REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (the “Agreement”) is made and entered into as of
this 1st day of February, 2007 by and among Precision Optics Corporation, Inc.,
a Massachusetts corporation (the “Company”), and the “Investors” named in that
certain Purchase Agreement by and among the Company and the Investors (the
“Purchase Agreement”).
The
parties hereby agree as follows:
1. Certain
Definitions.
As
used
in this Agreement, the following terms shall have the following
meanings:
“Affiliate”
means,
with respect to any person, any other person which directly or indirectly
controls, is controlled by, or is under common control with, such
person.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Common
Stock”
shall
mean the Company’s common stock, par value $0.01 per share, and any securities
into which such shares may hereinafter be reclassified.
“Investors”
shall
mean the Investors identified in the Purchase Agreement and any Affiliate or
permitted transferee of any Investor who is a subsequent holder of any Warrants
or Registrable Securities.
“Prospectus”
shall
mean (i) the prospectus included in any Registration Statement, as amended
or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by
reference in such prospectus, and (ii) any “free writing prospectus” as defined
in Rule 405 under the 1933 Act.
“Register,”
“registered”
and
“registration”
refer
to a registration made by preparing and filing a Registration Statement or
similar document in compliance with the 1933 Act (as defined below) which is
declared effective by the SEC.
“Registrable
Securities”
shall
mean (i) the Shares, (ii) the Warrant Shares and (iii) any other securities
issued or issuable with respect to or in exchange for Registrable Securities;
provided, that, a security shall cease to be a Registrable Security upon (A)
sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or
(B)
such security becoming eligible for sale by the Investors pursuant to Rule
144(k).
“Registration
Statement”
shall
mean any registration statement of the Company filed under the 1933 Act that
covers the resale of any of the Registrable Securities pursuant to the
provisions of this Agreement, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.
“Required
Investors”
means
the Investors holding a majority of the Registrable Securities.
“SEC”
means
the U.S. Securities and Exchange Commission.
“Shares”
means
the shares of Common Stock issued pursuant to the Purchase
Agreement.
“1933
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Warrants”
means,
the warrants to purchase shares of Common Stock issued to the Investors pursuant
to the Purchase Agreement, the form of which is attached to the Purchase
Agreement as Exhibit A.
“Warrant
Shares”
means
the shares of Common Stock issuable upon the exercise of the
Warrants.
2. Registration.
(a) Registration
Statements.
(i) Subject
to the provisions of Section 2(d), promptly following the closing of the
purchase and sale of the securities contemplated by the Purchase Agreement
(the
“Closing Date”) but no later than 45 days after the Closing Date (the “Filing
Deadline”), the Company shall prepare and file with the SEC one Registration
Statement on Form SB-2 (or, if Form SB-2 is not then available to the Company,
on such form of registration statement as is then available to the Company
to
effect a registration for resale of the Registrable Securities, subject to
the
Required Investors’ consent), covering the resale of the Registrable Securities
in an amount at least equal to the Shares and the Warrant Shares. Subject to
any
SEC comments, such Registration Statement shall include the plan of distribution
substantially in the form attached hereto as Exhibit
A.
Such
Registration Statement also shall cover, to the extent allowable under the
1933
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Registrable
Securities. Such Registration Statement shall not include any shares of Common
Stock or other securities for the account of any other holder without the prior
written consent of the Required Investors. The Registration Statement (and
each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to
the
Investors and their counsel prior to its filing or other submission. Subject
to
the provisions of Section 2(d), if a Registration Statement covering the
Registrable Securities is not filed with the SEC on or prior to the Filing
Deadline, the Company will make pro rata payments to each Investor, as
liquidated damages and not as a penalty, in an amount equal to 1.0% of the
aggregate amount invested by such Investor for each 30-day period or pro rata
for any portion thereof following the Filing Deadline for which no Registration
Statement is filed with respect to the Registrable Securities. Such payments
shall constitute the Investors’ exclusive monetary remedy for such events, but
shall not affect the right of the Investors to seek injunctive relief. Such
payments shall be made to each Investor in cash.
-2-
(ii) Additional
Registrable Securities.
