EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") by and between EISI,
a California corporation (the "Company"), and the persons listed on the
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signature page hereof (the "Investors").
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RECITALS
A. The Company and the Investors desire to enter into this Agreement
for the purpose of granting to the Investors certain rights with respect to
registering under the Securities Act of 1933, as amended, shares of Common Stock
of the Company.
B. The Common Stock is being acquired by the Investors pursuant
to the provisions of a Stock Purchase Agreement, dated as of June ___, 1998,
among the Company and the Investors (the "Stock Purchase Agreement").
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C. The Investors are also parties to an Investor Agreement of even
date (the "Investor Agreement").
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AGREEMENT
In consideration of the Recitals and mutual promises contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. Definitions. As used in this Agreement, the following terms
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shall have the following meanings:
"Advice" shall have the meaning set forth in Section 4 hereof.
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"Affiliate" means, with respect to any specified person, any other
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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 specified 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 "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day that is not a Saturday, a Sunday or a
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legal holiday on which banking institutions in the State of California are not
required to be open.
"Capital Stock" means, with respect to any person, any and all shares,
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interests, participations or other equivalents (however designated) of corporate
stock issued by such person, including each class of common stock and preferred
stock of such person.
"Common Stock" means the Common Stock of the Company issued to any
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Holder named on the signature pages hereof or any other shares of capital stock
or other securities of the Company into which such shares of Common Stock shall
be reclassified or changed, including, by reason of a merger, consolidation,
reorganization or recapitalization. If the Common Stock has been so
reclassified or changed, or if the Company pays a dividend or makes a
distribution on the Common Stock in shares of capital stock or subdivides (or
combines) its outstanding shares of Common Stock into a greater (or smaller)
number of shares of Common Stock, a share of Common Stock shall be deemed to be
such number of shares of stock and amount of other securities to which a holder
of a share of Common Stock outstanding immediately prior to such change,
reclassification, exchange, dividend, distribution, subdivision or combination
would be entitled.
"Company" shall have the meaning set forth in the heading hereof.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended,
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and the rules and regulations of the SEC promulgated thereunder.
"Hold Back Period" shall have the meaning set forth in Section 4
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hereof.
"Holder" means a person who owns Registrable Shares and is an Investor
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or transferee.
"Interruption Period" shall have the meaning set forth in Section 4
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hereof.
"Investor Agreement" shall have the meaning set forth in Recital C.
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"Permitted Transferees" shall have the meaning contained in the
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Investor Agreement.
"Person" means any individual, corporation, partnership, joint
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venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning set forth in Section 2
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hereof.
"Prospectus" means the prospectus included in any Registration
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Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Shares covered by such Registration Statement and all other
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amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"Registrable Shares" means shares of Common Stock unless (i) they have
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been effectively registered under Section 5 of the Securities Act and disposed
of pursuant to an effective Registration Statement, or (ii) all of such Common
Stock of a Holder which can be freely sold and transferred without restriction
under Rule 144 or Rule 145 under the Securities Act or any successor rule such
that, after any such transfer referred to in this clause (ii), such securities
may be freely transferred without restriction under the Securities Act.
Notwithstanding the foregoing, any shares of Common Stock held by an Investor
shall be "Registrable Shares" until such Investor ceases to own at least 0.5% of
the then outstanding Common Stock of the Company. Further, no Holder who is not
an Investor shall be deemed to own Registrable Shares after three years from the
date hereof.
"Registration" means registration under the Securities Act of an
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offering of Registrable Shares pursuant to a Piggyback Registration.
"Registration Period" means, as to any Holder, the period beginning on
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the date hereof and ending on the date when such Holder no longer owns any
Registrable Shares.
"Registration Statement" means any registration statement under the
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Securities Act of the Company that covers any of the Registrable Shares pursuant
to the provisions of this Agreement, including the related Prospectus, all
amendments and supplements to such registration statement, including pre- and
post-effective amendments, all exhibits thereto and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended, and the
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rules and regulations of the SEC promulgated thereunder.
