ZERO COUPON CONVERTIBLE SUBORDINATED NOTES DUE 2017
REGISTRATION RIGHTS AGREEMENT
DATED AS OF AUGUST 19, 1997
BY AND AMONG
COSTCO COMPANIES INC.
AS THE COMPANY,
AND
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
AND
X. X. XXXXXX & CO.
AS PURCHASERS
This Registration Rights Agreement is made and entered into as of
August 19, 1997, by and among Costco Companies, Inc., a Delaware corporation
(the "Company"), and Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation and X.
X. Xxxxxx & Co. (the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated
August 14, 1997, among the Company and the Purchasers (the "Purchase
Agreement"). In order to induce the Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights provided
for in this Agreement to the Purchasers and their respective direct and indirect
transferees. The execution of this Agreement is a condition to the closing of
the transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADVICE: As defined in the last paragraph of Section 4(q) hereof.
AFFILIATE of any specified person shall mean any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control," when used with respect to any person, means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing.
AGREEMENT: This Registration Rights Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
BUSINESS DAY: Each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
CLOSING DATE: The Closing Date as defined in the Purchase Agreement.
COMMON STOCK: Common Stock, $.01 par value per share, of the Company.
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COMPANY: Costco Companies, Inc., a Delaware corporation, and any
successor corporation thereto.
CONTROLLING PERSON: As defined in Section 6(a) hereof.
DAMAGE PAYMENT DATE: Each September 1 and March 1 as long as this
Agreement is in effect.
EFFECTIVENESS PERIOD: As defined in Section 2(a) hereof.
EFFECTIVENESS TARGET DATE: The 180th day following the Closing Date.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC pursuant thereto.
FILING DATE: The 90th day after the Closing Date.
HOLDER: Each registered holder of any Transfer Restricted Securities.
INDEMNIFIED PERSON: As defined in Section 6(a) hereof.
INDENTURE: The Indenture, dated the date hereof, between the Company
and the Trustee thereunder, pursuant to which the Notes are being issued, as
amended, modified or supplemented from time to time in accordance with the terms
thereof.
LIQUIDATED DAMAGES: As defined in Section 3(a) hereof.
NOTES: The up to $900,000,000 aggregate principal amount at maturity
of Zero Coupon Convertible Subordinated Notes due 2017 of the Company being
issued pursuant to the Purchase Agreement.
PAYING AGENT: As defined in the Indenture.
PROCEEDING: An action, claim, suit or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
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PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Transfer Restricted Securities
covered by such Registration Statement, and all other amendments and supplements
to any such prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such prospectus.
PURCHASERS: As defined in the preamble hereof.
REGISTRATION DEFAULT: As defined in Section 3(a) hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
that covers any of the Notes pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such registration statement.
RULE 144: Rule 144 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 158: Rule 158 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 174: Rule 174 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 415: Rule 415 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
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RULE 424: Rule 424 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
SHELF REGISTRATION: As defined in Section 2 hereof.
SPECIAL COUNSEL: Any special counsel to the holders of Transfer
Restricted Securities, for which holders of Transfer Restricted Securities will
be reimbursed pursuant to Section 5 hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRANSFER RESTRICTED SECURITIES: The Notes and the shares of Common
Stock into which the Notes are convertible, upon original issuance thereof, and
at all times subsequent thereto, until, in the case of any such Note or share,
(i) the date on which it has been registered effectively pursuant to the
Securities Act and disposed of in accordance with the Registration Statement
relating to it, (ii) the date on which either such Note or the shares of Common
Stock issued upon conversion of such Note are distributed to the public pursuant
to Rule 144 (or any similar provisions then in effect) or are saleable pursuant
to Rule 144(k) promulgated by the SEC pursuant to the Securities Act or (iii)
the date on which it ceases to be outstanding.
TRUSTEE: The Firstar Bank of Minnesota, N.A., the trustee under the
Indenture.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
connection with which securities of the Company are sold to an underwriter for
reoffering to the public pursuant to an effective Registration Statement.