Subject
to the provisions of Section 2(d), upon the written demand of any Investor
and
upon any change in the Warrant Price (as defined in the Warrant) such that
additional shares of Common Stock become issuable upon the exercise of the
Warrants (the “Additional Shares”), the Company shall prepare and file with the
SEC one or more Registration Statements on Form SB-2 or amend the Registration
Statement filed pursuant to clause (i) above, if such Registration Statement
has
not previously been declared effective (or, if Form SB-2 is not then available
to the Company, on such form of registration statement as is then available
to
the Company to effect a registration for resale of the Additional Shares,
subject to the Required Investors’ consent) covering the resale of the
Additional Shares, but only to the extent the Additional Shares are not at
the
time covered by an effective Registration Statement. Subject to any SEC
comments, such Registration Statement shall include the plan of distribution
substantially in the form attached hereto as Exhibit
A.
Such
Registration Statement also shall cover, to the extent allowable under the
1933
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Additional
Shares. Such Registration Statement shall not include any shares of Common
Stock
or other securities for the account of any other holder without the prior
written consent of the Required Investors. The Registration Statement (and
each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to
the
Investors and their counsel prior to its filing or other submission. Subject
to
the provisions of Section 2(d), if a Registration Statement covering the
Additional Shares is required to be filed under this Section 2(a)(ii) and is
not
filed with the SEC within 45 days of the request of any Investor or upon the
occurrence of any of the events specified in this Section 2(a)(ii), the Company
will make pro rata payments to each Investor, as liquidated damages and not
as a
penalty, in an amount equal to 1.0% of the aggregate amount invested by such
Investor for each 30-day period or pro rata for any portion thereof following
the date by which such Registration Statement should have been filed for which
no Registration Statement is filed with respect to the Additional Shares. Such
payments shall constitute the Investors’ exclusive monetary remedy for such
events, but shall not affect the right of the Investors to seek injunctive
relief. Such payments shall be made to each Investor in cash.
(iii) S-3
Qualification.
Subject
to the provisions of Section 2(d), promptly following the date (the
“Qualification Date”) upon which the Company becomes eligible to use a
registration statement on Form S-3 to register the Registrable Securities or
Additional Shares, as applicable, for resale, but in no event more than 45
days
after the Qualification Date (the “Qualification Deadline”), the Company shall
file a registration statement on Form S-3 covering the Registrable Securities
or
Additional Shares, as applicable (or a post-effective amendment on Form S-3
to
the registration statement on Form SB-2) (a “Shelf Registration Statement”) and
shall use commercially reasonable efforts to cause such Shelf Registration
Statement to be declared effective as promptly as practicable thereafter.
Subject to the provisions of Section 2(d), if a Shelf Registration Statement
covering the Registrable Securities is not filed with the SEC on or prior to
the
Qualification Deadline, the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to
1.0%
of the aggregate purchase price paid by such Investor pursuant to the Purchase
Agreement attributable to those Registrable Securities that remain unsold at
that time for each 30-day period or pro rata for any portion thereof following
the date by which such Shelf Registration Statement should have been filed
for
which no such Shelf Registration Statement is filed with respect to the
Registrable Securities or Additional Shares, as applicable. Such payments shall
constitute the Investors’ exclusive monetary remedy for such events, but shall
not affect the right of the Investors to seek injunctive relief. Such payments
shall be made to each Investor in cash.
-3-
(b) Expenses.
The
Company will pay all expenses associated with each registration, including
filing and printing fees, the Company’s counsel and accounting fees and
expenses, costs associated with clearing the Registrable Securities for sale
under applicable state securities laws, listing fees, fees and expenses of
one
counsel to the Investors and the Investors’ reasonable expenses in connection
with the registration, but excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals with respect to the Registrable Securities being
sold.
(c) Effectiveness.