"Underwritten Registration or Underwritten Offering" means a
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registration under the Securities Act in which securities of the Company are
sold to an underwriter for reoffering to the public.
2. Piggyback Registration.
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(a) Right to Piggyback. If at any time during the Registration
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Period the Company proposes to file a registration statement under the
Securities Act with respect to a public offering of securities of the same type
as the Registrable Shares pursuant to a firm commitment underwritten offering
solely for cash for its own account (other than a registration statement (i) on
Form S-8 or any successor forms thereto, or (ii) filed solely in connection with
a dividend reinvestment plan or employee benefit plan of the Company or its
Affiliates) or for the
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account of any holder of securities of the same type as the Registrable Shares,
then the Company shall give written notice of such proposed filing to the
Holders at least 15 days before the anticipated filing date. Such notice shall
offer the Holders the opportunity to register such amount of Registrable Shares
as they may request (a "Piggyback Registration"). Subject to Section 2(b)
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hereof, the Company shall include in each such Piggyback Registration all
Registrable Shares with respect to which the Company has received written
requests for inclusion therein within 10 days after receipt of notice by the
Holders. Each Holder shall be permitted to withdraw all or any portion of the
Registrable Shares of such Holder from a Piggyback Registration at any time
prior to the effective date of such Piggyback Registration.
(b) Priority on Piggyback Registrations. The Company shall permit the
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Holders to include all such Registrable Shares on-the-same terms and conditions
as any similar securities, if any, of the Company included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters
participating in such offering advises the Holders in writing that the total
amount of securities requested to be included in such Piggyback Registration
exceeds the amount which can be sold in (or during the time of) such offering
without delaying or jeopardizing the success of the offering (including the
price per share of the securities to be sold), then the amount of securities to
be offered for the account of the Holders with respect thereto shall be reduced
(to zero if necessary) pro rata on the basis of the number of common stock
equivalents requested to be registered by each such Holder participating in such
offering.
(c) Right to Abandon. Nothing in this Section 2 shall create any
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liability on the part of the Company to the Holders if the Company in its sole
discretion should decide not to file a registration statement proposed to be
filed pursuant to Section 2(a) hereof or to withdraw such registration statement
subsequent to its filing and prior to the later of its effectiveness or the
release of the Registrable Shares for public offering by the managing
underwriter, in the case of an underwritten public offering, regardless of any
action whatsoever that a Holder may have taken, whether as a result of the
issuance by the Company of any notice hereunder or otherwise.
3. Holdback Agreement. If (i) the Company shall file a registration
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statement with respect to the Common Stock or similar securities or securities
convertible into, or exchangeable or exercisable for, such securities and (ii)
the Company (in the case of a nonunderwritten public offering by the Company
pursuant to such registration statement) advises the Holders in writing that a
public sale or distribution of Registrable Shares would materially adversely
affect such offering or the managing underwriter or underwriters (in the case of
an underwritten public offering by the Company pursuant to such registration
statement) advises the Company in writing (in which case the Company shall
notify the Holders) that a public sale or distribution of Registrable Shares
would have material adverse impact on such offering, then each Holder shall, to
the extent not inconsistent with applicable law, refrain from effecting any
public sale or distribution of Registrable Shares during the 10 days prior to
the effective date of such registration statement and until the earliest of (A)
the abandonment of such offering, (B) 90 days from the effective date of such
registration statement and (C) if such offering is an underwritten offering, the
termination of any "hold back" period obtained by the underwriter or
underwriters
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in such offering from the Company in connection therewith (each such period, a
"Hold Back Period"); provided that the Hold Back Period shall not be more than
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180 days in the case of an "Initial Public Offering" of the Company's Common
Stock and not more than 90 days in the case of any other public offering.