2. SHELF REGISTRATION
(a) The Company agrees to file with the SEC as soon as practicable
after the Closing Date, but in no event later than the Filing Date, a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Transfer Restricted Securities (the "Shelf
Registration"). The Shelf Registration shall be on Form S-3
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under the Securities Act or another appropriate form permitting registration
of such Transfer Restricted Securities for resale by the Holders in the
manner or manners reasonably designated by them (including, without
limitation, one or more underwritten offerings). The Company shall not
permit any securities other than the Transfer Restricted Securities to be
included in the Shelf Registration. The Company shall use its reasonable
best efforts, as described in Section 4, to cause the Shelf Registration to
be declared effective pursuant to the Securities Act as promptly as
practicable following the filing thereof, but in no event later than the
Effectiveness Target Date, and to keep the Shelf Registration continuously
effective under the Securities Act for 24 months after the Closing Date
(subject to extension pursuant to the last paragraph of Section 4(q) hereof)
(the "Effectiveness Period"), or such shorter period ending when either (1)
all Transfer Restricted Securities covered by the Shelf Registration have
been sold in the manner set forth and as contemplated in the Shelf
Registration or (2) there cease to be outstanding any Transfer Restricted
Securities.
(b) SUPPLEMENTS AND AMENDMENTS. The Company shall use its reasonable
best efforts to keep the Shelf Registration continuously effective by
supplementing and amending the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the holders of a majority in amount of the Transfer Restricted
Securities covered by such Registration Statement or by any underwriter of such
Transfer Restricted Securities; PROVIDED that the Effectiveness Period shall be
extended to the extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 and as otherwise provided herein.
3. LIQUIDATED DAMAGES
(a) The Company and the Purchasers agree that the Holders of Transfer
Restricted Securities will suffer damages if the Company fails to fulfill its
obligations pursuant to Section 2 hereof and that it would not be possible to
ascertain the extent of such damages. Accordingly, in the event of such failure
by the Company to fulfill such obligations, the Company hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted
Securities under the circumstances and to the extent set forth below:
(i) if the Shelf Registration has not been filed with the SEC on
or prior to the Filing Date; or
(ii) if the Shelf Registration is not declared effective by the
SEC on or prior to the Effectiveness Target Date; or
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(iii) the Shelf Registration has been declared effective by
the SEC and such Shelf Registration ceases to be effective or usable
at any time during the Effectiveness Period for a period of time which
shall exceed 90 days in the aggregate during any 12-month period.
(any of the foregoing, a "Registration Default") then the Company shall pay
Liquidated Damages in cash to each Holder of Transfer Restricted Securities
following the occurrence of such Registration Default in an amount equal to $.02
per week per $1,000 principal amount of Notes and, if applicable, $.005 per week
per share (subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) of Common Stock constituting
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of such Liquidated
Damages will increase by an additional $.02 per week per $1,000 principal amount
at matury of Notes and $.005 per week per share (subject to adjustment as set
forth above) of Common Stock constituting Transfer Restricted Securities for
each subsequent 90-day period until all Registration Defaults have been cured;
PROVIDED, HOWEVER, that Liquidated Damages shall not at any time exceed $.10 per
week per $1,000 principal amount at maturity of Notes or $.025 per week per
share (subject to adjustment as set forth above) of Common Stock constituting
Transfer Restricted Securities. Following the cure of all Registration Defaults
relating to any Transfer Restricted Securities, the accrual of Liquidated
Damages with respect to such Transfer Restricted Securities will cease. A
Registration Default under clause (i) above shall be cured on the date that the
Shelf Registration is filed with the SEC; a Registration Default under clause
(ii) above shall be cured on the date that the Shelf Registration is declared
effective by the SEC; and a Registration Default under clause (iii) above shall
be cured on the date the Shelf Registration is declared effective or is usable.