(i) The
Company shall use commercially reasonable efforts to have the Registration
Statement declared effective as soon as practicable after filing. The Company
shall notify the Investors by facsimile or e-mail as promptly as practicable,
and in any event, within twenty-four (24) hours, after any Registration
Statement is declared effective and shall simultaneously provide the Investors
with copies of any related Prospectus to be used in connection with the sale
or
other disposition of the securities covered thereby. Subject to the provisions
of Section 2(d), if (A)(x) a Registration Statement covering the Registrable
Securities is not declared effective by the SEC prior to the earlier of (i)
five
(5) Business Days after the SEC shall have informed the Company that no review
of the Registration Statement will be made or that the SEC has no further
comments on the Registration Statement or (ii) the 115th
day
after the Closing Date (the 135th
day if
the SEC reviews the Registration Statement), (y) a Registration Statement
covering Additional Shares is not declared effective by the SEC within 115
days
following the time such Registration Statement was required to be filed pursuant
to Section 2(a)(ii) (135 days if the SEC reviews the Registration Statement)
or
(z) a Shelf Registration Statement is not declared effective by the SEC within
115 days after the Qualification Deadline (135 days if the SEC reviews the
Registration Statement), or
(B)
after a Registration Statement has been declared effective by the SEC, sales
cannot be made pursuant to such Registration Statement for any reason (including
without limitation by reason of a stop order, or the Company’s failure to update
the Registration Statement), but excluding the inability of any Investor to
sell
the Registrable Securities covered thereby due to market conditions and except
as excused pursuant to subparagraph (ii) below, then
the
Company will make pro rata payments to each Investor, as liquidated damages
and
not as a penalty, in an amount equal to 1.0% of the aggregate amount invested
by
such Investor for each 30-day period or pro rata for any portion thereof
following the date by which such Registration Statement should have been
effective (the “Blackout Period”). Such payments shall constitute the Investors’
exclusive monetary remedy for such events, but shall not affect the right of
the
Investors to seek injunctive relief. The amounts payable as liquidated damages
pursuant to this paragraph shall be paid monthly within three (3) Business
Days
of the last day of each month following the commencement of the Blackout Period
until the termination of the Blackout Period. Such payments shall be made to
each Investor in cash.
(ii) For
not
more than twenty (20) consecutive days or for a total of not more than
forty-five (45) days in any twelve (12) month period, the Company may delay
the
disclosure of material non-public information concerning the Company, by
suspending the use of any Prospectus included in any registration contemplated
by this Section containing such information, the disclosure of which at the
time
is not, in the good faith opinion of the Company, in the best interests of
the
Company (an “Allowed Delay”); provided, that the Company shall promptly (a)
notify the Investors in writing of the existence of (but in no event, without
the prior written consent of an Investor, shall the Company disclose to such
Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay, (b) advise the Investors in writing
to cease all sales under the Registration Statement until the end of the Allowed
Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay
as promptly as practicable.
-4-
(d) Rule
415; Cutbacks.
Notwithstanding the other provisions of this Section 2, if at any time the
SEC
takes the position that the offering of some or all of the Registrable
Securities in a Registration Statement is not eligible to be made on a delayed
or continuous basis under the provisions of Rule 415 under the 1933 Act, the
Company shall (i) remove from the Registration Statement such portion of the
Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such
restrictions and limitations on the registration and resale of the Registrable
Securities as the SEC may require to assure the Company’s compliance with the
requirements of Rule 415 (collectively, the “SEC Restrictions”). Any cut-back
imposed pursuant to this Section 2(d) shall be allocated among the Investors
on
a pro rata basis and shall be allocated first to any Warrant Shares, unless
the
SEC Restrictions otherwise require. No liquidated damages shall accrue on any
Cut Back Shares until such time as the Company is able to effect the
registration of the Cut Back Shares in accordance with any SEC Restrictions
(such date, the “Restriction Termination Date”). From and after the Restriction
Termination Date, all of the provisions of this Section 2 (including the
liquidated damages provisions) shall again be applicable to the Cut Back Shares;
provided, however, that for such purposes the Closing Date shall be deemed
to be
the Restriction Termination Date.
3. Company
Obligations.