4. Registration Procedures. In connection with the registration
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obligations of the Company pursuant to and in accordance with and subject to
Section 2 hereof, the Company shall use commercially reasonable efforts to
effect such registration to permit the sale of such Registrable Shares in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company shall as expeditiously as possible:
(a) At least ten (10) business days before filing a Registration
Statement or prospectus or any amendments or supplements thereto, furnish to the
Holders who are participating in such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the review of such Holders and such underwriters
(and their respective counsel);
(b) prepare and file with the SEC a Registration Statement for the
sale of the Registrable Shares on any form for which the Company then qualifies
or which counsel for the Company shall deem appropriate in accordance with such
Holders' intended method or methods of distribution thereof, subject to Section
2(b) hereof, and, subject to the Company's right to terminate or abandon a
registration pursuant to Section 3(c) hereof, use commercially reasonable
efforts to cause such Registration Statement to become effective and remain
effective as provided herein;
(c) prepare and file with the SEC such amendments (including post-
effective amendments) to such Registration Statement, and such supplements to
the related Prospectus, as may be required by the rules, regulations or
instructions applicable to the Securities Act during the applicable period in
accordance with the intended methods of disposition specified by the Holders of
the Registrable Shares covered by such Registration Statement, make generally
available earnings statements satisfying the provisions of Section 11(a) of the
Securities Act (provided that the Company shall be deemed to have complied with
this clause if it has complied with Rule 158 under the Securities Act), and
cause the related Prospectus as so supplemented to be filed pursuant to Rule 424
under the Securities Act; provided, however, that before filing a Registration
Statement or Prospectus, or any amendments or supplements thereto (other than
reports required to be filed by it under the Exchange Act), the Company shall
furnish to the Holders of Registrable Shares covered by such Registration
Statement and their counsel for review and comment, copies of all documents
required to be filed at least 3 business days prior to filing such documents
with the SEC;
(d) notify the Holders of any Registrable Shares covered by such
Registration Statement promptly and (if requested) confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to such Registration Statement or
any post-effective amendment, when the same has
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become effective, (ii) of any request by the SEC for amendments or supplements
to such Registration Statement or the related Prospectus or for additional
information regarding such Holders, (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of such Registration Statement or the
initiation of any proceedings for that purpose, (iv) 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 Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (v) of the happening of any event that requires the making of any
changes in such Registration Statement, Prospectus or documents incorporated or
deemed to be incorporated therein by reference so that they 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;
(e) use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of such Registration Statement, or the
lifting of any suspension of the qualification or exemption from qualification
of any Registrable Shares for sale in any jurisdiction in the United States;
(f) furnish to the Holder of any Registrable Shares covered by such
Registration Statement, each counsel for such Holders and each managing
underwriter, if any, without charge, one conformed copy each of such
Registration Statement, as declared effective by the SEC, and of each post-
effective amendment thereto, in each case including financial statements and
schedules and all exhibits and reports incorporated or deemed to be incorporated
therein by reference; and deliver, without charge, such number of copies of the
preliminary prospectus, any amended preliminary prospectus, each final
Prospectus and any post-effective amendment or supplement thereto, as such
Holder may reasonably request in order to facilitate the disposition of the
Registrable Shares of such Holder covered by such Registration Statement in
conformity with the requirements of the Securities Act;
(g) prior to any public offering of Registrable Shares covered by such
Registration Statement, use commercially reasonable efforts to register or
qualify such Registrable Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions as the Holders of such Registrable Shares shall
reasonably request in writing; provided, however, that the Company shall in no
event be required to qualify generally to do business as a foreign corporation
or as a dealer in any jurisdiction where it is not at the time so qualified or
to execute or file a general consent to service of process in any such
jurisdiction where it has not theretofore done so or to take any action that
would subject it to general service of process or taxation in any such
jurisdiction where it is not then subject;
(h) upon the occurrence of any event contemplated by paragraph 4(d)(v)
above or as reasonably requested by the Holders, prepare a supplement or post-
effective amendment to such Registration Statement or 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 to the
purchasers of the Registrable Shares being sold thereunder (including upon the
