REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") between Ion Laser
Technology, Inc., a Utah corporation (the "Company"), on the one hand, and LCO
Investments Limited, a company organized under the laws of Guernsey, Channel
Islands ("LCO"), and Xxxxxxx X. Xxxxxxxx ("Xxxxxxxx"), on the other, is made
and entered into as of May 8, 1997. LCO and Xxxxxxxx are referred to herein
individually as a "Holder" and collectively as the "Holders".
Recitals
A.The Company and the Holders have entered into that certain
Securities Purchase Agreement (the "Purchase Agreement") of even date with
this Agreement, pursuant to which the Holders have agreed to purchase and the
Company has agreed to sell shares of its Common Stock, par value $.001 per
share (the "Common Shares") and certain options to acquire Common Stock (the
"Options"), which Common Shares and the Common Stock issuable upon exercise of
the Options (collectively, "Registrable Securities") are restricted and not
registered under the Securities Act of 1933, as amended, (the "Act") or under
the provisions of any state securities law.
B.The Holders would not have agreed to execute the Purchase
Agreement or to consummate the transactions contemplated by the Purchase
Agreement unless the Company had agreed to enter into this Agreement.
Agreement
In consideration of the promises contained in this Agreement and in the
Purchase Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which the parties acknowledge by their signatures below,
the Company and the Holders agree as follows:
1.Piggyback Registrations. If at any time after 180 days from the
date of this Agreement the Company proposes to file a registration statement
covering proposed sales by it or any of its shareholders of shares of its
capital stock in a manner which would permit registration of shares of common
stock for sale to the public (other than a registration statement (i) covering
only shares issuable upon (a) the exercise of employee stock options or pur-
suant to an employee stock purchase, dividend reinvestment or similar plan, or
(b) the exercise of a convertible security other than the Options, or (ii)
under a Registration Statement filed on Form S-4 or S-8 or any similar form
under the Act or (iii) pursuant to Section 2, below), the Company will give
prompt notice to each Holder of such proposed registration (which notice shall
describe the proposed filing date and the date by which the registration
rights granted pursuant to this Section 1 must be exercised, the nature and
method of any such sale or disposition of securities and shall include a
listing of the jurisdictions, if any, in which the Company proposes to
register or qualify the securities under the applicable state securities or
"Blue Sky" laws of such jurisdictions). At the request of any Holder given
within thirty (30) calendar days after the receipt of such notice by Holder
(which request shall specify the number of shares such Holder requests to be
included in such registration), the Company will use its best efforts to cause
all shares as to which registration has been requested by such Holder to be
included in such registration statement for sale or disposition in accordance
with the method described in the initial notice given to such Holder and
subject to the same terms and conditions as the other shares of capital stock
being sold, and thereafter shall cause such registration statement to be filed
and become effective; provided, however, that the Company shall be permitted
to (A) withdraw the registration statement for any reason in its sole and
exclusive discretion and upon the written notice of such decision to the
Holders shall be relieved of all of its obligations under this Section 1 with
respect to that particular registration; or (B) exclude all or any portion of
the shares sought to be registered by the Holders from such registration
statement if the offering of the shares is an underwritten offering and to the
extent that, in the judgment of the managing underwriter of the offering, the
inclusion of such shares would be materially detrimental to the offering of
the remaining shares of capital stock, or such delay is necessary in light of
market conditions. Any shares sought to be registered by a Holder so excluded
from a registration statement shall be excluded pro rata based on the total
number of shares of capital stock being sold by all selling security holders
(other than the Company).