The
Company will use commercially reasonable efforts to effect the registration
of
the Registrable Securities in accordance with the terms hereof, and pursuant
thereto the Company will, as expeditiously as possible:
(a) use
commercially reasonable efforts to cause such Registration Statement to become
effective and to remain continuously effective for a period that will terminate
upon the earlier of (i) the date on which all Registrable Securities covered
by
such Registration Statement as amended from time to time, have been sold, and
(ii) the date on which all Registrable Securities covered by such Registration
Statement may be sold pursuant to Rule 144(k) (the “Effectiveness Period”) and
advise the Investors in writing when the Effectiveness Period has
expired;
(b) prepare
and file with the SEC such amendments and post-effective amendments to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective for the Effectiveness Period and to comply
with
the provisions of the 1933 Act and the 1934 Act with respect to the distribution
of all of the Registrable Securities covered thereby;
-5-
(c) provide
copies to and permit counsel designated by the Investors to review each
Registration Statement and all amendments and supplements thereto no fewer
than
three (3) Business Days prior to their filing with the SEC and not file any
document to which such counsel reasonably objects;
(d) furnish
to the Investors and their legal counsel (i) promptly after the same is prepared
and publicly distributed, filed with the SEC, or received by the Company (but
not later than two (2) Business Days after the filing date, receipt date or
sending date, as the case may be) one (1) copy of any Registration Statement
and
any amendment thereto, each preliminary prospectus and Prospectus and each
amendment or supplement thereto, and each letter written by or on behalf of
the
Company to the SEC or the staff of the SEC, and each item of correspondence
from
the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion of any thereof which contains information
for
which the Company has sought confidential treatment), and (ii) such number
of
copies of a Prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as each Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor that are covered by the related Registration
Statement;
(e) use
commercially reasonable efforts to (i) prevent the issuance of any stop order
or
other suspension of effectiveness and, (ii) if such order is issued, obtain
the
withdrawal of any such order at the earliest possible moment;
(f) prior
to
any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Investors and their counsel
in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
domestic jurisdictions requested by the Investors and do any and all other
commercially reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered by
the
Registration Statement; provided,
however, that the Company shall not be required in connection therewith or
as a
condition thereto to (i) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(f), (ii)
subject itself to general taxation in any jurisdiction where it would not
otherwise be so subject but for this Section 3(f), or (iii) file a general
consent to service of process in any such jurisdiction;
(g) use
commercially reasonable efforts to cause all Registrable Securities covered
by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;
(h) immediately
notify the Investors, at any time prior to the end of the Effectiveness Period,
upon discovery that, or upon the happening of any event as a result of which,
the Prospectus includes an untrue statement of a material fact or omits to
state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and promptly prepare, file with the SEC and furnish to such holder a supplement
to or an amendment of such Prospectus as may be necessary so that such
Prospectus shall not include an untrue statement of a material fact or omit
to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
and
-6-
(i) otherwise
use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, including, without
limitation, Rule 172 under the 1933 Act, file any final Prospectus, including
any supplement or amendment thereof, with the SEC pursuant to Rule 424 under
the
1933 Act, promptly inform the Investors in writing if, at any time during the
Effectiveness Period, the Company does not satisfy the conditions specified
in
Rule 172 and, as a result thereof, the Investors are required to deliver a
Prospectus in connection with any disposition of Registrable Securities and
take
such other actions as may be reasonably necessary to facilitate the registration
of the Registrable Securities hereunder; and make available to its security
holders, as soon as reasonably practicable, but not later than the Availability
Date (as defined below), an earnings statement covering a period of at least
twelve (12) months, beginning after the effective date of each Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the
purpose of this subsection 3(i), “Availability Date” means the 45th day
following the end of the fourth fiscal quarter that includes the effective
date
of such Registration Statement, except that, if such fourth fiscal quarter
is
the last quarter of the Company’s fiscal year, “Availability Date” means the
90th day after the end of such fourth fiscal quarter).
(j) With
a
view to making available to the Investors the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any
time
permit the Investors to sell shares of Common Stock to the public without
registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) six months after such date as all of the Registrable
Securities may be resold pursuant to Rule 144(k) or any other rule of similar
effect or (B) such date as all of the Registrable Securities shall have been
resold; (ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act; and (iii) furnish to
each
Investor upon request, as long as such Investor owns any Registrable Securities,
(A) a written statement by the Company that it has complied with the reporting
requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual
Report on Form 10-KSB or Quarterly Report on Form 10-QSB, and (C) such other
information as may be reasonably requested in order to avail such Investor
of
any rule or regulation of the SEC that permits the selling of any such
Registrable Securities without registration.
4. Due
Diligence Review; Information.
The
Company shall make available, during normal business hours, for inspection
and
review by the Investors, advisors to and representatives of the Investors (who
may or may not be affiliated with the Investors and who are reasonably
acceptable to the Company), all financial and other records, all SEC Filings
(as
defined in the Purchase Agreement) and other filings with the SEC, and all
other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company’s officers, directors and
employees, within a reasonable time period, to supply all such information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made
or
submitted by any of them), prior to and from time to time after the filing
and
effectiveness of the Registration Statement for the sole purpose of enabling
the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of such Registration
Statement.
-7-
The
Company shall not disclose material nonpublic information to the Investors,
or
to advisors to or representatives of the Investors, unless prior to disclosure
of such information the Company identifies such information as being material
nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
5. Obligations
of the Investors.
