1
EXHIBIT 10.15
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of December 15, 1998
(this "Agreement"), by and among Special Devices, Incorporated, a Delaware
corporation (the "Company"), X.X. Xxxxxx Equity Investors I, L.P. ("JFLEI"), JFL
Co-Invest Partners I, L.P. ("JFLCP"), Paribas Principal Inc., a New York
corporation (together with its affiliates, "Paribas"), the Xxxxxxxx Family
Trust, by Xxxxxx Xxxxxxxx trustee (the "Xxxxxxxx Trust"), and the Xxxxxxx Family
Trust, by Xxxxxx X. Xxxxxxx trustee (the "Xxxxxxx Trust"). Paribas, JFLEI,
JFLCP, the Xxxxxxxx Trust and the Xxxxxxx Trust are hereinafter sometimes
referred to collectively as the "Stockholders" and individually as a
"Stockholder."
WHEREAS, the Board of Directors of the Company has effected a
recapitalization of the Company pursuant to which, among other things, SDI
Acquisition Corp., a Delaware corporation ("Acquisition") has merged with and
into the Company, with the Company surviving such merger (the "Merger"),
pursuant to which the Company assumed the liabilities and obligations of
Acquisition;
WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and the Stockholders that, in
connection with the Merger, the Company provide the registration rights set
forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, the following
terms shall have the following meanings below:
"Common Stock" means the common stock of the Company, $.01 par
value per share, upon consummation of the Merger.
"Person" means an individual, corporation, unincorporated
association, partnership, group (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934), trust, joint stock company, joint
venture, business trust or unincorporated organization, any
governmental entity or any other entity of whatever nature.
"Registrable Shares" means any shares of Common Stock which
may be (i) held from time to time by the Stockholders or (ii) issued or
distributed in respect of the Common Stock referred to in clause (i)
above by way of stock dividend or stock split or other distribution,
recapitalization or reclassification. As to any particular Registrable
Share, such Registrable Share shall cease to be a Registrable Share
when (1) it shall have been sold, transferred or otherwise disposed of
or exchanged pursuant to a registration statement under the Securities
Act or (ii) it shall have been distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act;
provided that prior to the earlier of the Rollover Termination Date and
the date of the Triggering Event
1
2
(as defined in the Rollover Stockholders Agreement), Registrable Shares
shall not include any Additional Rollover Shares (as defined in the
Rollover Stockholders Agreement) held by any holder other than X.X.
Xxxxxx & Co. or its transferees or designees.
"SEC" has the meaning assigned to such term in Section
5(a)(i).
"Rollover Stockholders Agreement" means the Rollover
Stockholders Agreement, dated as of December 15, 1998, among the
Company, X.X. Xxxxxx & Co., the Xxxxxxxx Trust and the Xxxxxxx Trust.
"Subscription Agreement" means the Subscription Agreement
dated as of September 7, 1998 and amended as of December 3, 1998 and as
of December 15, 1998, among the Company, Paribas, X.X. Xxxxxx Equity
Investors I, L.P. and JFL Co-Invest Partners I, L.P.
2. Incidental Registrations
(a) Right to Include Registrable Shares. After the
completion of the initial public offering by the Company of its Common Stock,
each time the Company shall determine to file a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of Common
Stock (other than debt securities which are convertible into Common Stock and
other than registration statements on Form S-4 or S-8) either by it or by any
holders of its outstanding equity securities, the Company shall give prompt
written notice of its determination to each Stockholder and of such
Stockholder's rights under this Article 2. Upon the written request of each
Stockholder made within 15 days after the receipt of any such notice from the
Company, (which request shall specify the Registrable Shares intended to be
disposed of by such Stockholder), the Company shall, subject to Section 2(b),
use its best efforts to effect the registration under the Securities Act of all
Registrable Shares which the Company has been so requested to register by the
Stockholders thereof, to the extent required to permit the disposition of the
Registrable Shares so to be registered; provided, however, that (i) if, at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
proceed with the proposed registration of the securities to be sold by it, the
Company may, at its election, give written notice of such determination to each
Stockholder of Registrable Shares and thereupon shall be relieved of its
obligation to register any Registrable Shares in connection with such
registration (but not from its obligation to pay the Registration Expenses (as
defined in Section 8(b)) in connection therewith) and (ii) if such registration
involves an underwritten offering, all Stockholders of Registrable Shares
requesting to be included in the Company's registration must sell their
Registrable Shares to the underwriters on the same terms and conditions as apply
to the Company, with such differences, including any with respect to
indemnification, as may be customary or appropriate in combined primary and
secondary offerings (provided that no Stockholder shall be required to provide
indemnification which is more expansive than the indemnification provided in
Section 9(b) hereof and provided, further, that the representations and
warranties provided by any Stockholder shall be limited to such matters as the
authority of such Stockholder to sell its Registrable Shares, its title thereto
2
3
and the absence of liens thereon). If a registration requested pursuant to this
Section 2(a) involves an underwritten public offering, any Stockholder of
Registrable Shares requesting to be included in such registration may elect in
writing prior to the effective date of the registration statement filed in
connection with such registration, not to register such securities in connection
with such registration. No registration effected under this Article 2 shall
relieve the Company of its obligations to effect any registration upon request
under Article 4 hereof.