termination of any Delay Period), such Prospectus will not
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contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(i) use commercially reasonable efforts to cause all Registrable
Shares covered by such Registration Statement to be listed on each securities
exchange or automated interdealer quotation system, if any, on which similar
securities issued by the Company are then listed or quoted;
(j) use commercially reasonable efforts to comply with all applicable
rules and regulations of the SEC and any securities exchange or regulatory body;
(k) on or before the effective date of such Registration Statement,
provide the transfer agent of the Company for the Registrable Shares with
printed certificates for the Registrable Shares covered by such Registration
Statement which are in a form eligible for deposit with the selected trust
company;
(l) make available for inspection by any Holder of Registrable Shares
included in such Registration Statement, any underwriter participating in any
offering pursuant to such Registration Statement, and any attorney, accountant
or other agent retained by any such Holder or underwriter (collectively, the
"Inspectors"), such financial and other records and other information, pertinent
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corporate documents and properties of any of the Company and its subsidiaries
and affiliates (collectively, the "Records"), as shall be reasonably necessary
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to enable them to exercise their due diligence responsibilities; provided,
however, that the Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors in writing are confidential
shall not be disclosed to any Inspector unless such Inspector signs a
confidentiality agreement reasonably satisfactory to the Company, which
agreement shall permit the disclosure of such Records in such Registration
Statement or the related Prospectus if either (i) the disclosure of such Records
is necessary to avoid or correct a misstatement or omission in such Registration
Statement or (ii) the release of such Records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction; provided however, that
(A) any decision regarding the disclosure of information pursuant to subclause
(i) shall be made only after consultation with counsel for the applicable
Inspectors and the Company and (B) with respect to any release of Records
pursuant to subclause (ii), each Holder of Registrable Shares agrees that it
shall, promptly after learning that disclosure of such Records is sought in a
court having jurisdiction, give notice to the Company so that the Company, at
the Company's expense, may undertake appropriate action to prevent disclosure of
such Records; and
(m) if such offering is an underwritten offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in underwritten offerings) and take all such other appropriate and
reasonable actions requested by the Holders of a majority of the Registrable
Shares being sold in connection therewith (including those reasonably requested
by the managing underwriters) in order to expedite or facilitate the disposition
of such Registrable Shares, and in such connection, (i) use commercially
reasonable
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efforts to 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 and counsel to the Holders of the
Registrable Shares being sold), addressed to each selling Holder of Registrable
Shares covered by such Registration Statement and each of the underwriters as to
the matters customarily covered in opinions requested in underwritten offerings
and such other matters may be reasonably requested by such counsel and
underwriters, (ii) use commercially reasonable efforts to obtain "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 are, or are required
to be, included in the Registration Statement), addressed to each selling holder
of Registrable Shares covered by the Registration Statement (unless such
accountants shall be prohibited from so addressing such letters by applicable
standards of the accounting profession) and each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings
(iii) if requested and if an underwriting agreement is entered into, provide
indemnification provisions and procedures substantially to the effect set forth
in Section 7 hereof with respect to all parties to be Indemnified pursuant to
said Section. The above shall be done at each closing under such underwriting or
similar agreement, or as and to the extent required thereunder. In addition, the
Company agrees (i) not to effect any public sale or distribution of its Common
Stock or any securities convertible into or exchangeable or exercisable for such
securities, during the 10 days prior to the effective date of any underwritten
Piggyback Registration and until the earliest of (A) the abandonment of such
offering, or (B) the termination of any "hold back" period reasonably requested
by the underwriters (with exceptions for issuances pursuant to outstanding
options, warrants, and convertible or exchangeable securities, pursuant to
employee and dividend reinvestment plans, and such other exceptions as are
customary or agreed with the managing underwriter).
The Company may require each Holder of Registrable Shares covered by a
Registration Statement to furnish such information regarding such Holder and
such Holder's intended method of disposition of such Registrable Shares as it
may from time to time reasonably request in writing. If any such information is
not furnished within a reasonable period of time after receipt of such request,
the Company may exclude such Holder's Registrable Shares from such Registration
Statement.