2. Demand Registration. If at any time after 180 days from the date
of this Agreement the Company shall be requested in writing by LCO (and LCO
then holds more than 50% of the total number of issued and outstanding
Registrable Securities at such time) to effect the registration under the Act
of shares of the Company's Common Stock then owned by Holders (which request
shall specify the aggregate number of shares intended to be offered and sold
by Holders, shall describe the nature or method of the proposed offer and sale
thereof and shall contain an undertaking by Holders to cooperate fully with
the Company in order to permit the Company to comply with all applicable
requirements of the Act and the rules and regulations thereunder and to obtain
acceleration of the effective date of the registration statement contemplated
thereby), the Company shall effect the registration of such securities on an
appropriate form under the Act, provided that:
2.1 LCO's rights under this Section 2 shall be exercisable only
if the shares as to which LCO requests registration have an aggregate value of
at least $3,000,000 based on the average of the closing bid price for the
Company's common stock as listed on the American Stock Exchange or any other
exchange on which the Company's common stock then may be traded for the thirty
(30) trading-day period immediately preceding the date of such request for
registration;
2.2 the Company's Board of Directors, with the advice of such
investment bankers or securities professionals as the Board shall deem
necessary, shall have determined in good faith that the cost of complying with
the request for registration under this Section 2 would not have a materially
adverse effect upon the Company, its operations or the market for the
Company's common stock, provided, however, that if the Company's Board of
Directors determines in good faith that the cost of complying with the request
for registration would have a material adverse effect upon the Company, its
operations or the market for the Company's common stock, the Company may
decline Holders' request to register Holders' Registrable Securities under the
Act, provided further, however, that in such event the Company may not
thereafter again decline LCO's request for registration based upon this
Section 2(ii) so long as such subsequent request is received by the Company
more than 120 days after LCO's request for registration which was declined
based upon this Section 2(ii);
2.3 LCO shall be entitled to only one demand registration
pursuant to this Agreement, provided, however that any request for
registration pursuant to this Section 2 which does not result in the
declaration of effectiveness of a registration statement (which effectiveness
is maintained continuously for at least 120 days or such shorter period ending
when all shares to which LCO has requested registration in accordance herewith
have been sold in accordance with such registration) covering the offer and
sale of shares owned by Holders and requested to be included in such
registration statement, whether as a result of the withdrawal of the
registration statement by the Company or through other action or inaction of
the Company or for any other reason except for the voluntary decision of
Holders to terminate the registration after the request for such registration
has been delivered to the Company, shall not be counted in determining the
number of times registration rights have been exercised pursuant to this
Section 2;
2.4 the Company shall be entitled to postpone the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Section 2, if at the time it receives a request for such
registration, the Company's underwriter determines that such registration and
offering would materially interfere with any existing or then presently
contemplated financing, acquisition, corporate reorganization or other
material transaction involving the Company, and the Company promptly gives LCO
written notice of such determination, provided, however, that such
postponement shall not extend beyond the time that such material interference
continues to exist; and
2.5 LCO shall have no right to demand registration with respect
to any shares within ninety (90) calendar days after the effective date of any
registration statement previously filed by the Company.
3. Registration Procedures. If and whenever this Agreement
contemplates that the Company will effect the registration under the Act of
any shares held by the Holders, the Company shall:
3.1 prepare and file with the Securities and Exchange Commission
(the "SEC") a registration statement on the appropriate form with respect to
such shares and use its best efforts to cause such registration statement to
become and remain effective as provided herein, provided that before filing
any amendments or supplements to a registration statement or prospectus,
including documents incorporated by reference after the initial filing of the
registration statement, the Company will furnish to the Holders and the
underwriters, if any, copies of all such documents proposed to be filed at
least two business days prior thereto, which documents will be subject to the
reasonable review of such Holders and underwriters, and the Company will not
file an amendment to a registration statement or prospectus or any supplement
thereto (including such documents incorporated by reference) to which Holders
holding a majority of the Registrable Securities covered by such registration
statement or the underwriters, if any, shall reasonably object;
3.2 prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith and to take such other action as may be necessary to keep
such registration statement effective until the earlier of (i) the completion
of the distribution of shares so registered, or (ii) expiration of the 120 day
period following immediately the effective date of such registration statement
(at which time unsold shares may be deregistered), and otherwise comply with
applicable provisions of the Act and the rules and regulations promulgated
under the Act;
3.3 furnish to Holders and their counsel, and to each
underwriter of the shares to be sold by the Holders, without charge, such