(b) Priority in Incidental Registrations. If a
registration pursuant to this Article 2 involves an underwritten offering and
the managing underwriter in good faith advises the Company in writing that, in
its opinion, the number or type of securities which the Company, the
Stockholders and any other Persons intend to include in such registration
exceeds the largest number of securities which can be sold in such offering
without having a material adverse effect on such offering (including the price
at which such securities can be sold), then the Company shall include in such
registration: (i) first, 100% of the securities the Company proposes to sell for
its own account; and (ii) second, such number of Registrable Shares which the
Stockholders have requested to be included in such registration which, in the
opinion of such managing underwriter, can be sold without having the adverse
effect referred to above, such number of Registrable Shares to be included on a
pro rata basis among all requesting Stockholders on the basis of the relative
number of shares of Common Stock requested to be included in such registration
by such Stockholders; and (iii) third, to the extent that the number of
securities which are to be included in such registration pursuant to clauses (i)
and (ii), in the aggregate, is less than the number of securities which the
Company has been advised can be sold in such offering without having the adverse
effect referred to above, such number of other securities requested to be
included in the offering for the account of any other Persons which, in the
opinion of such managing underwriter, can be sold without having the adverse
effect referred to above, such number to be allocated pro rata among all holders
of such other securities on the basis of the relative number of such other
securities each other person has requested to be included in such registration.
3. Holdback Agreements. If any registration of Registrable
Shares shall be effected in connection with an underwritten public offering, the
Stockholders agree not to effect any public sale or distribution without the
consent of the managing underwriter (except in connection with such public
offering), of any equity securities of the Company, or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (in each case, other than as part of such underwritten public offering),
during the 90-day period, or, in connection with an initial public offering, the
120-day period (or such lesser periods as the managing underwriter may permit)
beginning on the effective date of such registration, if, and to the extent, the
managing underwriter of any such offering determines such action is necessary or
desirable to effect such offering and if and to the extent that each director
and executive officer of the Company so agrees; provided, however, that each
Stockholder has received the written notice required by Section 2(a) hereof
3
4
4. Registration on Demand.
(a) Demand by Stockholders. At any time on or after
the one hundred and eighty-first (181st) day after completion of the initial
public offering by the Company of its Common Stock, upon the written request by
(i) JFLEI or JFLCP, (ii) Paribas, (iii) the Xxxxxxxx Trust or (iv) the Xxxxxxx
Trust, that the Company effect the registration under the Securities Act of all
or part of the Registrable Shares of such requesting party, and specifying the
amount and intended method of disposition thereof, the Company shall promptly
give notice of such requested registration to all other Stockholders and, as
expeditiously as possible, use its best efforts to effect the registration under
the Securities Act of: (i) the Registrable Shares which the Company has been so
requested to register; and (ii) all other Registrable Shares which the Company
has been requested to register by any other Stockholder by written request
received by the Company within 15 days after the giving of such written notice
by the Company (which request shall specify the intended method of disposition
of such Registrable Shares); provided, however, that the Company shall not be
required to effect such registration unless the Registrable Shares requested to
be so registered have an aggregate proposed offering price of not less than
$5,000,000; provided, further, however, that the Company shall not be required
to effect more than (i) two registrations requested by JFLEI or JFLCP, (ii) two
registrations requested by Paribas, (iii) one registration requested by the
Xxxxxxxx Trust and (iv) one registration requested by the Xxxxxxx Trust,
pursuant to this Section 4(a) unless (X) all of the Registrable Shares that the
Stockholders initially requesting registration pursuant to this Section 4(a)
requested to be registered are not included in such registration statement or
(Y) the Company is eligible to file on Form S-3, in which case the Stockholders
shall be entitled to request an unlimited number of registrations pursuant to
this Section 4(a) except that the Company shall not be required to effect such
registration pursuant to this clause (Y) unless the Registrable Shares requested
to be so registered have an aggregate proposed offering price of not less than
$5,000,000 and no other registration statement on Form S-3 has been filed by the
Company and been declared effective within the previous twelve months. Promptly
after the expiration of the 15-day period referred to in clause (ii) above, the
Company shall notify all Stockholders to be included in the registration of the
other Stockholders participating in such registration and the number of
Registrable Shares requested to be included therein. The Stockholders initially
requesting a registration pursuant to this Section 4(a) may, at any time prior
to the effective date of the registration statement relating to such
registration, revoke such request by providing a written notice to the Company
revoking such request, provided, however, that if such revocation occurs after
the date of the filing of such registration statement, then the Registration
Expenses incurred by the Company in connection with the revoked request shall be
payable by the Stockholders participating in such demand registration.