Each Holder of Registrable Shares covered by a Registration Statement
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 4(d)(ii), 4(d)(iii), 4(d)(iv) or 4(d)(v)
hereof, such Holder shall forthwith discontinue disposition of any Registrable
Shares covered by such Registration Statement or the related Prospectus in any
jurisiction in which such an event has occurred until receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 4(h) hereof, or
until such Holder is advised in writing (the "Advice") by the Company that the
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use of the applicable Prospectus may be resumed, and has received copies of any
amended or supplemented Prospectus or any additional or supplemental filings
which are incorporated, or deemed to be incorporated, by reference in such
Prospectus (such period during which disposition is discontinued being an
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"Interruption Period") and, if requested by the Company, the Holder shall
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deliver to the Company (at the expense of the Company) all copies then in its
possession, other than permanent file copies then in such holder's possession,
of the Prospectus covering such Registrable Shares at the time of receipt of
such request.
Each Holder of Registrable Shares covered by a Registration Statement
further agrees not to utilize any material other than the applicable current
preliminary prospectus or Prospectus in connection with the offering such
Registrable Shares.
5. Registration Expenses. Whether or not any Registration Statement is
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filed or becomes effective, the Company shall pay all costs, fees and expenses
incident to the Company's performance of or compliance with this Agreement,
including (i) all registration and filing fees, including NASD filing fees, (ii)
all fees and expenses of compliance with securities or Blue Sky laws, including
reasonable fees and disbursements of counsel in connection therewith, (iii)
printing expenses (including expenses of printing certificates for Registrable
Shares and of printing preliminary and final prospectuses if the printing of
prospectuses is requested by the Holders or the managing underwriter, if any),
(iv) messenger, telephone and delivery expenses, (v) fees and disbursements of
counsel for the Company, (vi) fees and disbursements of all independent
certified public accountants of the Company (including expense of any "cold
comfort" letters required in connection with this Agreement) and all other
persons retained by the Company in connection with this Agreement) and all other
persons retained by the Company in connection with such Registration Statement,
and (vii) all other costs, fees and expenses incident to the Company's
performance or compliance with this Agreement. Notwithstanding the foregoing,
any discounts, commissions or brokers' fees or fees of similar securities
industry professionals and any transfer taxes relating to the disposition of the
Registrable Shares by a Holder, will be payable by such Holder and the Company
will have no obligation to pay any such amounts.
6. Underwriting Requirements.
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(a) The Company shall have the right to determine whether any public
offering of securities and any accompanying Piggyback Registration shall be an
underwritten offering.
(b) In the case of any underwritten offering pursuant to a Piggyback
Registration, the Company shall select the institution or institutions that
shall manage or lead such offering.
7. Indemnification.
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(a) Indemnification by the Company. The Company shall, without
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limitation as to time, indemnify and hold harmless, to the full extent permitted
by law, each Holder of Registrable Shares whose Registrable Shares are covered
by a Registration Statement or Prospectus, the officers, directors and agents
and employees of each of them, each Person who
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controls each such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling person, to the fullest extent lawful, from
and against any and all losses, claims, damages, liabilities, judgment, costs
(including, without limitation, costs of preparation and reasonable attorneys'
fees) and expenses (collectively, "Losses"), as incurred, arising out of or
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based upon any untrue or alleged untrue statement of a material fact contained
in such Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are based upon information furnished in writing to the Company by or on
behalf of such Holder expressly for use therein; provided, however, that the
Company shall not be liable to any such Holder to the extent that any such
Losses arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any preliminary prospectus if
(i) having previously been furnished by or on behalf of the Company with copies
of the Prospectus, such Holder failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale of
Registrable Shares by such Holder to the person asserting the claim from which
such Losses arise and (ii) the Prospectus would have corrected in all material
respects such untrue statement or alleged untrue statement or such omission or
alleged omission; and provided further, however, that the Company shall not be
liable in any such case to the extent that any such Losses arise out of or are
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the Prospectus, if (x) such untrue statement or alleged
untrue statement, omission or alleged omission is corrected in all material
respects in an amendment or supplement to the Prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or currently
with the sale of Registrable Shares. In connection with any Underwritten
Offering, the Company will also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who controls such
Persons (within the meaning of Section 15 of the Securities Act) to the same
extent as provided above with respect to Indemnification of Holders of
Registrable Shares, or on such other terms as are reasonable and customary and
requested by the managing underwriter.
