EXHIBIT 10.3 - REIMBURSEMENT AGREEMENT WITH EXHIBITS
REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT (this "Reimbursement Agreement") is dated as of
June 16, 2000, by and between Industrial Holdings, Inc., a Texas corporation
(the "Company"), and SJMB, L.P., a Delaware limited partnership ("SJMB").
W I T N E S S E T H:
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WHEREAS, pursuant to the terms and conditions of that certain Limited
Guaranty Agreement between SJMB and Comerica Bank - Texas, a Texas banking
corporation, National Bank of Canada, a Canadian chartered banking organization
and Hibernia National Bank, a national bank (each such bank a "Bank" and
collectively the "Bank Group") dated as of June 16, 2000 (the "Guaranty
Agreement"), SJMB guaranteed to the Bank Group the full and prompt payment and
performance of certain indebtedness of the Company to the Bank Group, up to a
maximum aggregate principal amount of two million dollars ($2,000,000);
WHEREAS, pursuant to the terms of the Optional Credit Support Agreement
dated June 30, 2000 (the "CSA"), and subject to the approval of the CSA by the
shareholders of the Company, SJMB has agreed to make certain advances, at its
discretion, for the purposes of curing or preventing breaches of certain
covenants of the Company under its loan documentation with the Bank Group;
WHEREAS, in partial consideration for SJMB's guaranty of certain of the
Company's indebtedness to the Bank Group the Company has issued to SJMB as of
this date warrants, the form of which is attached hereto as EXHIBIT A, to
purchase 400,000 shares of the Company's common stock, par value $0.01 per share
(the "Common Stock"), as may be adjusted (the "400,000 Warrants");
WHEREAS, in further consideration for SJMB's guaranty of certain of the
Company's indebtedness to the Bank Group, and advances made by SJMB under the
CSA, the Company agrees, pursuant to the terms and conditions of this
Reimbursement Agreement, to reimburse SJMB for each payment SJMB is required to
make to the Bank Group pursuant to the Guaranty Agreement or chooses to make
under the CSA, such reimbursement to be in the form of a Company promissory
note, the form of which is attached hereto as EXHIBIT B, convertible into shares
of Common Stock (each such note a "Subordinated Reimbursement Note") and
additional warrants, the form of which is attached hereto as EXHIBIT C, to
purchase a number of shares of Common Stock equal to 25% of any payment made by
SJMB under the Guaranty Agreement or the CSA, as may be adjusted (such warrants
referred to herein as the "Reimbursement Warrants" and, together with the
400,000 Warrants, the "Warrants"), all as more fully described herein;
WHEREAS, pursuant to the terms of that certain Subordinated Security
Agreement and Subordinated Pledge Agreement, each dated as of even date herewith
between the Company and SJMB and any other security agreements, deeds of trust
or mortgages required by SJMB as security for the reimbursement by the Company
of SJMB's obligations under the Guaranty Agreement (collectively, the "Security
Documents"), the obligations of the Company under the Subordinated Reimbursement
Notes will be secured by certain assets of the Company;
WHEREAS, the Company and SJMB have agreed to enter into that certain
Registration Rights Agreement dated the date hereof (the "Registration Rights
Agreement"), the form of which is attached hereto as EXHIBIT D, pursuant to
which the Company has granted registration rights to SJMB with respect to, among
other things, the Common Stock that may be acquired by SJMB upon exercise of the
Warrants or upon conversion of the Subordinated Reimbursement Notes (this
Reimbursement Agreement, the Warrants, any Reimbursement Note, the Security
Documents and the Registration Rights Agreement are collectively referred to
herein as the "Transaction Documents").
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NOW, THEREFORE, in consideration of the premises and the representations,
warrants and agreements herein, the parties agree as follows:
1. CAPITALIZED TERMS. All capitalized terms not defined herein shall have
the meaning assigned them in the Guaranty Agreement.
2. GUARANTY OBLIGATION. Pursuant to the terms and conditions of the
Guaranty Agreement, upon Demand by the Agent, SJMB shall fully pay and perform
any Guaranteed Indebtedness of the Company set forth in such Demand, up to a
maximum aggregate principal amount of two million dollars ($2,000,000) and other
amounts as set forth in the Guaranty Agreement (each such payment a "Guaranty
Payment").
3. REIMBURSEMENT OBLIGATIONS. Subject to Section 4 hereof, the Company
agrees it shall immediately be indebted to SJMB in a principal amount equal to
any Guaranty Payment made by SJMB in response to a Demand, and equal to any
advance made by SJMB under the CSA.
4. SUBORDINATION. The Company and SJMB acknowledge that the right of SJMB
to receive or enforce payment of the reimbursement obligations or a Subordinated
Reimbursement Note is subject to the terms of the Subordination Agreement of
even date herewith among the Bank Group, the Company and SJMB.
5. SUBORDINATED REIMBURSEMENT NOTE; WARRANTS. Immediately upon payment by
SJMB of either a Guaranty Payment or an advance under the CSA, and in no event
later than one business day after a Guaranty Payment is made, the Company will
provide SJMB with (a) a Subordinated Reimbursement Note and (b) Reimbursement
Warrants to purchase a number of shares of Common Stock equal to (i) the amount
of such Guaranty Payment made by SJMB in response to a Demand for payment by the
Bank Group, or (ii) the amount advanced by SJMB under the CSA, in each case,
multiplied by .25.
6. SECURITY. The obligations of the Company under any Subordinated
Reimbursement Note shall be secured by junior liens on certain assets of the
Company, pursuant to the terms of the Security Documents.
7. CONVERSION RIGHT. SJMB may, at its option, elect to convert any portion
of the principal and accrued interest of any Subordinated Reimbursement Note
outstanding at any time into fully paid and nonassessable shares of Common Stock
based upon a price (the "Conversion Price") per share equal to $1.25, subject to
adjustment as provided in each Reimbursement Note. The portion of any
Subordinated Reimbursement Note to be converted upon election by SJMB shall,
upon the date of such conversion, be divided by the Conversion Price into a
whole number of shares of Common Stock, with the remainder, if any, being paid
in cash.
8. CANCELLATION OF CERTAIN NOTE RECEIVABLE. Upon execution of this
Reimbursement Agreement, the Company will cancel that certain $343,207.10 note
receivable from St. Xxxxx Capital Partners, L.P., a Delaware limited
partnership, to the Company.
9. REGISTRATION RIGHTS. The Company hereby grants to SJMB certain
registration rights with respect to shares of Common Stock that may be acquired
upon exercise of the Warrants or the conversion of any portion of a Subordinated
Reimbursement Note. The Company hereby agrees to include such shares of Common
Stock in the Registration Rights Agreement.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company, as to itself and its Subsidiaries, hereby makes the following
representations and warranties to SJMB.
10.1 ORGANIZATION, STANDING AND QUALIFICATION. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws
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of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry
on its business as it is now being conducted. Each of the Company and its
Subsidiaries is licensed and qualified to do business as a foreign
corporation in each jurisdiction in which the character of the Company's
or any Subsidiary's properties, owned or leased, or the nature of its
activities makes such qualification or license necessary, except where
failure to be so licensed and qualified would not have a Material Effect.
10.2 AUTHORITY; NO DEFAULTS. The Company has all requisite corporate
power and authority to enter into this Reimbursement Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Reimbursement Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company. The Reimbursement
Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable
in accordance with its terms, except as enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws relating to creditors' rights generally
and by general principles of equity which may limit the right to obtain
equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Except for the note
payable to EnSerCo, L.L.C. (the "EnSerCo Debt") and certain indebtedness
owed to Trinity Industries, Inc. (the "Trinity Debt"), the execution and
delivery by the Company of the Reimbursement Agreement does not, and the
consummation of the transactions contemplated hereby will not conflict
with or result in a breach of or the acceleration of any obligation under,
or constitute a default or event of default (or event which, with notice
or lapse of time or both, would constitute a default) under, any provision
of any charter, bylaw, indenture, mortgage, lien, lease, agreement,
contract, instrument, order, judgment, decree, ordinance or regulation, or
any restriction to which any property of the Company or any of its
Subsidiaries is subject or by which the Company or any of its Subsidiaries
is bound, and which would have a Material Effect. Neither the Company nor
any of its Subsidiaries is in violation or default of any applicable law,
statute, order, rule or regulation promulgated, or judgment entered by any
court, administrative agency or commission or other governmental agency or
instrumentality, domestic or foreign (a "Governmental Entity"), relating
to or affecting the operation, conduct or ownership of the property or
business of the Company or any of its Subsidiaries, which, in any event,
would have a Material Effect.
10.3 APPROVALS. There is no legal impediment to (x) the valid
execution, delivery and performance by the Company of this Reimbursement
Agreement or (y) the valid offer, issue, sale and delivery of any
Subordinated Reimbursement Note or the Warrants pursuant to this
Reimbursement Agreement. Except as set forth on SCHEDULE 10.3, no consent,
approval or authorization of, or declaration or filing or registration
with, any Governmental Entity (including, without limitation, the SEC or
the Texas State Securities Board), stockholders or any other third party
is necessary or required for (x) the valid execution, delivery, or
performance by the Company of this Reimbursement Agreement or (y) the
valid offer, issue, sale and delivery of the Subordinated Reimbursement
Note and the Reimbursement Warrants pursuant to this Reimbursement
Agreement.
10.4 SEC DOCUMENTS. Except as set forth on SCHEDULE 10.4, the
Company has made all filings with the SEC that it has been required to
make under the Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as amended (the "Exchange Act")
since December 31, 1998. The Company has provided to SJMB a true, complete
and correct copy of the Company's annual report on Form 10-K for the
fiscal years ended December 31, 1998 and December 31,1999, together with
all amendments thereto, and any and all filings with the SEC made by the
Company (including all requested exhibits to such filings) since the
filing of said Form 10-K (all such documents that have been filed with the
SEC, as amended, are referred to as the "Company SEC Documents"). As of
their respective dates, and except as amended, the Company SEC Documents
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and as of their respective
dates, none of the Company SEC Documents contained any untrue statement of
an material fact or
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omitted to state a material fact required to be stated herein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements of
the Company and its Subsidiaries included in the Company SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q) and fairly present (subject, in the case of the
unaudited statements, to normal recurring audit adjustments) the
consolidated financial position of the Company and its Subsidiaries as of
the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended. Except as set forth in the Company SEC
Documents, since December 31, 1999, (i) there have been no changes in the
business, operations or financial condition of each of the Company and
each of its Subsidiaries which would have a Material Effect and (ii) the
operations of each of the Company and each of its Subsidiaries have been
conducted in the ordinary course of business except as previously
disclosed to SJMB.