(a) Each
Investor shall furnish in writing to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company
may
reasonably request. At least five (5) Business Days prior to the first
anticipated filing date of any Registration Statement, the Company shall notify
each Investor of the information the Company requires from such Investor if
such
Investor elects to have any of the Registrable Securities included in the
Registration Statement. An Investor shall provide such information to the
Company at least three (3) Business Days prior to the first anticipated filing
date of such Registration Statement if such Investor elects to have any of
the
Registrable Securities included in the Registration Statement.
(b) Each
Investor, by its acceptance of the Registrable Securities agrees to cooperate
with the Company as reasonably requested by the Company in connection with
the
preparation and filing of a Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all
of
its Registrable Securities from such Registration Statement.
(c) Each
Investor agrees that, upon receipt of any notice from the Company of either
(i)
the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
happening of an event pursuant to Section 3(h) hereof, such Investor will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the Investor
is advised by the Company that such dispositions may again be made.
(d) The
Company shall have no obligation to make liquidated damages payments under
this
Agreement to any Investor that is in breach of these obligations.
6. Indemnification.
(a) Indemnification
by the Company.
To the
extent permitted by law, the Company will indemnify and hold harmless each
Investor and its officers, directors, members, employees and agents, successors
and assigns, and each other person, if any, who controls such Investor within
the meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, any preliminary Prospectus or final Prospectus, or any amendment
or
supplement thereof; (ii) any blue sky application or other document executed
by
the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order
to
qualify any or all of the Registrable Securities under the securities laws
thereof (any such application, document or information herein called a
“Blue
Sky
Application”);
(iii)
the omission or alleged omission to state therein a material fact required
to be
stated therein or necessary to make the statements therein not misleading;
(iv)
any violation by the Company or its agents of any rule or regulation promulgated
under the 1933 Act applicable to the Company or its agents and relating to
action or inaction required of the Company in connection with such registration;
or (v) any failure to register or qualify the Registrable Securities included
in
any such Registration in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company will undertake
such registration or qualification on an Investor’s behalf pursuant to an
Investor’s affirmative request under Section 3(f) hereof and will reimburse such
Investor, and each such officer, director or member and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided,
however,
that
the Company will not be liable in any such case if and to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made
in
conformity with information furnished by such Investor or any such controlling
person in writing specifically for use in such Registration Statement or
Prospectus.
-8-
(b) Indemnification
by the Investors.
To the
extent permitted by law, each Investor shall, severally but not jointly,
indemnify and hold harmless the Company, its directors, officers, employees,
stockholders and each person who controls the Company (within the meaning of
the
0000 Xxx) against any losses, claims, damages, liabilities and expense
(including reasonable attorney fees) resulting from any untrue statement of
a
material fact or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary Prospectus or amendment
or
supplement thereto or necessary to make the statements therein not misleading,
to the extent, but only to the extent that such untrue statement or omission
is
contained in any information furnished in writing by such Investor to the
Company specifically for inclusion in such Registration Statement or Prospectus
or amendment or supplement thereto. In no event shall the liability of an
Investor be greater in amount than the dollar amount of the proceeds (net of
all
expense paid by such Investor in connection with any claim relating to this
Section 6 and the amount of any damages such Investor has otherwise been
required to pay by reason of such untrue statement or omission) received by
such
Investor upon the sale of the Registrable Securities included in the
Registration Statement giving rise to such indemnification
obligation.
(c) Conduct
of Indemnification Proceedings.
Any
person entitled to indemnification hereunder shall (i) give prompt notice to
the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim
with
counsel reasonably satisfactory to the indemnified party; provided
that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless
(a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party
with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); 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 hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation. It is
understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more
than
one separate firm of attorneys at any time for all such indemnified parties.
No
indemnifying party will, except with the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation.
-9-
(d) Contribution.
If for
any reason the indemnification provided for in the preceding paragraphs (a)
and
(b) is unavailable to an indemnified party or insufficient to hold it harmless,
other than as expressly specified therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result
of
such loss, claim, damage or liability in such proportion as is appropriate
to
reflect the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
Act
shall be entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder
of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of
the
Registrable Securities giving rise to such contribution obligation.
7. Miscellaneous.
(a) Amendments
and Waivers.
This
Agreement may be amended only by a writing signed by the Company and the
Required Investors. The Company may take any action herein prohibited, or omit
to perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission
to
act, of the Required Investors.
(b) Notices.
All
notices and other communications provided for or permitted hereunder shall
be
made as set forth in Section 9.4 of the Purchase Agreement.
