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                                                                    EXHIBIT 10.2

                         REGISTRATION RIGHTS AGREEMENT

          THIS REGISTRATION RIGHTS AGREEMENT, dated as of [DATE] (this
"Agreement"), is made by and among The L.L. Knickerbocker 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 :
                             ---------------------

          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.
              ----------- 

               (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 
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          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.
               ------------ 

               (a) Piggy-Back Registrations.  If at any time the Company shall
                   ------------------------                                   
     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,
                                                                     -------- 
     however, that the Company shall not exclude any Registrable Securities
     --------                                                              
     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 

                                      -2-
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     officers and directors of the Company; and provided, further, however,
                                                --------- -------- -------
     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
                                         --------  -------
     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
                   -------------------                                          
     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
                   -----------------------                                
     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 

                                      -3-
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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,
                                                            -----------------
     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
                      -----------------
     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
              --------------------------                                       
of the Registrable Securities, the Company shall:

                                      -4-
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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,
                                                                -------- 
     however, that, subject to the conditions set forth in Section 4(a) below,
     -------                                                                  
     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
                -------------------------                                   
     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,

                                      -5-
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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
                         --------  -------
     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 

                                      -6-
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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
                                     --------  -------                     
     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 

                                      -7-
<PAGE>
 
     (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;

                                      -8-
<PAGE>
 
          4.  Obligations of the Investors.  In connection with the registration
              ----------------------------                                      
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 

                                      -9-
<PAGE>
 
     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
              ------------------------                                        
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-
         --------- -------                                                   
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
              ---------------                                              
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 

                                      -10-
<PAGE>
 
     (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-
<PAGE>
 
     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 

                                      -12-
<PAGE>
 
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-
<PAGE>
 
          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. Knickerbocker Co., Inc., 30055
     Comercio, Rancho Santa Margarita, CA 92688, Attention:  Mr. Louis L.
     Knickerbocker, 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-
<PAGE>
 
     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. Knickerbocker Co., Inc.

                              By:
                                 -----------------------------------
                                 Louis L. Knickerbocker
                                 President

                              [BUYER]

                              By:   
                                 -----------------------------------
                                 [BUYER SIGN]
                                 [BUYER SIGN TITLE]

                                      -15-