EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of [DATE] (this
"Agreement"), is made by and among The L.L. Xxxxxxxxxxxxx Co., Inc. a California
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H :
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WHEREAS, in connection with the Private Securities Subscription
Agreement, dated as of [DATE], between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed, upon the terms and subject to
the conditions of the Subscription Agreement, to issue and sell to the Initial
Investor Convertible Debentures (the "Debentures") convertible into shares (the
"Shares") of Common Stock, no par value (the "Common Stock") of the Company; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. Definitions.
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(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Initial Investor and any transferee
or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement
or Statements in compliance with the Securities Act on such
appropriate registration form
promulgated by the Commission as shall be selected by the Company,
and, when requested by the Initial Investor or any Investor pursuant
to Section 2(b) hereof, shall (A) be reasonably acceptable to the
holders of a majority of the Registrable Securities to which such
registration relates, and (B) shall permit the disposition of
Registrable Securities in accordance with the intended method or
methods specified in the Investor's request for such registration, and
the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission
("SEC").
(iii) "Registrable Securities" means the Shares.
(iv) "Registration Statement" means a registration statement
under the Securities Act registering securities of the Company.
(b) As used in this Agreement, the term Investor includes (i)
each Investor (as defined above) and (ii) each person who is a permitted
transferee or assignee of the Registrable Securities pursuant to Section 9
of this Agreement.
(c) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Subscription
Agreement.
2. Registration.
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(a) Piggy-Back Registrations. If at any time the Company shall
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determine to prepare and file with the SEC a Registration Statement
relating to an offering for its own account or the account of others under
the Securities Act any of its equity securities, other than on Form S-4 or
Form S-8 or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other
employee benefit plans, the Company shall send to each Investor, who is
entitled to registration rights under this Section 2(a) written notice of
such determination and, if within twenty (20) days after receipt of such
notice, such Investor shall so request in writing, the Company shall
include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on
the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, such
limitation is necessary to effect an orderly public distribution, then the
Company shall be obligated to include in such Registration Statement only
such limited portion, if any, of the Registrable Securities with respect to
which such Investor has requested inclusion hereunder. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking
to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
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however, that the Company shall not exclude any Registrable Securities
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unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in
such Registration Statement, and has also excluded any securities sought to
be registered by
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officers and directors of the Company; and provided, further, however,
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that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of
other securities having the right to include such securities in the
Registration Statement to the extent such pro rata allotment is permitted
under the Company's currently existing agreements with such holders of the
Company's securities. No right to registration of Registrable Securities
under this Section 2(a) shall be construed to limit any registration
required under Section 2(b) hereof. The obligations of the Company under
this Section 2(a) shall expire (i) after the Company has afforded the
opportunity for the Investors to exercise registration rights under this
Section 2(a) for two registrations; provided, however, that any Investor
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who shall have had any Registrable Securities excluded from any
Registration Statement in accordance with this Section 2(a) shall be
entitled to include in an additional Registration Statement filed by the
Company the Registrable Securities so excluded or (ii) when all of the
Registrable Securities held by any Investor may be sold by such Investor
under Rule 144 under the Securities Act ("Rule 144") within any three-month
period.
(b) Demand Registration. If, at any time after the closing under
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the Subscription Agreement (the "Closing"), any Investor holding Twenty-
Five Percent (25%) or more of the Registrable Securities shall notify the
Company in writing that it intends to offer or cause to be offered for
public sale Registrable Securities held by such Investor, the Company shall
cause such of the Registrable Securities as may be requested by any
Investor to be registered, on Form S-3 under the Securities Act, on one
occasion only, under the Securities Act and applicable state laws as
expeditiously as possible. Once the right for registration of any
Registrable Securities under this Section 2(b) has been exercised by any
Investor, the Company shall prepare and file a Registration Statement on
Form S-3 covering such Registrable Securities with the SEC within seven (7)
days of the exercise of such registration right. Demand shall be deemed to
occur upon the Closing.
(c) If any offering pursuant to a Registration Statement pursuant
to Section 2(b) hereof involves an underwritten offering, the Investors who
hold at least Seventy-Five Percent (75%) in interest of the Registrable
Securities subject to such underwritten offering shall have the right to
select one legal counsel and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other
fees and expenses of such investment banker or bankers and manager or
managers so selected in accordance with this Section 2(c) (other than fees
and expenses relating to registration of Registrable Securities under
federal or state securities laws which are payable by the Company pursuant
to Section 5 hereof) with respect to their Registrable Securities and the
fees and expenses of such legal counsel selected by the Investors.