number of copies of one or more preliminary prospectuses, any supplements
thereto and a final prospectus and any supplements thereto in conformity with
the requirements of the Act, and such other documents as the Holders or such
underwriter may reasonably request, in order to facilitate the public sale or
other disposition of such shares;
3.4 if, during any period in which, in the opinion of the
Company's counsel, a prospectus relating to the shares is required to be
delivered under the Act in connection with any offer or sale contemplated by
any registration statement, any event known to the Company occurs as a result
of which the prospectus would include an untrue statement of material fact or
omit to state any material fact necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading, or
if it is necessary at any time to amend or supplement the related prospectus
to comply with the Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the respective rules and regulations thereunder, to notify
the Holders promptly and to prepare and file with the SEC an amendment or
supplement, whether by filing such documents pursuant to the Act or the
Exchange Act as may be necessary to correct such untrue statement or omission
or to make any registration statement or the related prospectus comply with
such requirements and to furnish to Holders and their counsel such amendment
or supplement to such registration statement or prospectus;
3.5 timely to file with the SEC (i) any amendment or supplement
to any registration statement or to any related prospectus that is required by
the Act or the Exchange Act or requested by the SEC, and (ii) all documents
(and any amendments to previously filed documents) required to be filed by the
Company pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act;
3.6 within five days of filing with the SEC of (i) any amendment
or supplement to any registration statement, (ii) any amendment or supplement
to the related prospectus, or (iii) any document incorporated by reference in
any of the foregoing or any amendment of or supplement to any such
incorporated document, to furnish a copy thereof to Holders;
3.7 to advise Holders and their counsel promptly (i) when any
post-effective amendment to any registration statement becomes effective and
when any further amendment of or supplement to the prospectus shall be filed
with the SEC, (ii) of any request or proposed request by the SEC for an
amendment or supplement to any registration statement, to the related
prospectus, to any document incorporated by reference in any of the foregoing
or for any additional information, (iii) of the issuance by the SEC of any
stop order suspending the effectiveness of any registration statement or any
order directed to the related prospectus or any document incorporated therein
by reference or the initiation or threat of any stop order proceeding or of
any challenge to the accuracy or adequacy of any document incorporated by
reference in such prospectus, (iv) of receipt by the Company of any
notification with respect to the suspension of the qualification of the shares
for sale in any jurisdiction or the initiation or threat of any proceeding for
such purpose, and (v) of the happening of any event which makes untrue any
statement of a material fact made in any registration statement or the related
prospectus as amended or supplemented or which requires the making of a change
in such registration statement or such prospectus as amended or supplemented
in order to make any material statement therein not misleading;
3.8 on or before the date a registration statement is declared
effective, use its best efforts to register or qualify the shares covered by
such registration statement under the securities or blue sky laws of such
jurisdictions as the Holders shall reasonably request, considering the nature
and size of the offering, and do such other acts and things as may be
reasonably necessary to enable the Holders to consummate the public sale or
other disposition in each such jurisdiction of such shares; provided, however,
that the Company shall not be obligated to qualify as a foreign corporation to
do business under the laws of any jurisdiction in which it has not been
qualified, or to file any general consent to service of process;
3.9 use its best efforts to cause all shares sold pursuant to
any registration statement to be listed on each national securities exchange,
if any, on which such shares are then listed;
3.10enter into customary agreements (including, if applicable,
an underwriting agreement in customary form) and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
such Registrable Securities;
3.11make reasonably available for inspection by any Holders, any
underwriter participating in any disposition pursuant to the registration
statement, and any attorney, accountant or other agent retained by any such
Holder or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of
the Company (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such
registration statement. Records and other information which the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records, in the opinion of counsel reasonably
acceptable to the Company, is necessary to avoid or correct a misstatement or
omission in the registration statement, or (ii) the release of such records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. The Holders agree that they will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential;
3.12use its best efforts to obtain a "cold comfort" letter from
the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by "cold comfort" letters as the
Holders holding a majority of the Registrable Securities being sold, or the
managing underwriter, reasonably request;
3.13use its best efforts to obtain an opinion or opinions from
counsel for the Company in customary form;
3.14make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the
earliest possible moment; and
3.15cooperate with the Holders and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities to
be sold under the registration statement, and enable such securities to be in
such denominations and registered in such names as the managing underwriter or
underwriters, if any, or such Selling Holders may request.