10.5 LITIGATION. Except as set forth in the Company SEC Documents,
as of the date of this Reimbursement Agreement, there is no suit, action,
proceeding or investigation pending or, to the best knowledge of the
Company, threatened against or affecting the Company or any of its
Subsidiaries (or any of their respective officers or directors in
connection with the business of the Company or any of such Subsidiaries),
nor any outstanding judgment, order, writ, injunction or decree against
the Company or any of its Subsidiaries, which would have a Material
Effect. Neither the Company nor any Subsidiary is subject to any court
order, writ, injunction, decree, settlement agreement or judgment that
contains or orders any on-going obligations, whether prohibitory or
mandatory in nature, the performance of which would have a Material
Effect.
10.6 CAPITALIZATION. The Company has authorized capital stock of
50,000,000 shares of Common Stock, of which there are 15,111,097 shares
issued and outstanding as of June 9, 2000, and 7,500,000 shares of
preferred stock, $0.01 par value per share, none of which are issued and
outstanding. All of the issued and outstanding shares of Common Stock were
duly and validly issued and are fully paid and non-assessable. None of the
outstanding shares of Common Stock have been issued in violation of any
preemptive rights of the current or past shareholders of the Company.
Except as set forth in the Company SEC Documents or on SCHEDULE 10.6, and
except for shares that may be issued in connection with completed or
pending acquisitions and financings or options or warrants issued to, or
to be issued to, SJMB, there are no outstanding options, warrants or
rights to subscribe for, or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of the Company or contracts, commitments,
understandings or arrangements by which the Company is or may be obligated
to issue additional shares of its capital stock or options, warrants, or
rights to purchase or acquire any additional shares of its capital stock.
All of the Common Stock issued on the exercise of the Warrants will be
fully paid, non-assessable and free and clear of any preemptive rights and
Encumbrances. As used in this Reimbursement Agreement, the term
"Encumbrance" means and includes (i) any security interest, mortgage, deed
of trust, lien, charge, pledge, proxy, adverse claim, equity, power of
attorney, or restriction of any kind, including but not limited to, any
restriction or servitude on the use, transfer, receipt of income, or other
exercise of any attributes of ownership, and (ii) any notice of pledge
registered with any financial intermediary or broker, any Uniform
Commercial Code financing statement or other public filing, notice or
record that by its terms purports to evidence or notify interested parties
of any of the matters referred to in clause (i) that has not been
terminated or released by another proper filing, notice or record.
10.7 SUBSIDIARIES. Except as set forth in the Company SEC Documents
or on SCHEDULE 10.7, the Company has no Subsidiaries. Except for that
certain Second Amendment to Amended and Restated Credit Agreement between
the Company and Comerica Bank-Texas, National Bank of Canada and Hibernia
National Bank dated as of June 30, 2000, (ii) that certain Letter
Agreement dated as of June 30, 2000, among the Company, SJMB, OF
Acquisition, L.P.,
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St. Xxxxx Management, L.L.C. and Philform, Inc. (the "OF Letter
Agreement") and (iii) that certain letter agreement dated as of June 29,
2000, among the Company, SJMB and St. Xxxxx Capital Corp. (the "Belleli
Letter Agreement", and, with the agreements described in clauses (i) and
(ii), the "Excepted Transactions"), and except as set forth in SCHEDULE
10.7, all outstanding shares of capital stock of each Subsidiary of the
Company were duly and validly issued and are fully paid, nonassessable and
owned by the Company or a Subsidiary of the Company, free and clear of all
Encumbrances, except those in favor of the Bank Group. There are no
options, warrants or other rights, agreements or commitments (including
preemptive rights) obligating the Company or any of its Subsidiaries to
issue, to sell or to transfer any shares of capital stock or other
securities of any Subsidiary of the Company.
10.8 LIABILITIES. Except as set forth in SCHEDULE 10.8 and as set
forth in the Company SEC Documents, the Company has no liabilities or
obligations, either accrued, absolute, contingent, or otherwise that have
a Material Effect. The Company has no knowledge of any liability that it
reasonably believes would result in a Material Effect, other than those
(a) reflected or reserved against in the unaudited consolidated balance
sheet of the Company and its consolidated Subsidiaries at March 31, 2000,
or disclosed in other Company SEC Documents or (b) incurred in the
ordinary course of business since March 31, 2000.
10.9 LICENSES, PERMITS, AUTHORIZATIONS, ETC. The Company and each of
the Subsidiaries holds all approvals, authorizations, consents, licenses,
orders, franchises, rights, registrations and permits of any type required
to operate its business as presently conducted, the failure of which to
hold would have a Material Effect. The execution, delivery and performance
by the Company of this Agreement will not result in any revocation,
cancellation, suspension or modification of any such approval,
authorization, consent, license, order, franchise, right, registration or
permit.
10.10 TITLE TO ASSETS; ENCUMBRANCES.
10.10.1 Except as disclosed to SJMB in the Security Documents,
each of the Company and its Subsidiaries has good and indefeasible
title to its owned assets, whether real, personal or intangible,
free and clear of all Encumbrances except (i) for Encumbrances
arising in connection with the Excepted Transactions, (ii) as
reflected in the Company SEC Documents, (iii) liens for current
taxes and assessments not yet d ue or being contested in good faith
by appropriate proceedings, (iv) mechanic's liens arising under the
operation of law for actions contested in good faith or for which
payment arrangements have been made, (v) liens granted or incurred
by such Person in the ordinary course of its business or financing
of equipment, office space, furniture and computers in the ordinary
course of its business, (vi) easements, rights of way, encroachments
or other reductions or matters affecting title which do not prevent
the assets from being used for the purpose for which they are
currently being used and (vii) encumbrances on the capital stock of
its subsidiaries in favor of the Bank Group;
10.10.2 Other than certain valves and equipment of the Company
held by Blastco Services Company, Xxxx Xxxxxx and Xxxxxxx Xxxxxx
which are to be transferred to the Company pursuant to that certain
Stock Purchase Agreement dated as of June 13, 2000, (the "Blastco
Agreement") there are no parties in possession of any of the assets
of the Company or its Subsidiaries other than personal property held
by third parties in the reasonable and ordinary course of business.
Each of the Company and its Subsidiaries enjoys full, free and
exclusive use and quiet enjoyment of its assets and its rights
pertaining thereto. Each of the Company and its Subsidiaries enjoys
peaceful and undisturbed possession under all leases under which it
is a lessee, and all such leases are legal, valid and binding
obligations of such Person, enforceable against such Person in
accordance with its terms.
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10.11 Taxes and Returns. The Company has filed, and has caused each
of its Subsidiaries to file, all required tax returns and reports, except
for where the failure to file or pay would not have a Material Effect. The
Company has paid, and has caused its Subsidiaries to pay, all taxes,
assessments and governmental charges and penalties which it or such
Subsidiary has incurred, except such as are being or may be contested in
good faith by appropriate proceedings except for where the failure to file
or pay would not have a Material Effect. Neither the Company nor any
Subsidiary is delinquent in the payment of any tax, assessment or
governmental charge. No deficiencies for any taxes have been proposed,
asserted, or assessed against either the Company or any Subsidiary, and no
requests for waivers of the time to assess any such tax are pending. For
the purposes of this Reimbursement Agreement, the term "tax" (including,
with correlative meaning, the terms "taxes" and "taxable") shall include
all federal, state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise
and other taxes, duties or assessments of any nature whatsoever, together
with all interest, penalties and additions imposed with respect to such
amounts.
10.12. HAZARDOUS WASTES AND SUBSTANCES. Except as set forth in the
Company SEC Documents, neither the operations of either the Company or of
any Subsidiary of the Company, nor the use of such Person's assets
violates any applicable federal, state or local law, statute, ordinance,
rule, regulation, memorandum of understanding, order or notice requirement
pertaining to the collection, transportation, storage, treatment,
discharge, release or disposal of hazardous or non-hazardous waste or
substances, including without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
xx.xx. 9601 ET SEQ.), as amended from time to time on or before the
Closing Date ("CERCLA") (including, without limitation, as amended
pursuant to the Superfund Amendments and Reauthorization Act of 1986), and
such regulations promulgated under CERCLA on or before the effective date
of this Agreement, (ii) the Resources Conservation and Recovery Act of
1976 (42 U.S.C. xx.xx. 6901 ET SEQ.), as amended from time to time
("RCRA") on or before the effective date of this Agreement, and such
regulations promulgated under RCRA, (iii) any applicable federal, state or
local laws or regulations relating to the environment in effect on the
effective date of this Agreement (collectively, the "Applicable
Environmental Laws"), which violation would have a Material Effect. Except
as set forth in the Company SEC Documents, to the best of the Company's
knowledge, none of the operations of the Company or any Subsidiary has
ever been conducted nor have any of such Person's assets been used in such
a manner as to constitute a violation of any of the Applicable
Environmental Laws, which violation would have a Material Effect. Except
as set forth in the Company SEC Documents, to the best of the Company's
Knowledge, no notice has been served on the Company or any Subsidiary by
any person or Governmental Entity regarding any existing, pending or
threatened investigation or inquiry related to violations under any
Applicable Environmental Law, which violation or claims could have a
Material Effect, or regarding any claims for corrective action, remedial
obligations or contribution for removal costs or damages under any
Applicable Environmental Law or regarding the designation of the Company
or any of its Subsidiaries as a potentially responsible party for any
facility under the Applicable Environmental Laws, nor does any fact or
circumstance exist which, if disclosed publicly, would be reasonably
likely to result in the service on either the Company or any Subsidiary of
any such notice. Except as set forth on the Company SEC Documents, there
has been no action taken, or omitted to be taken by the Company or its
Subsidiaries which has caused, or would be reasonably likely to cause, a
"release" of any "hazardous substance" at any "facility", without
limitation, within the meaning of such terms as defined in the Applicable
Environmental Laws.