(b) Effective Registration Statement. A registration
requested pursuant to this Article 4 shall not be deemed to have been effected
unless it has become effective under the Securities Act and has remained
effective for 180 days or such shorter period as all the Registrable Shares
included in such registration have actually been sold thereunder.
(c) Priority in Demand Registrations. If a demand
registration pursuant to this Section 4 involves an underwritten offering and
the managing underwriter in good faith advises the Company in writing that, in
its opinion, the number of securities requested to be
4
5
included in such registration (including securities of the Company which are not
Registrable Shares) exceeds the largest number of securities which can be sold
in such offering without having an adverse effect on such offering (including
the price, acceptable to the Stockholders requesting such registration, at which
such securities can be sold), then the Company will include in such registration
(i) first, 100% of the Registrable Shares requested to be registered pursuant to
Section 4(a) (provided that (x) if the number of Registrable Shares requested to
be registered pursuant to Section 4(a) (other than in a registration requested
by Paribas pursuant to the Subscription Agreement (a "Paribas Registration"))
exceeds the number which the Company has been advised can be sold in such
offering without having the adverse effect referred to above, the number of such
Registrable Shares to be included in such registration by the Stockholders shall
be allocated pro rata among such Stockholders on the basis of the relative
number of Registrable Shares each Stockholder has requested to be included in
such registration and (y) if the number of Registrable Shares requested to be
registered pursuant to a Paribas Registration exceeds the number which the
Company has been advised can be sold in such offering without having the adverse
effect referred to above, the number of Registrable Shares to be included in
such registration by the Stockholders shall be allocated (1) first as to Paribas
and (2) second, pro rata among such Stockholders (other than Paribas) on the
basis of the relative number of Registrable Shares each Stockholder has
requested to be included in such registration); and (ii) second, to the extent
that the number of Registrable Shares requested to be registered pursuant to
Section 4(a) is less than the number of securities which the Company has been
advised can be sold in such offering without having the adverse effect referred
to above, such number of shares of equity securities that the Company may
request to be included in such registration.
5. Registration Procedures.
(a) If and whenever the Company is required by the
provisions of Articles 2 or 4 hereof to use its best efforts to effect the
registration of Registrable Shares, the Company shall, as expeditiously as
possible:
(i) prepare and, in any event within 100
days after the date on which a request for registration may be given to the
Company, file with the Securities and Exchange Commission (the "SEC") a
registration statement with respect to such Registrable Shares and use its best
efforts to cause such registration statement to become effective; provided,
however, that the Company may discontinue any registration of its securities
which are not Registrable Shares (and, under the circumstances specified in
Article 4, Registrable Shares) at any time prior to the Effective Date of the
Registration Statement relating thereto;
(ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of 180 days (or such shorter period if all
Registrable Shares included in such registration have actually been sold
thereunder) and to comply with the provisions of the Securities Act, the
Exchange Act, and the rules and regulations promulgated thereunder with respect
to the disposition of all the securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
Stockholders thereof set forth in such registration statement;
5
6
provided, that the Company shall notify each Stockholder of Registrable Shares
covered by such registration statement of any stop order issued or threatened by
the SEC, any other order suspending the use of any preliminary prospectus or of
the suspension of the qualification of the registration statement for offering
or sale in any jurisdiction, and take all reasonable actions required to prevent
the entry of such stop order, other order or suspension or to remove it if
entered;
(iii) furnish to each seller of Registrable
Shares covered by such registration statement such number of copies of the
registration statement and of each amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus included
in such registration statement (including each preliminary prospectus and
summary prospectus), in conformity with the requirements of the Securities Act,
and such other documents as each seller of Registrable Shares covered by such
registration statement may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by such Stockholder;
(iv) use its best efforts to register or
qualify such Registrable Shares covered by such registration statement under the
state securities or blue sky laws of such jurisdictions as each Stockholder of
Registrable Shares covered by such registration statement and, if applicable,
each underwriter, may reasonably request, and do any and all other acts and
things which may be reasonably necessary to consummate the disposition in such
jurisdictions of the Registrable Shares owned by such Stockholder; provided,
however, that in connection therewith, the Company shall not be required to (A)
qualify as a foreign corporation to do business or to register as a broker or
dealer in any such jurisdiction where it would not otherwise be required to
qualify or register but for this clause (iv), (B) subject itself to taxation in
any jurisdiction or (C) file a general consent to service of process in any such
jurisdiction.
