combine its outstanding shares of Nonpreferred Stock into a smaller
number of shares of Nonpreferred Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of
7
<PAGE>
Common Stock which a record holder of the number of shares of Common Stock
comprising a Stock Unit immediately prior to the happening of such event would
own or be entitled to receive after the happening of such event; provided,
however, that no such event may take place with respect to any shares of
Nonpreferred Stock unless it shall also take place for all shares of
Nonpreferred Stock.
4.2. Other Provisions Applicable to Adjustments. The following provisions
------------------------------------------
shall be applicable to the making of adjustments of the number of shares of
Common Stock comprising a Stock Unit hereinbefore provided for in this Section
4:
(a) When Adjustments to Be Made. The adjustments required by Section 4.1
---------------------------
shall be made whenever and as often as any specified event requiring an
adjustment shall occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(b) Fractional Interests. In computing adjustments under this Section 4,
--------------------
fractional interests in Nonpreferred Stock shall be taken into account to the
nearest one-thousandth of a share.
(c) When Adjustment Not Required. If the Company shall take a record of the
----------------------------
holders of its Nonpreferred Stock for the purpose of entitling them to receive a
dividend or distribution and shall, thereafter and before the distribution
thereof to shareholders, abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
4.3. Merger, Consolidation or Disposition of Assets. In case the Company
----------------------------------------------
shall merge or consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation and pursuant to the terms of such merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation are to be received by or distributed to the holders of
Nonpreferred Stock of the Company, then each holder of a Warrant shall have the
right thereafter to receive, upon exercise of such Warrant, Stock Units each
comprising the number of shares of common stock of the successor or acquiring
corporation receivable upon or as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Nonpreferred Stock
comprising a Stock Unit immediately prior to such event. If, pursuant to the
terms of such merger, consolidation or disposition of assets, any cash, shares
of stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) are to be received by or
distributed to the holders of Nonpreferred Stock of the Company, there shall be
either, at the Holder's option, (i) a reduction of the Exercise Price equal to
the amount applicable to the number of shares of Common Stock then comprising a
Stock Unit of any such cash and of the fair value of any and all such shares of
stock or of other securities or property to be received by or distributed to the
holders of Nonpreferred Stock of the Company, or (ii) such Holder shall have the
right to receive, upon exercise of its Warrant, such cash, shares of stock or
other securities or property of any nature as a holder of the number of
8
<PAGE>
shares of Nonpreferred Stock underlying a Stock Unit would have been entitled to
receive upon the occurrence of such event. Such fair value shall be determined
in good faith by the Board of Directors of the Company, provided that if such
determination is objected to by the holders of Warrants evidencing a majority in
number of the total number of Stock Units at the time purchasable upon the
exercise of all then outstanding Warrants, such determination shall be made by
an independent appraiser selected by the Company and said holders. In the event
that the Company and said holders cannot, in good faith, agree upon an
appraiser, then the Company, on the one hand, and said holders, on the other
hand, shall each select an appraiser, the two appraisers so selected shall
select a third appraiser who shall be directed to prepare such a written
appraisal which shall be conclusive and binding on the parties. The fees and
expenses of any appraisers shall be paid by the Company, except in the case
where the valuation of any appraiser who renders an Appraisal is within ten
percent (10%) of the value originally determined by the Board of Directors, in
which case the holders shall pay the fees and expenses of any appraisers. In
case of any such merger, consolidation or disposition of assets, the successor
acquiring corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide for
adjustments of Stock Units which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 4. For the purposes of this Section
4 "common stock of the successor or acquiring corporation" shall include
------------------------------------------------------
stock of such corporation of any class, that is not preferred as to dividends or
assets over any other class of stock of such corporation and that is not subject
to redemption, and shall also include any evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date or the
happening of a specified event, and any warrants or other rights to subscribe
for or purchase any such stock. The foregoing provisions of this Subsection 4.3
shall similarly apply to successive mergers, consolidations or dispositions of
assets.
Section 5. Notice to Warrant Holders.
-------------------------
5.1. Notice of Adjustment of Stock Unit or Exercise Price. Whenever the
----------------------------------------------------
number of shares of Common Stock comprising a Stock Unit, or the price at which
a Stock Unit may be purchased upon exercise of the Warrants, shall be adjusted
pursuant to Section 4, the Company shall forthwith obtain a certificate signed
by independent accountants, of recognized national standing, selected by the
Company and reasonably acceptable to the Holder(s) of the Warrants, setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a statement of the fair
value, as determined by the Board of Directors of the Company or by appraisal
(if applicable), of any evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights
referred to in Section 4.3) and specifying the number of shares of Common Stock
comprising a Stock Unit and (if such adjustment was made pursuant to Section
4.3) describing the number and kind of any other shares of stock comprising a
Stock Unit, and any change in the purchase price or prices thereof, after giving
effect to such adjustment or change. The Company shall promptly, and in any
case within three days after the making of such adjustment, cause a signed copy
of such certificate to be delivered to each holder of a Warrant in accordance
with
9
<PAGE>
Section 14. The Company shall keep at its office or agency, maintained for
the purpose pursuant to Section 13, copies of all such certificates and cause
the same to be available for inspection at said office during normal business
hours by any holder of a Warrant or any prospective purchaser of a Warrant
designated by a holder thereof.
5.2. Notice of Certain Corporate Action. In case the Company shall propose
----------------------------------
(a) to pay any dividend payable in stock of any class to the holders of its
Nonpreferred Stock or to make any other distribution to the holders of its
Nonpreferred Stock (other than a cash dividend) or (b) to effect any
consolidation, merger or sale, organic change, transfer or other disposition of
all or substantially all of its property, assets or business, then in each such
case, the Company shall deliver to each holder of a Warrant, in accordance with
Section 14, a notice of such proposed action, which shall specify the date on
which a record is to be taken for the purposes of such stock dividend,
distribution or rights, consolidation, merger, sale, organic change or transfer
is to take place and the date of participation therein by the holders of
Nonpreferred Stock, if any such date is to be fixed, and shall also set forth
such facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Nonpreferred Stock and the number and kind of any
other shares of stock which will comprise a Stock Unit, and the purchase price
or prices thereof, after giving effect to any adjustment which will be required
as a result of such action. Such notice shall be so delivered as promptly as
reasonably possible.
Section 6. Reservation and Authorization of Common Stock. The Company shall
---------------------------------------------
at all times reserve and keep available for issue upon the exercise of Warrants
such number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant or upon such conversion, as the case may be, shall be duly and
validly issued, fully-paid and nonassessable.
Section 7. Taking of Record; Stock and Warrant Transfer Books. In the case
--------------------------------------------------
of all dividends or other distributions by the Company to the holders of its
Nonpreferred Stock with respect to which any provision of Section 4 refers to
the taking of a record of such holders, the Company will in each such case take
such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up or as otherwise may be required by law, close its
stock transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
Section 8. Taxes. The Company will pay all taxes (other than federal, state,
-----
local or foreign income taxes) which may be payable in connection with the
execution and delivery of this Warrant or the issuance and sale of the
Restricted Securities hereunder or in connection with any modification of the
Restricted Securities and will save the Holder harmless without limitation as to
time against any and all liabilities with respect to or resulting from any delay
in paying, or omission to pay, such taxes. The obligations of the Company under
this Section 8 shall survive any redemption, repurchase or acquisition of
Restricted Securities by the Company.
10
<PAGE>
Section 9. Restrictions on Transferability. The Restricted Securities shall
-------------------------------
not be transferable except upon the conditions specified in this Section 9.
9.1 Transfer to an Affiliate. The Holder shall have the right to transfer
------------------------
any Restricted Securities to any Affiliate of the Holder, in each case free of
the restrictions imposed by this Section 9 other than the requirement as to the
legending of the certificates for such Restricted Securities specified in
Section 9.3. No opinion of counsel shall be required for a transfer of
Restricted Securities to an Affiliate of the Holder.
9.2 Transfer to a Non-Affiliate. The Holder and his or her or her subsequent
---------------------------
transferees shall have the right to transfer any Restricted Securities to a non-
Affiliate of Holder as follows:
(a) Prior to any transfer or attempted transfer of any Restricted
Securities to a non-Affiliate of Holder, the holder of such Restricted
Certificate shall give written notice to the Company of such holder's intention
to effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in reasonable detail.
(b) Upon receipt of such notice, the Company may request an opinion of
counsel of a transferring holder to the effect that such proposed transfer may
be effected without registration under the Securities Act. Upon receipt of such
opinion, or if the Company does not request such an opinion, within five (5)
Business Days after receiving notice of the proposed transfer, the Company
shall, as promptly as practicable, so notify the holder of such Restricted
Certificate and such holder shall thereupon be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
such holder to the Company. Each certificate evidencing the Restricted
Securities thus to be transferred (and each certificate evidencing any
untransferred balance of the Restricted Securities evidenced by such Restricted
Certificate) shall bear the restrictive legend set forth in Section 9.3, unless
in the opinion of the Company or the opinion of such counsel, if requested,
pursuant to Rule 144(k) of the Securities Act or otherwise, such legend is not
required in order to ensure compliance with the Securities Act. The fees and
expenses of counsel for any such opinion shall be paid by the Company.
9.3 Restrictive Legend. Unless and until the Restricted Securities have been
------------------
registered under the Securities Act, this Warrant, each Warrant issued to any
transferee of the Holder, each certificate for any Warrant Stock issued upon
exercise of any Warrant and each certificate for any Warrant Stock issued to any
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY REQUIRED REGISTRATION OR QUALIFICATION UNDER ANY
STATE SECURITIES LAWS, OR THE
11
<PAGE>
PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION
UNDER FEDERAL OR STATE SECURITIES LAWS."
Section 10. Limitation of Liability. No provision hereof, in the absence of
-----------------------
affirmative action by the Holder to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the purchase price of the Warrant Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Section 11. Loss or Destruction of Warrant Certificates. Upon receipt of
-------------------------------------------
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company
(the original Holder's or any other institutional Holder's indemnity being
satisfactory indemnity in the event of loss, theft or destruction of any Warrant
owned by such institutional Holder), or, in the case of any such mutilation,
upon surrender and cancellation of such Warrant, the Company will make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new
Warrant of like tenor and representing the right to purchase the same aggregate
number of shares of Common Stock.
Section 12. Amendments. The terms of this Warrant may be amended, and the
----------
observance of any term therein may be waived, but only with the written consent
of the holders of Warrants evidencing a majority in number of the total number
of Stock Units at the time purchasable upon the exercise of all then outstanding
Warrants, provided that no such action may change the number of shares of stock
comprising a Stock Unit or the Exercise Price, without the written consent of
the holders of Warrants evidencing 100% in number of the total number of Stock
Units at the time purchasable upon the exercise of all then outstanding
Warrants. For the purposes of determining whether the holders of outstanding
Warrants entitled to purchase a requisite number of Stock Units at any time have
taken any action authorized by this Warrant, any Warrants owned by the Company
or any Affiliate of the Company (other than an institutional investor which may
be deemed an Affiliate solely by reason of the ownership of Warrants) shall be
deemed not to be outstanding.
Section 13. Office of the Company. So long as any Warrant remains
---------------------
outstanding, the Company shall maintain an office where the Warrants may be
presented for exercise, transfer, division or combination as in this Warrant
provided. Such office shall be at 5388 Sterling Center Drive, Unit C, Westlake
Village, California 91361, FAX: (818) 707-7132, unless and until the Company
shall designate and maintain some other office for such purposes and deliver
written notice thereof to the Holders of all outstanding Warrants.
Section 14. Notices Generally.
-----------------
14.1. All communications (including all required or permitted notices)
pursuant to the provisions hereof shall be in writing and shall be sent, to any
registered Holder of any Warrants or Warrant Stock, to the address of such
Holder as it appears in the stock or warrant
12
<PAGE>
ledger of the Company or at such other address as such Holder may have furnished
in writing to the Company.
14.2. Any notice shall be deemed to have been duly delivered when delivered
by hand, if personally delivered, and if sent by mail to a party whose address
is in the same country as the sender, two Business Days after being deposited in
the mail, postage prepaid, and if sent by recognized international courier,
freight prepaid, with a copy sent by telecopier, to a party whose address is not
in the same country as the sender, three Business Days after the later of (a)
being telecopied and (b) delivery to such courier.
Section 15. Governing Law. This Warrant shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware (without regard to
conflicts of law provisions thereof).
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name by its President and attested by its Senior Vice President.
Dated: December 30, 1999
RIGHTSTART.COM INC.
/s/ Jerry R. Welch
------------------
By: Jerry R. Welch
Its: President
ATTEST:
/s/ Kendrick F. Royer
- ---------------------
Name: Kendrick F. Royer
Title: Senior Vice President and General Counsel
<PAGE>
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for and purchases Stock Units of RightStart.com Inc., a Delaware
corporation, purchasable with this Warrant, and herewith makes payment therefor
(by check in the amount of $_____), or hereby tenders _______________ Stock
Units as payment therefor, all at the price and on the terms and conditions
specified in this Warrant and requests that certificates for the shares of
Common Stock hereby purchased (and any securities or other property issuable
upon such exercise) be issued in the name of and delivered to
_________________________ whose address is ________ and, if such Stock Units
shall not include all of the Stock Units issuable as provided in this Warrant
that a new Warrant of like tenor and date for the balance of the Stock Units
issuable thereunder be delivered to the undersigned.
Dated: _____________, _____
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of Stock Units
set forth below:
Number of Stock Units Name and Address of Assignee
- --------------------- ----------------------------
and does hereby irrevocably constitute and appoint ________________________
Attorney to make sure transfer occurs on the books of RightStart.com Inc., a
Delaware corporation, maintained for the purpose, with full power of
substitution in the premises.
Dated:
___________________________
Signature
___________________________
Witness
NOTICE: The signature to the assignment must correspond with the name as
written upon the face of the Warrant in every particular instance,
without alteration or enlargement or any change whatsoever.
The signature to this assignment must be guaranteed by a bank or trust
company having an office or correspondent in New York, New York or Los
Angeles, California or by a firm having membership on the New York
Stock Exchange.
<PAGE>
EXHIBIT 10.8
* Certain portions of this document have been omitted pursuant to a request for
confidential treatment filed separately with the Commission.
Term Sheet
----------
(Right Start-- Oxygen)
The following sets forth the preliminary understanding of the parties with
respect to a relationship among The Right Start, Inc., and RightStart.com Inc.
("Right Start"), on the one hand, and Oxygen Media, LLC ("Oxygen") on the other
hand. The parties agree that this term sheet is prepared for the sole purpose of
facilitating further discussion and negotiation of one or more definitive
agreements.
1. CO-BRANDED STORE.
Design of Store. The Co-Branded Store will be designed by both parties and
- ---------------
built, hosted, maintained and operated by Right Start on Right Start's server.
Co-Branded Store will include Oxygen's universal navigation device and such
elements of Oxygen's "look and feel" as proposed by Oxygen and agreed by the
parties. The Co-Branded Store will be based on Right Start's store located at
www.rightstart.com (the "Right Start Store"). The parties will agree on the
depth of co-branding (to be provided in the definitive agreement), but
acknowledged that the Co-Branded Store is not expected to be a mirror site of
the Right Start Store.
Location of Store. The Co-Branded Store will be resident in and be principally
- -----------------
accessible from the Moms Online site (the "Resident Site") and such other
relevant sites of Oxygen's web-based online network, including the O2 Simplify
site, whose target audience is women ages 18-49, as the same may be distributed
by Oxygen or any third party ("Oxygen Online Network") as reasonably determined
by the parties and, in the case of Oprah.com and associated Oprah-branded sites,
subject to the approval of Harpo Productions.
The Co-Branded Store will be located at such URLs that will accrue to the
benefit of Oxygen (or, if possible, both parties) for page view purposes.