4.Agreements of Holders. Holders (i) upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Subsection
3.4 shall forthwith discontinue Holders' disposition of securities included in
the registration statement until Holders receive copies of the supplemented or
amended prospectus, and (ii) if so directed by the Company, shall deliver to
the Company, at the Company's expense, all copies (other than permanent file
copies) then in Holders' possession of the prospectus covering such securities
that was in effect at the time of receipt of such notice.
5.Withdrawal. If Holders disapprove of the terms of any offering,
the sole remedy of Holders shall be to withdraw Holders' securities therefrom
by giving written notice to the Company and any managing underwriter (if any).
Holders' securities of the Company so withdrawn from the offering also shall
be withdrawn from registration.
6.Participation in Underwritten Registrations. In the case of any
registration under Section 2, if Holders or the Company determine to enter
into an underwriting agreement in connection therewith, or in the case of a
registration under Section 1, if the Company determines to enter into an
underwriting agreement in connection therewith, (i) all shares of Holders'
securities to be included in such registration shall be subject to an
underwriting agreement, which shall be in customary form and contain such
terms as are customarily contained in such agreements, and (ii) no person may
participate in any such registration unless such person (A) agrees to sell
such person's securities on the basis provided in such underwriting
arrangement, and (B) completes and executes all questionnaires, powers-of-
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
7. Registration Expenses. With respect to each registration effected
pursuant to Section 1 and to the first such registration under Section 2 of
this Agreement, the Company shall pay the following fees, disbursements and
expenses: all registration and filing fees, printing expenses, auditors'
fees, listing fees, registrar and transfer agent's fees, fees and
disbursements of counsel to the Company, reasonable fees and disbursements of
not more than one counsel to Holders in the case of the first such
registration under Section 2 of this Agreement, expenses (including reasonable
fees and disbursements of counsel) of complying with applicable securities or
"Blue Sky" laws, and the fees of any securities exchange in connection with
the review of such offering. The underwriting discounts and commissions
allocable to the shares included in any offering shall be borne by the
Holders' thereof.
8. Indemnification.
8.1 In each case of a registration of shares under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless the Holders, their officers and directors, each underwriter (as
defined in the Act), and each other person, if any, who controls any of the
Holders or any such underwriter within the meaning of the Act or the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including the fees and expenses of counsel in connection therewith), arising
out of any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such shares were
registered under the Act, any prospectus or preliminary prospectus contained
therein, or any amendment or supplement thereto (including, in each case,
documents incorporated by reference therein), or arising out of any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements made therein not misleading,
except insofar as such losses, claims, damages or liabilities arise out of any
such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any of the Holders, Holders' counsel, or
any underwriter, and furnished to the Company in writing by any of the Holders
or such counsel or underwriter; provided that the foregoing indemnification
with respect to a preliminary prospectus shall not inure to the benefit of any
underwriter (or the benefit of any person controlling such underwriter) from
whom the person asserting any such losses, claims, damages or liabilities
purchased shares to the extent such losses, claims, damages or liabilities
result from the fact that a copy of the final prospectus had not been sent or
given to such person at or prior to written confirmation of the sale of such
shares to such person.
8.2 In each case of a registration of shares under the Act
pursuant to this Agreement, Holders will indemnify and hold harmless the
Company, its directors, its officers who sign the registration statement, its
attorneys, each underwriter and each person, if any, who controls the Company
or such underwriter within the meaning of the Act or the Exchange Act, to the
same extent as the foregoing indemnity from the Company to the Holders, but
only with reference to information provided to the Company in writing by the
Holders and furnished to the Company by the Holders expressly for use in the
registration statement, any publicly available report of the Holders published
within the time frame of the registration statement, any prospectus or
preliminary prospectus contained therein, or any amendment or supplement
thereto.