(v) use its best efforts to cause such
Registrable Shares covered by such registration statement to be registered with
or approved by such other federal or state governmental agencies or authorities
as may be necessary to enable the Stockholders thereof to consummate the
disposition of such Registrable Shares;
(vi) if at any time when a prospectus
relating to the Registrable Shares is required to be delivered under the
Securities Act any event shall have occurred as the result of which any such
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, immediately give
written notice thereof to each Stockholder and the managing underwriter, if any,
of such Registrable Shares and prepare and furnish to each such Stockholder a
reasonable number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Shares, such prospectus shall not include an untrue statement of material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(vii) use its best efforts to cause such
Registrable Shares to be accepted for listing or quotation on any securities
exchange or automated quotation system on
6
7
which similar securities of the Company are then listed, and enter into
customary agreements including a listing application and indemnification
agreement in customary form, provided that the applicable listing requirements
are satisfied, and provide a transfer agent and registrar for such Registrable
Shares covered by such registration statement not later than the effective date
of such registration statement;
(viii) enter into such customary agreements
(including an underwriting agreement in customary form) and take such other
actions as each Stockholder of Registrable Shares being sold or the underwriter,
if any, reasonably requests in order to expedite or facilitate the disposition
of such Registrable Shares, including customary indemnification and opinions;
(ix) to the extent reasonably requested by
Paribas, JFLEI, JFLCP, the Xxxxxxxx Trust or the Xxxxxxx Trust, or the
underwriters, if any, use its best efforts to obtain a "cold comfort" letter or
letters from the Company's independent public accountants in customary form and
covering matters of the type customarily covered by "cold comfort" letters;
(x) make available, at the Company's
expense, for inspection by representatives of any Stockholder of Registrable
Shares covered by such registration statement, by any underwriter participating
in any disposition to be effected pursuant to such registration statement and by
any attorney, accountant or other agent retained by such Stockholders or any
such underwriter (collectively, the "Stockholder Representatives"), all relevant
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries (excluding any such records and documents as are
protected by attorney-client privilege or which the Company is prohibited from
disclosing pursuant to the terms of any nondisclosure agreements to which the
Company or any of its subsidiaries is a party; provided that, to the extent
permitted under any such nondisclosure agreement, the Company shall disclose any
information subject to such nondisclosure agreement upon execution and delivery
by such Stockholder or Stockholder Representative of a confidentiality agreement
for the benefit of the parties to such nondisclosure agreement);
(xi) otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable after the effective
date of the registration statement, an earnings statement which shall satisfy
the provisions of Section 11(a) of the Securities Act and the rules and
regulations promulgated thereunder;
(xii) notify counsel for the Stockholders of
Registrable Shares included in such registration statement and the managing
underwriter, if any, immediately, and confirm the notice in writing, (A) when
the registration statement, or any post-effective amendment to the registration
statement, shall have become effective, or any supplement to the prospectus or
any amendment prospectus shall have been filed and (B) of any request of the SEC
to amend the registration statement or amend or supplement the prospectus or for
additional information; and
7
8
(xiii) cause its officers, employees and
personnel to use their reasonable best efforts to support the marketing of the
Registrable Shares (including, without limitation, the participation in "road
shows," at the reasonable request of the underwriters, Paribas or the holders of
a majority of the Registrable Shares to be included in such registration) to the
extent possible taking into account the Company's business needs and the
requirements of the marketing process.