10.13 MATERIAL EFFECT DEFINED. The term "Material Effect" as used
herein means (a) a material adverse effect on the business, Properties,
operations or conditions (financial or otherwise) of the Company and its
Subsidiaries taken as a whole, (b) material impairment of the Company to
perform its obligations under this Reimbursement Agreement, a Subordinated
Reimbursement Note, or a Reimbursement Warrant, or (c) a material adverse
effect on the validity or enforceability of this Reimbursement Agreement,
a Subordinated Reimbursement Note, or a
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Reimbursement Warrant or a material impairment of the rights or remedies
of SJMB hereunder or under a Subordinated Reimbursement Note or
Reimbursement Warrant.
11. REPRESENTATIONS AND WARRANTIES OF SJMB. SJMB represents and warrants
that it is acquiring the shares of Common Stock available through this
Reimbursement Agreement, if any, and the Warrants for its own account and not
with a view to the distribution of any part thereof within the meaning of the
Securities Act, and the rules and regulations of the SEC promulgated thereunder
from time to time. SJMB (either alone or with its advisors) has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of its investment in the share of Common
Stock available through this Reimbursement Agreement, if any, and the Warrants,
and is capable of bearing the economic risks of such investment. SJMB is an
informed and sophisticated investor, and has engaged expert advisors,
experienced in the evaluation of securities in companies such as the Company as
contemplated hereunder. SJMB has undertaken such investigation and has been
provided with and has evaluated such documents and information as it has deemed
necessary to enable it to make an informed and intelligent decision with respect
to the execution, delivery and performance of this Reimbursement Agreement. SJMB
acknowledges that the Company has given it access to key employees, documents
and facilities of the Company. SJMB acknowledges that neither this Reimbursement
Agreement, the Subordinated Reimbursement Notes nor the Warrants, nor any
conversion or exercise of either thereof, have been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required. The Company is required to register the securities issuable (i) upon
conversion of a Subordinated Reimbursement Note, and (ii) upon exercise of a
Reimbursement Warrant, as set forth in the Registration Rights Agreement. SJMB
is an accredited investor as defined in Rule 501(a) of Regulation D under the
Securities Act. The source of funds to be used by SJMB to pay any amounts
hereunder does not include assets of any employee benefit plan, other than a
plan exempt from the coverage of the Employment Retirement Income Security Act
of 1974, as amended.
12. CLOSING.
12.1 TIME AND PLACE. The closing of the transactions contemplated by the
Transaction Documents (the "Closing") will take place on a date agreed to by the
parties (the "Closing Date"), at the offices of Gardere Xxxxx Xxxxxx & Xxxxx,
L.L.P., unless another time and place are agreed to by the parties.
12.2 CONDITIONS TO THE OBLIGATION OF SJMB. The obligation of SJMB to
effect the Closing is subject to the satisfaction by the Company on or prior to
the Closing of the following:
12.2.1 delivery by the Company to SJMB of copies, certified by the
Secretary of State of the State of Texas, of the Articles of Incorporation
of the Company and all amendments thereto;
12.2.2 delivery by the Company to SJMB of copies, certified by the
Secretary of the Company as of the Closing Date, of the bylaws of the
Company and all amendments thereto;
12.2.3 delivery by the Company to SJMB of copies, certified by a
certificate of the Secretary of the Company as of the Closing Date, of
resolutions duly adopted by the board of directors of the Company,
authorizing the execution and delivery by the Company of the Transaction
Documents to which the Company is a party and all other agreements or
other documents contemplated thereby;
12.2.4 delivery by the Company to SJMB of the 400,000 Warrants;
12.2.5 delivery by the Company to SJMB of the Subordinated Security
Agreement and the Subordinated Pledge Agreement;
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12.2.6 delivery by the Company to SJMB of the Registration Rights
Agreement;
12.2.7 the Company shall have entered into amended credit facilities
acceptable to SJMB with each of Comerica Bank - Texas, a Texas banking
corporation, National Bank of Canada, a Canadian chartered banking
organization, and Hibernia National Bank, a national bank;
12.2.8 there shall have been no material adverse change in the
financial condition, results of operations, business or prospects of the
Company; and
12.2.9 SJMB shall have been reimbursed by the Company for reasonable
fees and expenses incurred through the execution of the Transaction
Documents.
12.3 ADDITIONAL POSITION ON BOARD OF DIRECTORS. The parties hereto agree
that SJMB shall have the right, so long as the Guaranty Agreement remains in
force and effect, to nominate three individuals for election by the shareholders
of the Company to the Board of Directors of the Company. Accordingly, the
Company agrees to cause one of the current members on the Company's board of
directors (other than Xxxx Xxxxxxxx or Xxxxxxx Xxxxxxxxxx) to resign his
position by the earlier of (i) one day after the meeting of the Company's
shareholders called to vote upon, among other things, the transactions
contemplated by the OF Letter Agreement and (ii) August 31, 2000. The director
positions of Xxxx X. Xxxxxxxx and Xxxxxxx Xxxxxxxxxx shall count as two of the
three SJMB nominees for the Board of Directors. The total number of seats on the
Company's Board of Directors shall not exceed seven.
13. COVENANTS. The Company covenants and agrees with SJMB, so long as any
Subordinated Reimbursement Note is outstanding or any fee, expense, compensation
or any other amount payable by the Company shall remain unpaid or outstanding,
as follows:
13.1 DEBT. The Company shall not, nor shall the Company permit any
of its Subsidiaries to, create, incur, assume or otherwise become or
remain liable with respect to, any Debt (as defined hereinafter), except
for:
13.1.1 Permitted Debt; and
13.1.2 Debt outstanding on the date hereof and described in
filings made with the SEC.
SJMB agrees to consider any refinancing or extensions of the foregoing and
shall not unreasonably withhold its consent to any such refinancings or
extensions; provided, that it shall not be unreasonable for SJMB to
require security for any Subordinated Reimbursement Note as a condition to
such consent. In the event the SJMB requires that any Subordinated
Reimbursement Note be secured, the SJMB entity making the payment on
behalf of the Company that gives rise to the Subordinated Reimbursement
Note shall enter into such intercreditor and subordination agreements as
are acceptable to the holder of senior Permitted Debt.
13.2 RESTRICTIONS ON DISTRIBUTIONS. The Company shall not, nor shall
the Company permit any of its Subsidiaries to, declare, make or pay any
Distribution, except that any Subsidiary of Company may make Distributions
to the Company.
13.3 NEGATIVE PLEDGE. Except as contemplated in the Excepted
Transactions, the Company shall not, nor shall the Company permit any of
its Subsidiaries to, create, incur, assume or suffer to exist, any
Encumbrance on any asset of such Person other than Permitted Liens. The
Company will not enter into or become subject to, nor will it permit any
of its Subsidiaries to enter into or become subject to, any agreement
(other than this Agreement or the Excepted Transactions) that prohibits or
otherwise restricts the right of the Company or its Subsidiaries to
create, incur, assume or suffer to exist any lien in favor of SJMB on any
of the Company's or any of its Subsidiaries' assets.
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13.4 CONSOLIDATION, MERGERS AND ACQUISITIONS; FUNDAMENTAL Changes.
Without SJMB's prior written consent, the Company shall not, nor shall the
Company permit any of its operating Subsidiaries to, merge or consolidate
with or acquire substantially all of the outstanding capital stock or
assets of any other Person unless the Company or operating Subsidiary is
the surviving corporation in such transaction or liquidate, wind up or
dissolve (or suffer any liquidation or dissolution), or convey, lease,
sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or any substantial part of its business, property or
assets, whether now or hereafter acquired provided that nothing herein
shall prohibit the sale or transfer of fixed assets from a Subsidiary to
the Company or to another Subsidiary. The Company shall not, nor shall the
Company permit any of its operating Subsidiaries to, purchase, redeem,
retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding, except for the redemption of the Company's
preferred stock.
13.5 INVESTMENTS. The Company shall not, nor shall the Company
permit any of its Subsidiaries to, make, directly or indirectly, any
Investments, except:
13.5.1 Investments existing on the date hereof and disclosed
in the Company SEC Documents or on SCHEDULE 13.5;
13.5.2 Investments consisting of Cash Equivalents;
13.5.3 Accounts receivable from customers in the ordinary
course of business;
13.5.4 Investments by the Company in wholly owned
Subsidiaries; and
13.5.5 Investments contemplated by the Excepted Transactions.
13.6 TRANSACTIONS WITH AFFILIATES. The Company shall not, nor shall
the Company permit any of its Subsidiaries to, enter into, or be a party
to any transaction with any Affiliate, except for (i) the transactions
provided for in the Transaction Documents, (ii) transactions currently
disclosed or disclosed in the future in accordance with applicable
securities laws in the Company SEC Documents, (iii) customary employment
arrangements and benefit programs on reasonable terms, (iv) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no
less favorable than terms which would have been obtainable from a person
other than an Affiliate, or (v) an agreement, transaction, commitment or
arrangement which is approved by a majority of the disinterested directors
of the Company.