A link connecting O2 Simplify to the Right Start Store will be in effect on or
before October 25, 1999. The Co-Branded Store will be launched by early to
mid-November, 1999 (with November 10, 1999 as the target date) as part of the O2
Simplify site and thereafter as part of the Moms Online site. In addition, on or
before November 1, 1999, Right Start agrees to provide certain products (with
hyperlinks to the Right Start Store for purchase) for sale in the Oxygen holiday
store. Once the co-branded store is established, all links from Oxygen
(including the Holiday Store, etc.) will be to the Co-Branded Store.
1
<PAGE>
Products. The Co-Branded Store will feature all products carried by the Right
- --------
Start Store. In addition, the Co-Branded Store may carry any and all types of
products, including those not covered in the Product Categories (as defined
hereinafter).
Right Start will be responsible for selection, turnover and arrangement of the
product offerings in the Co-Branded Store, subject to the parties jointly
determining what products or product categories will be featured on the front
screen of the Co-Branded Store and its channels or departments.
2. BUSINESS TERMS.
Term. October 25, 1999 through December 31, 2002. No extension or renewal unless
- ----
expressly agreed by the parties. The definitive agreement will include other
customary termination provisions to be agreed by the parties (e.g., material
breach, bankruptcy).
Revenue Share. Right Start will share revenues derived from sales of products
- -------------
from the Co-Branded Store as follows: [ * ]% of the Net Revenues (as defined
below) shall be paid to Oxygen; [ * ]% of the Net Revenues shall be retained by
Right Start; and any Net Profits (as defined below) remaining after taking into
account such sharing of Net Revenues will be [ * ] by Right Start and Oxygen.
Oxygen will forego all revenue sharing until [ * ]% of the costs actually
incurred by Right Start in initially building and launching the Co-Branded Store
are recouped.
"Net Revenues" shall mean total proceeds from customer sales less: (i) sales tax
collected, (ii) shipping and handling revenues and (iii) customer refunds for
returns and adjustments.
"Net Profit" shall mean Net Revenues less: (i) cost of goods sold, (ii) revenue
sharing due to Oxygen, (iii) revenue sharing due to Right Start and (iv) direct
operating costs and fairly allocated overhead relating to the Co-branded Store.
"Cost of goods sold" shall mean RightStart.com's cost of inventory sold by the
Co-Branded Store, including freight-in on such goods, the cost of inventory
damaged or
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
2
<PAGE>
otherwise deemed unsalable for which vendor credit is not available and that
originates from the Co-Branded Store, and a provision for shrink associated with
sales on the Co-Branded Store not to exceed [ * ]% of Net Sales.
Payment Terms. Payments will be made quarterly in arrears within 30 business
- -------------
days after the end of each calendar quarter, together with a reasonably detailed
accounting statement, subject to reasonable audit rights.
Expenses. Each party shall be responsible for its own costs and expenses in
- --------
connection with this agreement and the performance of its respective obligations
hereunder. Right Start will be responsible for the cost of building, hosting,
maintaining and operating the Co-Branded Store.
Warrants. Right Start will grant to Oxygen (or its designated affiliate) one or
- --------
more warrants to purchase 136,500 common shares of RightStart.com Inc. at a
price of $11.25. Such warrant(s) shall be exercisable for five (5) years from
the date of grant. Definitive agreement to provide for cashless exercise,
adjustments for any stock splits, subdivisions, or combinations of the stock to
be issued upon exercise and reasonable safe guards with respect to the
reorganization, consolidation, or merger of RightStart.com Inc.
3. ADVERTISING/SPONSORSHIP OPPORTUNITIES.
Advertising/Sponsorship Commitment. Exhibit A sets forth Right Start's
- ----------------------------------
commitments to purchase advertising and sponsorship on Oxygen's Cable Network
and Online Network (to be allocated as provided therein). Media dollars to be
billed as Gross.
Online Scheduling. Web impressions will be allocated across all relevant pages
- -----------------
across Oxygen Online Network in ad banners, a dedicated area on relevant web
pages (known as the Partner Utility Bar) for sponsor content (to be developed by
Oxygen and Right Start), and through a variety of other means (including
targeted e-mail campaigns, newsletters, etc.). Placement and allocations will be
reasonably determined by Oxygen in consultation with Right Start and in a manner
consistent with Oxygen's editorial standards and practices.
Television Scheduling. Equitable distribution both horizontally and vertically
- ---------------------
within the total daypart definition and during such scheduled hours not more
than one commercial unit (i.e. 30 second or 1 minute spot) per hour block (from
6 a.m. to 3 a.m.) unless otherwise agreed. No commitment to provide minimum
separation or equitable
- -----------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
3
<PAGE>
distribution between and within the hour blocks. All spots will be subject to
Oxygen's standard terms and conditions for sponsors or such other terms and
conditions as agreed by the parties. Right Start will also participate in
Oxygen's URL promotional stripe, a persistent on-air element (i.e., resides on
screen during programming and advertising time) being provided in lieu of
traditional sponsorship billboards.
Television Estimating. Oxygen Media intends to purchase a television audience
- ---------------------
measurement system when Nielsen reports a universe estimate of more than [ * ]
households. Prior to audience measurement capabilities, television delivery is
to be based on Oxygen distribution ratings and VPVH estimates attached hereto as
Exhibit B. At such time as Oxygen's Nielsen measurement system becomes
available, delivery guarantees will be converted to households on quarterly
total day averages based on data provided by Nielsen's measurement system.
Television estimates in years 2 through 5 (for years 4 and 5, only if the
renewal option is exercised to extend the term of the agreement) will be revised
quarterly if necessary based on a guaranteed minimum CPM.
4. CO-MARKETING AND CO-PROMOTIONS.
Right Start Co-Marketing Opportunities. Right Start commits to giving Oxygen at
- --------------------------------------
least [ * ]. Oxygen shall have the right to select the types of marketing
opportunities to be provided by Right Start from the options set forth on
Exhibit D. The parties will consult with each other on potential opportunities
on a periodic basis. Marketing fees to be billed as net.
Oxygen Co-Marketing Opportunities. Parties will explore co-promotion
- ---------------------------------
opportunities involving Oxygen's existing promotional efforts, which include
Oxygen's convergence lab, participation in Oxygen's grass roots marketing
efforts (i.e., Oxygen Tank Tour), and consumer promotions on-air and on-line.
5. CO-BRANDED OFFERINGS.
Right Start will work with Oxygen to create, develop and host custom product or
service offerings ( the "Co-Branded Offerings"). The objective of such
Co-Branded Offerings is, among other things, to help Oxygen users be better
consumers in the Product Categories or of the Co-Branded Service. It is expected
that the first Co-Branded Offerings will be commercially available within the
year 2000 and that new Co-Branded Offerings will be developed and launched on a
semi-annual basis thereafter.
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
4
<PAGE>
Any and all such co-developed offerings shall be co-branded in a manner that
gives Right Start a persistent, appropriately prominent attribution using the
Right Start logo and shall be made available on the Oxygen Online Network to
Oxygen users exclusively. To the extent the parties agree to make such
Co-Branded Offerings available in the Right Start Store, Right Start shall
provide prominent attribution to Oxygen and link to the home page or other
relevant area of the Oxygen Online Network. Ownership of intellectual property,
including, without limitation, ownership of product design, trademarks and
copyrights, shall be determined on a case-by-case basis for each jointly
developed, Co-Branded Offering as reasonably agreed to by the parties.
A project committee, with representatives appointed by each party, will work
together to conceive such new programming and tools, create a joint development
plan, and oversee the development efforts. Any joint development plan created by
such project committee will be submitted to both parties for approval and will,
among other things, include a project budget specifying what cash and noncash
resources are to be committed by each party and a timetable for completion.
6. EXCLUSIVITY.
Oxygen Exclusivity. Oxygen will not enter into any affiliation, revenue sharing,
- ------------------
advertising or sponsorship or co-promotional arrangement with any of the third
party retailers listed on Exhibit D with respect to the business of selling
products for babies and toddlers through age 3 and developmental toys for babies
and toddlers through age 6 (collectively, the "Product Categories") directly to
end consumers over the Oxygen Online Network. Oxygen will not enter into any
affiliation, partnership, sponsorship or co-promotional arrangement with [ * ].
The Product Categories will also include developmental toys for kids from age 7
through 12 unless Right Start fails to make a comprehensive selection of such
products commercially available by June 30, 2000, in which case developmental
toys for kids from age 7 through 12 will not be included within the Product
Categories subject to Oxygen exclusivity. Exhibit D may be amended by Right
Start subject to the approval of Oxygen, which approval, with respect solely to
the addition of any third party retailer whose business is comparable to that of
the retailers set forth on Exhibit D, shall not be unreasonably withheld.
Notwithstanding the foregoing, Oxygen's exclusivity, promotion or other
obligations hereunder shall not apply to the following:
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
5
<PAGE>
- -- Any type of arrangement (e.g., linking, content integration, banner
advertising) with any third party (other than any listed on Exhibit D),
even if any such third party carries products in the Product Categories.
- -- Any linking arrangement to any third party (including any listed on Exhibit
D) in order to make available to Oxygen users any product (including any
particular version or brand) in the Product Categories that is not carried
by RightStart.com Inc., provided that Oxygen shall first give
RightStart.com Inc. a reasonable opportunity to stock such product and
provided, further, that Oxygen shall not prominently promote such third
party as a source for such product to the extent RightStart.com carries
comparable products and provided further that such linking arrangement
shall not involve promotion of such third party as a source for any other
products within the Product Categories.
- -- Any site or online service owned, controlled, operated or sponsored by
Oxygen that is dedicated to featuring and promoting small businesses or
start-ups by women (e.g., Women's Hands).
Oxygen shall have no obligation to cause any third party site or service to
which Oxygen links, on a co-branded or other basis, to make the services of such
third party available to Oxygen users to, in turn, link to Right Start or not to
link to any competitor of Right Start (including the parties listed on Exhibit
D).
The parties acknowledge that Oxygen has sold advertising to competitors of Right
Start which commitments shall be grandfathered and permitted to run through
their normal course, without any extension or renewal. A schedule to the
definitive agreement(s) shall be prepared listing competitors of Right Start
with whom Oxygen has commitments.
Right Start Exclusivity. Right Start will not enter into any affiliation or
- -----------------------
other arrangement which makes the Right Start services available, on a
co-branded, private label or other contextually relevant basis, on or to any web
site, channel or online service that is either operated by or directly or
indirectly affiliated with the third parties listed on Exhibit D.
Notwithstanding the foregoing, Right Start's exclusivity obligation hereunder
shall not apply to the purchase of any banner advertising, advertising spots or
similar non-contextually relevant advertising that links to otherwise promotes
Right Start's own store located at www.Right Start.com without any revenue
sharing or other sharing of customers.
6
<PAGE>
7. OTHER PROVISION.
Cross-Use of Oxygen Content. Right Start shall have the ability to borrow
- ---------------------------
content (to be mutually agreed upon by the parties) from Oxygen to be placed on
the Right Start Store. Oxygen shall have the ability to edit and determine and
pre-approve the final version of such content. Any such Oxygen-derived content
shall be made available on RightStart.com with such clickable branding to Oxygen
and on such other terms as the parties may agree.
Editorial Authority. Notwithstanding anything to the contrary, Oxygen shall have
- -------------------
complete editorial authority and control over its programming and other
editorial content in any media. Such authority shall include the right to
feature links to competitive retailers, products, services or other offerings so
long as such links are nonpromotional in nature and are provided to achieve
editorial objectives. Oxygen may adopt a policy or disclosure statement relating
to its sponsors and partners which, among other things, may provide how links to
the Co-Branded Store will be distinguished from any editorial content either by
placement, design or otherwise.
User Data. Any and all information derived or collected by Right Start from or
- ---------
about Oxygen users shall be jointly owned by Right Start and Oxygen with certain
exceptions (e.g., credit card information). Specific types of information and
reporting requirements will be defined in further detail in the definitive
agreement.
Privacy Policy. The parties agree that use of the Store shall be governed by
- --------------
mutually agreed terms and conditions and a mutually agreed privacy policy (which
shall be consistent with the terms and conditions and privacy policies,
respectively, of both parties). Such privacy policy shall permit the use of any
personally identifiable information of an Oxygen user collected by Right Start
to be used for e-mail promotions or other direct marketing campaigns by either
party only if such user expressly "opts in" or consents to receive such
promotions from such party.
Other Right Start Obligations. Right Start will be responsible for, among other
- -----------------------------
things (to be specified in the definitive agreement): (a) processing and
fulfilling all customer requests and transactions in a manner consistent with
the standards upheld at Right Start's own online store; (b) stocking adequate
inventories to meet the reasonably foreseeable demand of Oxygen users, taking
into account its own customers; and (c) providing at its cost all online and
offline customer service and support. No banner ads, sponsorships or any other
types of advertising will appear on or in connection with the Co-Branded Store,
except as the parties may otherwise agree in writing.
Confidentiality; Publicity. The definitive agreement(s) will contain standard
- --------------------------
confidentiality provisions (subject to exceptions for disclosure required by
law). Neither
7
<PAGE>
party shall issue any press releases or otherwise make any public announcements
regarding the arrangement contemplated hereunder without the prior written
consent of the other party hereto, unless such disclosure is required by law;
provided that if a party is compelled to disclose information, such party shall
give notice to the other party and an opportunity for such other party to review
the disclosure. Right Start will use its best efforts to obtain confidential
treatment for documents relating to Oxygen filed with the Securities and
Exchange Commission.
Miscellaneous. The definitive agreement between the parties shall contain
- -------------
provisions for cross-licensing content and related provisions regarding the
parties' respective intellectual property and other ownership rights, standard
representations and warranties, cross-indemnities covering noninfringement of
third party rights and the parties' operation of their respective sites and
business, confidentiality obligations, choice of law (New York) and other
provisions that are usual and customary for this type of arrangement.
* * * * *
Nothing in this document is binding nor is it a proposal or an offer to enter
into or execute a definitive agreement on these or any other terms. Upon the
parties' execution of this term sheet, the parties will promptly and diligently
in good faith use their reasonable commercial efforts to negotiate and enter
into a definitive agreement containing terms consistent with the foregoing and
otherwise mutually acceptable.
Oxygen Media, LLC RightStart.com Inc.
By: /s/ Daniel M. Taitz By: /s/ Jerry R. Welch
------------------------ -----------------------
Daniel M. Taitz Jerry R. Welch
General Counsel President
The Right Start, Inc.
By: /s/ Jerry R. Welch
-----------------------
Jerry R. Welch
President
8
<PAGE>
Exhibit A
Final - September 30, 1999
Rightstart/Oxygen Media, Inc. Partnership Proposal
--------------------------------------------------
Partnership Elements:
- --------------------
I. The Web
- -----------
. Preferred e-commerce partner status. Status promoted as link to co-branded
store at mom's online, O2 Simplify and other relevant areas (as determined
by Oxygen in consultation with Right Start).
. Participation in Oxygen Partner Program Bar on such relevant sites.
. Sponsorship identification of existing content on such relevant Oxygen web
editorial pages.
. Banner Advertising to link to Co-Branded Store.
. Combined Sponsorship,store and banner impressions: [ * ]
. [ * ] revenue to be shared as follows: [ * ] of gross proceeds paid to
Oxygen, [ * ] of gross proceeds to be paid to Right Start and any profit
margin remaining, if any, to be [ * ] Oxygen and Right Start [ * ].
II. Television
- ---------------
. Significant share of voice package on total Oxygen television network
. Total of [ * ] advertising time per year for branding and traffic driving
messages
. Participation in URL promotion plan on Oxygen "stripe"
. Inclusion in video stream on Oxygen.com
. Estimated W18-49 impressions: [ * ]
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
III. Oxygen Co-Marketing
- ------------------------
. Production fund for short form sponsor programs.
9
<PAGE>
. Participating sponsorship in On-air and on-line marketing event each year
IV. Right Start Co-Promotion of Oxygen
- ---------------------------------------
. Right Start to promote Oxygen through its stores (currently over 40
nationwide) and catalogs, including through in-store displays and bag
stuffers, catalogs, "in-box" mailers, etc.