8.3 In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"Indemnified Party") shall promptly notify the person against whom such
indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and any others the Indemnifying Party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any Indemnified Party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party has agreed to the retention of such counsel at its expense, or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party, the Indemnifying Party
proposes that the same counsel represent both the Indemnified Party and the
Indemnifying Party and representation of both parties by the counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood, where the expense of separate counsel shall be borne by the
Indemnifying Party pursuant to the foregoing sentence, that the Indemnifying
Party shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm qualified in such jurisdiction to act as counsel for such
Indemnified Party. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
8.4 The indemnification pursuant to this Section 8 shall be on
such other terms and conditions as are at the time customary and reasonably
required by underwriters in public offerings, including providing for
contribution in the event indemnification provided in this Section 8 is
unavailable or insufficient.
9. Holdback Agreement. Holders agree not to effect any public sale
or distribution of the Company's shares of capital stock during the seven (7)
calendar days prior to and the ninety (90) calendar day period beginning on
the effective date of any underwritten registration statement effected
pursuant to this Agreement (except as part of such underwritten registration)
unless the managing underwriter or underwriters with respect to such offering
otherwise agree.
10. Selection of Underwriters. The Company will have the right to
select the investment banking firm(s) acting as managing underwriter in
connection with any underwritten public offering; provided, that in the event
the offering is pursuant to a demand registration hereunder, Holders of a
majority of the issued and outstanding shares of Common Stock held by all
Holders at such time shall have the sole rights to select such managing
underwriter.
11.Survival. The indemnification provisions of Section 8 shall not
terminate and shall survive forever.
12.Rule 144.The Company agrees that it will use its best efforts
to file in a timely manner all reports required to be filed by it pursuant to
the Exchange Act and, at any time and upon request of the Holders, will
furnish such Holders and others with such information as may be necessary to
enable the Holders to effect sales of Registrable Securities without
registration pursuant to Rule 144 under the Act.
13. General.
13.1 Assignment. Except in connection with the transfer by a
Holder of not less than 30,000 shares of Common Stock or Options to Purchase
30,000 shares of Common Stock, such Holders' rights under this Agreement shall
not be transferable without the written consent of the Company. Any attempted
assignment or other transfer of this Agreement in contravention of this
Section 13.1 shall be null and void.
13.2Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so signed shall be deemed to be an original,
and such counterparts together shall constitute one and the same instrument.
13.3 Entire Agreement. This Agreement sets forth the entire
agreement between the parties as to the subject matter hereof, supersedes any
and all prior or contemporaneous agreements or understandings of the parties
relating to the subject matter of this Agreement, and may not be amended
except by an instrument in writing signed by all of the parties to this
Agreement.
13.4 Governing Law. The laws of the State of Utah (without
giving effect to the choice of law provisions thereof) shall govern the
interpretation and enforcement of this Agreement.
13.5Headings. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
13.6Notices. All notices or other communications provided for
under this Agreement shall be in writing, and mailed, telecopied or delivered
by hand delivery or by overnight courier service, to the parties at their
respective addresses as indicated below or at such other address as the
parties may designate in writing:
If to LCO:
LCO Investments Limited
Canada Court
Xxxxxx Xxxx, Xx. Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx Xxxxxxx
If to Xxxxxxxx:
00 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
In each instance with a copy to:
Xxxxxxx & O'Neil, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
If to the Company:
Ion Laser Technology, Inc.
0000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxx Xxxxxxx, President and CEO
With a copy to:
Durham, Evans, Xxxxx & Xxxxxxx
00 Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
All notices and communications shall be effective as follows: When mailed,
upon three (3) business days after deposit in the mail (postage prepaid); when
telecopied, upon confirmed transmission of the telecopied notice; when hand
delivered, upon delivery; and when sent by overnight courier, the next
business day after deposit of the notice with the overnight courier.
13.7 Remedies. Any person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
DATED: May 8, 1997.
ION LASER TECHNOLOGY, INC., a Utah corporation
By: /s/ E. Xxxxx Xxxxxxx
----------------------------
E. Xxxxx Xxxxxxx, President and CEO
LCO INVESTMENTS LIMITED
By /s/ Xxxxxxx X. X. Xxxxx
----------------------------
Xxxxxxx X. X. Xxxxx
Its Director
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxxx
