REGISTRATION RIGHTS AGREEMENT
EXHIBIT
4.1
This
Registration Rights Agreement (the “Agreement”) is made and entered into as of
this 25th day of June, 2008 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”). Capitalized terms used herein have the respective
meanings ascribed thereto in the Purchase Agreement unless otherwise defined
herein.
The
parties hereby agree as follows:
1. Certain
Definitions.
As
used
in this Agreement, the following terms shall have the following
meanings:
“Antidilution
Shares”
means
additional shares of Common Stock that may become issuable in accordance with
the terms of any securities of the Company outstanding as of the Closing Date
solely as a result of the transactions contemplated by the Purchase
Agreement.
“Common
Stock”
means
the Company’s common stock, par value $0.01 per share, and any securities into
which such shares may hereinafter be reclassified.
“Conversion
Shares”
means
the shares of Common Stock issuable at the given time upon conversion of the
Notes.
“Interest
Shares”
means
the shares of Common Stock issuable in lieu of cash interest on the
Notes.
“Investors”
means
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.
“Notes”
means
the 10% Senior Secured Convertible Notes issued by the Company to the Investors
pursuant to the Purchase Agreement, the form of which is attached to the
Purchase Agreement as Exhibit
A.
“Prospectus”
means
(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”
means
(i) the Conversion Shares, (ii) the Interest Shares, (iii) the Warrant Shares
and (iv) 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 without
restriction by the Investors pursuant to Rule 144.
“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.
“SSF”
means
the Investors affiliated with AWM Investment Company, Inc.
“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
B.
“Warrant
Shares”
means
the shares of Common Stock issuable upon the exercise of the
Warrants.
2. Registration.
(a) Registration
Statements.
(i) No
later
than the earlier of (i) two (2) Business Days after the Amendment Effective
Date
and (ii) December 15, 2008 (the earlier of such dates, the “Filing Deadline”),
the Company shall prepare and file with the SEC one Registration Statement
on
Form S-1 (or, if Form S-1 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), covering the resale
of
the Registrable Securities in an amount at least equal to the Conversion Shares,
the Interest Shares (assuming that all interest on the Notes is paid in Interest
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;
provided, however, that no Investor shall be named as an “underwriter” in the
Registration Statement without the Investor’s prior written consent. 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; provided, however, that the
Registration Statement may include the Antidilution Shares. 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. 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.
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(ii) Additional
Registrable Securities.
At any
time after the Amendment Effective Date, upon the written demand of any Investor
and upon any change in the Conversion Price (as defined in the Notes) or in
the
Warrant Price (as defined in the Warrant) such that additional shares of Common
Stock become issuable upon the due conversion of the Notes or the due exercise
of the Warrants (the “Additional Shares”), the Company shall prepare and file
with the SEC one or more Registration Statements on Form S-1 or amend the
Registration Statement filed pursuant to clause (i) above, if such Registration
Statement has not previously been declared effective (or, if Form S-1 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) 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;
provided, however, that no Investor shall be named as an “underwriter” in the
Registration Statement without the Investor’s prior written consent. 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. 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 thirty (30)
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.
At any
time after the Amendment Effective Date and 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 thirty
(30) 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 S-1) (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. 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.
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(b) Expenses.
Except
as expressly provided in Section 2(d), 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. If (A)(x) except to the
extent provided in Section 2(d), 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 60th
day
after the Filing Deadline (the 90th
day if
the SEC comments on the Registration Statement), (y) except to the extent
provided in Section 2(d), a Registration Statement covering Additional Shares
is
not declared effective by the SEC within 120 days following the time such
Registration Statement was required to be filed pursuant to Section 2(a)(ii)
or
(z) except to the extent provided in Section 2(d), a Shelf Registration
Statement is not declared effective by the SEC within 120 days after the
Qualification Deadline, 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 any Allowed Delay (as defined below)
or the inability of any Investor to sell the Registrable Securities covered
thereby due to market conditions or
its
receipt of material nonpublic information at its request in accordance with
Section 4 hereof, 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.
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(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 Statement
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.
(d) Rule
415.
(i) If
at any
time the staff of the SEC (the “Staff”) 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 or requires any Investor to be named as an
“underwriter” (the “Staff Interpretation”), the Company shall use its
commercially reasonable efforts to persuade the Staff that the offering
contemplated by the Registration Statement is a valid secondary offering and
not
an offering “by or on behalf of the issuer” as defined in Rule 415 and that none
of the Investors is an “underwriter”. The date on which the Staff informs the
Company that the Staff Interpretation applies to the Registrable Securities
is
hereinafter referred to as the “Interpretation Date.”
(ii) In
the
event that, despite the Company’s commercially reasonable efforts and compliance
with the terms of this Section 2(d), the Staff refuses to allow all of the
Registrable Securities to be included in the Registration Statement and/or
insists that one or more of the Investors must be named as an “underwriter”, the
Company shall (i) use commercially reasonable efforts to resolve any other
remaining Staff comments as promptly as possible and, in any event, no later
than the 30th
day
following the Interpretation Date (the “Interpretation Deadline Date”) and, (ii)
within two Business Days of the earlier of the Interpretation Deadline Date
or
the resolution of any other Staff comments, file with the SEC a request for
acceleration of the effectiveness of the Registration Statement as then on
file
with the SEC (which shall not include any changes requested or required by
the
Staff pursuant to the Staff Interpretation unless the Investors and the Company
mutually agree otherwise) to a date and time not more than two Business Days
after the date such request is filed (the “Acceleration Date”).