13.7 SALES OF ASSETS. Except for sales of assets by a Subsidiary to
the Company or to another Subsidiary, the Company shall not, nor shall the
Company permit any of its Subsidiaries to, sell, assign, transfer, lease,
convey or otherwise dispose of any of its assets or properties, whether
now owned or hereafter acquired, or any income or profits therefrom, or
enter into any agreement to do so, except:
13.7.1 sales of inventory in the ordinary course of business;
13.7.2 the sale, discount or transfer of delinquent accounts
receivable in the ordinary course of business for purposes of
collection;
13.7.3 occasional sales, leases or other dispositions of
immaterial assets for consideration not less than fair market value;
13.7.4 sales, leases or other dispositions of assets that are
obsolete or have negligible fair market value;
13.7.5 sales of equipment for a fair and adequate
consideration (but if replacement equipment is necessary for the
proper operation of the business of the
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Company or any Subsidiary, the Company or such Subsidiary must
promptly replace the sold equipment); or
13.7.6 those assets identified on SCHEDULE 13.7.6 attached
hereto.
13.8 SALES AND LEASEBACKS. The Company shall not, nor shall the
Company permit any of its Subsidiaries to, become liable, directly or by
way of a guaranty or accommodation obligation, with respect to any lease
or any property (whether real or personal or mixed) whether now owned or
hereafter acquired, (i) which the Company or such Subsidiary has sold or
transferred or is to sell or transfer to any other Person or (ii) which
the Company or such Subsidiary intends to use for substantially the same
purposes as any other property which has been or is to be sold or
transferred by the Company or such Subsidiary to any other Person in
connection with such lease.
13.9 AMENDMENT TO ORGANIZATIONAL DOCUMENTS. The Company will not
enter into or permit any modification or amendment of, or waive any
material right or obligation of, SJMB or the rights of holders of Common
Stock of the Company, under its certificate or articles of incorporation,
bylaws or other charter documents other than such modifications,
amendments or waivers which would not, singly or in the aggregate, result
in a Material Effect.
13.10 FISCAL YEAR. The Company shall not change its fiscal year.
13.11 COMPLIANCE WITH LAWS. The Company shall, and shall cause each
of its Subsidiaries to, conduct its business and affairs and maintain its
Properties in compliance with all applicable laws, rules, regulations,
judgments, orders, and decrees (including, without limitation, all
Applicable Environmental Laws), except where the failure to do so will not
have a Material Effect.
13.12 INSURANCE. The Company shall, and shall cause each of its
Subsidiaries to, maintain insurance in full force and effect either with
the Company's existing insurance carriers in the current amounts of
coverage or replacement insurance with insurance companies of recognized
standing on all of its Properties of an insurable nature in such manner
and amounts and against such casualties and contingencies as are
customarily insured by businesses of established reputation which own
similar assets. The Company shall, and shall cause each of its
Subsidiaries to, also maintain in full force and effect either with the
Company's existing insurance carriers in the current amounts of coverage
or replacement insurance with insurance companies of recognized standing
general liability and worker's compensation. The Company shall, and shall
cause each of its Subsidiaries to, at any time and from time to time,
furnish evidence of all insurance required by this SECTION 13.12 to SJMB
promptly upon the request of SJMB.
13.13 PAYMENT AND PERFORMANCE. The Company will pay all amounts due
under each Transaction Document to which it is a party in accordance with
the terms thereof and will observe, perform and comply with every
covenant, term and condition expressed or implied therein.
13.14 BOOKS, FINANCIAL STATEMENTS AND REPORTS. The Company will at
all times maintain, and will cause its Subsidiaries to at all times
maintain, full and accurate books of account and records. The Company will
furnish, or cause to be furnished, the following statements and reports to
SJMB:
13.14.1 As soon as available, and in any event within ninety
(90) days after the end of each fiscal year, consolidated financial
statements of the Company and its Subsidiaries together with all
notes thereto, prepared in accordance with GAAP, together with an
opinion, based on an audit using generally accepted auditing
standards, by independent certified public accountants selected by
the Company, stating that such consolidated financial statements
have been so prepared. These financial statements shall contain a
consolidated balance sheet as of the end of such fiscal year and
consolidated
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statements of earnings, of cash flows, and of changes in owners'
equity for such fiscal year, each setting forth in comparative form
the corresponding figures for the preceding fiscal year.
13.14.2 as soon as available and in any event within
forty-five (45) days after the close of each quarter of the
Company's fiscal years, a copy of (A) quarterly consolidated
financial statements for the Company prepared in accordance with
GAAP and certified by the chief financial officer or chief
accounting officer or treasurer of the Company, or (B) the Company's
10-Q filing with the SEC for such quarter;
13.14.3 The Company will maintain its Xxxxx filing status with
the SEC and will deliver to SJMB within 20 days after completing
filings with the SEC, copies of all information, documents, and
other reports (or copies of such portions of any of the foregoing as
the SEC may by rules and regulations prescribe) which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. The Company will timely comply in all material
respects with its reporting and filing obligations under the
applicable federal securities laws.
13.14.4 The Company will promptly notify SJMB in writing of
the occurrence of (i) any Event of Default and (ii) any event of
default (or if any event of default would result upon any payment
with respect to the Note) with respect to any Debt as such event of
default is defined therein or in the instrument under which it is
outstanding, permitting holders to accelerate the maturity of such
Debt.
13.14.5 Promptly upon request, any information which SJMB may
from time to time reasonably request concerning any covenant,
provision or condition of the Transaction Documents or any matter in
connection with such Persons' businesses and operations, including
without limitation business plans, environmental compliance matters,
budgets, forecasts and sales reports. Upon reasonable notice to the
Company by SJMB, the Company will permit representatives appointed
by SJMB to visit during normal business hours and inspect any of
such Person's Property, including its books of account, other books
and records, and any facilities or other business assets, and to
make extra copies therefrom and photocopies and photographs thereof,
and to write down and record any information such representatives
obtain, and the Company shall permit SJMB or its representatives to
investigate and verify the accuracy of the information furnished to
SJMB in connection with the Transaction Documents and to discuss all
such matters with its officers, employees and representatives and
SJMB agrees to keep any and all of such information in strictest
confidence and not to disclose such information to any outside party
except as may be required by law or compelled by judicial order.
13.14.6 Promptly on request, the Company shall provide SJMB
assistance in preparing and will provide any information required to
prepare any regulatory filings which SJMB may be required to file in
connection with this Reimbursement Agreement or the OF Letter
Agreement.
13.15 MAINTENANCE OF EXISTENCE, QUALIFICATIONS AND ASSETS.
Except as contemplated by the Excepted Transactions, the Company shall,
and shall cause its Subsidiaries to, (i) maintain its corporate existence
and good standing and its authority to transact business in all states
where necessary; (ii) maintain all licenses, permits and franchises
necessary for its business; and (iii) keep all of its assets that are
useful in and necessary to its business in good working order and
condition (ordinary wear and tear excepted) and make all necessary repairs
and replacements.
13.16 PAYMENT OF TRADE DEBT, TAXES, ETC. The Company will, and will
cause each of its Subsidiaries to, (i) timely file all required tax
returns; (ii) timely pay all taxes, assessments, and other governmental
charges or levies imposed upon it or upon its income, profits or Property;
(iii)
I-11
within ninety (90) days after the same becomes due pay all Debt owed by it
on ordinary trade terms to vendors, suppliers and other Persons providing
goods and services used by it in the ordinary course of its business; (iv)
pay and discharge when due all other Debt now or hereafter owed by it,
PROVIDED, HOWEVER, that the Company's current default with respect to the
EnSerCo Debt and the Trinity Debt shall not cause a breach of this Section
13.16 upon execution of this Reimbursement Agreement; and (v) maintain
appropriate accruals and reserves for all of the foregoing Debt in
accordance with GAAP. The Company may, however, delay paying or
discharging any such Debt so long as it is in good faith contesting the
validity thereof by appropriate proceedings and has set aside on its books
adequate reserves therefor.
13.17 PAYMENT OF EXPENSES. Whether or not the transactions
contemplated by this Reimbursement Agreement are consummated, the Company
will promptly (and in any event, within thirty (30) calendar days after
any invoice or other statement or notice) pay all reasonable costs and
expenses incurred by or on behalf of SJMB (including reasonable attorneys'
fees and out-of-pocket expenses) in connection with the negotiation,
preparation, execution, and delivery of the Transaction Documents, and any
and all consents, waivers or other documents or instruments relating
thereto, and any filing, recording, refiling and re-recording of any
Transaction Documents and any other documents or instruments or further
assurances required to be filed or recorded or refiled or re-recorded by
the terms of any Transaction Document, as well as any and all expenses and
filing fees associated with preparing and filing any regulatory filings
SJMB is required to make.
13.18 ENVIRONMENTAL MATTERS.
13.18.1 The Company will comply in all material respects with
all Applicable Environmental Laws and shall obtain, at or prior to
the time required by Applicable Environmental Laws, all
environmental, health and safety permits, licenses and other
authorizations necessary for its operations and will maintain such
authorizations in full force and effect so as to avoid any action or
omission having a Material Effect.
13.18.2 The Company will promptly furnish to SJMB all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by the Company, or
of which it has notice, pending or threatened against any the
Company, by any Governmental Entity with respect to any alleged
violation of or non-compliance with any Applicable Environmental
Laws or any permits, licenses or authorizations in connection with
its ownership or use of its Properties or the operation of its
business.
13.19 OPINION. Within a reasonable amount of time following the
Closing, the Company shall provide to SJMB an opinion of counsel to the
Company in form and substance reasonably acceptable to the Company and
SJMB.
13.20 AMENDMENT OF SECURITY DOCUMENTS. The Company agrees that upon
the closing of the transactions contemplated by the OF Letter Agreement,
it will (a) ensure that OF Acquisition, L.P. (the "Partnership") execute
such documents to become a Debtor under the Subordinated Security
Agreement and to execute such financing statements as necessary in order
to reflect a security interest in favor of SJMB in all of the assets of
the Partnership and (b) execute an amendment to the Subordinated Pledge
Agreement pledging the partnership interests held by the Company in the
Partnership to SJMB.
13.21 XXXXXX FINANCIAL, INC. CONSENT. The Company shall, within 45
days of the date hereof, obtain the consent of Xxxxxx Financial, Inc.
("Xxxxxx") to the transactions contemplated by the Transaction Documents.
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14. REMEDIES.