(d) Payments by the Company. If the Registration Statement
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covering the Registrable Securities for which a demand for registration has
been made pursuant to Section 2(b) hereof is not effective within the
earlier of 90 days after the Closing or 90 days after such demand has been
made, then the Company will make payments to each
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holder of Registrable Securities (each, a "Holder") in such amounts and at
such times as shall be determined pursuant to this Section 2(d). The amount
to be paid by the Company to the Holders shall be determined as of each
Computation Date, and such amount shall be equal to (i) in the case of the
first Computation Date, One Percent (1%) and (ii) in the case of each other
Computation Date, Two Percent (2%), in each case of the aggregate
subscription price paid by the Initial Investor for the Debentures pursuant
to the Subscription Agreement (the "Periodic Amount"); provided, however,
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that if any Computation Date is less than 30 days subsequent to another
Computation Date, then the Periodic Amount payable on the later Computation
Date shall be prorated. The Periodic Amount shall be prorated based on each
Holder's Debenture holdings. The Periodic Amount shall be paid by the
Company within five business days after each Computation Date and shall be
payable in cash; provided, however, that the Company may elect in lieu of
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payment of any Periodic Amount in cash to deliver to the Initial Investor
shares of Common Stock having an Aggregate Market Value equal to the amount
of the Periodic Amount if, but only if, (i) such shares are freely tradable
by the Initial Investor without any restriction under the Securities Act or
any state securities or "blue sky" law and (ii) after the issuance of such
shares to the Holder, the aggregate number of shares of Common Stock
beneficially owned by the Holder (determined in accordance with Section
13(d) of, and Regulations 13 D-G under, the Securities Exchange Act of
1934, as amended (the "Exchange Act") would not exceed 4.9% of the
outstanding shares of Common Stock.
As used in this Section 2(d), the following terms shall have the
following meanings:
"Aggregate Market Value" of any shares of Common Stock as of any
Computation Date means the product obtained by multiplying (a) such number
of shares of Common Stock times (b) the Average Market Price of the Common
Stock for such Computation Date.
"Average Market Price" of any security for any period shall be
computed as the average closing bid price of the shares over the five
trading-day period ending on the relevant Computation Date, as reported by
Bloomberg, L.P.
"Computation Date" means the date which is 60 days after the
exercise of demand registration rights under Section 2(b) and, if the
Registration Statement required to be filed by the Company pursuant to
Section 2(b) has not theretofore been declared effective by the SEC, each
date which is 30 days after a Computation Date and, if the Registration
Statement required to be filed by the Company pursuant to Section 2(b) is
not declared effective by the SEC within 60 days after the exercise of
demand registration rights under Section 2(b), the date on which such
Registration Statement is declared effective.
3. Obligations of the Company. In connection with the registration
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of the Registrable Securities, the Company shall:
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(a) prepare promptly and file with the SEC promptly (but in no
event later than 7 days) after a request in accordance with Section 2(b)
hereof a Registration Statement or Statements on Form S-3 with respect to
all Registrable Securities to be included therein, and thereafter use its
best efforts to cause the Registration Statement to become effective as
soon as reasonably possible after such filing. If such Registration
Statement is filed pursuant to Rule 415, the Company shall keep the
Registration Statement effective pursuant to Rule 415 at all times until
such date as is three years after the date such Registration Statement is
first ordered effective by the SEC. In any case, the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) filed by the Company shall not contain any 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 in which they were made, not misleading; provided,
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however, that, subject to the conditions set forth in Section 4(a) below,
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each Investor may notify the Company in writing that it wishes to exclude
all or a portion of its Registrable Securities from such Registration
Statement; provided further, however, that if at any time the Investors
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shall be entitled to sell all Registrable Securities held by them pursuant
to Rule 144 promulgated under the Securities Act or any other similar rule
or regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration and without
imposing restrictions arising under the federal securities laws on the
purchases thereof in a period of three consecutive months, then the Company
shall, so long as it meets the current public information requirements of
Rule 144, thereafter no longer be required to maintain the registration of
Registrable Securities pursuant to this Agreement;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration Statement effective at all times
until such date as is three years after the date such Registration
Statement is first ordered effective by the SEC, and, during such period,
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement, such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the Investors
who hold a majority in interest of the Registrable Securities being offered
reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements,
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(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times until such date as
is the earlier of three years after the date such Registration Statement is
first ordered effective by the SEC or is three years after the Initial
Investor acquired the Debentures and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in
such jurisdictions; provided, however, that the Company shall not be
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required in connection therewith or as a condition thereto to (I) qualify
to do business in any jurisdiction where it would not otherwise be required
to qualify but for this Section 3(d), (II) subject itself to general
taxation in any such jurisdiction, (III) file a general consent to service
of process in any such jurisdiction, (IV) provide any undertakings that
cause more than nominal expense or burden to the Company or (V) make any
change in its charter or by-laws, which in each case the Board of Directors
of the Company determines to be contrary to the best interests of the
Company and its stockholders;
(e) in the event Investors who hold a majority in interest of the
Registrable Securities being offered in the offering select underwriters