(b) The Company shall notify the Trustee within one Business Day
after each and every date on which a Registration Default occurs. Liquidated
Damages shall be paid by the Company to the Holders by wire transfer of
immediately available funds to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have been specified on
or before the Damage Payment Date. Each obligation to pay Liquidated Damages
shall be deemed to commence accruing on the date of the applicable Registration
Default and to cease accruing when all Registration Defaults have been cured.
In no event shall the Company pay Liquidated Damages in excess of the applicable
maximum weekly amount set forth above, regardless of whether one or multiple
Registration Defaults exist.
4. REGISTRATION PROCEDURES
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In connection with the Company's registration obligations hereunder,
the Company shall effect such registrations on the appropriate form available
for the sale of the Transfer Restricted Securities to permit the sale of
Transfer Restricted Securities in accordance with the method or methods of
disposition thereof specified by the holders of a majority in amount of Transfer
Restricted Securities, and pursuant thereto the Company shall as expeditiously
as possible:
(a) No fewer than five Business Days prior to the initial filing of a
Registration Statement or Prospectus and no fewer than two Business Days prior
to the filing of any amendment or supplement thereto (other than any document
that would be incorporated or deemed to be incorporated therein by reference),
furnish to the Holders of the Transfer Restricted Securities, their Special
Counsel and the managing underwriters, if any, copies of all such documents
proposed to be filed, which documents (other than those incorporated or deemed
to be incorporated by reference) will be subject to the review of such Holders,
their Special Counsel and such underwriters, if any, and cause the officers and
directors of the Company, counsel to the Company and independent certified
public accountants to the Company to respond to such inquiries as shall be
necessary in connection with such Registration Statement, in the opinion of
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act; PROVIDED,
HOWEVER, that the Company shall not be deemed to have kept a Registration
Statement effective during the applicable period if it voluntarily takes or
fails to take any action that results in selling Holders of the Transfer
Restricted Securities covered thereby not being able to sell such Transfer
Restricted Securities pursuant to Federal securities laws during that period
(and the time period during which such Registration Statement is required to
remain effective hereunder shall be extended by the number of days during which
such selling Holders of Transfer Restricted Securities are not able to sell
Transfer Restricted Securities). The Company shall not file any such
Registration Statement or related Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Transfer Restricted
Securities, their Special Counsel, or the managing underwriters, if any, shall
reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including post-
effective amendments, to each Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the applicable time
period; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all securities covered by such Registration Statement during
such period in
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accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement as so amended or in such Prospectus
as so supplemented;
(c) Notify the Holders of Transfer Restricted Securities to be sold
or their Special Counsel and the managing underwriters, if any, promptly (and in
the case of an event specified by clause (i)(A) of this paragraph in no event
fewer than two Business Days prior to such filing), and (if requested by any
such person), confirm such notice in writing, (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment is proposed to be filed, and,
(B) with respect to a Registration Statement or any post-effective amendment,
when the same has become effective, (ii) of any request by the SEC or any other
Federal or state governmental authority for amendments or supplements to a
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC, any state securities commission, any other
governmental agency or any court of any stop order, order or injunction
suspending or enjoining the use or the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose, (iv) if at any time any
of the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 4(m) hereof cease
to be true and correct in all material respects, (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Transfer Restricted Securities for
sale in any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, and (vi) of the happening of any event that makes any statement
made in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in such Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any 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, and that in the case of the Prospectus,
it will not contain any 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, in light of the circumstances under which they were made, not
misleading;
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of any order enjoining or suspending the use or
effectiveness of a Registration Statement or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Transfer
Restricted Securities for sale in any jurisdiction, at the earliest practicable
moment;
(e) If requested by the managing underwriters, if any, or the Holders
of a majority in amount of the Transfer Restricted Securities being sold in
connection with such
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offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters, if
any, and such Holders agree should be included therein, and (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received notification
of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; PROVIDED, HOWEVER, that the Company shall not be
required to take any action pursuant to this Section 4(e) that would, in the
opinion of counsel for the Company, violate applicable law;
(f) Furnish to each Holder of Transfer Restricted Securities, their