14.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
(a) Within one business day of SJMB making a Guaranty Payment,
the Company fails to provide SJMB with a Subordinated Reimbursement
Note and Reimbursement Warrants to purchase a number of shares of
Common Stock equal to the amount of the Guaranty Payment multiplied
by .25; or
(b) The Company defaults in the payment of amounts due under
this Reimbursement Agreement when such amounts becomes due and
payable and such default remains uncured for a period of five days;
or
(c) The Company defaults in the performance of any covenant
made by the Company, and such default remains uncured for a period
of 30 business days after the default date in any of (i) this
Reimbursement Agreement (other than a default in the performance of
a covenant specifically addressed elsewhere in this Section 15),
(ii) the Warrants, (iii) any Security Document or (iv) the
Registration Rights Agreement; or
(c) Any representation or warranty made by the Company in this
Reimbursement Agreement, the Warrants, any Security Document, the
Registration Rights Agreement, or in any certificate furnished by
the Company in connection with the consummation of the transactions
contemplated thereby or hereby, is untrue in any material respect as
of the date of making thereof; or
(d) A default or event of default occurs under any document
evidencing any Indebtedness (as such term is defined in a
Subordinated Reimbursement Note) of the Company or any Subsidiary
(other than the Debt evidenced by a Subordinated Reimbursement Note
or good-faith disputes with trade creditors) having an aggregate
principal amount in excess of $500,000 and all applicable cure
periods have run with respect thereto without such default or event
of default having been cured to the satisfaction of the holder of
such Indebtedness; provided, however, that the Company's current
defaults in respect of the EnSerCo Debt, the Trinity Debt or the
indebtedness to Xxxxxx shall not be considered a default hereunder;
subject to Sections 14.1(i) and (j) hereof; or
(e) A court of competent jurisdiction enters a judgment or
judgments against the Company or any Subsidiary, or any property or
assets of the Company or any Subsidiary, for the payment of money
aggregating in excess of $100,000 in excess of applicable insurance
coverage; or
(f) A court of competent jurisdiction enters (i) a decree or
order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (ii)
a decree or order adjudging the Company or any Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Company or any Subsidiary under any applicable
federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Subsidiary or of any substantial part
of the property of the Company or any Subsidiary or ordering the
winding up or liquidation of the affairs of the Company or any
Subsidiary and any such decree or order of relief or any such other
decree or order remains unstayed for a period of 90 days from its
date of entry; or
(g) The Company or any Subsidiary commences a voluntary case
or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization
I-13
or other similar law or any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the Company or any
Subsidiary files a petition, answer or consent seeking
reorganization or relief under any applicable federal or state law,
or the Company or any Subsidiary makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts
generally as they become due; or
(h) (1) any person or group (within the meaning of Section
13(d) of the Securities Exchange Act of 1934), other than SJMB and
its affiliates, becomes the beneficial owner of 40% or more of the
total voting power of the Company and was not the beneficial owner
of 40% or more of the total voting power of the Company as of the
date of this Agreement; (2) the Company or any Subsidiary merges or
consolidates with or into any other Person (unless the Company or
any of its Subsidiaries is the surviving or acquiring party); (3)
the Company or any Subsidiary dissolves or liquidates; or (4) the
Company or any Subsidiary sells all or any substantial portion of
its assets;
(i) the Company fails to obtain the consent of Xxxxxx to
the transactions contemplated by the Transaction Documents; or
(j) Xxxxxx declares a default under the documentation
reflecting the Company's indebtedness to Xxxxxx.
14.2 ACCELERATION OF MATURITY. Any Reimbursement Note outstanding
shall become immediately due and payable if an Event of Default described
in Sections 15.1(f) or 15.1(g) occurs and such Subordinated Reimbursement
Note shall, at the option of SJMB, in its sole discretion, become
immediately due and payable if any other Event of Default occurs, and in
every such case SJMB may declare all outstanding Subordinated
Reimbursement Notes to be due and payable immediately.
15. COLLECTION; FEES. If any of the amounts due to SJMB pursuant to this
Reimbursement Agreement is placed in the hands of an attorney for collection,
and if it is collected through any legal proceedings at law or in equity or in
bankruptcy, receivership or other court proceedings, the Company hereby
undertakes to pay all reasonable costs and expenses of collection including, but
not limited to, court costs and the reasonable attorneys' fees of SJMB.
16. REIMBURSEMENT AGREEMENT AMENDMENTS. This Reimbursement Agreement may
be amended only by a written instrument signed by the parties hereto.
17. SUCCESSORS AND ASSIGNS. All rights, interests and obligations in this
Reimbursement Agreement shall bind and INURE to the benefit of the respective
successors and assigns of the Company and SJMB, it being expressly understood
that neither party may assign its rights, interests or obligations without the
prior written consent of the other; PROVIDED, HOWEVER, that SJMB may assign any
or all of its rights and obligations hereunder and under the Warrants, including
but not limited to the conversion rights set forth in Section 7 hereof, to an
affiliate of SJMB without the Company's consent.
18. NOTICE; ADDRESS OF PARTIES. Except as otherwise provided, all
communications to the Company or SJMB provided for herein or with reference to
this Reimbursement Agreement shall be deemed to have been sufficiently given or
served for all purposes on the third business day after being sent as certified
or registered mail, postage and charges prepaid, to the following addresses:
If to The Company: Industrial Holdings, Inc.
0000 Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: President
Telecopy: (000) 000-0000
or at any other address designated by the Company in writing to SJMB;
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If to SJMB: SJMB, L.P.
000 Xxxx Xxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
or at any other address designated by SJMB to the Company in writing.
19. SEPARABILITY CLAUSE. In case any provision in this Reimbursement
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions in such
jurisdiction shall not in any way be affected or impaired thereby; PROVIDED,
HOWEVER, such construction does not destroy the essence of the bargain provided
for hereunder.
20. GOVERNING LAW. This Reimbursement Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Texas (without
regard to principles of choice of law).
21. USURY. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Texas and the United States of America,
and judicial or administrative interpretations or determinations thereof
regarding the contracting for, charging and receiving of interest for the use,
forbearance, and detention of money (hereinafter referred to in this Section 21
as "Applicable Law"). SJMB shall have no right to claim, to charge or to receive
any interest in excess of the maximum rate of interest, if any, permitted to be
charged on that portion of the amount representing principal which is
outstanding and unpaid from time to time by Applicable Law. Determination of the
rate of interest for the purpose of determining whether this Reimbursement
Agreement is usurious under Applicable Law shall be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
actual time of this Reimbursement Agreement, all interest or other sums deemed
to be interest (hereinafter referred to in this Section 21 as "Interest") at any
time contracted for, charged or received from the Company in connection with
this Reimbursement Agreement. If this Reimbursement Agreement is paid in part
prior to the end of the full stated term of this Reimbursement Agreement and the
interest received for the actual period of existence of this Reimbursement
Agreement exceeds the maximum rate allowed by Applicable Law, SJMB shall credit
the amount of the excess against any amount owing under this Reimbursement
Agreement or, if this Reimbursement Agreement has been paid in full, or in the
event that it has been accelerated prior to maturity, SJMB shall refund to the
Company the amount of such excess, and shall not be subject to any of the
penalties provided by Applicable Law for contracting for, charging or receiving
Interest in excess of the maximum rate allowed by Applicable Law. Any such
excess which is unpaid shall be canceled.
22. REPRESENTATION. EACH PARTY TO THIS AGREEMENT OTHER THAN SJMB
ACKNOWLEDGES THAT GARDERE XXXXX XXXXXX & XXXXX, L.L.P. HAS REPRESENTED,
REPRESENTS AND SHALL REPRESENT ONLY SJMB WITH RESPECT TO THE DRAFTING,
NEGOTIATION, EXECUTION AND DELIVERY OF THIS REIMBURSEMENT AGREEMENT AND ANY
RELATED DOCUMENTS OR INSTRUMENTS, AND THAT EACH PARTY HAS HAD ADEQUATE
OPPORTUNITY TO CONSULT WITH ITS OWN COUNSEL IN CONNECTION THEREWITH AND ANY
OTHER ASPECT OF THIS TRANSACTION.
23. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants of the Company shall survive the execution of this
Reimbursement Agreement.
24. DEFINITIONS.
As used in this Reimbursement Agreement, the following terms have the
meanings indicated.
"AFFILIATE" of a Person means any other individual or entity who directly
or indirectly controls, is controlled by, or is under common control with, that
Person.
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"CASH EQUIVALENTS" means, when used in connection with the Company or any
Subsidiary of such Person's Investments in:
(a) government securities due within 180 days from the
date of acquisition thereof;
(b) Readily marketable direct obligations of any State
of the United States or any political subdivision
of any such State given on the date of such
investment a credit rating of at least A2 by
Xxxxx'x Investors Service, Inc. or A by Standard &
Poor's Corporation, in each case due within 180
days from the date of acquisition thereof;
(c) Certificates of deposit issued by, money market
deposit accounts with, eurodollar deposits
through, bankers' acceptances of, and repurchase
and reverse repurchase agreements covering
government securities executed by any bank doing
business in and incorporated under the laws of the
United States or any state thereof whose deposits
are insured through the FDIC, or any successor
thereto, and having (either itself or its holding
company) on the date of such Investment combined
capital, surplus and undivided profits of at least
$250,000,000, or any offshore branch of such bank,
in each case maturing within 180 days from the
date of acquisition thereof;
(d) "Money-market mutual funds" investing solely in
instruments of the types described in
subparagraphs (a) through (c) above.
"DEBT" means, for any Person, (a) all obligations required by GAAP to be
classified upon a balance sheet as liabilities, (b) liabilities secured by any
Lien existing on property owned or acquired by that Person, (c) obligations that
have been (or under GAAP should be) capitalized for financial reporting
purposes, (d) all accrued obligations of such Person in respect of any contract,
agreement or instrument imposing an obligation upon such Person to pay over
funds; (e) all trade debt of such Person; (g) all guaranties, endorsements and
other contingent obligations with respect to Debt of others, and (h) for all
deferrals, renewals, extensions and refundings of, and amendments, modifications
and supplements to, any of the indebtedness referred to in (a) through (e)
above.
"GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board.
"INVESTMENT" means, with respect to any Person, any (i) direct or indirect
purchase or other acquisition by such Person of stock, partnership interest or
other equity interest, or of a beneficial interest therein, of any other Person,
(ii) acquisition of assets not made in the ordinary course of business, or (iii)
direct or indirect loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, advances to
employees and similar items made or incurred in the ordinary course of
business), or capital contribution by such Person to any other Person, including
all Debt and accounts owed by that other Person which are not current assets or
did not arise from sales of goods or services to such Person in the ordinary
course of business. The amount of any Investment shall be determined in
conformity with GAAP.
"OBLIGATIONS" means all obligations, liabilities and indebtedness of every
nature of theCompany or any of its Subsidiaries from time to time owing to SJMB
under any Transaction Document to which such Person is a party, including,
without limitation, the due and punctual payment of the principal of and
interest on any Reimbursement Note, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, including,
to the extent permitted by applicable law, interest
I-16
that accrues after the commencement of any proceeding by or against any of the
Company or its Subsidiaries under the Bankruptcy Code and all other applicable
debtor relief laws, and all other monetary obligations of the Company or any of
its Subsidiaries to SJMB under this Reimbursement Agreement and each of the
other Transaction Documents to which such Person is a party, including any and
all fees, costs, expenses and indemnities.
"PERMITTED DEBT" means (a) the Obligations; (b) debt arising from
endorsing negotiable instruments for collection in the ordinary course of
business; (c) purchase money debt incurred to finance equipment in the ordinary
course of business; and (d) trade payables that are for goods furnished or
services rendered in the ordinary course of business and that are payable in
accordance with customary trade terms.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PROPERTY" means any asset, whether real, personal or mixed, or tangible
or intangible, or any interest therein.
"SEC" means the U.S. Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act of 1933, as amended.
"SUBSIDIARY" means, with respect to any Person, any entity of which more
than 50% (in number of votes) of the stock (or equivalent interests) is owned of
record or beneficially, directly or indirectly, by such Person.
25. COUNTERPARTS. This Reimbursement Agreement may be executed in one more
counterparts, each of which constitutes an original execution and, in the
aggregate, constitutes a single document.
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INDUSTRIAL HOLDINGS, INC. SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has signed this Reimbursement Agreement as
of the date first written above.
INDUSTRIAL HOLDINGS, INC.
By: _____________________________________
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Executive Officer
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SJMB SIGNATURE PAGE
IN WITNESS WHEREOF, SJMB has signed this Reimbursement Agreement as of the
date first written above.
SJMB, L.P.
By: SJMB, L.L.C., its general partner
By: _____________________________________
Name: Xxxxx Xxxxxxxx
Title: Vice President
I-19
EXHIBIT "A" TO REIMBURSEMENT AGREEMENT
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
INDUSTRIAL HOLDINGS, INC.
Expiring on June 16, 2005
This Warrant to Purchase Common Stock (the "Warrant") certifies that for
value received, SJMB, L.P., a Delaware limited partnership (the "Holder"), or
its assigns, is entitled to subscribe for and purchase from the Company (as
hereinafter defined), in whole or in part, 400,000 shares of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (as
hereinafter defined) at an initial Exercise Price (as hereinafter defined),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of shares of Common Stock purchasable
hereunder and the Exercise Price therefor are subject to adjustment as
hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00 p.m., Houston, Texas time, on June 16, 2005.
As used herein, the following terms shall have the meanings set forth
below:
"COMPANY" shall mean Industrial Holdings, Inc., a Texas corporation, and
shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
"COMMON STOCK" shall mean and include the Company's Common Stock, par
value $0.01 per share, authorized on the date of the original issue of this
Warrant and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets of the character referred to in Section 3.5 hereof,
the stock, securities provided for in such Section 3.5, and (ii) any other
shares of common stock of the Company into which such shares of Common Stock may
be converted.
"EXERCISE PRICE" The initial purchase price for each share of Common Stock
payable upon exercise of the Warrants shall be $1.25 The Exercise Price shall be
adjusted from time to time pursuant to the provisions hereof.
"MARKET PRICE" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (i) the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers National Market System or
SmallCap Market on such date, or, if there shall have been no trading on such
date or if the Common Stock shall not be listed on such system, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any NASD member firm selected from time to time by the Company for such purpose,
in each such case, unless otherwise provided herein, averaged over a period of
ten (10) consecutive Trading Days prior to the date as of which the
determination is to be made; or (ii) if the Common Stock shall not be listed or
admitted to trading or the closing bid and asked prices are unable to be
furnished by an
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NASD member firm, as provided in clause (i) above, the fair market value of the
Common Stock as determined in good faith by the Board of Directors of the
Company.
"NOTE" shall mean any Subordinated Reimbursement Note of the Company
issued to Holder pursuant to the terms and conditions of the Reimbursement
Agreement, as hereinafter defined.
"OUTSTANDING," when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the Company.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"TRADING DAYS" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
"WARRANT SHARES" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrants.
ARTICLE I
EXERCISE OF WARRANTS
1.1 METHOD OF EXERCISE. The Warrants represented hereby may be exercised
by the holder hereof, in whole or in part, at any time and from time to time on
or after the date hereof until 5:00 p.m., Houston, Texas time, on June 16, 2005.
To exercise the Warrants, the holder hereof shall deliver to the Company, at the
Warrant Office designated in Section 2.1 hereof, (i) a written notice in the
form of the Subscription Notice attached as an exhibit hereto, stating therein
the election of such holder to exercise the Warrants in the manner provided in
the Subscription Notice; (ii) payment in full of the Exercise Price (A) in cash
or by bank check for all Warrant Shares purchased hereunder, or (B) through a
"cashless" or "net-issue" exercise of each such Warrant ("Cashless Exercise");
the holder shall exchange each Warrant subject to a Cashless Exercise for that
number of Warrant Shares determined by multiplying the number of Warrant Shares
issuable hereunder by a fraction, the numerator of which shall be the difference
between (x) the Market Price and (y) the Exercise Price for each such Warrant,
and the denominator of which shall be the Market Price; the Subscription Notice
shall set forth the calculation upon which the Cashless Exercise is based, or
(C) a combination of (A) and (B) above; and (iii) this Warrant. The Warrants
shall be deemed to be exercised on the date of receipt by the Company of the
Subscription Notice, accompanied by payment for the Warrant Shares and surrender
of this Warrant, as aforesaid, and such date is referred to herein as the
"Exercise Date". Upon such exercise, the Company shall, as promptly as
practicable and in any event within ten (10) business days, issue and deliver to
such holder a certificate or certificates for the full number of the Warrant
Shares purchased by such holder hereunder, and shall, unless the Warrants have
expired, deliver to the holder hereof a new Warrant representing the number of
Warrants, if any, that shall not have been exercised, in all other respects
identical to this Warrant. As permitted by applicable law, the Person in whose
name the certificates for Common Stock are to be issued shall be deemed to have
become a holder of record of such Common Stock on the Exercise Date and shall be
entitled to all of the benefits of such holder on the Exercise Date, including
without limitation, the right to receive dividends and other distributions for
which the record date falls on or after the Exercise Date and the right to
exercise voting rights.
1.2 EXPENSES AND TAXES. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
1.3 RESERVATION OF SHARES. The Company shall reserve at all times so long
as the Warrants remain outstanding, free from preemptive rights, out of its
treasury Common Stock or its authorized but unissued shares of
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Common Stock, or both, solely for the purpose of effecting the exercise of the
Warrants, a sufficient number of shares of Common Stock to provide for the
exercise of the Warrants.
1.4 VALID ISSUANCE. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof and, without limiting the generality of the
foregoing, the Company shall take no action or fail to take any action which
will cause a contrary result (including, without limitation, any action that
would cause the Exercise Price to be less than the par value, if any, of the
Common Stock).
1.5 REIMBURSEMENT AGREEMENT. The Warrants represented hereby are part of a
duly authorized issuance and sale of warrants to purchase Common Stock issued
pursuant to the terms and conditions of that certain Reimbursement Agreement
dated as of June 16, 2000 (the "Reimbursement Agreement") between the Company
and Holder. The holder hereof shall be entitled to registration rights with
respect to the underlying shares of Common Stock under the Securities Act and
any applicable state securities or blue sky laws to the extent set forth in the
Registration Rights Agreement among Holder and the Company dated as of even date
herewith (the "Registration Rights Agreement"), as amended or modified. The
terms of the Reimbursement Agreement are hereby incorporated herein for all
purposes and shall be considered a part of this Warrant as if they had been
fully set forth herein. Notwithstanding the previous sentence, in the event of
any conflict between the provisions of the Reimbursement Agreement and of this
Warrant, the provisions of this Warrant shall control.
1.6 ACKNOWLEDGMENT OF RIGHTS. At the time of the exercise of the Warrants
in accordance with the terms hereof and upon the written request of the holder
hereof, the Company will acknowledge in writing its continuing obligation to
afford to such holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of this Warrant;
PROVIDED, HOWEVER, that if the holder hereof shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.7 NO FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of this Warrant. If more than
one Warrant shall be presented for exercise at the same time by the same holder,
the number of full shares of Common Stock which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of whole shares
of Common Stock purchasable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 1.7, be issuable on the exercise of this Warrant, the Company shall pay
an amount in cash calculated by it to be equal to the Market Price of one share
of Common Stock at the time of such exercise multiplied by such fraction
computed to the nearest whole cent.
ARTICLE II
TRANSFER
2.1 WARRANT OFFICE. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 7135 Ardmore, Xxxxxxx, Xxxxx 00000 and may
subsequently be such other office of the Company or of any transfer agent of the
Common Stock in the continental United States as to which written notice has
previously been given to the holder hereof. The Company shall maintain, at the
Warrant Office, a register for the Warrants in which the Company shall record
the name and address of the Person in whose name this Warrant has been issued,
as well as the name and address of each permitted assignee of the rights of the
registered owner hereof.