. Right Start to include Oxygen promotion in its print ad campaigns,
including promotion of [ *] in local advertising of Right Start Stores.
. Right Start to commit aggregate [ * ] through such promotional
opportunities (see below).
V. Partnership Investment Summary
- ----------------------------------
Oxygen Value to Rightstart:
<TABLE>
<CAPTION>
. Dates: Media: September 1999 (web only pre Feb 2 launch)-December 31 2002
Year TV $ TV Impressions Web $ Web Impressions Web slotting fee Marketing
---- ----- -------------- ----- ----------------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
2000 $[*] [*] $ [*] [*] $ - $ [*]
2001 $[*] [*] $ [*] [*] $ - $ [*]
2002 $[*] [*] $ [*] [*] $ - $ [*]
$[*] [*] $ [*] [*] - [*]
</TABLE>
o [*]
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
10
<PAGE>
. Rightstart Value to Oxygen
[*]
All spending is net.
. Renewal options for years 2003 and 2004: Oxygen will grant Rightstart the
right to renew at the contracted CPM's for the years 2003 and 2004. Renewal
inventory will be offered at year 2002 impression levels for both television and
the web, unless otherwise agreed.
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
11
<PAGE>
Exhibit B
OXYGEN
PLANNING ESTIMATES
2000
[*]
OXYGEN
PLANNING ESTIMATES
CALENDAR YEAR 2001
[*]
OXYGEN
PLANNING ESTIMATES
2002
[*]
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
12
<PAGE>
Exhibit C
The Right Start / Rightstart.Com / Oxygen Media
Customer Impression Forecast
[*]
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
13
<PAGE>
Exhibit D -- Competitors
Right Start Competitors
- -----------------------
E-TOYS
iVILLAGE
BABYCENTER
WOMEN.COM
iBABY
BABYS 'R' US
BABYSTYLE.COM
SMARTERKIDS.COM
ZAINYBRAINEY
NOODLE KIDOODLE
IMAGINARIUM
KAYBEE KIDS
Oxygen Competitors
- ------------------
Women.com/homearts.com
iVillage
CondeNet
MSN Women's Central/Underwire
womenconnect.com
Martha Stewart
Any site or service operated by a third party that also operates or is directly
or indirectly affiliated with a television network and the programming and other
content prominently featured on such site or service is both (x) primarily
targeted at or specifically oriented for women and (y) being developed, adapted,
promoted and/or distributed, on a productized basis under a common brand, on and
across such third party's online platform and such third party's or any of its
affiliate's television platforms.
14
<PAGE>
EXHIBIT 10.9
WARRANT
SUBSCRIPTION AGREEMENT
----------------------
This Subscription Agreement (this "Agreement") is made as of December 30,
1999, by and between RightStart.com Inc., a Delaware corporation (the
"Company"), and Oxygen Media, LLC, a Delaware limited liability company (the
"Oxygen").
The parties hereto agree as follows:
1. Purchase and Sale of Securities.
-------------------------------
(a) Authorization of Issuance. The Company's Board of Directors (the
-------------------------
"Board") has authorized the issuance and sale to Oxygen of a warrant,
substantially in the form attached hereto as Exhibit A (the "Warrant"), to
purchase an aggregate of 136,500 shares of common stock, par value $.01 per
share of the Company (the "Common Stock"). The Warrant is being issued pursuant
to that certain Term Sheet dated October 28, 1999, between the Company, Oxygen
and The Right Start, Inc., a copy of which has been attached hereto as Exhibit B
(the "Term Sheet").
(b) Purchase and Sale. Subject to the terms and conditions set forth in
-----------------
the Warrant and this Agreement, including the covenants contained in this
paragraph, Oxygen agrees to purchase, and the Company agrees to issue and sell
to Oxygen, a Warrant to purchase 136,500 shares of Common Stock, subject to
adjustment from time to time as set forth in the Warrant.
(c) Oxygen Representation and Warranties. In connection with the purchase
------------------------------------
and sale of the Warrant and the Common Stock issuable upon conversion of the
Warrant (the "Warrant Stock"), Oxygen represents and warrants to the Company
that:
(i) the Warrant and the Warrant Stock to be acquired by Oxygen
pursuant to this Agreement will be acquired for Oxygen's own accounts and
not with a view to, or intention of, distribution thereof in violation of
the Securities Act of 1933, as amended (the "Securities Act"), or any
applicable state securities laws, and the Warrant and the Warrant Stock
will not be disposed of in contravention of the Securities Act or any
applicable state securities laws;
(ii) Oxygen is familiar with the term "accredited investor" as
defined in Rule 501 under the Securities Act and Oxygen is an "accredited
investor" within the meaning of such term in Rule 501 under the Securities
Act;
(iii) Oxygen is sophisticated in financial matters and is able
to evaluate the risks and benefits of the investment in the Company's
securities;
(iv) Oxygen is able to bear the economic risk of its investment
in the Warrant and the Common Stock issuable on conversion thereof for an
indefinite period of time because the Warrant and the Common Stock (A) have
not been registered under the
<PAGE>
Securities Act and, therefore, cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration
is available and (B) are subject to additional restrictions as provided
herein;
(v) Oxygen has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the sale of the Warrant and
the Warrant Stock and has had full access to such other information
concerning the Company as it has requested; and
(vi) this Agreement constitutes the legal, valid and binding
obligation of Oxygen, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Oxygen does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Oxygen is party or any judgment, order or
decree to which Oxygen is subject which would have a material adverse
effect on Oxygen or the Company.
2. Legends. Oxygen agrees that a legend in substantially the form set forth
-------
below shall be placed on all certificates evidencing the Warrant or the Warrant
Stock (in addition to any legend required under applicable state securities
laws). Such legend shall read as follows:
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be sold or
transferred, assigned, pledged or hypothecated unless and until
registered under such Act or unless the Company has received an
opinion of counsel or other evidence, satisfactory to the Company and
its counsel, that such registration is not required.
3. Representations and Warranties of the Company.
---------------------------------------------
(a) Corporate Existence; Authority. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of Delaware, and
it has all requisite power and authority to carry on its business as it is being
conducted.
(b) Authorization. All corporate action necessary for the
-------------
authorization, execution and delivery of this Agreement and the Warrant by the
Company, and the performance of all obligations of the Company hereunder and
thereunder, has been taken, and this Agreement and the Warrant, each when
executed and delivered, will constitute valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) as to rights to indemnity and
contribution that may be limited by applicable laws.
(c) Valid Issuance of Common Stock. Upon issuance in accordance with
------------------------------
the terms of Warrant, the Common Stock issuable upon exercise of the Warrant
will be duly authorized and validly issued, fully paid, and nonassessable and
will be free of restrictions on
2
<PAGE>
transfer other than restrictions on transfer under this Agreement, the Warrant
and under applicable state and federal securities laws.
(d) No Conflicts. The execution, delivery and performance by the
------------
Company of this Agreement and the Warrant, and the consummation of the
transactions contemplated hereby and thereby, will not result in any violation,
be in conflict with or constitute, with or without the passage of time or giving
of notice, a default under the Company's certificate of incorporation or bylaws
or, to the Company's knowledge, any agreement, contract or instrument to which
the Company is a party, the effect which would have a material adverse effect on
the Company.
4. Registration Rights.
-------------------
(a) Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its securities under the Securities Act on Form S-1, S-2 or S-3
or the equivalent (otherwise than to register debt securities under Form S-3, or
any comparable successor form), whether of its own accord or at the request of
any holder or holders of such securities, it will each such time give written
notice to Oxygen of its intention so to do.
Upon the written request of Oxgyen given within 20 days after receipt of any
such notice, the Company will use its best efforts to cause all Restricted
Securities (including Restricted Securities issuable upon conversion of a
Warrant that is converted at least 15 days prior to the effective date of the
registration for such securities) to be registered under the Securities Act
pursuant to such registration statement, all to the extent requisite to permit
the sale or other disposition (in accordance with the intended methods thereof
as aforesaid) by the prospective Seller or Sellers of the Restricted Securities
so registered. For purposes of this Agreement, the term "Restricted Securities"
shall mean all Warrant Stock that bears the restrictive legend set forth in
Section 2. For purposes of this Agreement, the term "Seller" or "Sellers" shall
mean a holder of Restricted Securities of the Company for which the Company
shall be required to file a registration statement or which shall be registered
under the Securities Act at the request of such holder pursuant to the
provisions of this Section 4. Neither the Company nor any of its Affiliates (as
defined in the Warrants) shall be deemed a "Seller" for any purposes of this
Agreement.
If the managing underwriter for the respective offering, if any, advises the
Company in writing that the inclusion in such registration of some or all of the
Restricted Securities sought to be registered by the Seller or Sellers in its
opinion will cause the proceeds or the price per unit the Company or the
requesting or demanding holder of securities will derive from such registration
to be reduced or that the number of securities to be registered at the instance
of the Company or such requesting or demanding holder plus the number of
securities sought to be registered by the Sellers is too large a number to be
reasonably sold, the number of securities sought to be registered for each
Seller shall be reduced pro rata, in proportion to the number of securities
sought to be registered by all Sellers holding pari passu registration rights,
to the extent necessary to reduce the number of securities to be registered to
the number recommended by the managing underwriter. It is the intention of the
Company that Oxygen's registration rights rank pari passu as to cutbacks with
that of registration rights granted to other
3
<PAGE>
holders of the Company's securities, except as set forth in that certain
Investors' Rights Agreement dated as of July 9, 1999 between the Company and the
investors named therein.
(b) Registration Procedures.
-----------------------
(i) If and whenever the Company is required by the provisions of
this Section 4 to use its best efforts to effect the registration of any of
the Restricted Securities under the Securities Act, the Company will
(except as otherwise provided in this Agreement), as expeditiously as
possible,
(A) cooperate with any underwriters for, and the Sellers of,
such Restricted Securities, and will enter into a usual and customary
underwriting agreement with respect thereto (provided that the Company
shall not be required to enter into more than two such underwriting
agreements (one for a domestic offering and one for an international
offering) in connection with any such registration) and take all such
other reasonable actions as are necessary or advisable to permit,
expedite and facilitate the disposition of such Restricted Securities
in the manner contemplated by the related registration statement, in
each case to the same extent as if all the securities then being
offered were for the account of the Company, and the Company will
provide to any Seller of Restricted Securities, any underwriter
participating in any distribution thereof pursuant to a registration
statement, and any attorney, accountant or other agent retained by any
Seller or underwriter, reasonable access to appropriate Company
officers and employees to answer questions and to supply information
reasonably requested by any such Seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(B) furnish or cause to be furnished to each Seller of
Restricted Securities covered by such registration statement,
addressed to such Sellers, a copy of the opinion of counsel for the
Company, and a copy of the "comfort" letter signed by the independent
public accountants who have certified the Company's financial
statements included in the registration statement, delivered on the
closing date to the underwriters of such Restricted Securities;
(C) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to
cause such registration statement to become and remain effective; and
prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities covered by
such registration statement whenever the Seller or Sellers of such
securities shall desire to sell or otherwise dispose of the same;
provided that no such registration statement will be filed by the
Company until counsel for the Sellers of securities included therein
shall have had a reasonable opportunity to review the same and to
exercise their rights under clause (A) above with respect thereto and
4
<PAGE>
no amendment to any such registration statement naming such Sellers as
selling shareholders shall be filed with the Commission until such
Sellers shall have had at least seven days to review such registration
statement as originally filed and theretofore amended and to exercise
their rights under clause (A) above;
(D) furnish to each Seller such numbers of copies of a
summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act,
and such other documents, as such Seller may reasonably request in
order to facilitate the public sale or other disposition of the
securities owned by such Seller;
(E) use its best efforts to register or qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each Seller shall
request, and do any and all other acts and things which may be
necessary or advisable to enable such Seller to consummate the public
sale or other disposition in such jurisdictions of the securities
owned by such Seller, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified or to file therein
any general consent to service;
(F) in the event of the issuance of any stop order suspending
the effectiveness of any registration statement or of any order
suspending or preventing the use of any prospectus or suspending the
qualification of any Restricted Securities for sale in any
jurisdiction, use its best efforts promptly to obtain its withdrawal;
(G) in the event any prospectus used in connection with the
distribution of Restricted Securities registered under the Securities
Act pursuant to the provisions of this Section 4 is discovered to
contain any untrue statement of any material fact or any omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, promptly
provide each holder that shall have requested registration of
Restricted Securities with amended prospectuses correcting such
statements;
(H) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission; and
(I) list such securities on any securities exchange on which
any stock of the Company is then listed, if the listing of such
securities is then permitted under the rules of such exchange;
provided, however, that notwithstanding any other provision of this
-------- -------
Section 4, the Company shall not be required to maintain the
effectiveness of any registration statement for a period in excess of
one year (plus any period during which the effectiveness of such
----
registration has been suspended). From time to time after a transfer
of Warrant Stock pursuant to a registration statement the Company will
file all reports required to be filed by it under the Securities Act,
the Exchange Act of 1934, as
5
<PAGE>
amended (the "Exchange Act") and the rules and regulations adopted by
the Securities and Exchange Commission thereunder, and will take such
further action as any holder or holders of Restricted Securities may
reasonably request, all to the extent required to enable such holders
to sell Restricted Securities pursuant to such laws and regulations
thereunder. Upon written request, the Company will deliver to such
holders a written statement as to whether it has complied with such
requirements.
(ii) In connection with the registration of Restricted Securities
under the Securities Act pursuant to the provisions of this Section 4, each
holder of Restricted Securities requesting such registration will (except
as otherwise provided in this Agreement), as expeditiously as possible,
(A) in the event of the issuance of any stop order
suspending the effectiveness of any registration statement or of any
order suspending or preventing the use of any prospectus or suspending
the qualification of any Restricted Securities for sale in any
jurisdiction, use its best efforts promptly to discontinue the
disposition of such Restricted Securities owned by such holders in
such jurisdiction until such order has been withdrawn; and
(B) in the event any prospectus used in connection with the
distribution of Restricted Securities registered under the Securities
Act pursuant to the provisions of this Section 4 is discovered to
contain any untrue statement of any material fact or any omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, use its best
efforts promptly to discontinue the disposition of such Restricted
Securities owned by such holder until amended prospectuses correcting
such statements have been provided to such holder.
(c) Expenses; Limitations on Registration. All expenses incident to the
-------------------------------------
Company's performance of its obligations in connection with any registration of
the Sellers' Restricted Securities under this Agreement including, without
limitation, printing expenses, fees and disbursements of counsel for the
Company, fees of the National Association of Securities Dealers, Inc. in
connection with its review of any offering contemplated in any registration
statement and expenses of any special audits to which the Company shall agree or
which shall be necessary to comply with governmental requirements in connection
with any such registration shall be paid by the Company. In addition, the
Company shall pay (i) all registration and filing fees for the Sellers'
Restricted Securities under federal and state securities laws, and (ii) expenses
of registering or qualifying under or complying with the securities or blue sky
laws of any jurisdictions. Notwithstanding the foregoing, in the event a Seller
withdraws its request for registration of Restricted Securities other than by
reason of (1) the Company's failure to perform its obligations in connection
with such registration, (2) the failure to be timely satisfied of any closing
condition contained in any underwriting agreement entered into in connection
with such registration and not within the exclusive control of such Seller, (3)
the termination of such underwriting agreement by the underwriters party thereto
other than by reason of the failure on the part of such Seller to perform its
obligations thereunder, or (4) the occurrence of any change
6
<PAGE>
that, in the sole judgment of such Seller, may materially adversely affect the
selling price or marketability of the Restricted Securities for which
registration was requested, including, without limitation, (A) any material
adverse change in the business, business prospects, properties, condition
(financial or otherwise) or operations of the Company, (B) the suspension of
trading in the Common Stock by the Commission or any national securities
exchange or automated quotation system or trading in securities generally on the
New York Stock Exchange or the establishment of limited or minimum prices on any
such national exchange or quotation system, (C) the declaration of any banking
moratorium by Federal, New York or California State authorities, or (D) the
occurrence of any outbreak or escalation of hostilities, the declaration by the
United States of any national emergency or war or the occurrence of any other
calamity or crisis the effect of which on financial markets is such, in the sole
judgment of the managing underwriter for such Seller, as to make it
impracticable or inadvisable to proceed with the offering of the Restricted
Securities, then such Seller shall bear such expenses. In addition, under all
circumstances, each Seller shall pay one hundred percent (100%) of the gross
underwriting spread or fees with respect to such Seller's Restricted Securities
covered by any registration pursuant to this Section 2.