(b) Indemnification by Holder of Registrable Shares. In connection
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with any Registration Statement in which a Holder is participating, such Holder
shall furnish to the Company in writing such information as the Company
reasonably requests for use in connection with such Registration Statement or
the related Prospectus and agrees to indemnify, to the full extent permitted by
law, the Company, its directors, officers, agents or employees, each Person who
controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act) and the directors, officers, agents or employees
of such controlling Persons, from and against all Losses arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in such
Registration Statement or the related Prospectus or any amendment or supplement
thereto, or any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated
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therein or necessary to make the statements therein not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue statement or
omission or alleged omission is based upon any information so furnished in
writing by or on behalf of such Holder to the Company expressly for use in such
Registration Statement or Prospectus.
(c) If any Person shall be entitled to indemnity hereunder (an
"Indemnified Party"), the Indemnified Party shall give prompt notice to the
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party from which such indemnity is sought (the "Indemnifying Party") of any
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claim or of the commencement of any proceeding with respect to which the
Indemnified Party seeks indemnification or contribution pursuant hereto;
provided, however, that the delay or failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party from any obligation or liability except
to the extent that the Indemnifying Party has been materially prejudiced by such
delay or failure. The Indemnifying Party shall have the right, exercisable by
giving written notice to an Indemnified Party promptly after the receipt of
written notice from such Indemnified Party of such claim or proceeding, to
assume, at the Indemnifying Party's expense, the defense of any such claim or
proceeding, with counsel reasonably satisfactory to such Indemnified Party;
provided, however, that (i) an Indemnified Party shall have the right to employ
separate counsel in any such claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless: (1) the Indemnifying Party agrees to
pay such fees and expenses; (2) the Indemnifying Party fails promptly to assume
the defense of such claim or proceeding or fails to employ counsel reasonably
satisfactory to such Indemnified Party; or (3) the named parties to any
proceeding (including impleaded parties) include both such Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it that are
inconsistent with those available to the Indemnifying Party or that a conflict
of interest is likely to exist among such Indemnified Party and any other
Indemnified Parties (in which case the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of such Indemnified Party);
and (ii) subject to clause (3) above, the Indemnifying Party shall not, in
connection with any one such claim or proceeding or separate but substantially
similar or related claims or proceedings in the same jurisdiction, arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one firm of attorneys (together with appropriate local
counsel) at any time for all of the Indemnified Parties, or for fees and
expenses that are not reasonable. Whether or not such defense is assumed by the
Indemnifying Party, such Indemnified Party shall not be subject to any liability
for any settlement made without its consent. The Indemnifying Party shall not
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release, in form and substance reasonably
satisfactory to the Indemnified Party, from all liability in respect of such
claim or litigation for which such Indemnified Party would be entitled to
indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section
------------
7 is unavailable to an Indemnified Party in respect of any Losses (other than in
accordance with its terms), then each applicable Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnifying Party as a result of such
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Losses, in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party, on the one hand, and such Indemnifying Party, on the
other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party, on the one hand, and Indemnified
Party, on the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include any legal or other fees or expenses incurred by such party
in connection with any investigation or proceeding. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
7(d) were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provision of this Section
7(d), an Indemnifying Party that is a Holder shall not be required to contribute
any amount which is in excess of the amount by which the total proceeds received
by such Holder from the sale of the Registrable Shares sold by such Holder (net
of all underwriting discounts and commissions) exceeds the amount of any damages
that such Indemnifying Party 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 (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.