Special Counsel and each managing underwriter, if any, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements (but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits,
unless requested in writing by such Holder, counsel or managing underwriter);
(g) Deliver to each Holder of Transfer Restricted Securities, their
Special Counsel, and the underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such persons reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Transfer Restricted
Securities and the underwriters, if any, in connection with the offering and
sale of the Transfer Restricted Securities covered by such Prospectus and any
amendment or supplement thereto;
(h) Prior to any public offering of Transfer Restricted Securities,
use its reasonable best efforts to register or qualify or cooperate with the
Holders of Transfer Restricted Securities to be sold or tendered for, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Transfer Restricted Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; PROVIDED, HOWEVER, that the Company shall not
be required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
subject the Company to any tax in any such jurisdiction where it is not then so
subject;
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(i) In connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company and to enable such
Transfer Restricted Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or Holders may request at
least two Business Days prior to any sale of Transfer Restricted Securities;
(j) Use its reasonable best efforts to cause the offering of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities within the United States, except as may be required as a
consequence of the nature of such selling Holder's business, in which case
the Company will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals as may be necessary
to enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Transfer Restricted Securities; PROVIDED,
HOWEVER, that the Company shall not be required to register the Transfer
Restricted Securities in any jurisdiction that would subject it to general
service of process in any such jurisdiction where it is not then so subject
or subject the Company to any tax in any such jurisdiction where it is not
then so subject or to require the Company to qualify to do business in any
jurisdiction where it is not then so qualified;
(k) Upon the occurrence of any event contemplated by Section
4(c)(vi) hereof, as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered, such
Prospectus will not contain 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, in light of the circumstances under which they were made,
not misleading;
(l) Prior to the effective date of the first Registration
Statement relating to the Transfer Restricted Securities, to provide a CUSIP
number for the Transfer Restricted Securities;
(m) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection therewith
(including those reasonably requested by the
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managing underwriters, if any, or the Holders of a majority in amount of the
Transfer Restricted Securities being sold) in order to expedite or facilitate
the disposition of such Transfer Restricted Securities, and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration, (i) make
such representations and warranties to the Holders of such Transfer
Restricted Securities and the underwriters, if any, with respect to the
business of the Company and its subsidiaries (including with respect to
businesses or assets acquired or to be acquired by any of them), and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested; (ii)
obtain opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably satisfactory
to the managing underwriters, if any, and Special Counsel to the Holders of
the Transfer Restricted Securities being sold), addressed to each selling
Holder of Transfer Restricted Securities and each of the underwriters, if
any, covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested
by such Special Counsel and underwriters; (iii) obtain customary "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and financial
data is, or is required to be, included in the Registration Statement),
addressed (where reasonably possible) to each selling Holder of Transfer
Restricted Securities and each of the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings; (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders of Transfer Restricted Securities and the underwriters, if any, than
those set forth in Section 6 hereof (or such other provisions and procedures
acceptable to Holders of a majority in amount of the Transfer Restricted
Securities covered by such Registration Statement and the managing
underwriters); and (v) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in amount of the Transfer
Restricted Securities being sold, their Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) of this Section
4(m) and to evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company;
(n) Make available for inspection by a representative of the Holders
of Transfer Restricted Securities being sold, any underwriter participating in
any such disposition of Transfer Restricted Securities, if any, and any
attorney, consultant or accountant retained
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by such selling Holders or underwriter, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries as
they may reasonably request (including with respect to business and assets
acquired or to be acquired to the extent that such information is available
to the Company), and cause the officers, directors, agents and employees of
the Company and its subsidiaries (including with respect to business and
assets acquired or to be acquired to the extent that such information is
available to the Company) to supply all information in each case reasonably
requested by any such representative, underwriter, attorney, consultant or
accountant in connection with such Registration Statement, PROVIDED, HOWEVER,
that such persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the Company in
writing as confidential at the time of delivery of such information shall be
kept confidential by such persons, unless (i) disclosure of such information
is required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to Federal