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(iii) If
the
amended Registration Statement is not declared effective on or prior to 5:30
p.m., New York time, on the second Business Day following the Acceleration
Date
(the “Acceleration Deadline”), then no later than 5:30 p.m., New York time, on
the Business Day immediately following the Acceleration Deadline, the Company
shall file with the SEC an amendment to the Registration Statement (the “Section
8 Amendment”) to remove the delaying legend placed on the Registration Statement
pursuant to Rule 473(a), which Section 8 Amendment shall include the legend
specified in Rule 473(b) to the effect that the amended Registration Statement
shall thereafter become effective in accordance with the provisions of Section
8(a) of the 1933 Act.
(iv) In
the
event that the SEC commences an investigation, examination or other proceeding
with respect to the Registration Statement pursuant to Section 8(e) of the
1933
Act, the Company and, if required, the Investors, shall cooperate therewith
in
good faith and shall take such action as shall be necessary to prohibit the
issuance of a stop order pursuant to Section 8(d) of the 1933 Act on the grounds
that any of them have failed to cooperate with any such investigation,
examination or other proceeding; provided, however, that no party shall be
required to waive any attorney-client privilege or attorney work product
privilege in connection therewith.
(v) In
the
event that the SEC commences (i) a refusal order proceeding pursuant to Section
8(b) of the 1933 Act with respect to the Registration Statement or (ii) a stop
order proceeding pursuant to Section 8(d) of the 1933 Act with respect to the
Registration Statement, the Company shall diligently oppose any such proceedings
unless (A) SSF, (B) the Company and (C) any other Investor who is required
to be
named an underwriter in the Registration Statement or whose Registrable
Securities are required to be cut back in the Registration Statement as a result
of the Staff Interpretation and who agrees to participate in the costs thereof
as provided below (a “Participating Investor”), mutually agree at any time not
to oppose such proceedings or to continue such opposition. The costs of such
opposition shall be borne by SSF and each Participating Investor on a pro rata
basis calculated based on the number of Registrable Securities held by SSF
or a
Participating Investor compared to the total number of Registrable Securities
held by SSF and all Participating Investors. SSF and each Participating Investor
shall have the right to participate in such proceedings. In connection with
its
opposition of such proceedings, the Company shall retain counsel reasonably
satisfactory to SSF and each Participating Investor (which shall be SSF’s
counsel unless SSF otherwise agrees). The Company shall not agree to any
settlement or compromise of any proceeding without the prior written consent
of
SSF and each Participating Investors, which shall not be unreasonably withheld
or delayed.
(vi) In
the
event that the SEC issues (i) a refusal order pursuant to Section 8(b) of the
1933 Act refusing to declare the Registration Statement effective or (ii) a
stop
order pursuant to Section 8(d) of the 1933 Act with respect to the Registration
Statement, the Company shall file with the United States Court of Appeals for
the District of Columbia Circuit and diligently prosecute through appropriate
proceedings a petition for judicial review of any such order in a timely fashion
in accordance with the provisions of Section 9(a) of the 1933 Act to a final,
nonappealable determination unless SSF, the Company and any Participating
Investor mutually agree otherwise. The costs of prosecuting such petition shall
be borne by SSF and each Participating Investor on the basis specified in clause
(v) above. SSF and each Participating Investor shall have the right to
participate in such proceedings. In connection with such proceedings, the
Company shall retain counsel reasonably satisfactory to SSF and each
Participating Investor (which shall be SSF’s counsel unless SSF otherwise
agrees). The Company shall not agree to any settlement or compromise of any
proceeding without the prior written consent of SSF and each Participating
Investors, which shall not be unreasonably withheld or delayed.
-6-
(vii) SSF
and
each Participating Investors shall have the right to participate or have its
counsel participate in any meetings or discussions with the Staff or the SEC
regarding the Staff Interpretation and to comment or have their counsel comment
on any written submission made to the Staff, the SEC or any court with respect
thereto. No such written submission shall be made by the Company to which
counsel to SSF or a Participating Investor reasonably objects.