2.2 OWNERSHIP OF WARRANTS. The Company may deem and treat the Person in
whose name the Warrants are registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if properly assigned in compliance with this Article II, may
be exercised by an assignee for the purchase of Warrant Shares without having a
new Warrant issued.
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2.3 RESTRICTIONS ON TRANSFER OF WARRANTS. The Company agrees to maintain
at the Warrant Office books for the registration and transfer of the Warrants.
Subject to the restrictions on transfer of the Warrants in this Section 2.3, the
Company, from time to time, shall register the transfer of the Warrants in such
books upon surrender of this Warrant at the Warrant Office properly endorsed or
accompanied by appropriate instruments of transfer and written instructions for
transfer satisfactory to the Company. Upon any such transfer and upon payment by
the holder or its transferee of any applicable transfer taxes, new Warrants
shall be issued to the transferee and the transferor (as their respective
interests may appear) and the surrendered Warrants shall be canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes
or income taxes) and all other expenses and charges payable in connection with
the transfer of the Warrants pursuant to this Section 2.3.
2.3.1 RESTRICTIONS IN GENERAL. The holder of the Warrants agrees
that it will not transfer the Warrants unless registration of such Warrant
Shares under the Securities Act and any applicable state securities or
blue sky laws has become effective or the holder has provided to the
Company an opinion of counsel acceptable to the Company that such
registration is not required. Prior to any transfer (other than the grant
of a security interest) as provided herein, the transferor shall provide
written notice to the Company and an opinion of counsel to the effect that
the proposed transfer is exempt from registration under all applicable
securities laws, all in form and substance reasonably satisfactory to the
Company. Any lender or lenders to which the Holder grants a security
interest in the Warrants shall be entitled to exercise all remedies to
which it is entitled by contract or by law, including (without limitation)
transferring the Warrants into its own name or into the name of any
purchaser at any sale undertaken in connection with enforcement by such
lender of its remedies.
2.4 COMPLIANCE WITH SECURITIES LAWS. Subject to the terms of the
Registration Rights Agreement, and notwithstanding any other provisions
contained in this Warrant except Section 2.3.1, the holder hereof understands
and agrees that the following restrictions and limitations shall be applicable
to all Warrant Shares and to all resales or other transfers thereof pursuant to
the Securities Act:
2.4.1 The holder hereof agrees that the Warrant Shares shall not be
sold or otherwise transferred unless the Warrant Shares are registered
under the Securities Act and applicable state securities or blue sky laws
or are exempt therefrom.
2.4.2 A legend in substantially the following form will be placed on
the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY OTHER APPLICABLE SECURITIES LAWS."
2.4.3 Stop transfer instructions may be imposed with respect to the
Warrant Shares so as to restrict resale or other transfer thereof, subject
to this Section 2.4.
ARTICLE III
ANTI-DILUTION
3.1 ANTI-DILUTION PROVISIONS. The Exercise Price shall be subject to
adjustment from time to time as hereinafter provided.
3.2 ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF COMMON STOCK.
3.2.1 (A) If and whenever after the date hereof the Company shall
issue or sell any Common Stock for no consideration or for a consideration
per share less than the Exercise Price, issue convertible securities other
than this Warrant, including other warrants, grant stock options, or issue
any
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other common stock equivalent (other than shares reserved for issuance to
officers, employees, directors, consultants or advisors of the Company
pursuant to existing stock option or restricted stock purchase plans),
then, forthwith upon such issue or sale, the Exercise Price shall be
reduced (but not increased), to the lower price per share (calculated
pursuant to this Section 3.2 to the nearest one-ten thousandth of a cent)
but in any event not less than $.001 per share.
(B) Notwithstanding the provisions of this Section 3.2, no
adjustment shall be made in the Exercise Price in the event that the
Company issues, in one or more transactions, (i) Common Stock or
convertible securities upon exercise of any options issued to officers,
directors or employees of the Company pursuant to a stock option plan or
an employment, severance or consulting agreement as now or hereafter in
effect, in each case approved by the Board of Directors (provided that the
aggregate number of shares of Common Stock which may be issuable,
including options issued prior to the date hereof, under all such employee
plans and agreements shall at no time exceed the number of such shares of
Common Stock that are issuable under currently effective employee plans
and agreements); (ii) Common Stock upon exercise of the Warrants or any
other warrant issued pursuant to the terms of the Reimbursement Agreement
or otherwise issued to the Holder; (iii) Common Stock upon exercise of any
stock purchase warrant or option (other than the options referred to in
clause (i) above) or other convertible security outstanding on the date
hereof; (iv) Common Stock issued as consideration in acquisitions
(including warrants, options or convertible securities issued as
consideration for an acquisition or to officers, directors or employees of
the acquired entity in conjunction therewith), or (v) warrants or
convertible notes pursuant to the transactions contemplated by that
certain Amended and Restated Letter of Intent dated June 12, 2000, among
Holder, the Company and St. Xxxxx Capital Partners, L.P. or Common Stock
upon exercise of such warrants or conversion of such convertible notes. In
addition, for purposes of calculating any adjustment of the Exercise Price
as provided in this Section 3.2, all of the shares of Common Stock
issuable pursuant to any of the foregoing shall be assumed to be
outstanding prior to the event causing such adjustment to be made.
3.2.2 For purposes of this Section 3.2, the following Sections
3.2.2(A) to 3.2.2(E) inclusive, shall be applicable:
(A) ISSUANCE OF RIGHTS OR OPTIONS. In case at any time after the
date hereof the Company shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") (other than warrants, options or convertible
securities issued as consideration for or assumed in conjunction with an
acquisition or to officers, directors or employees of the acquired entity
in conjunction therewith), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which shares of
Common Stock are issuable upon the exercise of such rights or options or
upon conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of such rights or options, or plus, in
the case of such rights or options that relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than
the Exercise Price in effect as of the date of granting such rights or
options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon conversion or exchange
of all such Convertible Securities issuable upon the exercise of such
rights or options shall be deemed to be outstanding as of the date of the
granting of such rights or options and to have been issued for such price
per share, with the effect on the Exercise Price specified in Section
3.2.1 hereof. Except as provided in Section 3.2.2 hereof, no further
adjustment of the Exercise Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon exercise of such
rights or options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
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(B) CHANGE IN OPTION PRICE OR CONVERSION RATE. If: (i) the purchase
price provided for in any right or option, (ii) the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock shall be
decreased (other than under or by reason of provisions designed to protect
against dilution), the Exercise Price then in effect hereunder shall
forthwith be decreased to the Exercise Price that would have been in
effect at such time had such rights, options or Convertible Securities
provided for such changed purchase price, additional consideration or
conversion rate, at the time initially issued.
(C) CONSIDERATION FOR STOCK. In case at any time Common Stock or
Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash,
the consideration therefor shall be deemed to be the amount received by
the Company therefor. In case at any time any Common Stock, Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. In case at any time any Common Stock, Convertible Securities or
any rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of
consideration received therefor shall be deemed to be the fair value, as
determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be attributable to
such Common Stock, Convertible Securities, rights or options as the case
may be. In case at any time any rights or options to purchase any shares
of Common Stock or Convertible Securities shall be issued in connection
with the issuance and sale of other securities of the Company, together
consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options
shall be deemed to have been issued with consideration.
(D) RECORD DATE. In the case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock or
Convertible Securities, or (ii) to subscribe for or purchase Common Stock
or Convertible Securities, then such record date shall be deemed to be the
date of the issuance or sale of the Common Stock or Convertible Securities
deemed to have been issued or sold as a result of the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(E) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned directly by
the Company in treasury, and the disposition of any such shares shall be
considered an issuance or sale of Common Stock for the purpose of this
Section 3.2.
3.3 STOCK DIVIDENDS. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
3.4 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased and the number of Warrant Shares purchasable upon
the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced. Except as provided in this Section 3.4, no adjustment
in the Exercise Price and no change in the number of Warrant Shares purchasable
shall be made under this Article III as a result of, or by reason of, any such
subdivision or combination.
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3.5 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that a holder of Common Stock of
the Company shall be entitled to receive capital stock, securities or assets
with respect to or in exchange for their shares, then the following provisions
shall apply:
3.5.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in this Section 3.5), lawful and
adequate provisions shall be made whereby the holder of Warrants shall
thereafter have the right to purchase and receive upon the terms and
conditions specified in this Warrant and in lieu of the Warrant Shares
immediately theretofore receivable upon the exercise of the rights
represented hereby, such shares of capital stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of Warrant
Shares immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger, share exchange or sale not taken
place, and in any such case appropriate provision reasonably satisfactory
to such holder shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital
stock, securities or assets thereafter deliverable upon the exercise of
Warrants.
3.5.2 In the event of a merger, share exchange or consolidation of
the Company with or into another Person as a result of which a number of
shares of Common Stock or its equivalent of the successor Person greater
or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are
issuable to holders of Common Stock, then the Exercise Price in effect
immediately prior to such merger, share exchange or consolidation shall be
adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock.
3.5.3 The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if
other than the Company) resulting from such consolidation, share exchange
or merger of the Person purchasing or otherwise acquiring such assets
shall have assumed by written instrument executed and mailed or delivered
to the holder hereof at the last address of such holder appearing on the
books of the Company the obligation to deliver to such holder such shares
of capital stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to receive, and all
other liabilities and obligations of the Company hereunder. Upon written
request by the holder hereof, such successor Person will issue a new
warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section 3.5.
3.5.4 If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share
exchange or sale, transfer or other disposition of all or substantially
all of the Company's assets with the Person having made such offer or with
any affiliate of such Person, unless prior to the consummation of such
consolidation, merger, share exchange, sale, transfer or other disposition
the holder hereof shall have been given a reasonable opportunity to then
elect to receive upon the exercise of the Warrants either the capital
stock, securities or assets then issuable with respect to the Common Stock
or the capital stock, securities or assets, or the equivalent, issued to
previous holders of the Common Stock in accordance with such offer.