for the offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the managing underwriter of such offering;
(f) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold
pursuant to such registration of the happening of any event of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits 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, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold
pursuant to such registration (or, in the event of an underwritten
offering, the managing underwriters) of the issuance by the SEC of any stop
order or other suspension of effectiveness of the Registration Statement at
the earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of
the Registrable Securities being sold pursuant to such registration to
review the Registration Statement and all amendments and supplements
thereto a reasonable period of time prior to their filing with the SEC, and
shall not file any document in a form to which such counsel reasonably
objects;
(i) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the
period covered thereby, an
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earnings statement (in form complying with the provisions of Rule 158 under
the Securities Act) covering a twelve-month period beginning not later than
the first day of the Company's fiscal quarter next following the date of
the Registration Statement;
(j) at the request of the Investors who hold a majority in
interest of the Registrable Securities being sold pursuant to such
registration, furnish on the date that Registrable Securities are delivered
to an underwriter for sale in connection with the Registration Statement
(i) a letter, dated such date, from the Company's independent certified
public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters; and (ii) an opinion, dated
such date, from counsel representing the Company for purposes of such
Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and Investors;
(k) make available for inspection by any Investor whose
Registrable Securities are being sold pursuant to such registration, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties
of the Company (collectively, the "Records"), as shall be reasonably
necessary to enable each Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees
to supply all information which any Inspector may reasonably request for
purposes of such due diligence; provided, however, that each Inspector
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shall hold in confidence and shall not make any disclosure (except to an
Investor) of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors
are so notified, unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration Statement,
(ii) the release of such Records is ordered pursuant to a subpoena or other
order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other
agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor
agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4(e) hereof unless (i) disclosure of such information
is necessary to comply with federal or state securities laws, (ii) the
disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of such information is ordered pursuant to a subpoena or other order from a
court or governmental body of competent jurisdiction or
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(iv) such information has been made generally available to the public other
than by disclosure in violation of this or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange on
which similar securities issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under the
rules of such exchange or (ii) secure designation of all the Registrable
Securities covered by the Registration Statement as a National Association
of Securities Dealers Automated Quotations System ("NASDAQ") "national
market system security" within the meaning of Rule 11Aa2-1 of the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the quotation of the Registrable Securities on the NASDAQ National Market
System or, if, despite the Company's best efforts to satisfy the preceding
clause (i) or (ii), the Company is unsuccessful in satisfying the preceding
clause (i) or (ii), to secure listing on a national securities exchange or
NASDAQ authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the Registration Statement;
(n) cooperate with the Investors who hold Registrable Securities
being sold and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be sold
pursuant to the denominations or amounts as the case may be, and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may reasonably request; and, within five business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) instructions to the
transfer agent to issue new stock certificates without a legend and an
opinion of such counsel that the shares have been registered; and
(o) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement;
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4. Obligations of the Investors. In connection with the registration
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of the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended
method of disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of the Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least fifteen (15)
days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the
Company requires from each such Investor (the "Requested Information") if
such Investor elects to have any of such Investor's Registrable Securities
included in the Registration Statement. If within five (5) business days
prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of
the Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification
and contribution obligations, with the managing underwriter of such
offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities,
unless such Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities from the
Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3(f) or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g)
and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on
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the basis provided in any underwriting arrangements approved by the
Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the
terms of such underwriting arrangements and (iii) agrees to pay its pro
rata share of all underwriting discounts and commissions and other fees and
expenses of investment bankers and any manager or managers of such
underwriting and legal expenses of the underwriter applicable with respect
to its Registrable Securities, in each case to the extent not payable by
the Company pursuant to the terms of this Agreement.
5. Expenses of Registration. All expenses (other than underwriting
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discounts and commissions and other fees and expenses of investment bankers in
connection with an underwritten demand registration under Section 2(b) and other
than brokerage commissions) incurred in connection with registrations, filings
or qualifications pursuant to Section 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Investors shall bear the fees and out-of-
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pocket expenses of the one legal counsel selected by the Investors pursuant to
Section 3(h) hereof.