(b) Each Stockholder of Registrable Shares hereby
agrees that, upon receipt of any notice from the Company of the happening of any
event of the type described in Section 5(a)(vi) hereof, such Stockholder shall
forthwith discontinue disposition of such Registrable Shares covered by such
registration statement or related prospectus until such Stockholder's receipt of
the copies of the supplemental or amended prospectus contemplated by Section
5(a)(vi) hereof. In the event the Company shall give any such notice, the period
mentioned in Section 5(a)(ii) hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice
pursuant to Section 5(a)(vi) hereof and including the date when such Stockholder
shall have received the copies of the supplemental or amended prospectus
contemplated by Section 5(a)(vi) hereof. If for any other reason the
effectiveness of any registration statement filed pursuant to Article 4 hereof
is suspended or interrupted prior to the expiration of the time period regarding
the maintenance of the effectiveness of such Registration Statement required by
Section 5(a)(ii) hereof so that Registrable Shares may not be sold pursuant
thereto, the applicable time period shall be extended by the number of days
equal to the number of days during the period beginning with the date of such
suspension or interruption to and ending with the date when the sale of
Registrable Shares pursuant to such registration statement may be recommenced.
(c) Each Stockholder hereby agrees to provide the
Company, upon receipt of its request, with such information about such
Stockholder to enable the Company to comply with the requirements of the
Securities Act and to execute such certificates as the Company may reasonably
request in connection with such information and otherwise to satisfy any
requirements of law. Each Stockholder further agrees to furnish to the Company
in writing such information regarding the Stockholder and his, her or its
proposed distribution of Registrable Shares as the Company may from time to time
reasonably request.
6. Underwritten Registrations. Subject to the provisions of
Articles 2, 3 and 4 hereof, any of the Registrable Shares covered by a
registration statement may be sold in an underwritten offering at the discretion
of the Stockholder thereof. In the case of an underwritten offering pursuant to
Article 2 or Article 4 hereof, the managing underwriter or underwriters that
will administer the offering shall be selected by the Company, provided that
such managing underwriter or underwriters is reasonably satisfactory to the
Stockholders of a majority of the Registrable Shares to be registered.
8
9
7. Suspension of Registration Requirement.
(a) Notwithstanding anything to the contrary set
forth in this Agreement, the Company's obligation to use its best efforts to
cause a registration statement and any filings with any state securities
authorities to become effective or to amend or supplement any such registration
statement or filings shall be suspended during such period as circumstances
exist (including, without limitation, pending negotiations relating to, or the
consummation of, any transaction) which (i) would require additional disclosure
of material information by the Company in such registration statement or filing
which the Company has a bona fide business purpose for not disclosing in such
registration statement or (ii) render the Company unable to comply with SEC
requirements (any such circumstances hereinafter referred to as a "Suspension
Event"). The Company shall use all commercially reasonable efforts to minimize
the length of such suspension as a result of a Suspension Event and in no event
shall the length of a suspension due to clause (i) alone exceed 90 days in any
12-month period. To the extent that any such suspension occurs during a period
in which a registration statement has been filed pursuant hereto and remains
effective, the time during which the Company shall be required to maintain the
effectiveness of such registration statement shall be extended for the number of
days during which such suspension continued.
(b) Notwithstanding anything to the contrary set
forth in this Agreement, the Company shall not be required to cause a
registration statement requested pursuant to Section 4(a) to become effective
during the period beginning 30 days prior to the Company's good faith estimate
of the date of filing of, and ending 180 days after the effective date of, a
Company-initiated registration, provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective and provided, however that the Company shall be entitled to
delay the effectiveness of such requested registration for one such period in
any 12-month period.
(c) The Company shall give the Stockholders written
notice immediately upon the occurrence of any Suspension Event instructing such
Stockholders to suspend sales of Registrable Shares as a result of such
Suspension Event. The Stockholders agree that after receipt of such notice they
will not effect any sales of Registrable Shares pursuant to any registration
statement filed pursuant to this Agreement until such time as such Stockholders
shall have received further notice from the Company that such sales may be
recommenced, which notice shall be given by the Company not later than five days
after the conclusion of any such Suspension Event.
8. Expenses
(a) The fees, costs and expenses of all registrations
in accordance with Articles 2 and 4 hereof shall be borne by the Company,
subject to the provisions of Section 8(b) hereof.