securities laws in connection with the filing of any Registration Statement
or the use of any prospectus referred to in this Agreement), (iii) such
information becomes generally available to the public other than as a result
of a disclosure or failure to safeguard by any such person or (iv) such
information becomes available to any such person from a source other than the
Company and such source is not bound by a confidentiality agreement;
(o) Provide an indenture trustee for the Transfer Restricted
Securities, if applicable, and cause the Indenture to be qualified under the
TIA not later than the effective date of the first Registration Statement
relating to the Transfer Restricted Securities; and in connection therewith,
cooperate with the trustee under the Indenture and the holders of the
Transfer Restricted Securities to effect such changes to the Indenture as may
be required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable best efforts to cause
such trustee to execute, all customary documents as may be required to effect
such changes, and all other forms and documents required to be filed with the
SEC to enable the Indenture to be so qualified in a timely manner;
(p) Comply with applicable rules and regulations of the SEC and
make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act), no
later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Transfer Restricted Securities are
sold to underwriters in a firm commitment or reasonable efforts underwritten
offering and (ii) if not sold to underwriters in such an offering, commencing
on the first day of the first fiscal quarter after
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the effective date of a Registration Statement, which statement shall cover
said period, consistent with the requirements of Rule 158; and
(q) (i) list all Common Stock covered by such Registration
Statement on any securities exchange on which the Common Stock is then listed
or (ii) authorize for quotation on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or the National Market System
of NASDAQ all Common Stock covered by such Registration Statement if the
Common Stock is then so authorized for quotation.
The Company may require each seller of Transfer Restricted
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such Transfer
Restricted Securities as is required by law to be disclosed in the applicable
Registration Statement and the Company may exclude from such registration the
Transfer Restricted Securities of any seller who unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in any
amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Transfer Restricted Securities agrees by acquisition
of such Transfer Restricted Securities that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
4(c)(ii), 4(c)(iii), 4(c)(v) or 4(c)(vi) hereof, such Holder will forthwith
discontinue disposition of such Transfer Restricted Securities covered by
such Registration Statement or Prospectus until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 4(k)
hereof, or until it is advised in writing (the "Advice") by the Company that
the use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus.
If the Company shall give any such notice, the Effectiveness Period shall be
extended by the number of days during such period from and including the date
of the giving
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of such notice to and including the date when each seller of Transfer
Restricted Securities covered by such Registration Statement shall have
received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 4(k) hereof or (y) the Advice, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus.
5. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by it whether or
not any Registration Statement is filed or becomes effective and whether or
not any securities are issued or sold pursuant to any Registration Statement.
The fees and expenses referred to in the foregoing sentence shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (B) in
compliance with securities or Blue Sky laws (including, without limitation
and in addition to that provided for in (b) below, fees and disbursements of
counsel for the underwriters or Special Counsel for the Holders in connection
with Blue Sky qualifications of the Transfer Restricted Securities and
determination of the eligibility of the Transfer Restricted Securities for
investment under the laws of such jurisdictions as the managing underwriters,
if any, or Holders of a majority in amount of Transfer Restricted Securities
may designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Transfer Restricted Securities in a
form eligible for deposit with The Depository Trust Company and of printing
Prospectuses if the printing of Prospectuses is requested by the managing
underwriters, if any, or by the Holders of a majority in amount of the
Transfer Restricted Securities included in or tendered for in connection with
any Registration Statement), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company and Special
Counsel for the Holders (plus any local counsel, deemed appropriate by the
Holders of a majority in amount of the Transfer Restricted Securities), in
accordance with the provisions of Section 5(b) hereof, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 4(m)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Company so
desires such insurance, and (vii) fees and expenses of all other persons
retained by the Company. In addition, the Company shall pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, and the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange.
Notwithstanding the foregoing or anything in this Agreement to the contrary,
each Holder
15
shall pay all underwriting discounts and commissions of any underwriters with
respect to any Transfer Restricted Securities sold by it.
(b) In connection with any registration hereunder, the Company
shall reimburse the Holders of the Transfer Restricted Securities being
registered or tendered for in such registration for the reasonable fees and
disbursements of not more than one firm of attorneys representing the selling
Holders (in addition to any local counsel), which firm shall be chosen by the
Holders of a majority in amount of the Transfer Restricted Securities.
6. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each of
the Purchasers, (ii) each Holder of Transfer Restricted Securities, (iii)
each person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) any of the foregoing (any
of the persons referred to in this clause (iii) being hereinafter referred to
as a "controlling person"), and (iv) the respective officers, directors,
partners, employees, representatives and agents of the Purchasers, each
Holder of Transfer Restricted Securities, or any controlling person (any
person referred to in clause (i), (ii), (iii) or (iv) may hereinafter be
referred to as an "INDEMNIFIED PERSON"), from and against any and all losses,
claims, damages, liabilities and judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or form of Prospectus or in any amendment or supplement
thereto or in any preliminary Prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Indemnified Person furnished in writing to
the Company by or on behalf of such Indemnified Person expressly for use
therein; PROVIDED that the foregoing indemnity with respect to any
preliminary Prospectus shall not inure to the benefit of any Indemnified
Person from whom the person asserting such losses, claims, damages,
liabilities and judgments purchased securities if such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
Prospectus is eliminated or remedied in the Prospectus and a copy of the
Prospectus shall not have been furnished to such person in a timely manner
due to the wrongful action or wrongful inaction of such Indemnified Person.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or any
amendment or
16
supplement thereto and with respect to which indemnity may be sought against
the Company, such Indemnified Person shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses. Any Indemnified Person shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company
shall have failed to assume the defense and employ counsel or (iii) the named
parties to any such action (including any impleaded parties) include both
such Indemnified Person and the Company and such Indemnified Person shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
the Company (in which case the Company shall not have the right to assume the
defense of such action on behalf of such Indemnified Person, it being
understood, however, that the Company shall not, in connection with any one
such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all
such Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such fees and expenses shall be reimbursed
as they are incurred). The Company shall not be liable for any settlement of
any such action effected without its written consent but if settled with the
written consent of the Company, the Company agrees to indemnify and hold
harmless any Indemnified Person from and against any loss or liability by
reason of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
(c) In connection with any Registration Statement in which a Holder
of Transfer Restricted Securities is participating, such Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers and any person controlling the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
each Indemnified Person but only with reference to information relating to such
Indemnified Person furnished in writing by or on behalf of such Indemnified
Person expressly for use in such Registration Statement. In case any action
shall be brought against the Company, any of its directors, any such officer or
any person controlling the Company based on such Registration Statement and in
respect of which indemnity may be sought against any
17
Indemnified Person, the Indemnified Person shall have the rights and duties
given to the Company (except that if the Company shall have assumed the
defense thereof, such Indemnified Person shall not be required to do so, but
may employ separate counsel therein and participate in defense thereof but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Person), and the Company, its directors, any such officers and
any person controlling the Company shall have the rights and duties given to
the Indemnified Person, by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on
the one hand and each Indemnified Person on the other hand from the offering
of the Notes 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) above but also the
relative fault of the Company and each such Indemnified Person in connection
with the statements or omissions which resulted in such losses, claims,
damages, liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and each such Indemnified
Person shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company or such
Indemnified Person and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by PRO
RATA allocation (even if the Indemnified Person were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6, no
Indemnified Person shall be required to contribute any amount in excess of the
amount by which the total net profit received by it in connection with the sale
of the Notes pursuant to this Agreement exceeds the amount of any damages which
such Indemnified Person has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation
18
(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. The Indemnified Persons' obligations to
contribute pursuant to this Section 6(d) are several in proportion to the
respective amount of Notes included in any such Registration Statement by
each Indemnified Person and not joint.
7. RULES 144 AND 144A
The Company shall use its best efforts to file the reports required
to be filed by it under the Securities Act and the Exchange Act in a timely
manner and, if at any time it is not required to file such reports but in the
past had been required to or did file such reports, it will, upon the request
of any holder of Transfer Restricted Securities, make available other
information as required by, and so long as necessary to permit, sales of its
Transfer Restricted Securities pursuant to Rule 144 and Rule 144A.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the
Exchange Act.
