EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement") is made November 18, 1996, by and between Industrial Holdings, Inc.,
a Texas corporation (the "Company"), and St. ▇▇▇▇▇ Capital Partners, L.P., a
Delaware limited partnership (the "Purchaser").
WHEREAS, on the date hereof, Purchaser loaned the Company money and in
consideration thereof acquired from the Company a 12% Promissory Note in the
original principal amount of $1,900,000 and a 12% Promissory Note in the
original principal amount of $1,600,000;
WHEREAS, on the date hereof, the Purchaser acquired from the Company
Common Stock Purchase Warrants (collectively, the "Warrants") which may be
exercised to initially acquire 380,000 shares and 160,000 shares of the
Company's Common Stock, par value $0.01 per share ("Common Stock"), subject to
adjustment (the "Shares");
WHEREAS, the Company wishes to grant the Purchaser certain registration
rights in respect of the Shares, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE XI.
Definitions
As used in this Agreement, the following terms shall have the meanings
set forth below:
A. "COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
B. "PURCHASER" shall mean St. ▇▇▇▇▇ Capital Partners, L.P., a Delaware
limited partnership.
C. "REGISTRABLE SECURITIES" shall mean (i) the Shares; and (ii) any
Common Stock issued or issuable at any time or from time to time in respect of
the Shares upon a stock split, stock dividend, recapitalization or other similar
event involving the Company until such Common Stock is sold pursuant to a
Registration Statement or an exemption from registration under the Securities
Act.
D. The terms "REGISTER", "REGISTERED", and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
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E. "REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Registration Rights Agreement, including, without limitation, all registration,
qualification and filing fees, exchange listing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
F. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
G. "SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Purchaser and, except as set forth above, all fees and disbursements of
counsel for the Purchaser.
H. "UNDERWRITTEN PUBLIC OFFERING" shall mean a public offering in which
the Common Stock is offered and sold on a firm commitment basis through one or
more underwriters, all pursuant to an underwriting agreement between the Company
and such underwriters.
ARTICLE XII.
Registration Rights
A. DEMAND REGISTRATION.
1. Before May 31, 1997, the Company shall file with the
Securities and Exchange Commission a shelf registration statement covering the
resale of the Shares on Form ▇-▇, ▇-▇, or S-3 (the "Registration Statement")
which shall remain effective for the lesser of: (i) 3 years, or (ii) until such
time as the Holder does not beneficially own any Registrable Securities. The
Company shall use its reasonable best efforts to cause such Registration
Statement to become effective as soon as practicable and to cause the Shares to
be qualified in such state jurisdictions as the Purchaser may request.
2. Except as set forth herein, the Company shall take all
reasonable steps necessary to keep the Registration Statement current and
effective until all Shares have been distributed by the Purchaser including any
necessary refiling of additional registration statements.
3. The Company shall be entitled to require that the parties
refrain from effecting any public sales or distributions of the Registrable
Securities pursuant to a Registration Statement that has been declared effective
by the Commission or otherwise, if the board of directors of the Company
reasonably determines that such public sales or distributions would interfere in
any material respect with any transaction involving the Company that the board
of directors reasonably determines to be material to the Company. The board of
directors shall, as promptly as practicable, give the Purchaser written notice
of any such development. In the event of a request by the board of directors of
the Company that the Purchaser refrain from effecting any public sales or
distributions of the Registrable Securities, the Company shall be required to
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lift such restrictions regarding effecting public sales or distributions of the
Registrable Securities as soon as reasonably practicable after the board of
directors shall reasonably determine public sales or distributions by the
Purchaser of the Registrable Securities shall not interfere with such
transaction, PROVIDED, that in no event shall any requirement that the
Purchasers refrain from effecting public sales or distributions in the
Registrable Securities extend for more than 90 days.
B. PIGGYBACK REGISTRATION.
1. Subject to the terms hereof, if: (i) at any time or from time
to time the Company or any shareholder of the Company shall determine to
register any of its securities (except for registration statements relating to
employee benefit plans or exchange offers), either for its own account or the
account of a security holder; and (ii) the Purchaser is the beneficial owner of
any Registrable Securities; the Company will promptly give to the Purchaser
written notice thereof no less the 10 days prior to the filing of any
registration statement; and include in such registration (and any related
qualification under blue sky laws or other compliance), and in the underwriting
involved therein, if any, such Registrable Securities as Purchaser may request
in a writing delivered to the Company within 20 days after Purchaser's receipt
of Company's written notice.