It shall be a condition precedent to the obligation of the Company to take any
action pursuant to this Section 4 in respect of the securities which are to be
registered at the request of any prospective Seller that such prospective Seller
shall furnish to the Company such information regarding such Seller and the
securities held by such Seller and the intended method of disposition thereof as
the Company shall reasonably request and as shall be required in connection with
the action to be taken by the Company.
(d) Indemnification.
---------------
(i) In the event of any registration of any Restricted Securities
under the Securities Act pursuant to this Section 4, the Company shall
indemnify and hold harmless the Seller of such Restricted Securities and
any underwriter thereof, and their respective directors and officers, and
each other Person, if any, who controls such Seller or any such underwriter
within the meaning of the Securities Act ("Controlling Person"), against
------------------
any losses, claims, damages or liabilities, joint or several, to which such
Seller or underwriter or any such director or officer or Controlling Person
may become subject under the Securities Act or any other statute or at
common law, insofar as such losses, claims, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(A) any alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such
securities were registered under the Securities Act, or in any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or (B) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse such Seller or such director,
officer or Controlling Person for any legal or any other expenses
reasonably incurred by such Seller or such director, officer or Controlling
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall
-------- -------
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any alleged untrue
statement or alleged
7
<PAGE>
omission made in such registration statement, preliminary prospectus,
prospectus, or amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument
duly executed by such Seller specifically for use therein. The indemnity
provided in this subsection shall remain in full force and effect
regardless of any investigation made by or on behalf of such Seller or such
director, officer or Controlling Person, and shall survive the transfer of
such securities by such Seller.
(ii) Each holder of any Restricted Securities shall, by acceptance
thereof, severally and not jointly, indemnify and hold harmless the
Company, each other selling stockholder and any underwriter of such
Restricted Securities and their respective directors and officers and each
other Person, if any, who controls the Company or such underwriter (within
the meaning of the Securities Act) against any losses, claims, expenses,
damages or liabilities, joint or several, to which the Company or such
underwriter or any such director or officer or any such Person may become
subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (A) any alleged untrue
statement of any material fact contained, on the effective date thereof, in
any registration statement under which Restricted Securities were
registered under the Securities Act, or in any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto,
or (B) any alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such alleged
untrue statement or alleged omission was contained in written information
furnished to the Company through an instrument duly executed by such holder
specifically for use therein, and shall reimburse the Company or such
director, officer or other Person for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
loss, claim, damage, liability or action; provided that in no event shall
such indemnification amount to be paid hereunder be in excess of the net
proceeds received by such selling stockholder in such offering.
(iii) Indemnification similar to that specified in clauses (i) and
(ii) of this Section 4(d) shall be given by the Company and each holder of
any Restricted Security (with such modifications as shall be appropriate)
to each other and to any underwriter with respect to any required
registration or other qualification of any Restricted Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act. The indemnity and expense reimbursements obligations of the
Company under clauses (i) and (ii) of this Section 4(d) shall be in
addition to any liability the Company may otherwise have.
(iv) Each Person (an "Indemnitor") who under the preceding provisions
----------
of this Section 4(d) agrees to indemnify another Person (the "Indemnitee")
----------
shall have the right, subject to the provisions hereto, to designate
counsel (acceptable to the Indemnitee) to defend any case or proceeding
against the Indemnitee arising in respect of any claim of liability for
which such indemnification may be claimed, to the end that duplication of
legal expense may be minimized; provided that, if the Indemnitee notifies
the Indemnitor
8
<PAGE>
that the former has been advised by its counsel that any single counsel in
such case or proceeding would have a conflict of interest in representing
both the Indemnitor and the Indemnitee, the Indemnitee may designate its
own counsel in such case or proceeding and, to the extent so provided above
in this Section 4(d), shall be entitled to be reimbursed by Indemnitor for
its legal expenses reasonably incurred in connection with defending itself
in such case or proceeding.
(e) Termination of Registration Rights. The right of any holder to
----------------------------------
request registration or inclusion in any registration pursuant to this Section 4
shall terminate on the closing of the first Company-initiated registered public
offering of Common Stock of the Company, if all shares of Warrant Stock held by
such holder (assuming exercise in full of the Warrant) may immediately be sold
under Rule 144 during any 90-day period, or the earlier of (i) such date after
the closing of the first Company-initiated registered public offering of Common
Stock of the Company as all shares of Warrant Stock held by such holder
(assuming exercise in full of the Warrant) may immediately be sold under Rule
144 during any 90-day period, and (ii) five (5) years after the closing of the
first Company-initiated registered public offering.
5. "Lock-Up" Agreement. If requested by the Company or any representative of
------------------
an underwriter of Common Stock (or other securities) of the Company following
the Company's initial public offering, Oxygen shall not sell or otherwise
transfer or dispose of any Common Stock or other securities of the Company held
by it (other than those included in the registration) during the one hundred
eighty (180) day period following the effective date of a registration statement
of the Company filed under the Securities Act. If requested by the Company or
any representative of an underwriter of Common Stock (or other securities) of
the Company following the first public offering of the Company, Oxygen shall not
sell or otherwise transfer or dispose of any Common Stock or other securities of
the Company held by such holders (other than those included in the registration)
during the ninety (90) day period following the effective date of a registration
statement of the Company filed under the Securities Act. The obligations
described in this Section 5 shall not apply to a registration relating solely to
employee benefit plans on Form S-1 or Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to a transaction on
Form S-4 or similar forms that may be promulgated in the future. The Company
may impose stop-transfer instructions with respect to the shares of Common Stock
(or other securities) subject to the foregoing restriction until the end of such
lock-up periods.
6. Notices. Any notice delivered in connection with this Agreement must be
-------
in writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested), sent by reputable overnight
courier service (charges prepaid) or sent by facsimile (with follow-up telephone
confirmation of receipt) to the recipient at the address and facsimile number
below indicated (unless such information is subsequently modified in writing by
such recipient and delivered pursuant to this notice provision):
If to the Company, addressed to:
RightStart.com Inc.
5388 Sterling Center Drive, Unit C
9
<PAGE>
Westlake Village, California 91361
Attn: Chief Financial Officer or General Counsel
Facsimile: (818) 707-7132
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017
Attn: Kenneth J. Baronsky, Esq.
Facsimile: (213) 629-5063
If to Oxygen, addressed to:
Oxygen Media
75 9th Avenue
New York, New York 10011
Attn: Abe Hsuan, Esq.
Facsimile: (212) 651-2052
with a copy to:
Debevoise & Plimpton
875 Third Avenue, 27th Floor
New York, New York 10022
Attn: Michael Gillespie, Esq.
Facsimile: (212) 909-6836
6. General Provisions.
------------------
(a) This Agreement shall be binding upon and inure to the benefit of each
of the parties hereto and their respective, permitted successors and assigns.
Either party may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto to a successor to substantially
all of such assigning party's business or assets, provided that such successor
agrees to be bound by this Agreement.
(b) So long as the Warrant and the Warrant Stock have not been registered
under the Securities Act, prior to transfer of a Warrant or Warrant Stock by
Oxygen, Oxygen agrees that its transferee will execute and deliver a copy of
this Agreement to the Company and Oxygen.
(c) This Agreement shall be governed by and construed in accordance with
the law of the State of Delaware (excluding the law of conflicts thereof).
10
<PAGE>
(d) No course of dealing or any delay or failure to exercise any right,
power or remedy hereunder on the party of any party hereto shall operate as a
waiver of or otherwise prejudice such party's rights, powers or remedies.
(e) Notwithstanding anything in this Agreement, the Company shall not be
obligated to issue or sell any of the Warrant Stock if, in the judgment of the
Board, such issuance or sale may violate Federal or applicable state securities
laws or regulations or may require the Company to register or qualify any such
Warrant Stock under any Federal or state securities laws, or require the Company
or any of its agents or representatives to register or qualify with any
governmental agency or organization, pursuant to such laws or regulations.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
RIGHTSTART.COM INC.,
a Delaware corporation
By: /s/ Jerry R. Welch
------------------
Name: Jerry R. Welch
Title: President and Chief Executive Officer
OXYGEN MEDIA, LLC,
a Delaware limited liability company
By: /s/ Daniel M. Taitz
-------------------
Name: Daniel M. Taitz
Title: General Counsel
<PAGE>
EXHIBIT 10.10
* Certain portions of this document have been omitted pursuant to a request for
confidential treatment filed separately with the Commission.
SERVICES AGREEMENT
This Services Agreement ("Agreement") is entered into as of February 15,
1999 ("Effective Date"), by and between Guidance Solutions, Inc. ("Developer"),
with offices at 4134 Del Rey Avenue, Marina Del Rey, CA 90292, and The Right
Start, Inc. (the "Company"), with offices at 5388 Sterling Center Drive, Unit C,
Westlake Village, CA 91361.
WHEREAS, RightStart.com Inc. (the "Subsidiary") is in the business of
providing or desires to provide products for parents, infants and children on
the Internet; and
WHEREAS, Developer provides professional services to third parties seeking
to develop electronic commerce web sites for use on the Internet; and
WHEREAS, the Company desires to retain the services of Developer to perform
the services as specifically described in the attached Schedule I under the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and conditions
specified in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS
"Additional Services" shall have the meaning set forth in Section 2.2
hereof.
"Billing Rates" shall mean the applicable hourly billing rates of
Developer's employees as described in Schedule II hereto.
"Company" shall have the meaning set forth in the preamble.
"Company-Supplied Content" shall mean all Content provided or to be
provided by or on behalf of the Company in connection with the design and
development of the Web Sites pursuant to this Agreement, excluding any
Developer-Supplied Content.
"Confidential Information" shall have the meaning set forth in Section 6.1.
"Content" shall mean text, graphics, including JPEG and GIF files, images,
artwork and audiovisual materials to be displayed on any Web Sites pursuant to
this Agreement and the
1
<PAGE>
selection and arrangement of the foregoing, including trade dress and overall
"look and feel" of the Web Sites.
"Damages" shall have the meaning set forth in Section 9.1.
"Derivatives" of a work shall mean derivative works of that work as such
term is used in the United States Copyright Act of 1976, as amended.
"Developer" shall have the meaning set forth in the preamble.
"Developer-Supplied Content" shall mean all Content, including without
limitation HTML files, provided by Developer in connection with the development
of the Web Sites pursuant to this Agreement which Content is accessible to Web
Site users, including without limitation Third Party Content. For the avoidance
of doubt, the Developer-Supplied Content does not include any Guidance Solutions
Software.
"Effective Date" shall have the meaning set forth in the preamble.
"GIF" shall mean the Graphics Interchange Format.
"Guidance Solutions Software" shall have the meaning given to such term in
Schedule III attached hereto and incorporated herein by this reference.
Guidance Solutions Software does not include the Right Start Software, the
Developer-Supplied Content, nor any enhancements or amendments to the Guidance
Solutions Software that are released after the term of this Agreement as
provided in Section 4.
"HTML" shall mean hypertext markup language.
"Indemnitee" shall have the meaning set forth in Section 9.3(a).
"Indemnitor" shall have the meaning set forth in Section 9.3(a).
"JPEG" shall mean Joint Photographics Experts Group.
"Miscellaneous Services" shall have the meaning set forth in Section 2.3.
"Notice of Claim" shall have the meaning set forth in Section 9.3(a).
"Right Start Software" shall have the meaning given to such term in
Schedule III attached hereto and incorporated herein by this reference.
"Services" shall mean the specific services as set forth in Schedule I
hereto, specifying the target completion dates for such services (and any
Additional Services set forth in any addendum to such Schedule I pursuant to
Section 2.2) and any miscellaneous services that are not
2
<PAGE>
identified in Schedule I hereto or any addendum thereto to be provided by
Developer to the Company under the terms and conditions of this Agreement.
"Third Party Claim" shall have the meaning set forth in Section 9.3(b).
"Third Party Content" shall mean any Content owned by a third party that
Developer provides in connection with the development of the Web Sites pursuant
to this Agreement and is accessible to Web Site users.
"Web Sites" shall mean the Internet world-wide web sites to be designed and
developed by Developer for the Company pursuant to this Agreement.
2. SERVICES
2.1 Services. Developer shall provide to the Company the Services. The
--------
Company shall provide Developer with all Company-Supplied Content, as needed
during the term of this Agreement, and reasonable access to the Company's
facilities, records, personnel and other materials as Developer may from time to
time require in connection with the performance of the Services hereunder,
subject to the terms and conditions of Section 6 hereof.
2.2 Additional Services. If the parties so agree in writing, from time to
-------------------
time, the parties may add an addendum to Schedule I for each new service
("Additional Services") mutually agreed to by the parties. Each such addendum
shall specify the Additional Services and the target completion date, and shall
be signed by the parties.
2.3 Miscellaneous Services. From time to time, Developer may provide
----------------------
miscellaneous services that are not identified in Schedule I or any addendum
thereto ("Miscellaneous Services") to the Company upon the Company's request.
All such Miscellaneous Services shall be provided to the Company at the Billing
Rates identified in Schedule II hereto.
3. PAYMENT
3.1 Service Fees. In consideration for the Services, any Additional
------------
Services and any Miscellaneous Services to be provided by Developer under this
Agreement, the Company agrees to pay Developer promptly and fully the following
fees:
(a) Time-and-Materials Work. The Company agrees to pay for Developer's
-----------------------
time-and-materials Services, Additional Services and Miscellaneous Services at a
rate of [ /*/ ]% of the
- -----------------------------
/*/ Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
3
<PAGE>
Billing Rates set forth in Part A of Schedule II hereto. Such Billing Rates
shall remain in effect until the aggregate fees payable by the Company for
Developer's time-and-materials Services, Additional Services and Miscellaneous
Services, calculated on a [ * ]% discount basis, exceeds $[ * ]. Thereafter, the
rates for such Services, Additional Services and Miscellaneous Services shall be
the Developer's then-current market rates; provided, however, that such market
rates shall not exceed the [ * ] of (i) [ * ] the billing rates set forth in
Part A of Schedule II, or (ii) [ * ] the lowest billing rates charged by
Developer to its non-venture fee-for-service customers for similar services.
(b) Flat-Fee Services. The Company agrees to pay for Developer's
-----------------
flat-fee Services, Additional Services and Miscellaneous Services in accordance
with the Billing Rates set forth in Part B of Schedule II hereto, as such rates
may be adjusted from time to time with the prior consent of the Company (which
consent shall not be unreasonably withheld).
3.2 Payment of Expenses. From time to time, Developer may incur
-------------------
reasonable expenses in the performance of Services, the Additional Services and
Miscellaneous Services hereunder. Such expenses may include, but are not
limited to, travel, food, lodging and miscellaneous office expenses, such as
phone, courier, duplicating and similar charges. The Company shall promptly
reimburse Developer on a pass-through basis for those actual expenses which are
reasonably incurred by Developer in performing its duties and obligations
hereunder. These expenses will be itemized on Developer's invoices as described
in Section 3.3 hereof. Developer shall notify and obtain approval from the
Company prior to incurring any expenses under this Section 3.2 in excess of
$[ * ] in any calendar month.
3.3 Billings. Developer shall invoice the Company monthly for Services,
--------
Additional Services and any Miscellaneous Services for the time incurred by the
Developer in connection with the Web Sites at the Billing Rates set forth in
Schedule II, as such rates may be adjusted pursuant to Section 3.1. Each
invoice will describe the Services, the Additional Services or any Miscellaneous
Services rendered, the respective costs of each activity, and any associated
expenses. Each invoice shall be due and payable immediately upon receipt but no
later than 30 days of the date of the invoice. Any balance which is unpaid for
more than 30 days after the invoice date will be subject to a late fee, which
will be calculated at a rate of 1.5% per month of such overdue balance, provided
--------
that nothing in this Agreement shall be deemed to require the payment by the
Company of late fees on overdue balances in excess of the amount which Developer
may lawfully contract to charge under applicable usury and other laws.
- ----------------------------------------
/*/ Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
4
<PAGE>
4. TERM
Unless this Agreement is terminated pursuant to Sections 10.2, this
Agreement shall be in effect from the Effective Date until the completion of the
Services and any Additional Services or Miscellaneous Services by Developer.
5. OWNERSHIP; LICENSE
5.1 Developer-Supplied Content.
--------------------------
(a) Assignment. Subject to the payment by the Company of all agreed upon
----------
fees and expenses pursuant to Section 3 of this Agreement when due, Developer
assigns to the Company exclusively, throughout the world, all of its right,
title and interest in and to the Developer-Supplied Content supplied by
Developer hereunder, including all copyright and trademark and trade dress
rights associated therewith. Nothing herein transfers to the Company ownership
of rights of Developer in respect of any know-how, processes, techniques,
methods, inventions, discoveries or developments created or developed or
otherwise owned or controlled by Developer, including without limitation any
patent that may issue in respect of any invention, system or process created or
developed by Developer during the course of performing the Services, Additional
Services or Miscellaneous Services under this Agreement (all of which the
Company agrees and acknowledges are and shall remain the sole and exclusive
property of Developer).
(b) License. The Company's sole rights with respect to any know-how,
-------
processes, techniques, methods, inventions, discoveries, developments or patents
developed or otherwise owned or controlled by Developer shall be a non-
transferable (except to Subsidiary or to a successor to substantially all of the
business of the Company or Subsidiary that, in each case, is not then a direct
competitor of Developer and who agrees to be subject to the terms and conditions
of this Agreement), non-sublicensable (except to Subsidiary or to a successor to
substantially all of the business of the Company or Subsidiary that, in each
case, is not then a direct competitor of Developer and who agrees to be subject
to the terms and conditions of this Agreement), non-exclusive, royalty-free and
fully paid-up, and worldwide license to use and practice any of the foregoing
solely to the extent necessary in order for the Company to use, develop,
reproduce, broadcast, distribute, display, publish, transmit and otherwise make
available the Developer-Supplied Content and the Company-Supplied Content on the
Web Sites.
(c) Third Party Content. The Company acknowledges that Developer may
-------------------
include Third Party Content in the Developer-Supplied Content. Developer will
identify all Third Party Content and any limitations that are applicable to the
use and exploitation of such Third Party Content prior to or at the time of
delivery thereof. Except as otherwise agreed by the Company and Developer prior
to the delivery by Developer of any Third Party Content, Developer has the sole
obligation for obtaining any and all rights, clearances or licenses necessary to
use and exploit any Third Party Content in connection with the Web Sites or to
comply with the Company's rights under this Agreement.
5
<PAGE>
(d) Trade Dress. Notwithstanding that title to all Developer-Supplied
-----------
Content prepared for the Company under and during the term of this Agreement
shall belong to the Company, the ideas, concepts, overall structures, and other
information embodied or reflected in the Developer-Supplied Content developed
during the course of this Agreement by personnel of Developer, including without
limitation screen formats, structure, sequence and organization of any
Developer-Supplied Content, may be used, without an obligation to account, by
Developer in any way that Developer deems appropriate, including by or for its
clients or customers. Developer agrees not to replicate the "look and feel" and
overall trade dress aspects of the Web Sites for a direct competitor of the
Company or Subsidiary, or create any web site for any direct competitor of the
Company or Subsidiary which is confusingly similar to the Web Sites in respect
of "look and feel" and overall trade dress. Developer is in the business of
developing and designing web sites for a wide variety of clients, including
clients that may be in competition with the Company, and the Company understands
that Developer will continue these activities.
5.2 Guidance Solutions Software. Developer shall at all times remain the
---------------------------
exclusive owner of all right, title and interest in and to the Guidance
Solutions Software and all intellectual property rights associated therewith,
except as otherwise expressly provided herein. Except as provided in Section
5.3, neither this Agreement, nor any act by Developer or Company in furtherance
thereof, shall be construed as granting any right or license, express or
implied, in the Guidance Solutions Software. This Section 5.2 shall survive the
termination of this Agreement for any reason.
5.3 License of Guidance Solutions Software. Subject to the terms and
--------------------------------------
conditions of this Agreement, Developer hereby grants to the Company, Subsidiary
and any third-party that hosts the Web Sites a perpetual, world-wide, royalty-
free, nonexclusive, fully paid-up, license and right to use, develop, reproduce,
publish, broadcast, distribute, modify, transmit, display, transfer, maintain
and otherwise fully exploit the Guidance Solutions Software and its Derivatives;
provided, however, that such third-party hosting service of the Web Sites enter
into the Developer's then form of non-disclosure agreement. Developer reserves
all rights with respect to the Guidance Solutions Software not expressly granted
by this Agreement to the Company, including without limitation any right to
reproduce, display, distribute, adapt, modify, enhance or prepare Derivatives
based on the Guidance Solutions Software. The Company shall not use the Guidance
Solutions Software other than as expressly permitted under this Agreement.
6. CONFIDENTIAL INFORMATION
6.1 Confidential Information. During the course of this Agreement,
------------------------
Developer and the Company may become aware of information relating to the
products, documentation, software research and development, inventions,
processes, techniques, designs or other technical, marketing and business
information of the other party or its affiliates, including the Guidance
Solutions Software. All such information is considered by both parties to be
proprietary and confidential ("Confidential Information").
6
<PAGE>
6.2 Confidentiality. Both during and after this Agreement, each party
---------------
agrees that, except as authorized in writing by the other party, it will: (i)
use reasonable efforts to preserve and protect the confidentiality of all
Confidential Information of the other party and its affiliates (and in any event
no less care than is used by such party in protecting the confidentiality of its
own Confidential Information); (ii) except as necessary to carry out the terms
hereof, use reasonable efforts to prevent any disclosure to anyone, including
its employees of the existence, source, content or substance of the Confidential
Information of the other party and its affiliates; and (iii) not use
Confidential Information of the other party and its affiliates in any way other
than in furtherance of this Agreement or as required by applicable laws.
6.3 Exceptions. No party shall have any liability to the other for
----------
disclosure of any Confidential Information of the other party or its affiliates
which the disclosing party can establish to have: (i) become publicly known
without breach of this Agreement; (ii) been publicly released for disclosure by
the other party or its affiliates; (iii) been given to such party by someone
other than the other party or its affiliates without a duty to maintain
confidentiality; or (iv) been required by applicable laws.
6.4 Injunctive Relief. Each party agrees that any material breach or
-----------------
attempted or threatened breach of this Section 6 could result in irreparable
injury to the other party for which there would be no adequate remedy at law and
consents to injunctive relief without limiting the applicability of any other
remedies.
6.5 Return of Confidential Information. Not later than thirty (30) days
----------------------------------
after the termination of this Agreement for any reason, each party will return
to the other party all originals or copies of Confidential Information of the
other party and all notes with respect thereto, and provided, however, that as
to notes and internal analyses and work product containing Confidential
Information, each party may, in lieu of delivering such material to the other
party, destroy all such material without retaining any copies thereof and shall
confirm in writing to the other party of such destruction.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 By Developer. Developer represents and warrants that (i) it has full
------------
power and authority to enter into and perform its obligations under this
Agreement and that such power and authority are not limited or restricted by any
agreements or understandings between Developer and any other persons, (ii) with
respect to any Services or Miscellaneous Services to be provided by Developer to
the Company, including any Developer-Supplied Content or other deliverables
supplied by Developer hereunder, either (A) Developer shall have obtained all
necessary third-party rights and licenses for use thereof in connection with the
Web Sites as contemplated hereby or (B) in the case of Third Party Content or
software or other technology developed by a third party as to which Developer
has not then acquired such rights and licenses, Developer shall specifically
identify such Third Party Content and inform the Company prior to furnishing or
incorporating such Third Party Content or such third party software or other
technology that the Company needs to acquire such rights and licenses at its own
expense, (iii) neither the execution, delivery nor performance of this Agreement
by Developer will result in the breach of any term or
7
<PAGE>
provision of any contract, agreement or understanding of Developer with any
third party, and (iv) Developer shall not challenge the Company's ownership
(subject to the payment by the Company of all agreed upon fees and expenses
pursuant to Section 3 of this Agreement) or validity of the Developer-Supplied
Content, the Company-Supplied Content and Confidential Information of the
Company.
7.2 By the Company. The Company represents and warrants that (i) it has
--------------
full power and authority to enter into and perform this Agreement and that such
power and authority are not limited or restricted by any agreements or
understandings between the Company and other persons, (ii) with respect to any
Company-Supplied Content or any other information or materials provided by the
Company to Developer hereunder, the Company shall have obtained all necessary
rights and licenses for Developer to utilize such Content, information or
materials on the Company's behalf prior to providing such Content, information
or materials to Developer, (iii) neither the execution, delivery nor performance
of this Agreement by the Company will result in the breach of any term or
provision of any contract, agreement or understanding of the Company with any
third party, and (iv) the Company shall not challenge the ownership or validity
of the Guidance Solutions Software and Confidential Information of Developer.
7.3 No Other Warranty/Disclaimer. Developer shall use its commercially
----------------------------
reasonable efforts in accordance with practices customary in its industry to
ensure that the Web Sites' operations will be uninterrupted, error-free, and
while the Developer is responsible for hosting the Web Sites, that the Web Sites
reside on a secure server and that there are appropriate safeguards, procedures
and firewalls in place to ensure the safety and security of the Web Sites'
server and Web Sites from outside persons. The parties acknowledge that the
Internet is a new medium, and problems frequently do occur. Developer does not
warrant that the Web Sites' operations will be uninterrupted, error-free, or
completely secure or that any defects in any software to be provided by
Developer to the Company under this Agreement will be corrected. Furthermore,
Developer does not make and hereby disclaims, any and all other express and/or
implied warranties, including, but not limited to, warranties of
merchantability, fitness for a particular purpose, any implied warranties of
noninfringement and any warranties arising from a course of dealing, usage, or
trade practice. In no event will Developer be liable to the Company or any
other person for any claims arising out of or related to any lost revenue, lost
profits, indirect, consequential, special or punitive damages, loss of data, or
interruption or loss of use of service even if advised of the possibility of
such damages, whether under theory of contract, tort, strict liability or
otherwise. In any event, any liability of Developer arising out of or in
connection with this Agreement or the Company's use of the Guidance Solutions
Software shall not exceed the amount paid by the Company pursuant to Section 3.1
(calculated on a non-discounted basis).
7.4 Year 2000 Compliance. The Guidance Solutions Software and Right Start
--------------------
Software are Year 2000 Compliant. For purposes of this Section 7.4, the
Guidance Solutions Software and Right Start Software are Year 2000 Compliant if
it will not produce errors in the processing of the date data related to the
year change from December 31, 1999 to January 1, 2000.
8
<PAGE>
8. ADVERTISING AND MARKETING
The parties hereto agree that Developer may use the Company's name, service
marks or trademarks in any advertising, sales presentation or promotional
efforts in accordance with the Company's guidelines to be provided to the
Developer or, prior to receipt of such guidelines, with the Company's prior
written consent.
9. INDEMNIFICATION
9.1. By Developer. Developer hereby agrees to indemnify and hold harmless
------------
the Company and its officers, employees and agents against any suits, losses,
liabilities, damages, claims, settlements, costs and expenses, including
reasonable attorneys' fees and expenses (collectively, "Damages"), arising from:
(i) any breach by Developer of this Agreement; or (ii) any breach of the
representations and warranties contained in Sections 7.1 and 7.4 hereof.
9.2 By the Company. The Company hereby agrees to indemnify and hold
--------------
harmless Developer and its officers, employees and agents against any Damages
arising from: (i) any breach by the Company of this Agreement; (ii) any breach
of the representations and warranties contained in Section 7.2 hereof; or (iii)
the maintenance and operation of the Web Sites by any third party if the Web
Sites have been altered or modified by any party other than the Developer.
9.3 Indemnification Procedure.
-------------------------
(a) Any party making a claim for indemnification hereunder (an
"Indemnitee") shall notify the indemnifying party (an "Indemnitor") of the claim
in writing promptly (but in no event later than ten (10) days) after receiving
notice of any action, lawsuit, proceeding, investigation or other claim against
it (if by a third party) or discovering the liability, obligation or facts which
may reasonably be expected to give rise to such claim for indemnification,
describing the claim, the amount thereof (if known and quantifiable), and the
basis thereof (a "Notice of Claim"), provided that the failure to so notify an
--------
Indemnitor shall not relieve the Indemnitor of its obligations hereunder except
to the extent such failure shall have actually prejudiced the Indemnitor.
(b) With respect to any third party action, lawsuit, proceeding,
investigation or other claim which is the subject of a Notice of Claim (a "Third
Party Claim"), an Indemnitor shall be entitled to assume and control the defense
of such Third Party Claim at the Indemnitor's expense and at its option by
sending written notice of its election to do so within fifteen (15) days after
receiving the Notice of Claim from the Indemnitee; provided, however, that:
(i) The Indemnitee shall be entitled to participate in the defense of
such Third Party Claim and to employ counsel of its choice for such purpose
(the fees and expenses of such separate counsel shall be borne by the
Indemnitee);
9
<PAGE>
(ii) If the Indemnitor elects to assume the defense of any such
Third Party Claim, the Indemnitor shall obtain the prior written consent of
the Indemnitee (which shall not be unreasonably withheld) prior to
compromising or settling such Third Party Claim; and
(iii) If the Indemnitor shall not have assumed the defense of such
Third Party Claim within the fifteen (15) day period set forth above, the
Indemnitee may assume the defense of such Third Party Claim and may make
any compromise or settlement thereof or otherwise protect against the same
and be entitled to all amounts paid as a result of such Third Party Claim
or any compromise or settlement thereof, provided that, in the case of any
--------
such compromise or settlement, the Indemnitee shall obtain the prior
written consent of the Indemnitor (which shall not be unreasonably
withheld).
(c) The party that assumes the defense of a Third Party Claim shall select
the counsel, subject to the approval of the other party (such approval not to be
unreasonably withheld). The party selecting the counsel shall give the other
party notice of the name of the counsel selected by it at the time of assuming
the defense and the other party shall be deemed to have approved such counsel
unless it objects to such counsel within five (5) business days.
(d) The Indemnitee shall at all times cooperate in all reasonable ways
with, make its relevant files and records available for inspection and copying
by, and make its employees available or otherwise render reasonable assistance
to, the Indemnitor.
10. GENERAL PROVISIONS
10.1 No Solicitation of Employees. Each party agrees not to hire or
----------------------------
solicit, directly or indirectly, the other party's employees during the term of
this Agreement and for a period of two years after the expiration or termination
of this Agreement without the other party's prior written consent.
10.2 Termination for Cause. Upon the occurrence of any material breach of
---------------------
this Agreement which remains uncured following written notice specifying the
nature of the breach from the injured party, for a period of thirty (30) days
after such notice, in the case of nonpayment by the Company or for a period of
thirty (30) days after such notice, in all other cases, the injured party has
the right to immediately terminate this Agreement by providing additional
written notice of such termination. In the event of a termination of this
Agreement by the Company pursuant to this Section 10.2, Developer, within 30
days after the effective date of termination, shall deliver to the Company all
of Developer's work (including source code for the Guidance Solutions Software),
in connection with completed work paid for by the Company, and the Company shall
make all payments to Developer required pursuant to the Agreement, and the
Company's license of the Guidance Solutions Software pursuant to Section 5.3
shall continue in full force and effect. In the event of a termination of this
Agreement by Developer pursuant to this Section 10.2, Developer shall have no
further obligations under this Agreement to perform any further services for the
Company, and the Company shall make all payments to Developer required pursuant
to this Agreement. Termination of this Agreement by Developer pursuant to
10
<PAGE>
this Section 10.2 shall not affect the Company's ownership of any Developer-
Supplied Content for which the Company has made full payment to Developer, but,
upon such termination, the Company's right, title and interest in any and all
other Developer-Supplied Content, and all right and license of the Company with
respect to the Guidance Solutions Software, shall be extinguished.
10.3 Modification. This Agreement may be modified or amended by the
------------
parties only in writing executed by both parties hereto.
10.4 Waiver. A waiver of a breach or default does not constitute a waiver
------
of future or other breaches or defaults.
10.5 Applicable Law and Forum. This Agreement shall be deemed entered
------------------------
into in Los Angeles County, California and will be governed by and interpreted
in all respects by the laws of the State of California without regard to
provisions regarding choice of laws. Subject to Section 10.17 hereof, the
parties hereby agree that Los Angeles County, California is the venue for any
proceedings regarding this Agreement and that any legal proceedings regarding
this Agreement shall be brought in the courts of Los Angeles County, California,
or the United States District Court for the Central District of California. The
parties hereby consent to the personal jurisdiction of such courts.
10.6 Entire Agreement. This Agreement includes Schedule I, Schedule II,
----------------
Schedule III, and any addenda to such Schedules, all of which are incorporated
into this Agreement by this reference, and together with the Restricted Stock
Agreement between The Right Start, Inc., RightStart.com, Inc., and Guidance
Solutions, Inc., dated the Effective Date, the related Registration Rights
Agreement and the other documents contemplated hereby or thereby constitute the
entire understanding between the parties with respect to the subject matter
hereof, superseding all prior negotiations, preliminary agreements,
correspondence or understandings, written or oral between the parties.
10.7 Notices. All notices, statements and payments to Developer shall be
-------
delivered to 4134 Del Rey Avenue, Marina Del Rey, CA 90292, Attn: Gary Burnison,
facsimile no. (310) 754-4010 with a copy to Gibson, Dunn & Crutcher LLP, 333
South Grand Avenue, Los Angeles, CA 90071, Attn: Bruce D. Meyer. All notices,
statements and payment to be given to the Company shall be delivered to 5388
Sterling Center Drive, Unit C, Westlake Village, CA 91361, Attn: Gina
Englehard, facsimile no. (818) 707-7132 or at such other address as either party
shall designate in writing to the other party, by giving notice in accordance
with this Section 10.8 from time to time. All notices shall be in writing and
shall either be served by personal delivery, fax, certified or registered mail
or overnight service, all charges prepaid. Except as otherwise provided herein,
such notices shall be deemed given (i) when personally delivered, (ii) when
faxed (provided that a copy of such notice is also sent on such same date by
--------
certified or registered mail or overnight service), (iii) on the date five (5)
days following the date of mailing or (iv) the date one (1) business day
following the date of mailing via an overnight service, except that notices of
change of address shall be effective only after the actual receipt thereof.
11
<PAGE>
10.8 Uncontrollable Events. If either party cannot perform any of its
---------------------
obligations because of circumstances beyond its reasonable control, then such
non-performing party will: (i) notify the other party; (ii) take reasonable
steps to resume performance as soon as possible; and (iii) not be considered in
breach during the period in which the failure to perform is beyond the party's
reasonable control.
10.9 Independent Contractor Relationship. In accordance with the mutual
-----------------------------------
intentions of the parties hereto, Developer is performing services for the
Company as an independent contractor, and all of the terms and conditions of
this Agreement shall be interpreted in light of such relationship. Nothing
contained in this Agreement constitutes appointment of either party as an agent,
representative, partner, joint venture or employee of the other party for any
purpose. Neither party may bind the other party to any agreement with any third
party.
10.10 Severability. Should any provision of this Agreement be held to be
------------
void, invalid or inoperative, such provision shall be enforced to the greatest
extent possible and the remaining provisions of this Agreement shall not be
affected and shall remain valid and in full force.
10.11 Headings. The headings of the Sections of this Agreement are for
--------
convenience only and shall not be of any effect in construing their meanings.
10.12 Survivability. The following Sections shall survive the expiration
-------------
or earlier termination of this Agreement: 5.1, 5.2, 6, 8, 9 and 10.
10.13 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original Agreement for all purposes, including the
judicial proof of any of the terms hereof, provided, however that all such
--------
counterparts shall constitute one and the same Agreement.
10.14 Remedies. Unless expressly set forth to the contrary, either
--------
party's election of any remedies provided in this Agreement shall not be
exclusive of any other remedies available hereunder or other wise at law or in
equity, and all such remedies shall be deemed to be cumulative.
10.15 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of each of the parties hereto and their respective,
permitted successors and assigns. Neither party hereto may assign any of its
rights or obligations hereunder without the prior written consent of the other
party hereto, except to a successor to substantially all of such assigning
party's business or assets and to an affiliate of the Developer or the Company,
and provided further that such successor or affiliate agrees to be bound by this
--------
Agreement.
10.16 Attorney Fees. Should any litigation or arbitration be commenced
-------------
among the parties in relation to this Agreement, the party prevailing in such
litigation or arbitration shall be entitled, in addition to such other relief as
may be granted, to a reasonable fees and expenses for
12
<PAGE>
attorneys, accountants and expert witnesses in connection with such litigation
or arbitration or in a separate action brought for that purpose.
10.17 Arbitration of All Disputes, Claims or Controversies. As a material
----------------------------------------------------
part of this Agreement, the parties agree that any and all disputes, claims or
controversies arising out of or relating to this Agreement, the relationship
between the parties, or the Services performed, shall be determined exclusively
by confidential, final and binding arbitration in Los Angeles, California, in
accordance with the then existing rules for commercial arbitration of the
American Arbitration Association. Disputes, claims and controversies subject to
final and binding arbitration under this Agreement include, without limitation,
all those that otherwise could be tried in court to a judge or jury in the
absence of this Agreement. Such disputes, claims and controversies include,
without limitation, claims for disputes over Developer's fees and expenses, any
disputes over the quality of Services which the Developer renders, any claims
relating to or arising out of the Company's or Developer's performance under
this Agreement, and any other claims arising out of any alleged act or omission
by the Company or Developer. By agreeing to submit all disputes, claims and
controversies to binding arbitration, each of the parties expressly waives its
rights to have such matters heard or tried in court before a judge or jury or in
another tribunal. Any award shall be final, binding and conclusive upon the
parties, subject only to judicial review provided by statute, and a judgment
rendered on the arbitration award may be entered in any state or federal court
having jurisdiction thereof. Notwithstanding the foregoing, each party agrees
that if the other party or anyone acting on the other party's behalf threatens
or attempts to or does violate Sections 5 or 6 of this Agreement then in any
suit or proceeding that may be commenced by the non-violating party, its
successors or assigns, for or with respect to such threatened, attempted or
actual violation, an order may be obtained enjoining the violating party and/or
any other person, persons or entities acting in concert with the violating party
from violating any such restriction. Such a restraining order may be obtained
pending determination of the litigation as well as upon final determination
thereof, and request for such restraining order shall be without prejudice to
any other right or remedy available to the non-violating party by reason of such
threatened, attempted or actual violation of any such contractual restriction.
The violation of Sections 5 or 6 of this Agreement would cause irreparable
injury to the non-violating party and monetary damages in and of itself would
not afford adequate relief.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
GUIDANCE SOLUTIONS, INC.
By: /s/ Gary Burnison
------------------------------------
Name: Gary Burnison
Title: Chief Financial Officer
THE RIGHT START, INC.
By: /s/ Jerry R. Welch
-----------------------------------
Name: Jerry R. Welch
Title: President and Chief Financial
Officer
14
<PAGE>
SCHEDULE I
SERVICES
Time and Materials Services
The Services listed below will be provided by Developer on a time-and-materials
basis at the applicable Billing Rates listed in Part A of Schedule II. The
target completion dates listed below represent estimates and may be revised
during the course of Developer performing its Services. Developer will use
diligent efforts to achieve the target completion dates.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Services Target Completion Date
- ---------------------------------------------------------------------------------
<S> <C>
Completion of Phase 1 6/29/99
Completion of "Pre-school" and "Kindergarten" 9/13/99
sections
Completion of the following enhancements: 10/1/99
. Drop shipments
. Net Effects online customer service
. SID's and links for affiliates
. Re-design of Articles-page
Completion of the following enhancements: Work to commence in
. [ * ] 1/2000; target completion
. [ * ] dates TBD
Other enhancements to be agreed by the parties TBD
- ---------------------------------------------------------------------------------
</TABLE>
Flat Fee Services
The Services listed below will be provided by Developer on a flat-fee basis at
the applicable rates set forth in Part B of Schedule II:
. Hosting of the Web Site (includes "basic" application support), to be more
fully described in a Hosting Proposal.
. "Premium Application" Support, to be more fully described in the Hosting
Proposal.
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
15
<PAGE>
SCHEDULE II
RATES
-----
A. Time and Materials Rates
------------------------
Billing Rates for Developer's personnel for time-and-materials services are set
forth below, subject to the discount provided in Section 3.1(a). In the event
that other personnel are required in connection with such services, the rates
for such personnel shall be mutually agreeable to the parties.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Resource Hourly Rate
- -----------------------------------------------------------------
<S> <C>
Client Partner [ * ]
Site Director/Producer [ * ]
Project Manager [ * ]
Technical Director [ * ]
Account Executive [ * ]
Senior Developer [ * ]
Associate Developer [ * ]
Art Director [ * ]
Graphic Designer [ * ]
HTML Design [ * ]
Editor [ * ]
- -----------------------------------------------------------------
</TABLE>
B. Flat-Fee Rates
Hosting
Monthly hosting fees will be based on bandwidth used, as measured by data
(gigabytes) transferred during the week of the applicable month with the highest
activity:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
"Peak week" data transferred (in Approximate User Sessions Monthly Hosting Fee
gigabytes) Per Week *
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
0 - 4 0 - 14,000 [ * ]
5 - 14 14,000 - 43,000 [ * ]
15 - 29 43,000 - 85,000 [ * ]
30 - 49 85,000 - 142,000 [ * ]
50 - 74 142,000 - 213,000 [ * ]
Each additional 25 GB 213,000 + [ * ] per each [ * ]
From 75 and above
- -----------------------------------------------------------------------------------------------------
</TABLE>
* The number of user sessions is an approximation based on aggregate usage
figures from other web sites developed by Developer, and is provided for
reference purposes only. The actual correlation between user sessions and
gigabytes of data transferred will vary depending on each individual site
composition, application architecture and individual user behavior.
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
16
<PAGE>
Basic Support
The "Basic Support" package is included in the monthly hosting package, and
there is no additional charge.
Premium Support
Monthly fees for "Premium Support" are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Component Rate
- -----------------------------------------------------------------------------------------
<S> <C>
"Red Alert" software Rates charged by Red Alert from
time to time (without any mark-up
by Developer)
Dedicated support [ * ]
- -----------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
17
<PAGE>
SCHEDULE III
A. Guidance Solutions Software
Guidance Solutions Software includes Developer's Relational Database Management
Systems (RDBMS) based on the Objective SQL model. RDBMS includes the following:
(1) Database applications used in connection with database objects, user-
interface, file parsing and interpretation and database manipulation.
(2) Database tables, views and stored procedures used to implement
Objective SQL (including the properties within each table), and the
methods and events that are implemented through the following views
and stored procedures:
[*]
B. Right Start Software
Right Start Software consists of the following:
(1) Custom database model objects specifically designed for the Web Site
which interact with the Guidance Solutions Software, consisting of the
following views and stored procedures:
[*]
(2) Software used for data exports to the Company's legacy systems and
data imports from the Company's legacy systems and vendors.
- ------------------------------
* Portion has been omitted pursuant to a request for confidential treatment
filed separately with the Commission.
18
<PAGE>
EXHIBIT 10.11
STOCK GRANT AGREEMENT
This Stock Grant Agreement (this "Agreement") is made as of the 30th day of
October, 1999 by and among The Right Start, Inc., a California corporation (the
"Company"), RightStart.com Inc., a Delaware corporation (the "Subsidiary") and
Guidance Solutions, Inc. (the "Developer"); (the Company and the Subsidiary
shall be collectively referred to herein as the "Right Start");
WHEREAS, the Company, as of the date hereof, owns a majority of the
outstanding common stock, par value $.01 per share of Subsidiary (the "Common
Stock");
WHEREAS, Developer has provided services to the Company and Subsidiary in
connection with Subsidiary's electronic commerce Internet web site currently
located at www.rightstart.com (the "Web Site");
------------------
WHEREAS, the Board of Directors of each of the Company and Subsidiary (each
a "Board") believes that an ongoing relationship between the Subsidiary and the
Developer will be instrumental in increasing the value of the Subsidiary and,
accordingly, that it is in the best interests of the Subsidiary and its
stockholders to provide Developer with a direct interest in the success of the
Subsidiary; and
WHEREAS, in order to provide the Developer with an equity incentive in the
Subsidiary, the Company, in accordance with the terms of this Agreement, has
agreed to transfer to the Developer an aggregate of 288,333 shares of the
Subsidiary's Common Stock (the "Shares").
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
SECTION 1
Authorization and Grant of Stock
--------------------------------
1.1 Authorization of Restricted Stock. The Company has authorized the
---------------------------------
transfer to the Developer of 288,333 shares of the Subsidiary's Common Stock
held by the Company, on the terms set forth herein.
1.2 Grant of the Shares; Consideration. The Company hereby grants to the
----------------------------------
Developer the Shares, 171,000 of which shall be granted on the date hereof to
Developer for services previously rendered by Developer in connection with the
performance of that certain Services Agreement dated as of February 15, 1999,
between the Company and Developer, and 117,333 shares of which shall be granted
on the date hereof to Developer as an incentive to continue to provide
partnering and development services to the Right Start.
1
<PAGE>
1.3 Stock Issuance. On the date hereof, the Company shall issue the Shares
--------------
to Developer. Upon issuance, Developer shall be entitled to exercise all rights
as a Common Stock holder of Subsidiary without limitation.
SECTION 2
Representations and Warranties
------------------------------
2.1 Representations and Warranties of the Company and Subsidiary.
------------------------------------------------------------
2.1.1 Organization; Good Standing; Qualification. The Company and the
------------------------------------------
Subsidiary are corporations duly organized, validly existing, and in good
standing under the laws of their states of incorporation, have all requisite
corporate power and authority to execute and deliver this Agreement and to carry
out the provisions of this Agreement, and the Company has all requisite
corporate power and authority to transfer the Shares.
2.1.2 Authorization. All corporate action on the part of the Company and
-------------
the Subsidiary, and their respective officers, directors and stockholders
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company and Subsidiary hereunder, and the
transfer and delivery of the Shares being granted hereunder, has been taken and
this Agreement, when executed and delivered, will constitute the valid and
legally binding obligations of the Company and the Subsidiary, each enforceable
in accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) as to rights to indemnity and contribution that may be
limited by applicable laws.
2.1.3 Valid Transfer of Common Stock.
------------------------------
(a) The Company is the sole legal and the beneficial owner of the Shares to
be granted to Developer hereunder and is conveying to the Developer such Shares,
free and clear of any liens, claims, interests, charges and encumbrances.
(b) The Company has neither previously sold, assigned, conveyed, transferred
or otherwise disposed of, in whole or in part, the Shares to be transferred by
it hereunder, nor entered into any agreement to sell, assign, convey, transfer
or otherwise dispose of, in whole or in part, such Shares.
2.1.4 Capitalization and Voting Rights. As of the date hereof, the
--------------------------------
authorized capital of the Subsidiary consists of:
(a) Preferred Stock. 5,000,000 shares of blank check Preferred Stock, par
value $.01, of which 3,333,333 shares have been designated as Series A
Convertible Preferred Stock; no shares of Preferred Stock are issued and
outstanding.
2
<PAGE>
(b) Common Stock. 20,000,000 shares of common stock, par value $.01, of
which 9,100,000 shares are issued and outstanding.
SECTION 3
Transferability; Registration Rights; Financial Information
-----------------------------------------------------------
3.1 Transferability of Common Stock. The Shares may be transferred by
-------------------------------
Developer in compliance with applicable state and federal securities laws,
provided each person or entity to whom all or a portion of such Common Stock is
transferred agrees to be bound by this Section 3.1. Each certificate
representing any shares of Common Stock constituting all or a portion of the
Shares (unless Subsidiary shall have received an opinion from counsel at
Developer's expense (which counsel may be counsel to the Subsidiary) reasonably
acceptable to the Subsidiary to the effect that such securities may lawfully be
disposed of without registration, qualification or legend) shall be imprinted
with the following legend (a "'33 Act Legend"):
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be sold or transferred,
assigned, pledged or hypothecated unless and until registered under such
Act or unless the Company has received an opinion of counsel or other
evidence, satisfactory to the Company and its counsel, that such
registration is not required.
3.2 Registration Rights. The Subsidiary shall also grant to Developer
-------------------
registration rights with respect to the Shares. Such registration rights to be
granted to Developer shall consist of one demand registration and unlimited
piggyback registrations for the Shares held by Developer at the time of
registration, all of which registration rights may be exercised only after the
Subsidiary's initial public offering. Such registration rights shall be subject
to customary terms regarding cut-backs, allocation among shareholders and
indemnification.
3.3 Securities Laws; Investor Representations; Legends.
--------------------------------------------------
3.3.1 No Issuance in Violation of Securities Laws; Legends. Notwithstanding
----------------------------------------------------
the foregoing, the Shares shall not be delivered to Developer if such delivery
would constitute a violation of any applicable Federal or state securities or
other laws or regulations. As a condition to the delivery of the Shares to
Developer, the Company may require Developer to make certain representations and
warranties that may be required by applicable law or regulation, and,
specifically, may require Developer to provide evidence satisfactory to the
Company that the Shares are being acquired only for investment purposes and
without any present intention to sell or distribute such shares in violation of
any federal or state securities or other laws or regulations.
3.3.2 Investor Representations and Warranties. In connection with the
---------------------------------------
grant of the Shares, the Developer represents and warrants to the Company that:
3
<PAGE>
4.5.2.1 the Shares to be acquired by the Developer pursuant to
this Agreement will be acquired for the Developer's own accounts and not with a
view to, or intention of, distribution thereof in violation of the Securities
Act or any applicable state securities laws, and the Shares will not be disposed
of in contravention of the Securities Act or any applicable state securities
laws.
4.5.2.2 the Developer is familiar with the term "accredited
investor" as defined in Rule 501 under the Securities Act and the Developer is
an "accredited investor" within the meaning of such term in Rule 501 under the
Securities Act;
4.5.2.3 the Developer is sophisticated in financial matters and
is able to evaluate the risks and benefits of the investment in the Common
Stock;
4.5.2.4 the Developer is able to bear the economic risk of its
investment in the Common Stock constituting the Shares for an indefinite period
of time because the Shares have not been registered under the Securities Act
and, therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available;
4.5.2.5 this Agreement constitutes the legal, valid and binding
obligation of the Developer, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by the Developer does not
and will not conflict with or violate any law, regulation, judgment, order or
decree to which Developer is subject which would have a material adverse effect
on Developer; and
4.5.2.6 the Developer is not an "investment company" or a person
directly or indirectly controlled by or acting on behalf of a "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
3.3.3 Financial Information. Unless notified by Developer to the contrary,
---------------------
the Subsidiary shall provide to Developer (so long as Subsidiary is not a
reporting company under the Securities Exchange Act of 1934, as amended) audited
annual financial information and unaudited quarterly financial information (each
including a balance sheet as of such period end date, and statements of cash-
flows and statements of operations of Subsidiary for such period).
3.3.4 California Corporate Securities Law. The grant of the securities
-----------------------------------
which are the subject of this Agreement has not been qualified with the
Commissioner of Corporations of the State of California and the issuance of such
securities or the payment or receipt of any part of the consideration therefor
prior to such qualification is unlawful, unless an exemption from such
qualification is available. The rights of all parties to this Agreement are
expressly conditioned upon such qualification being obtained, or such exemption
being available.
4
<PAGE>
SECTION 4
Miscellaneous
-------------
4.1 Governing Law. This Agreement shall be governed in all respects by the
-------------
laws of the State of California.
4.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Developer to receive the Shares shall
not be assignable other than to an affiliate of Developer without the prior
written consent of the Company.
4.3 Entire Agreement; Amendment. This Agreement and the other documents
---------------------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
4.4 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Developer, to 4134 Del Rey Avenue, Marina del Rey,
California 90292; attention: Gary Burison, Chief Financial Officer (or to such
other address as Developer shall have furnished to the Company in writing), or
(b) if to the Company or Subsidiary, to 5388 Sterling Center Drive, Unit C,
Westlake Village, California 91361; attention: President (or to such other
address as the Company or Subsidiary shall have furnished to the Developer).
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or 72 hours after
the same has been deposited in a regularly maintained receptacle for the deposit
of the United States mail, addressed and mailed as aforesaid.
4.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
5
<PAGE>
IN WITNESS WHEREOF, the foregoing Agreement is hereby executed as of the
date first above written.
COMPANY: THE RIGHT START, INC.
- -------
By: /s/ Jerry R. Welch
-------------------
Jerry R. Welch
President and Chief Executive Officer
SUBSIDIARY: RIGHTSTART.COM INC.
- ----------
By: /s/ Jerry R. Welch
------------------
Name: Jerry R. Welch
Title: President and Chief Executive Officer
DEVELOPER: GUIDANCE SOLUTIONS, INC.
- ---------
By: /s/ Gary Burnison
------------------
Name: Gary Burnison
Title: Chief Financial Officer
6
<PAGE>
EXHIBIT 10.12
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of the 30th day of October, 1999 by and among RightStart.com Inc., a
Delaware corporation (the "Company") and Guidance Solutions, Inc. (the
-------
"Developer").
---------
Recitals
WHEREAS, the Company, The Right Start, Inc., a California corporation
("Parent") and Developer are parties to the Stock Grant Agreement dated as of
------
even date herewith (the "Grant Agreement"); and
---------------
WHEREAS, certain of Parent's and the Developer's obligations under the
Grant Agreement are conditioned upon the execution and delivery by the Company
of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto further agree as follows:
1. CERTAIN EFINITIONS. As used in this Agreement, the following terms shall
have the meanings set forth below:
1.1 "Affiliate" of any party means any person (or group of persons) who
---------
effectively controls, is effectively controlled by or is under common control
with such party.
1.2 "Closing" shall mean the date of the sale of shares by Parent to Developer
-------
of the Company's Common Stock.
1.3 "Commission" shall mean the Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
1.4 "Common Stock" shall mean the common stock of the Company, $.01 par value
------------
per share.
1.5 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
1.6 "Holder" shall mean Developer so long as it holds any Common Stock and any
------
holder of Common Stock who acquired such Securities from Developer in accordance
with this Agreement.
1.7 "Other Stockholders" shall mean persons other than Holders who, by
------------------
virtue of agreements with the Company, are entitled to include their securities
in certain registrations hereunder.
<PAGE>
1.8 "Registrable Securities" shall mean any Securities held by a Holder granted
----------------------
or receiving registration rights under Section 3 of this Agreement; provided,
--------- --------
however, that Registrable Securities shall not include any shares of Common
- -------
Stock which have previously been registered or which have been sold to the
public either pursuant to a registration statement or Rule 144, or which have
been sold in a private transaction in which the transferor's rights under this
Agreement are not assigned.
1.9 The terms "register," "registered" and "registration" shall refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
1.10 "Registration Expenses" shall mean all expenses incurred in effecting
---------------------
any registration pursuant to this Agreement, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses.
1.11 "Rule 144" shall mean Rule 144 as promulgated by the Commission under the
--------
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the Commission.
1.12 "Rule 415" shall mean Rule 415 as promulgated by the Commission under
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
1.13 "Securities" shall mean shares of the Company's Common Stock granted under
----------
the Grant Agreement and any shares issued upon or in exchange for such
securities.
1.14 "Securities Act" shall mean the Securities Act of 1933, as amended, or any
--------------
similar successor federal statute and the rules and regulations thereunder, all
as the same shall be in effect from time to time.
1.15 "Selling Expenses" shall mean all underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of special counsel to the selling
stockholder.
2. RESTRICTIONS ON TRANSFER.
2.1 Legend.
------
(a) Each certificate representing Securities now or hereafter owned by
Developer shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT BY AND
BETWEEN THE COMPANY
2
<PAGE>
AND CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY
OF THE COMPANY."
(b) Developer agrees that the Company may instruct its transfer agent to
impose transfer restrictions on the shares represented by certificates bearing
the legend referred to in this Section 2.1 to enforce the provisions of this
-----------
Agreement and the Company agrees promptly to do so. The legend shall be removed
upon termination of this Agreement.
(c) Each certificate representing Securities shall (unless otherwise permitted
by the provisions of this Agreement) be imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
(d) The Company shall be obligated to reissue promptly unlegended certificates
at the request of any Holder thereof if the Holder shall have obtained an
opinion of counsel at such Holder's expense (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
2.2 General Restrictions on Transfer. Each Holder agrees not to make any
--------------------------------
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 2.2, and provided that:
-----------
(a) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b) (i) In addition to complying with Section 3.7 hereof, such Holder shall
-----------
have notified the Company of the proposed disposition and shall have furnished
the Company with a detailed statement of the circumstances surrounding the
proposed disposition, and (ii) if reasonably requested by the Company, such
Holder shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the Securities Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
by a Holder (i) which is a partnership to its partners or retired partners in
accordance with partnership interests or to a partnership under common control
with such Holder, (ii) which is a corporation to its shareholders in accordance
with their interest in the corporation, (iii) which is a limited liability
company to its members or former members in accordance with their interest in
the limited liability company, (iv) to such Holder's family member or trust for
the benefit of an individual Holder, or (v) to such Holder's Affiliates,
provided the aforementioned transferees will be
- --------
3
<PAGE>
subject to the terms of this Section 2.2 to the same extent as if such
-----------
transferee were an original Holder hereunder.
3. REGISTRATION RIGHTS.
3.1 Demand Registration.
-------------------
(a) If the Company shall receive at any time after the Company's initial
underwritten public offering of its Common Stock (so long as such request is not
within 180 days after the effective date of a registration statement filed by
the Company covering an underwritten offering of any of its securities to the
general public) a written request from Developer that the Company file a
registration statement registering Registrable Securities constituting at least
twenty-five percent (25%) of the Registrable Securities held by the Developer on
the date hereof, then the Company will:
(i) promptly give written notice of the proposed registration to all other
Holders holding Registrable Securities; and
(ii) as soon as practicable, use its best efforts to effect such registration,
on Form S-3 or successor form replacing Form S-3, if practicable, (including,
without limitation, filing post-effective amendments, appropriate qualifications
under applicable blue sky or other state securities laws, and appropriate
compliance with the Securities Act) as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request (as permitted
hereunder) as are specified in a written request received by the Company within
ten (10) business days after such written notice from the Company is mailed or
delivered.
Notwithstanding the foregoing provisions, the Company shall not be
obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 3 if:
---------
(A) in any particular jurisdiction, the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification, or compliance (unless the Company is already subject to service
in such jurisdiction and except as may be required by the Securities Act);
(B) the Company has initiated one registration pursuant to Section 3.1(a)
--------------
(counting for these purposes only (1) a registration which has been declared or
ordered effective and pursuant to which securities have been sold and (2) a
registration which has been withdrawn by the initiating Holders as to which the
Holders have not paid the Registration Expenses pursuant to Section 3.3 hereof
-----------
and were required to bear such expenses);
(C) such request for registration is made during the period starting with the
date sixty (60) days prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred eighty (180) days after the
effective date of, a Company-initiated registration; provided that the Company
--------
is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
4
<PAGE>
(b) Subject to the foregoing clauses (A) through (C), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request of Developer (or
its transferees), as the case may be; provided, however, that if (i) in the good
-------- -------
faith judgment of the Board of Directors of the Company (the "Board of
--------
Directors"), such registration would be seriously detrimental to the Company and
- ---------
the Board of Directors concludes, as a result, that it is essential to defer the
filing of such registration statement at such time, and (ii) the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors, it would be
seriously detrimental to the Company for such registration statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
such registration statement, then the Company shall have the right to defer such
filing (except as provided in clause (C) above) for a period of not more than
one hundred twenty (120) days after receipt of the request of the Developer (or
its permitted Affiliate transferees), as the case may be, and, provided further,
-------- -------
that the Company shall not defer its obligation in this manner more than once in
any twelve-month period.
The registration statement filed pursuant to the request of the Developer
(or its transferees) may, subject to the provisions of Sections 3.1(d) and 3.9
--------------- ---
hereof, include other securities of the Company, with respect to which
registration rights have been granted, and may include securities of the Company
being sold for the account of the Company.
(c) Underwriting. The right of any Holder to registration pursuant to Section
-------
3.1 shall be conditioned upon such Holder's participation in such underwriting,
- ---
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein and such other restrictions as may be reasonably imposed
by the underwriter.
(d) Procedures. The Company shall (together with all Holders and other persons
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the initiating Holder(s), which underwriters are reasonably
acceptable to the Company. If the Company shall request inclusion in any
registration pursuant to Section 3.1 of securities being sold for its own
-----------
account, or if other persons shall request inclusion in any registration
pursuant to Section 3.1, the initiating Holder(s) shall, on behalf of all
-----------
Holders, offer to include such securities in the underwriting and may condition
such offer on their acceptance of the further applicable provisions of this
Section 3 (including Section 3.9). Notwithstanding any other provision of this
- --------- -----------
Section 3.1, if the representative of the underwriters advises the initiating
- -----------
Holder(s) in writing that marketing factors require a limitation on the number
of shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in Section 3.9
-----------
hereof; provided that the Holder(s) exercising its demand registration rights
--------
under this Section 3.1 shall first be entitled to register all of its securities
-----------
subject to such request before any other person or entity shall be entitled to
include securities in such offering. If a person who has requested inclusion in
such registration as provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by written notice from the
Company, the underwriter or the initiating Holder(s). The securities so excluded
shall also be withdrawn from registration. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall also be withdrawn
from such registration. If shares are so withdrawn
5
<PAGE>
from the registration and if the number of shares to be included in such
registration was previously reduced as a result of marketing factors pursuant to
this Section 3.1(d), then the Company shall offer to all Holders who have
--------------
retained rights to include securities in the registration the right to include
additional securities in the registration in an aggregate amount equal to the
number of shares so withdrawn, with such shares to be allocated among such
Holders requesting additional inclusion in accordance with Section 3.9.
-----------
3.2 Piggyback Registration.
----------------------
(a) If the Company shall determine to register any of its securities either for
its own account or the account of a security holder or holders exercising their
respective demand registration rights (other than a registration relating solely
to employee benefit plans, or a registration relating to a corporate
reorganization or other transaction on Form S-4, or a registration on any
registration form that does not permit secondary sales), the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration (and any related
qualification under blue sky laws or other compliance), except as set forth in
Section 3.2(b) below, and in any underwriting involved therein, all the
- --------------
Registrable Securities specified in a written request or requests, made by any
Holder and received by the Company within ten (10) business days after the
written notice from the Company described in clause (i) above is mailed or
delivered by the Company. Such written request may specify all or a part of a
Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
-------
3.2(a)(i). In such event, the right of any Holder to registration pursuant to
- ---------
this Section 3.2 shall be conditioned upon such Holder's participation in such
-----------
underwriting, the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein and such other restrictions as may be
reasonably imposed by the underwriter and the Company. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders of securities of the Company with registration
rights to participate therein distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 3.2, if the
-----------
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten or the
Company's Board of Directors reasonably determines that the number of shares
proposed to be registered must be reduced in view of then existing market
conditions, the Company shall be required to include in the offering only that
number of Registrable Securities and Other Shares (as defined in Section 3.9
-----------
below) that the Board of Directors determine in its sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling Holders and Other Stockholders requesting
to participate in such registration in accordance with Section 3.9 hereof, or in
-----------
such other proportions as shall mutually be agreed to be such selling Holders).
If any person does not agree to the terms of any such underwriting, he or she
shall be excluded
6
<PAGE>
therefrom by written notice from the Company or the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 3.9 hereof.
-----------
3.3 Expenses of Registration. All Registration Expenses incurred in connection
------------------------
with any registration, qualification or compliance pursuant to Sections 3.1 or
------------
3.2 hereof shall be borne by the Company; provided, however, that if the Holders
- --- -------- -------
bear the Registration Expenses for any registration proceeding begun pursuant to
Section 3.1 and subsequently withdrawn by the Holders registering shares
therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 3.1 hereof. Furthermore, in the event that a
-----------
withdrawal by the Holders is based upon material adverse information relating to
the Company that is different from the information known or available (upon
request from the Company or otherwise) to the Holders requesting registration at
the time of their request for registration under Section 3.1, such registration
-----------
shall not be treated as a counted registration for purposes of Section 3.1
-----------
hereof, even though the Holders do not bear the Registration Expenses for such
registration. All Selling Expenses relating to securities so registered shall be
borne by the holders of such securities pro rata on the basis of the number of
shares of securities so registered on their behalf, as shall any other expenses
in connection with the registration required to be borne by the Holders of such
securities.
3.4 Registration Procedures. In the case of each registration effected by the
-----------------------
Company pursuant to this Section 3, the Company will keep each Holder advised in
---------
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of ninety (90) days or until
the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; provided,
--------
however, that (i) such 90-day period shall be extended for a period of time
- -------
equal to the period the Holder refrains from selling any securities included in
such registration at the request of an underwriter of Common Stock (or other
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 90-day period shall be extended, if necessary,
to keep the registration statement effective until all such Registrable
Securities are sold, however in no event longer than two (2) years from the
effective date of the registration statement and provided that Rule 415, or any
--------
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis for such period; and provided further that applicable rules under
-------- -------
the Securities Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amendment that (A) includes any
prospectus required by Section 10(a)(3) of the Securities Act or (B) reflects
facts or events representing a material or
7
<PAGE>
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (A) and
(B) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as a Holder from
time to time may reasonably request;
(d) Cause all such Registrable Securities registered pursuant hereunder to be
listed on each securities exchange on which similar securities issued by the
Company are then listed, if any;
(e) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;
(f) In connection with any underwritten offering pursuant to a registration
statement filed pursuant to Section 3.1 hereof, the Company will enter into an
-----------
underwriting agreement in form reasonably necessary to effect the offer and sale
of Common Stock.
3.5 Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers, directors and
partners, legal counsel, and accountants and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification, or compliance has been effected pursuant to this
Section 3, against all expenses, claims, losses, damages, and liabilities (or
- ---------
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement of a material fact contained in any prospectus, offering
circular, or other document (including any related registration statement,
notification, or the like) incident to any such registration, qualification, or
compliance, or based on any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its officers,
directors, partners, legal counsel, and accountants and each person controlling
such Holder, each such underwriter, and each person who controls any such
underwriter, as incurred, for any legal and any other expenses reasonably
incurred in connection with investigating and defending or settling any such
claim, loss, damage, liability, or action; provided, however, that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability, or expense arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by such
Holder or
8
<PAGE>
underwriter. It is agreed that the indemnity agreement contained in this Section
-------
3.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
- ------
damage, liability, or action if such settlement is effected without the consent
of the Company.
(b) Each Holder will, if Registrable Securities held by such Holder are included
in the securities as to which such registration, qualification, or compliance is
being effected, indemnify the Company, each of its directors, officers,
partners, legal counsel, and accountants, each person who controls the Company
within the meaning of Section 15 of the Securities Act, and each Other
Stockholder, and each of their officers, directors, and partners, and each
person controlling such Other Stockholder, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement of a material fact contained in any such registration
statement, prospectus, offering circular, or other document, or any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and such
Other Stockholders, directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control persons, as incurred, for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement or omission is
made in such registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder; provided, however, that the obligations of such
-------- -------
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld); and provided further that in no event shall any
indemnity under this Section 3.5(b) exceed the net proceeds from the offering
--------------
received by such Holder.
(c) Each party entitled to indemnification under this Section 3.5 (the
-----------
"Indemnified Party") shall give notice to the party required to provide
-----------------
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
------------------
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
--------
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further 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 3, to the extent such
---------
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 3.5 is held by a court
-----------
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such
9
<PAGE>
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in an underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control and the foregoing Section 3.5 shall have no further force and effect.
-----------
3.6 Information by Holder. Each Holder of Registrable Securities shall furnish
---------------------
to the Company such information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification,
or compliance referred to in this Section 3.
---------
3.7 Transfer or Assignment of Registration Rights. The rights to cause the
---------------------------------------------
Company to register a Holder's Registrable Securities (as presently constituted
and subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like) granted under Section 3.1 and under Section 3.2 may
----------- -----------
be transferred or assigned to a transferee or assignee (in accordance with
Section 2 hereof) (a) who acquires at least twenty-five percent (25%) of such
- ---------
Holder's Securities, which assignee or transferee is acceptable to the Company
(which acceptance shall not be unreasonably withheld) or (b) to an Affiliate of
Holder regardless of the number of Securities transferred to such Affiliate;
provided that the Company is given written notice at the time of or within a
- --------
reasonable time after said transfer or assignment, stating the name and address
of the proposed transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned; and
provided further, that the transferee or assignee of such rights assumes in
- -------- -------
writing the obligations of such Holder under this Section 3.
---------
10
<PAGE>
3.8 "Lock-Up" Agreement. If requested by the Company or any representative of
------------------
an underwriter of Common Stock (or other securities) of the Company following an
initial public offering, each of the holders of the Securities shall not sell or
otherwise transfer or dispose of any Common Stock or other securities of the
Company held by such holders (other than those included in the registration)
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Securities Act. If
requested by the Company or any representative of an underwriter of Common Stock
(or other securities) of the Company following the first public offering of the
Company after the Company's initial public offering, each of the holders of the
Securities shall not sell or otherwise transfer or dispose of any Common Stock
or other securities of the Company held by such holders (other than those
included in the registration) during the ninety (90) day period following the
effective date of a registration statement of the Company filed under the
Securities Act. The obligations described in this Section 3.8 shall not apply to
-----------
a registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of such lock-up periods.
3.9 Allocation of Registration Opportunities. In any circumstance in which all
----------------------------------------
of the securities of the Company with registration rights (the "Other Shares")
------------
requested to be included in a registration on behalf of the Holders or Other
Stockholders cannot be so included as a result of limitations of the aggregate
number of shares of Registrable Securities and Other Shares that may be so
included, the number of shares of Registrable Securities and Other Shares that
may be so included shall be allocated among the Holders and Other Stockholders
requesting inclusion of shares pro rata on the basis of the number of shares of
Registrable Securities and Other Shares such parties requested to have
registered in such offering; provided, however, that such allocation shall not
-------- -------
operate to reduce the aggregate number of Registrable Securities and Other
Shares to be included in such registration if any Holder or Other Stockholder
does not request inclusion of the maximum number of shares of Registrable
Securities and Other Shares allocated to him pursuant to the above-described
procedure, in which case the remaining portion of his allocation shall be
reallocated among those requesting Holders and other selling stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares for which registration had
been requested, and this procedure shall be repeated until all of the shares of
Registrable Securities and Other Shares which may be included in the
registration on behalf of the Holders and Other Stockholders have been so
allocated.
3.10 Delay of Registration. No Holder shall have any right to take any action to
---------------------
restrain, enjoin, or otherwise delay any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 3.
---------
11
<PAGE>
3.11 Termination of Registration Rights. The right of any Holder to request
----------------------------------
registration or inclusion in any registration pursuant to Section 3.1 or 3.2
----------- ---
shall terminate on the closing of the first Company-initiated registered public
offering of Common Stock of the Company if all shares of Registrable Securities
held may immediately be sold under Rule 144 during any 90-day period, or the
earlier of (i) such date after the closing of the first Company-initiated
registered public offering of its Common Stock as all shares of Registrable
Securities held may immediately be sold under Rule 144 during any 90-day period,
and (ii) five (5) years after the closing of the first Company-initiated
registered public offering.
4. MISCELLANEOUS.
4.1 Governing Law. This Agreement shall be governed in all respects by the laws
-------------
of the State of Delaware (except choice of law provisions thereof).
4.2 Arbitration. The parties hereto agree that any dispute or controversy
-----------
arising out of or relating to any interpretation, construction, performance or
breach of this Agreement (other than disputes involving confidentiality or
infringement of intellectual property rights) shall be settled by arbitration to
be held in Los Angeles County, California, in accordance with the rules then in
effect of the American Arbitration Association. The arbitrator, who shall be
mutually agreed upon by the parties hereto, may grant injunctions or other
relief in such dispute or controversy. The decision of the arbitrator shall be
final, conclusive and binding on the parties to the arbitration. Judgement may
be entered on the arbitrator's decision in any court of competent jurisdiction.
The non-prevailing party shall pay the costs and expenses of such arbitration,
and each party hereto shall separately pay its respective counsel fees and
expenses.
4.3 Successors and Assigns. Except as otherwise expressly provided herein, this
----------------------
Agreement shall not be assignable by the parties hereto. To the extent
assignable as otherwise provided herein, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto.
4.4 Entire Agreement; Amendment; Waiver. Except as set forth in Section 2.1(f),
----------------------------------- --------------
this Agreement (including the Exhibits and Schedules hereto) constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof. Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated, except by a written instrument signed by the
Company and a majority of the Holders of the Securities, and any such amendment,
waiver, discharge or termination shall be binding on all the Holders, but in no
event shall the obligation of any Holder hereunder be materially increased,
except upon the written consent of such Holder.
4.5 Notices, etc. All notices and other communications required or permitted
------------
hereunder shall be in writing and shall be mailed by United States first-class
mail, postage prepaid, sent by facsimile or delivered personally by hand or
nationally recognized courier addressed (a) if to Developer, to the address set
forth below, (b) if to a Holder other than Developer [(or a member thereof)], at
such address or facsimile number as such holder or permitted assignee shall have
furnished to the Company in writing, or (c) if to the Company, at the following
address:
12
<PAGE>
If to Developer:
Guidance Solutions, Inc.
4134 Del Ray Avenue
Marina Del Ray, CA 90292
Attention: Gary Burnison
Facsimile: (310) 754-4010
with a copy to:
Bruce Meyer, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Facsimile: 213-229-6979
If to the Company:
RightStart.com Inc.
5388 Sterling Center Drive - Unit C
Westlake Village, CA 91361
Attention: President
Facsimile: (818) 707-7132
with a copy to:
Kenneth J. Baronsky, Esq.
Milbank, Tweed, Hadley & McCloy LLP
601 So. Figueroa Street, 30th Floor
Los Angeles, California 90017
Facsimile: (213) 629-5063
All such notices and other written communications shall be effective on the
date of mailing, confirmed facsimile transfer or delivery.
13
<PAGE>
4.6 Delays or Omissions. No delay or omission to exercise any right, power or
-------------------
remedy accruing to any Holder, upon any breach or default of the Company under
this Agreement shall impair any such right, power or remedy of such Holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default therefore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Holder of any breach or default under this Agreement or any waiver on the part
of any Holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Holder, shall be cumulative and not alternative.
4.7 Rights; Separability. Unless otherwise expressly provided herein, a
--------------------
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders.
4.8 Information Confidential. Each Holder acknowledges that the information
------------------------
received by them pursuant hereto may be confidential and for its use only, and
it will not use such confidential information in violation of the Exchange Act
or reproduce, disclose or disseminate such information to any other person
(other than its employees or agents having a need to know the contents of such
information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
4.9 Headings. The titles of the paragraphs and subparagraphs of this Agreement
--------
are for convenience of reference only and are not to be considered in construing
or interpreting this Agreement.
4.10 Counterparts. This Agreement may be executed in any number of counterparts,
------------
each of which shall be an original, but all of which together shall constitute
one instrument.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement effective as of the day and year first above written.
RIGHTSTART.COM INC.
By: /s/ Jerry R. Welch
---------------------------------------------
Jerry R. Welch
President
GUIDANCE SOLUTIONS, INC.
By: /s/ Gary Burnison
---------------------------------------------
Name: Gary Burnison
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.13
Guidance Solutions, Inc.
4134 Del Ray Avenue
Marina del Ray, California 90292
October 30, 1999
RightStart.com Inc.
The Right Start, Inc.
5388 Sterling Center Drive, Unit C
Westlake Village, California 91361
Ladies and Gentlemen:
Reference is made to that certain Services Agreement (the "Services
Agreement") dated as of even date herewith by and among Guidance Solutions, Inc.
("Developer") and The Right Start, Inc ("RSI"). Capitalized terms used herein
and not otherwise defined shall have the meanings assigned to such terms in the
Services Agreement.
WHEREAS, RSI has entered into a Services Agreement with Developer for
the purpose of developing the website located at www.rightstart.com and other
------------------
websites as designated (the "RightStart Websites");
WHEREAS, pursuant to the Section 5.3 of the Services Agreement,
Developer granted to RSI, RightStart.com Inc. ("RS.com," and together with RSI,
"Right Start") and certain third parties a license to use the Guidance Solutions
Software and its Derivatives for the purpose of enabling access to and use of
the RightStart Websites by end users (the "License");
WHEREAS, RSI has entered into an Intellectual Property Agreement (the
"IP Agreement") dated as of July 9, 1999 with RS.com;
WHEREAS, pursuant to Section 3.01 of the IP Agreement, RSI granted to
RS.com a sublicense to use the Guidance Solutions Software and its Derivatives
(the "Sub-License," and together with the License, the "Guidance Licenses");
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the undersigned hereby agree as follows:
1. The Guidance Licenses shall be used for the sole purpose of
enabling access to and use of one or more web sites by end users.
2. Except for the Sub-License and as provided in Section 3 below,
neither RS.com nor RSI will transfer or sub-license the Guidance Licenses (or
Derivatives thereof) to any person or entity, without first receiving
Developer's prior written consent.
3. Notwithstanding the foregoing, RS.com shall be permitted to
transfer or sub-license the Guidance Licenses to a successor to all or
substantially all of RS.com's business or assets without Developer's consent, so
long as such successor, at the time of transfer or sub-licenses, is not a direct
competitor of Developer and such successor agrees to be bound by the
<PAGE>
confidentiality provisions in the Services Agreement or substantially similar
confidentiality provisions reasonably acceptable to Developer.
If the foregoing meets with your understanding of the arrangement
between the parties, please countersign a copy of this letter and return such
copy to us.
Very truly yours,
GUIDANCE SOLUTIONS, INC.
By: /s/ Joseph Tang
---------------
Joseph Tang
President
Agreed and accepted as of the
date first set forth above
THE RIGHT START, INC.
By: /s/ Gina M. Engelhard
---------------------
Gina M. Engelhard
Chief Financial Officer and Secretary
RIGHTSTART.COM INC.
By: /s/ Jerry R. Welch
------------------
Jerry R. Welch
President
2