8. UNDERWRITTEN REGISTRATIONS
(a) If any of the Transfer Restricted Securities covered by any
Shelf Registration are to be sold in an underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the Holders of a majority in amount of such
Transfer Restricted Securities included in such offering, subject to the
consent of the Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Securities agrees, if
requested (pursuant to a timely written notice) by the managing underwriters
in an underwritten offering or placement agent in a private offering of the
Company's securities, not to effect any private sale or distribution
(including a sale pursuant to Rule 144(k) and Rule 144A, but excluding
non-public sales to any of its affiliates, officers, directors, employees and
controlling persons) of any of the Notes, in the case of an offering of the
Company's debt securities, or the
19
Common Stock, in the case of an offering of the Company's equity securities,
during the period beginning 10 days prior to, and ending 90 days after, the
closing date of the underwritten offering.
The foregoing provisions of Section 8(b) shall not apply to any
Holder of Transfer Restricted Securities if such Holder is prevented by
applicable statute or regulation from entering into any such agreement.
9. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company, or by a
holder of Transfer Restricted Securities, of any of their obligations under
this Agreement, each holder of Transfer Restricted Securities or the Company,
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, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Company is
not currently a party to any agreement granting any registration rights with
respect to any of its debt securities to any person. Without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority amount of the then outstanding Transfer Restricted Securities, the
Company shall not grant to any person the right to request it to register any
of its debt securities under the Securities Act unless the rights so granted
are subject in all respects to the prior rights of the holders of Transfer
Restricted Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. The Company shall not grant to
any of its security holders (other than the Holders of Transfer Restricted
Securities in such capacity) the right to include any of its securities in
any Shelf Registration other than Transfer Restricted Securities.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, without the written consent of the Holders of a
majority of the then outstanding Transfer Restricted Securities (on a fully
converted basis); PROVIDED, HOWEVER, that, for the purposes of this
Agreement, Transfer
20
Restricted Securities that are owned, directly or indirectly, by either the
Company or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Transfer Restricted Securities whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders of Transfer Restricted
Securities may be given by Holders of a majority of the Transfer Restricted
Securities (on a fully converted basis) being sold by such Holders pursuant
to such Registration Statement; PROVIDED, HOWEVER, that the provisions of
this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(e) NOTICES. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopy:
(i) if to the Company, as provided in the Purchase Agreement,
(ii) if to the Purchasers, as provided in the Purchase Agreement,
or
(iii) if to any other person who is then the registered Holder of
any Transfer Restricted Securities, to the address of such
Holder as it appears in the Note or Common Stock register of
the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by
hand, if personally delivered; one Business Day after being timely delivered
to a next-day air courier; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; and when
receipt is acknowledged by the recipient's telecopier machine, if telecopied.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder of Transfer
Restricted Securities. The Company may not assign its rights or obligations
hereunder without the prior written consent of each Holder of Transfer
Restricted Securities. Notwithstanding the foregoing, no transferee shall
have any of the rights granted under this Agreement until such transferee
shall acknowledge its rights and obligations hereunder by a signed written
statement of such transferee's acceptance of such rights and obligations.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so
21
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement.
(h) GOVERNING LAW; SUBMISSION TO JURISDICTION.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY
OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(i) SEVERABILITY. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
All references made in this Agreement to "Section" and "paragraph" refer to
such Section or paragraph of this Agreement, unless expressly stated
otherwise.
22
(k) 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 prevailing party, as determined by the
court, shall be entitled to recover its reasonable attorneys' fees in
addition to any other available remedy.
23
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of the date first written above.
COSTCO COMPANIES, INC.
By:
-------------------------------
Name:
Title:
The foregoing Registration Rights
Agreement is hereby confirmed
and accepted as of the date
first above written.
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
X. X. XXXXXX & CO.
By: Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation
By:____________________________
Name: Xxxxxxx X. Xxxx
Title: Vice President