2. The Purchaser may participate in any number of registrations
until all of the Shares held by such Purchaser have been distributed pursuant to
a registration.
3. If any registration statement is an Underwritten Public
Offering, the right of the Purchaser to registration pursuant to this Section
shall be conditioned upon such Purchaser's participation in such reasonable
underwriting arrangements as the Company shall make regarding the offering, and
the inclusion of Registrable Securities in the underwriting shall be limited to
the extent provided herein. The Purchaser and all other shareholders proposing
to distribute their securities through such underwriting shall (together with
the Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section, if the managing underwriter
concludes in its reasonable judgment that the number of shares to be registered
for selling shareholders (including the Purchaser) would materially adversely
effect such offering, the number of Shares to be registered, together with the
number of shares of Common Stock or other securities held by other shareholders
proposed to be registered in such offering, shall be reduced on a pro rata basis
based on the number of Shares proposed to be sold by the Purchaser as compared
to the number of shares proposed to be sold by all stockholders. If the
Purchaser disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter, delivered not less than ten days before the effective date. The
Registrable Securities excluded by the managing underwriter or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 120 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
4. The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness of
such registration whether or not the Purchaser has elected to include securities
in such registration.
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C. EXPENSES OF REGISTRATION. All Registration Expenses shall be borne by
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the Purchaser shall be borne by the
Purchaser.
D. BEST REGISTRATION RIGHTS. If, on or after the date of this
Registration Rights Agreement, the Company grants to any person with respect to
any security issued by the Company or any of its Subsidiaries registration
rights that provide for terms that are in any manner more favorable to the
holder of such registration rights than the terms granted to the Purchaser (or
if the Company amends or waives any provision of any Agreement providing
registration rights of others or takes any other action whatsoever to provide
for terms that are more favorable to other holders than the terms provided to
the Purchaser) then this Registration Rights Agreement shall immediately be
deemed amended to provide the Purchaser with any (or all) of such more favorable
terms as the Purchaser shall elect to include herein.
E. REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep the Purchaser advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense, the Company will:
1. Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable efforts to
cause such registration statement to become and remain effective until the
distribution described in such registration statement has been completed;
2. Furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such underwriter
may reasonably request in order to facilitate the public sale of the shares by
such underwriter, and promptly furnish to each underwriter and the Purchaser
notice of any stop-order or similar notice issued by the Commission or any state
agency charged with the regulation of securities, and notice of any Nasdaq or
securities exchange listing.
3. Cause the Shares to be listed on the Nasdaq Stock Market's
National Market and each Securities Exchange on which the Common Stock is
approved for listing.
F. INDEMNIFICATION.
1. To the extent permitted by law, the Company will indemnify the
Purchaser, each of its officers and directors and partners, and each person
controlling the Purchaser within the meaning of Section 15 of the Securities
Act, with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to the extent such
expenses, claims, losses, damages or liabilities arise out of or are based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, offering circular or other similar
document, or any amendment or supplement thereto,
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incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein 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, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse
Purchaser, each of its officers and directors and partners, and each person
controlling Purchaser, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss, damage,
liability or expense if settlement is effected without the consent of the
Company (which consent shall not unreasonably be withheld); provided, further,
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by Purchaser, such controlling person or such underwriter specifically
for use therein. Notwithstanding the foregoing, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus filed
with the Commission pursuant to the applicable rules of the Commission or in any
supplement or addendum thereto, the indemnity agreement herein shall not inure
to the benefit of any underwriter if a copy of the final prospectus filed
pursuant to such rules, together with all supplements and addenda thereto, was
not furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the Securities
Act.