8. Rule 144. If the Company shall have filed a registration
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statement pursuant to the requirements of Section 12 of the Securities Exchange
Act or a registration statement pursuant to the requirements of the Securities
Act, the Company covenants that it will timely file the reports required to be
filed by it under the Securities Act or the Exchange Act (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)(1) of Rule 144 adopted by the SEC under the Securities
Act) and the rules and regulations adopted by the SEC thereunder (or if the
Company is not required to file such reports, the Company will, upon the request
of any Holder of Registrable Shares, make publicly available other information),
and will take such further action as any Holder of Registrable Shares may
reasonably request, all to the extent required from time to time to enable such
Holder of Registrable Shares to sell Registrable Shares within the exemption
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the SEC. Upon the request of any Holder of Registrable Shares, the Company will
deliver to such Holder, a written statement as to whether it has complied with
such requirements.
9. Miscellaneous.
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(a) Termination. This Agreement and the obligations of the
-----------
Company and the Holders hereunder (other than Section 7 hereof) shall terminate
on the first date on which no Registrable Shares remain outstanding.
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(b) Notices. All notices, requests, demands and other communications
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which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method and such transmission is confirmed; the day after it is sent, if sent for
next day delivery to a domestic address by recognized overnight delivery service
(e.g., Federal Express); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent to the
address nest to partys name on the signature page hereto.
(c) Interpretation. When a reference is made in this Agreement to
--------------
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the word "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". This Agreement shall not be construed for or against either party
by reason of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties. All terms defined in this
Agreement in the singular shall have the same comparable meanings when used in
the plural and vice versa, unless otherwise specified.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement
----------------------------------------------
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
(e) Governing Law. This Agreement shall be construed, interpreted and
-------------
the rights of the parties determined in accordance with the laws of the State of
California (without reference to the choice of law provisions
(f) Severability. Each party agrees that, should any court or other
------------
competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith or not to take an action consistent herewith or required hereby, the
validity, legality and enforceability of the remaining provisions and
obligations contained or set forth herein shall not in any way be affected or
impaired thereby. Upon any such holding that any provision of this Agreement is
null, void or unenforceable, the parties will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are consummated to the extent possible. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall incur no liability or obligation unless such party did not in
good faith seek to resist or object to the imposition or entering of such order
or judgment.
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(g) Injunctive Relief. The parties acknowledge that it will be
-----------------
impossible to measure in money the damages that would be suffered if the parties
fail to comply with any of the obligations herein imposed on them and that in
the event of any such failure, an aggrieved person or entity will be irreparably
damaged and will not have an adequate remedy at law. Any such person or entity
shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the parties
shall raise the defense that there is an adequate remedy at law.
(h) Attorneys' Fees. If any party to this Agreement brings an action
---------------
to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
(i) Cumulative Remedies. All rights and remedies of either party
-------------------
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
(j) Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when executed and delivered by each of the parties.
(k) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Holders of at least a
majority in number of the Registrable Shares then outstanding.
(l) Publicity. No public release or announcement concerning the
---------
transactions contemplated hereby shall be issued by any party without the prior
consent of the other parties, except to the extent that such party is advised by
counsel that such release or announcement is necessary or advisable under
applicable law or the rules or regulations of any securities exchange, in which
case the party required to make the release or announcement shall to the extent
practicable provide the other party with an opportunity to review and comment on
such release or announcement in advance of its issuance.
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
EISI, INC.
By: /s/ XXXXXX X. XXXXXX
----------------------
Xxxxxx X. Xxxxxx
Chairman of the Board
INVESTORS
/s/ E*CAPITAL CORPORATION
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/s/ XXXXXXXX FAMILY TRUST
------------------------------
/s/ DEN-MAT CORP.
------------------------------
/s/ XXXXXX XXXXXXX
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________________________________________________________________________________
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