6. Indemnification. In the event any Registrable Securities are
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included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such
Investor, each person, if any, who controls any Investor within the meaning
of the Securities Act or the Exchange Act, any underwriter (as defined in
the Securities Act) for the Investors, the directors, if any, of such
underwriter and the officers, if any, of such underwriter, and each person,
if any, who controls any such underwriter within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person"), against
any losses, claims, damages, expenses or liabilities (joint or several)
(collectively "Claims") to which any of them become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations in the Registration Statement, or any post-
effective amendment thereof, or any prospectus included therein: (i) any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any post-effective amendment thereof or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act or
any state securities law or any rule or regulation (the matters in the
foregoing clauses (i) through
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(iv) being, collectively, "Violations"). Subject to the restrictions set
forth in Section 6 (d) with respect to the number of legal counsel, the
Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them
in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) (I) shall not
apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to
the Company by any Indemnified Person or underwriter for such Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to
Section 3(c) hereof; (II) with respect to any preliminary prospectus shall
not inure to the benefit of any such person from whom the person asserting
any such Claim purchased the Registrable Securities that are the subject
thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; and (III) shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Persons and
shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section
6(a), the Company, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person
who controls such stockholder or underwriter within the meaning of the
Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which any
of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will
promptly reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided,
--------
however, that the indemnity agreement contained in this Section 6(b) shall
-------
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
-------- ------- -------
Investor shall be liable under this Section 6(b) for only that amount of a
Claim as does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities
-11-
pursuant to such Registration Statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf
of such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything
to the contrary contained herein, the indemnification agreement contained
in this Section 6(b) with respect to any preliminary prospectus shall not
inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing by such persons expressly for inclusion in the
Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against
any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and this indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties; provided, however, that
-------- -------
an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel, with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and other party represented by such
counsel in such proceeding. The Company shall pay for only one separate
legal counsel for the Investors; such legal counsel shall be selected by
the Investors holding a majority in interest of the Registrable Securities.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve
such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due
and payable.
7. Contribution. To the extent any indemnification provided for
------------
herein is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that (a) no contribution shall be made under circumstances
-------- -------
where the maker would not have been liable for indemnification under the fault
standards set forth in Section 6, (b) no seller of Registrable Securities guilty
of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available to
--------------------------
the Investors the benefits of Rule 144 or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration, until such time as the Investors
have sold all the Registrable Securities pursuant to a Registration Statement or
Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule
144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may
be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
-------------------------------------
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to transferees or assignees of all or
any portion of such securities only if: (a) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned,
(b) immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (c) at or before the time the
Company received the written notice contemplated by clause (a) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein.
10. Amendment of Registration Rights. Any provision of this
--------------------------------
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold Seventy-Five Percent (75%) of the outstanding Debentures. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
-13-
11. Third Party Beneficiary. The parties acknowledge and agree that
-----------------------
Shoreline Pacific, the Institutional Division of Financial West Group
("Shoreline Pacific"), shall be deemed a third party beneficiary of the
Company's agreements and representations set forth in this Agreement, entitled
to enforce the terms thereof, and to indemnification for any damages resulting
to Shoreline Pacific from any actual or threatened breach thereof by the
Company, both in Shoreline Pacific's personal capacity and, should Shoreline
Pacific so elect, on behalf of the Investor.
12. Miscellaneous.
-------------
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or when sent by registered mail, return receipt requested,
addressed (i) if to the Company, at The L.L. Xxxxxxxxxxxxx Co., Inc., 00000
Xxxxxxxx, Xxxxxx Xxxxx Xxxxxxxxx, XX 00000, Attention: Xx. Xxxxx X.
Xxxxxxxxxxxxx, President (ii) if to the Initial Investor, at the address
set forth under its name in the Subscription Agreement and (iii) if to any
other Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 12(b), and shall
be effective, when personally delivered, upon receipt, and when so sent by
certified mail, four business days after deposit with the United States
Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed
in accordance with the laws of the State of New York applicable to the
agreements made and to be performed entirely within such state, without
giving effect to rules governing the conflict of laws. In the event that
any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This
-14-
Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may
require.
(h) The headings in the Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may
be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
The L.L. Xxxxxxxxxxxxx Co., Inc.
By:
-----------------------------------
Xxxxx X. Xxxxxxxxxxxxx
President
[BUYER]
By:
-----------------------------------
[BUYER SIGN]
[BUYER SIGN TITLE]
-15-