2. To the extent permitted by law, the Purchaser will, if
securities held by the Purchaser are included in the securities as to which such
registration, qualification or compliance is being effected pursuant to terms
hereof, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other person selling the
Company's securities covered by such registration statement, each of such
person's officers and directors and each person controlling such persons within
the meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by Purchaser of any rule or regulation
promulgated under the Securities Act applicable to Purchaser and relating to
action or inaction required of Purchaser in connection with any such
registration, qualification or compliance, and will reimburse the Company, such
other persons, such directors, officers, persons, underwriters or control
persons for any legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other
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document in reliance upon and in conformity with written information furnished
to the Company by such Purchaser specifically for use therein; provided,
however, that the indemnity contained herein shall not apply to amounts paid in
settlement of any claim, loss, damage, liability or expense if settlement is
effected without the consent of such Purchaser (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, the liability of such
Purchaser under this subsection (b) shall be limited in an amount equal to the
net proceeds from the sale of the shares sold by Purchaser, unless such
liability arises out of or is based on willful conduct by Purchaser. In
addition, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the final prospectus filed pursuant to applicable rules
of the Commission or in any supplement or addendum thereto, the indemnity
agreement herein shall not inure to the benefit of the Company or any
underwriter if a copy of the final prospectus filed pursuant to such rules,
together with all supplements and addenda thereto, was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Securities Act.
3. Notwithstanding the foregoing paragraphs (a) and (b) of this
Section, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or as to which the
Indemnifying Party is asserting separate or different defenses, which defenses
are inconsistent with the defenses of the Indemnified Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. No Indemnified Party shall
consent to entry of any judgment or enter into any settlement without the
consent of each Indemnifying Party.
4. If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and all shareholders offering
securities in the offering (the "Selling Security Holders") on the other from
the offering of the Company's securities, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the
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relative fault of the Company on the one hand and the Selling Security Holders
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Selling Security Holders on the other shall be the net proceeds
from the offering (before deducting expenses) received by the Company on the one
hand and the Selling Security Holders on the other. The relative fault of the
Company on the one hand and the Selling Security Holders on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Selling
Security Holders and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Selling Security Holders agree that it would not be just and
equitable if contribution pursuant to this Section were based solely upon the
number of entities from whom contribution was requested or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this Section. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages and liabilities referred to
above in this Section shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim, subject to the provisions hereof.
Notwithstanding the provisions of this Section, no Selling Shareholder shall be
required to contribute any amount or make any other payments under this
Agreement which in the aggregate exceed the proceeds received by such Selling
Shareholder. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
G. CERTAIN INFORMATION.
1. The Purchaser agrees, with respect to any Registrable
Securities included in any registration, to furnish to the Company such
information regarding Purchaser, the Regis- trable Securities and the
distribution proposed by the Purchaser as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
2. The failure of the Purchaser to furnish the information
requested pursuant to this Section shall not affect the obligation of the
Company to the other Selling Security Holders who furnish such information
unless, in the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs or may impair the legality of the Registration Statement or
the underlying offering.
H. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of Restricted Securities
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(used herein as defined in Rule 144 under the Securities Act) to the public
without registration, the Company agrees to use its best lawful efforts to:
1. Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times during
which the Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
2. File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at all times during which the Company is subject to such reporting
requirements); and
3. So long as the Purchaser owns any Restricted Securities (as
defined in Rule 144 promulgated under the Securities Act), to furnish to
Purchaser forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 and with regard to
the Securities Act and the Exchange Act (at all times during which the Company
is subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as the Purchaser may reasonably request in availing itself of any
rule or regulation of the Commission allowing the Purchaser to sell any such
securities without registration.
I. TRANSFERABILITY. The rights conferred by this Agreement shall be
freely transferable to a recipient of Registrable Securities.
J. GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Texas.
K. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and the
Purchaser.
L. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Purchaser: St. ▇▇▇▇▇ Capital Partners, L.P., c/o St. ▇▇▇▇▇ Capital Corp., ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other address as the
Purchaser shall have furnished to the Company in writing, or (b) if to the
Company: to Industrial Holdings, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at
such other address as the Company shall have furnished to the Purchaser. Each
such notice or other communication shall for all purposes of this Agreement be
treated as effective upon receipt.
M. DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter
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occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
N. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
O. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
P. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
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THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this agreement effective
upon the date first set forth above.
INDUSTRIAL HOLDINGS, INC.
S/▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇, President
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THE PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Purchaser has signed this Agreement as of the
date first written above.
ST. ▇▇▇▇▇ CAPITAL PARTNERS, L.P.
By: St. ▇▇▇▇▇ Capital Corp., its
General Partner
S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
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