(b) The fees, costs and expenses of registration to
be borne as provided in Section 8(a) hereof shall include, without limitation,
all expenses incident to the Company's
9
10
performance of or compliance with this Agreement, including without limitation
all SEC and stock exchange or NASD registration and filing fees and expenses,
fees and expenses of compliance with securities or blue sky laws (including
without limitation reasonable fees and disbursements of counsel for the
underwriters, if any, or for the selling Stockholders in connection with blue
sky qualifications of the Registrable Shares), rating agency fees, printing
expenses (including expenses of printing certificates for Registrable Shares and
prospectuses), the fees and expenses incurred in connection with the listing of
the securities to be registered on each securities exchange or automated
quotation system on which similar securities issued by the Company are then
listed, fees and disbursements of counsel for the Company and all independent
certified public accountants (including the expenses of any annual audit,
special audit and "cold comfort" letters required by or incident to such
performance and compliance) (but in any event not including any underwriting
discounts or commissions or transfer taxes, if any, attributable to the sale of
Registrable Shares by such Stockholders) (collectively, "Registration
Expenses").
9. Indemnification
(a) Indemnification by the Company. In the event of
any registration of any securities of the Company under the Securities Act
pursuant to Articles 2 or 4 hereof, the Company shall, and it hereby does,
indemnify and hold harmless, to the extent permitted by law, each of the
Stockholders of any Registrable Shares covered by such registration statement,
each affiliate of such Stockholder and their respective directors and officers
(and the directors, officers, affiliates and controlling Persons thereof), each
other Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such Stockholder or any
such underwriter within the meaning of the Securities Act (collectively, the
"Indemnified Parties"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses, including, without limitation, the
reasonable fees and expenses of legal counsel, (including any amounts paid in
any settlement effected with the Company's consent, and including any expenses
paid in connection with the enforcement of the indemnification rights contained
herein) to which any Indemnified Party may become subject under the Securities
Act, state securities or blue sky laws, common law, any other applicable law,
foreign or domestic, or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof, whether or not such
Indemnified Party is a party thereto) or expenses arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(iii) any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company and relating to action required of or
inaction by the Company in connection with any such registration, and the
Company shall reimburse such Indemnified Party for any reasonable legal or any
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
the Company shall not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission
10
11
made in such registration statement or amendment or supplement thereto or in any
such preliminary, final or summary prospectus in reliance upon and in conformity
with written information with respect to such Stockholder furnished to the
Company by such Stockholder specifically for use therein. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Stockholder or any Indemnified Party and shall survive the
transfer of such securities by such Stockholder.
(b) Indemnification by the Stockholders and Underwriters. The
Company may require as a condition to including any Registrable Shares in any
registration statement filed in accordance with Articles 2 or 4 hereof, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Stockholders of such Registrable Shares or any underwriter to, severally and
not jointly, indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 9(a) hereof) the Company with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
written information with respect to such Stockholder or such underwriter
furnished to the Company by such Stockholder or such underwriter specifically
for use in such registration statement, preliminary, final or summary prospectus
or amendment or supplement, or a document incorporated by reference into any of
the foregoing; provided, however, that the liability of such indemnifying party
under this section 9(b) shall be limited to the amount of proceeds received by
such indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any of the Stockholders, or any of their
respective affiliates, directors, officers or controlling Persons, and shall
survive the transfer of such securities by such Stockholder.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 9, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided that the failure of the
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 9, except to the extent
that the indemnifying party is actually materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation; that the indemnified party shall have the right to employ counsel
to represent the indemnified party and its respective controlling persons,
directors, officers, general or limited partners, employees or agents who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the indemnified party against such indemnifying party under this
Section 9 provided that the employment of such counsel shall be at the expense
of the indemnified party, unless (i) the indemnifying party shall have agreed in
writing to pay the
11
12
expenses of such counsel, (ii) the indemnifying party shall not have promptly
employed counsel reasonably satisfactory to the indemnified party to assume the
defense of such action or counsel or (iii) any indemnified party shall have
reasonably concluded that there may be defenses available to such indemnified
party or its respective controlling persons, directors, officers, employees or
agents which are in conflict with or in addition to those available to the
indemnifying party, and in that event the reasonable fees and expenses of one
firm of separate counsel for the indemnified party (in addition to the
reasonable fees and expenses of one firm serving as local counsel) shall be paid
by the indemnifying party. No indemnifying party shall consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in this
Section 9 shall for any reason be unavailable to any indemnified party under
Section 9(a) or 9(b) hereof or is insufficient to hold it harmless in respect of
any loss, claim, damage or liability, or any action in respect thereof referred
to therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the indemnified party
and indemnifying party or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the relative
fault of the indemnified party and indemnifying party with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. Notwithstanding any other provision of this Section 9(d), no
Stockholder of Registrable Shares shall be required to contribute an amount
greater than the dollar amount of the proceeds received by such Stockholder with
respect to the sale of any such Registrable Shares. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In addition, no person shall be
required to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such person's prior consent, which consent
shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subdivisions of this Section 9 (with
appropriate modifications) shall be given by the Company and each Stockholder of
Registrable Shares with respect to any required registration or other
qualification of securities under any federal or state law or regulation or
governmental authority other than the Securities Act.