(viii) So
long
as the Company is in compliance with the terms of this Section 2(d), all time
periods specified in Section 2(c)(i) shall be tolled and no liquidated damages
shall accrue or be payable pursuant to Section 2(c)(i) of this Agreement solely
as a result of the failure of the amended Registration Statement to become
effective due to the Staff Interpretation, in each case until the earliest
of
(i) the date that the Registration Statement (as amended, if necessary, by
the
Section 8 Amendment) is declared effective by the SEC; provided, however, that
if the Registration Statement becomes effective automatically pursuant to
Section 8(a) of the 1933 Act after the Company has received written notice
that
the SEC has ordered an examination, investigation or other proceeding pursuant
to Section 8(e) of the 1933 Act, the Registration Statement shall not be deemed
to have become effective until such time as sales may be made thereunder
pursuant to Section 5(c) of the 1933 Act, (ii) the date which is 10 days after
receipt by the Company of written notice from SSF or any Participating Investor
that the Company is in material breach of this Section 2(d) if such breach
is
not cured to the reasonable satisfaction of such Investor prior thereto, or
(iii) the date on which a court of competent jurisdiction upholds the Staff
Interpretation (or modifies the Staff Interpretation in such a manner that
either (i) all of the Registrable Securities are not able to be included in
the
Registration Statement or (ii) one or more of the Investors are required to
be
named as an “underwriter” therein) by a final and nonappealable judgment. The
period specified in this Section 2(d)(viii) is hereinafter referred to as the
“Tolling Period.”
(ix) In
the
event that the Staff Interpretation is not contested by the Company in
compliance with the terms of this Section 2(d) or is upheld (or modified in
a
such a manner that either (i) all of the Registrable Securities are not able
to
be included in the Registration Statement or (ii) one or more of the Investors
are required to be named as an “underwriter” therein) by a final and
nonappealable judgment of a court of competent jurisdiction, the Company shall
(i) remove from the Registration Statement such portion of the Registrable
Securities and the Antidilution Shares, if applicable, that are not able to
be
included in the Registration Statement (which may be all of such securities)
(the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations
on the registration and resale of the Registrable Securities and the
Antidilution Shares as the Staff Interpretation as then in effect may require
to
assure the Company’s compliance with the requirements of Rule 415; provided,
however, that the Company shall not agree to name any Investor as an
“underwriter” in such Registration Statement without the prior written consent
of such Investor (collectively, the “415 Restrictions”). Any cut-back imposed
pursuant to this Section 2(d)(ix) shall be allocated first to the Antidilution
Shares on a pro rata basis among the beneficial owners thereof and second to
the
Registrable Securities among the Investors on a pro rata basis. Any cut-back
affecting the Registrable Securities shall be allocated first to any Warrant
Shares, unless the 415 Restrictions otherwise require or provide or an Investor
otherwise requests with respect to the portion of any cut-back allocable to
it.
No liquidated damages shall accrue on or as to any Cut Back Shares during the
Tolling Period and until such time as the Company is able to effect the
registration of the Cut Back Shares in accordance with any 415 Restrictions
(such date, the “Restriction Termination Date”). From and after the Restriction
Termination Date, all of the provisions of Section 2 of this Agreement
(including the liquidated damages provisions) shall again be applicable to
the
Cut Back Shares; provided, however, that for such purposes, references to the
Initial Closing Date shall be deemed to be the Restriction Termination
Date.
-7-
(x) Time
shall be of the essence in the performance of the obligations contained in
this
Agreement, including, without limitation, the performance of the obligations
set
forth in this Section 2(d).
(xi) The
Company acknowledges that SSF and the Participating Investors have specifically
requested the inclusion of the provisions set forth in this Section 2(d) as
a
condition to their investment in the Company and that SSF and the Participating
Investors would not have made such investment without such provisions. The
Company further acknowledges that in the event of any breach of this Section
2(d), SSF and the Participating Investors would suffer a material loss for
which
damages at law would be difficult or impossible to determine. Accordingly,
in
addition to all other rights and remedies available to them at law or in equity,
SSF and each Participating Investor shall have the right to have the provisions
of this Section 2(d) specifically enforced against the Company and neither
SSF
nor any Participating Investor shall be obligated to post any bond or other
security in connection with any action to compel such specific
performance.
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 without restriction pursuant to Rule 144 (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;
-8-
(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
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(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 sold without restriction by the holders thereof pursuant
to
Rule 144 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-K or Quarterly Report on
Form 10-Q, 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.
-10-
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. 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 in writing 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.
-11-
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 in a Blue Sky
Application 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, other than any violation resulting
from the Company’s compliance with the provisions of Section 2(d) hereof; or (v)
any failure to register or qualify the Registrable Securities included in any
such Registration Statement 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.
(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.
-12-
(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.
(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.
-13-
(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.
(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.
-14-
(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 (other than Section 5-1401 of the New York General Obligation Law).
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.
-15-
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
|
||
-16-
|
SPECIAL
SITUATIONS FUND III QP, L.P.
|
||
|
By:
|
/s/ Xxxxxx X. Xxxxx | |
|
Name:
Xxxxxx X. Xxxxx
|
||
|
Title:
General Partner
|
||
|
SPECIAL
SITUATIONS PRIVATE EQUITY FUND, L.P.
|
||
|
By:
|
/s/ Xxxxxx X. Xxxxx | |
|
Name:
Xxxxxx X. Xxxxx
|
||
|
Title:
General Partner
|
||
-17-
|
/s/
Xxxxxx Xxxxxxxx
|
|
Xxxxxx
Xxxxxxxx
|
-18-
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.
-19-
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.
-20-
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 without restriction pursuant to Rule 144 of the
Securities Act.
-21-