-10-
(c) Assignments
and Transfers by Investors.
The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the Investors and their respective successors and assigns. An Investor may
transfer or assign, in whole or from time to time in part, to one or more
persons its rights hereunder in connection with the transfer of Registrable
Securities by such Investor to such person, provided that such Investor complies
with all laws applicable thereto and provides written notice of assignment
to
the Company promptly after such assignment is effected.
(d) Assignments
and Transfers by the Company.
This
Agreement may not be assigned by the Company (whether by operation of law or
otherwise) without the prior written consent of the Required Investors,
provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with
a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company’s
assets to another corporation, without the prior written consent of the Required
Investors, after notice duly given by the Company to each Investor.
(e) Benefits
of the Agreement.
The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(f) Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed via facsimile, which shall
be
deemed an original.
(g) Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
(h) Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provisions hereof prohibited or unenforceable in any
respect.
(i) Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
-11-
(j) Entire
Agreement.
This
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(k) Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York
for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified
for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that
any
such suit, action or proceeding brought in any such court has been brought
in an
inconvenient forum. EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
-12-
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
| The Company: | PRECISION OPTICS CORPORATION, INC. | |
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxx | |
|
Name:
Xxxxxxx X. Xxxxxx
Title:
President, Chief Executive Officer and
Treasurer
|
||
-13-
| The Investors: | SPECIAL SITUATIONS FUND III QP, L.P. | |
| |
|
|
| By: | /s/ Xxxxx X. Greenhouse | |
|
Name:
Xxxxx X. Greenhouse
Title:
General Partner
|
||
|
SPECIAL
SITUATIONS PRIVATE EQUITY FUND, L.P.
|
||
| |
|
|
| By: | /s/ Xxxxx X. Greenhouse | |
|
Name:
Xxxxx X. Greenhouse
Title:
General Partner
|
||
|
LAPLACE
GROUP LLC
|
||
| |
|
|
| By: | /s/ Xxxxxx Xxxxxxx | |
|
Name:
Xxxxxx Xxxxxxx
Title:
Managing Member
|
||
| /s/ Xxxx Xxxxxx | ||
|
Xxxx Xxxxxx |
||
| /s/ Xxxxxx Xxxxxxxx | ||
|
Xxxxxx Xxxxxxxx |
||
-14-
Exhibit
A
Plan
of Distribution
The
selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of common stock
or
interests in shares of common stock received after the date of this prospectus
from a selling stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any
or
all of their shares of common stock or interests in shares of common stock
on
any stock exchange, market or trading facility on which the shares are traded
or
in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale,
or at
negotiated prices.
The
selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:
· ordinary
brokerage transactions and
transactions in which the broker-dealer solicits purchasers;
· block
trades in which the
broker-dealer will attempt to sell the shares as agent, but may position and
resell a portion of the block as principal to facilitate the
transaction;
· purchases
by a broker-dealer as
principal and resale by the broker-dealer for its account;
· an
exchange distribution in accordance
with the rules of the applicable exchange;
· privately
negotiated
transactions;
· short
sales effected after the date
the registration statement of which this Prospectus is a part is declared
effective by the SEC;
· through
the writing or settlement of
options or other hedging transactions, whether through an options exchange
or
otherwise;
· broker-dealers
may agree with the
selling stockholders to sell a specified number of such shares at a stipulated
price per share; and
· a
combination of any such methods of
sale.
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock, from time to time, under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also
may
transfer the shares of common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
-15-
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the selling stockholders from the sale of the common
stock
offered by them will be the purchase price of the common stock less discounts
or
commissions, if any. Each of the selling stockholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole
or
in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering. Upon any
exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements
of
the Securities Act.
To
the
extent required, the shares of our common stock to be sold, the names of the
selling stockholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, any applicable commissions
or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not be
sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
-16-
We
have
advised the selling stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to
the
activities of the selling stockholders and their affiliates. In addition, to
the
extent applicable we will make copies of this prospectus (as it may be
supplemented or amended from time to time) available to the selling stockholders
for the purpose of satisfying the prospectus delivery requirements of the
Securities Act. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities
Act.
We
have
agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to
the
registration of the shares offered by this prospectus.
We
have
agreed with the selling stockholders to keep the registration statement of
which
this prospectus constitutes a part effective until the earlier of (1) such
time
as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement or (2) the date on which
the shares may be sold pursuant to Rule 144(k) of the Securities
Act.
-17-