(f) Non-Exclusivity. The obligations of the parties under this
Section 9 shall be in addition to any liability which any party may otherwise
have to any other party.
10. Assignability. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. In addition, and whether or not any express assignment shall
have been made, the provisions of this Agreement which are for the benefit of
the parties hereto other than the Company shall also be for
12
13
the benefit of and enforceable by any subsequent Stockholder of any Registrable
Shares, subject to the provisions contained herein. The Company may not assign
any of its rights or delegate any of its duties under this Agreement without the
written consent of the Stockholders of a majority of the Registrable Shares.
11. Notices. Any and all notices, designations, consents, offers,
acceptances or any other communications shall be given in writing by either (a)
personal delivery to and receipted for by the addressee or by (b) telecopy or
registered or certified mail which shall be addressed:
(i) if to the Company, to:
Special Devices, Incorporated
00000 Xxxx Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: The President
Fax: (000) 000-0000
with a courtesy copy to:
c/o X.X. Xxxxxx & Company
000 Xxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Fax: (000) 000-0000
(ii) if to JFLEI or JFLCP, to:
c/o X.X. Xxxxxx & Company
000 Xxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Fax: (000) 000-0000
in either case, with a courtesy copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Xxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
(iii) if to the Paribas, to:
13
14
c/o Paribas Principal Partners
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
Fax: (000) 000-0000
with a courtesy copy to:
White & Case
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxx, Esq.
Fax: (000) 000-0000
(iv) if to Xxxxxx Xxxxxxx, to:
c/o Special Devices, Incorporated
00000 Xxxx Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
or if to Xxxxxx Xxxxxxxx, to:
c/o Ordnance Products, Inc.
00000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
in either case, with a courtesy copy to:
Jeffer, Mangels, Xxxxxx & Xxxxxxx
2121 Avenue of the Stars, tenth floor
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxx, Esq.
Fax: (000) 000-0000
All such notices and communications shall be deemed to have been duly
given and effective: when delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed; and
when receipt acknowledged, if telecopied.
12. Arbitration. Any controversy, dispute or claim arising out of, in
connection with or in relation to the interpretation, performance or breach of
this Agreement shall be determined, at the request of any party, by arbitration
in a city mutually agreeable to the parties to such controversy, dispute or
claim, or, failing such agreement, in New York, New York, before
14
15
and in accordance with the then-existing Rules for Commercial Arbitration of the
American Arbitration Association, and any judgment or award rendered by the
arbitrator will be final, binding and unappealable and judgment may be entered
by any state or Federal court having jurisdiction thereof. The pre-trial
discovery procedures of the Federal Rules of Civil Procedure shall apply to any
arbitration under this Section 12. Any controversy concerning whether a dispute
is an arbitrable dispute or as to the interpretation or enforceability of this
Section 12 shall be determined by the arbitrator. The arbitrator shall be a
retired or former United States District Judge or other person acceptable to
each of the parties, provided such individual has substantial professional
experience with regard to corporate or partnership legal matters. The parties
intend that this agreement to arbitrate be valid, enforceable and irrevocable.
13. Severability. If any provision of this Agreement or any portion
thereof is finally determined to be unlawful or unenforceable, such provision or
portion thereof shall be deemed to be severed from this Agreement. Every other
provision, and any portion of such an invalidated provision that is not
invalidated by such a determination, shall remain in full force and effect.
14. Amendments, Waivers. This Agreement may not be amended, modified or
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by (x) the Company and (y)
Stockholders or other Persons holding at least seventy-five percent (75%) of the
voting power represented by the Registrable Shares (pursuant to a valid proxy or
otherwise).
15. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to any other available remedy.
16. Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the transactions contemplated herein
and understandings among the parties relating to the subject matter hereof. Any
and all previous agreements and understandings between or among the parties
hereto regarding the subject matter hereof are, whether written or oral,
superseded by this Agreement; provided, however that (i) this Agreement shall
not be deemed to supersede the Subscription Agreement or the Rollover
Stockholders Agreement and (ii) the execution of this Agreement is not a waiver
by the parties hereto of any of the terms or provisions of the Subscription
Agreement or the Rollover Stockholders Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
18. Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
15
16
19. Limitation of Liability of Stockholders and Officers of Company.
ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE COMPANY WHICH MAY ARISE AT ANY
TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE INCURRED
BY IT PURSUANT TO ANY INSTRUMENT, TRANSACTION OR UNDERTAKING CONTEMPLATED HEREBY
SHALL BE SATISFIED OUT OF THE COMPANY'S ASSETS ONLY. NO SUCH OBLIGATION OR
LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT
THEREOF BE HAD TO, THE PROPERTY OF ANY OF THE COMPANY'S STOCKHOLDERS (SOLELY AS
A RESULT OF THEIR STATUS AS STOCKHOLDERS), DIRECTORS, OFFICERS, EMPLOYEES OR
AGENTS, REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF
CONTRACT, TORT OR OTHERWISE. NOTWITHSTANDING THE FOREGOING, THIS SECTION 19
SHALL NOT IN ANY WAY AFFECT OR LIMIT ANY RIGHTS OR OBLIGATIONS OF THE COMPANY OR
ANY STOCKHOLDER UNDER THIS AGREEMENT.
20. Limitation of Liability of Stockholders and Officers of each
Stockholder. ANY OBLIGATION OR LIABILITY WHATSOEVER OF ANY STOCKHOLDER WHICH MAY
ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY
BE INCURRED BY IT PURSUANT TO ANY INSTRUMENT, TRANSACTION OR UNDERTAKING
CONTEMPLATED HEREBY SHALL BE SATISFIED OUT OF THE SHAREHOLDER'S ASSETS ONLY. NO
SUCH OBLIGATION OR LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT
FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY OF SUCH STOCKHOLDERS
(SOLELY AS A RESULT OF THEIR STATUS AS STOCKHOLDERS), DIRECTORS, OFFICERS,
EMPLOYEES OR AGENTS, REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN
THE NATURE OF CONTRACT, TORT OR OTHERWISE. NOTWITHSTANDING THE FOREGOING, THIS
SECTION 20 SHALL NOT IN ANY WAY AFFECT OR LIMIT ANY RIGHTS OR OBLIGATIONS OF THE
COMPANY OR ANY STOCKHOLDER UNDER THIS AGREEMENT.
21. Governing Law. This Agreement is made pursuant to and shall be
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
22. No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Shares in this Agreement. Without
limiting the generality of the foregoing, the Company will not hereafter enter
into any agreement with respect to its securities which grants, or modify any
existing agreement with respect to its securities to grant, to the holder of its
securities in connection with an incidental registration of such securities
equal or higher priority to the rights granted to the Purchasers under Article 2
or Article 4.
23. Remedies. Each holder of Registrable Shares, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages
16
17
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Agreement and hereby agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
SPECIAL DEVICES, INCORPORATED
By: /s/ Xxxx X. Xxxxx
-------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
PARIBAS PRINCIPAL INC.
By: /s/ Xxxxxxx Xxxxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Director
X.X. XXXXXX EQUITY INVESTORS I, L.P., a
Delaware limited partnership
By: JFL INVESTORS L.L.C., its:
General Partner
By: /s/ Xxxxxx Xxxxxxxx
-----------------------
Name: Xxxxxx Xxxxxxxx
Title: Managing Member
JFL CO-INVEST PARTNERS I, L.P.,
a Delaware limited partnership
By: JFL INVESTORS L.L.C., its:
General Partner
By: /s/ Xxxxxx Xxxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxxx
Title: Managing Member
17
18
THE XXXXXXXX FAMILY TRUST
By: /s/ Xxxxxx Xxxxxxxx
--------------------------
Xxxxxx Xxxxxxxx
Trustee
THE XXXXXXX FAMILY TRUST
By: /s/ Xxxxxx Xxxxxxx
---------------------------
Xxxxxx Xxxxxxx
Trustee
18