3.6 ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Exercise Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per share
of Common Stock (as
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reasonably determined in good faith by the Board of Directors of the Company),
in the case of any other dividend or distribution. Such reduction shall be made
whenever any such dividend or distribution is made and shall be effective as of
the date as of which a record is taken for the purpose of such dividend or
distribution or, if a record is not taken, the date as of which holders of
record of Common Stock entitled to such dividend or distribution are determined.
3.7 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments which by reason of this Section 3.7 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
3.8 NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number of
Warrant Shares issuable upon the exercise of the Warrants shall be adjusted as
herein provided, or the rights of the holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock, securities
or assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based and shall obtain an opinion of the Company's independent
accountants as to the correctness of such adjustments and calculations and to
the effect that such adjustments and calculations have been made in accordance
with the terms hereof. The Company shall cause to be mailed to the holder hereof
copies of such Officer's Certificate and its independent accountants' opinion
together with a notice stating that the Exercise Price and the number of Warrant
Shares purchasable upon exercise of the Warrants have been adjusted and setting
forth the adjusted Exercise Price and the adjusted number of Warrant Shares
purchasable upon the exercise of the Warrants.
3.9 NOTIFICATIONS TO HOLDERS. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in capital
stock or make any special dividend or other distribution (other than cash
dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders of its
Common Stock any additional shares of capital stock of any class or other
rights;
(iii) to effect any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation, merger or share
exchange of the Company with another Person, or sale, transfer or other
disposition of all or substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution, liquidation
or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days' (but not more than 90 days') prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days'
(but not more than 90 days') prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto,
and such notice in accordance with the foregoing clause (b) shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock, as the case may be, for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
share exchange, sale, transfer, disposition, dissolution, liquidation or winding
up, as the case may be.
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3.10 COMPANY TO PREVENT DILUTION. If any event or condition occurs as to
which other provisions of this Article III are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Warrants evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Warrant, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Exercise Price and the number of Warrant Shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Exercise
Price as otherwise determined pursuant to this Article III except in the event
of a combination of shares of the type contemplated in Section 3.4 hereof, and
then in no event to an amount greater than the Exercise Price as adjusted
pursuant to Section 3.4 hereof.
ARTICLE IV
MISCELLANEOUS
4.1 ENTIRE AGREEMENT. This Warrant, together with the Agreement and the
Registration Rights Agreement, contains the entire agreement between the holder
hereof and the Company with respect to the Warrant Shares purchasable upon
exercise hereof and the related transactions and supersedes all prior
arrangements or understandings with respect thereto.
4.2 GOVERNING LAW. This warrant shall be governed by and construed in
accordance with the laws of the State of Texas.
4.3 WAIVER AND AMENDMENT. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant shall be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
4.4 ILLEGALITY. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
4.5 COPY OF WARRANT. A copy of this Warrant shall be filed among the
records of the Company.
4.6 NOTICE. Any notice or other document required or permitted to be given
or delivered to the holder hereof shall be in writing and delivered at, or sent
by certified or registered mail to such holder at, the last address shown on the
books of the Company maintained at the Warrant Office for the registration of
this Warrant or at any more recent address of which the holder hereof shall have
notified the Company in writing. Any notice or other document required or
permitted to be given or delivered to the Company, other than such notice or
documents required to be delivered to the Warrant Office, shall be delivered at,
or sent by certified or registered mail to, the offices of the Company at 7135
Ardmore, Xxxxxxx, Xxxxx 00000, or such other address within the continental
United States of America as shall have been furnished by the Company to the
holder of this Warrant.
4.7 LIMITATION OF LIABILITY; NOT STOCKHOLDERS. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
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4.8 EXCHANGE, LOSS, DESTRUCTION, ETC. OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
this Warrant, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity or such other security in such form and amount
as shall be reasonably satisfactory to the Company, or in the event of such
mutilation upon surrender and cancellation of this Warrant, the Company will
make and deliver a new warrant of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any warrant issued under the provisions of this
Section 4.8 in lieu of any Warrant alleged to be lost, destroyed or stolen, or
in lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company. This Warrant shall be promptly canceled
by the Company upon the surrender hereof in connection with any exchange or
replacement. The Company shall pay all taxes (other than securities transfer
taxes or income taxes) and all other expenses and charges payable in connection
with the preparation, execution and delivery of warrants pursuant to this
Section 4.8.
4.9 REGISTRATION RIGHTS. The Warrant Shares shall be entitled to such
registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
4.10 HEADINGS. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated as of June 16, 2000.
INDUSTRIAL HOLDINGS, INC.
By: _______________________________________
Xxxxxxx X. Xxxxx
President and Chief Executive Officer
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SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for, and to purchase thereunder,
_______ shares of the Common Stock covered by such Warrant through a "cashless"
or "net issue" exercise of such Warrant ("Cashless Exercise") pursuant to
Section 1.1 of such Warrant, and requests that certificates for such shares (and
any other securities or other property issuable upon such exercise) be issued in
the name of, and delivered to ________________.
The calculation upon which the Cashless Exercise is based is as follows:
(No. of Warrants) ((Market Price - Exercise Price)/Market Price) = No. of
shares of Common Stock
- OR -
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for, and to purchase thereunder,
_______ shares of the Common Stock covered by such Warrant, and herewith makes
payment in full for such shares, and requests (a) that certificates for such
shares (and any other securities or other property issuable upon such exercise)
be issued in the name of, and delivered to ________________, and (b) if such
shares shall not include all of the shares issuable as provided in such Warrant,
that a new Warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
Signature: _____________________________________
Date: _________________________________________
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ASSIGNMENT
For value received, _______________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer such Warrant on the books
of the Company, with full power of substitution.
______________________________________
Date: _______________________________
I-31
EXHIBIT "B" TO REIMBURSEMENT AGREEMENT
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
THE RIGHT TO RECEIVE ANY PAYMENTS HEREON IS SUBJECT TO THE TERMS OF THAT CERTAIN
SUBORDINATION AGREEMENT AND ASSIGNMENT AGREEMENT DATED OF EVEN DATE HEREWITH BY
AND BETWEEN THE MAKER AND THE LENDER AND IN FAVOR OF COMERICA BANK-TEXAS,
NATIONAL BANK OF CANADA AND HIBERNIA NATIONAL BANK, REFERENCE TO WHICH
INSTRUMENT IS HERE MADE AND WHICH INSTRUMENT IS HERE INCORPORATED BY REFERENCE
FOR ALL PURPOSES. THIS IS NOT A NEGOTIABLE NOTE. ANY HOLDERS' RIGHTS IN THIS
NOTE ARE SUBJECT TO THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
INDUSTRIAL HOLDINGS, INC.
$_________ SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$___________ Houston, Texas ________ __, 2000
INDUSTRIAL HOLDINGS, INC., a Texas corporation (hereinafter called the
"Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to SJMB, L.P., a Delaware limited partnership (hereinafter called the "Holder"),
or its registered assigns, the principal sum of up to __________ Dollars
($_______), together with interest on the amount of such principal sum from time
to time outstanding, payable in accordance with the terms set forth below. This
Note is one of the Subordinated Reimbursement Notes issued pursuant to that
certain Reimbursement Agreement dated as of June 16, 2000 between Holder and the
Company (the "Reimbursement Agreement");
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. For all purposes of this Note, except as otherwise
expressly provided or unless the context otherwise requires: (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular; (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as promulgated from time to time by the
Association of Independent Certified Public Accountants; and (c) the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Note as a whole and not to any particular Article, Section or other
subdivision.
"BOARD OF DIRECTORS" means the board of directors of the Company as elected from
time to time or any duly authorized committee of that board.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which
is not a day on which banking institutions in Houston, Texas are authorized or
obligated by law or executive order to be closed.
"COMMON STOCK" means shares of common stock, par value $0.01 per share, of the
Company.
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"CONVERSION PRICE" means the price per share determined in accordance with
Articles IV and V (as adjusted in accordance with the terms of this Note) at
which shares of Common Stock shall be delivered to Holder upon conversion of
this Note.
"DEFAULT" means any event which is, or after notice or passage of time would be,
an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in Section 3.1.
"INDEBTEDNESS" of any Person means all indebtedness of such Person, whether
outstanding on the date of this Note or hereafter created, incurred, assumed or
guaranteed, (a) for the principal of and premium, if any, and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created (i) for money borrowed by such Person (including capitalized lease
obligations), (ii) for money borrowed by others (including capitalized lease
obligations) and guaranteed, directly or indirectly, by such Person, or (iii)
constituting purchase money indebtedness, or indebtedness secured by property
("Purchase Money Indebtedness") at the time of the acquisition of such property
by such Person, for the payment of which the Person is directly or contingently
liable; (b) for all accrued obligations of the Person in respect of any
contract, agreement or instrument imposing an obligation upon the Person to pay
over funds; (c) for all trade debt of the Person; and (d) for all deferrals,
renewals, extensions and refundings of, and amendments, modifications and
supplements to, any of the indebtedness referred to in (a), (b) or (c) above.
"MARKET PRICE" for any day, when used with reference to Common Stock, shall mean
the price of said Common Stock determined as follows: (i) the last reported sale
price for the Common Stock on such day on the principal securities exchange on
which the Common Stock is listed or admitted to trading or if no such sale takes
place on such date, the average of the closing bid and asked prices thereof as
officially reported, or, if not so listed or admitted to trading on any
securities exchange, the last sale price for the Common Stock on the National
Association of Securities Dealers National Market System or SmallCap Market on
such date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose, in each such case,
unless otherwise provided herein, averaged over a period of ten (10) consecutive
Trading Days prior to the date as of which the determination is to be made; or
(ii) if the Common Stock shall not be listed or admitted to trading or the
closing bid and asked prices are unable to be furnished by an NASD member firm,
as provided in clause (i) above, the fair market value of the Common Stock as
determined in good faith by the Board of Directors of the Company.
"MATURITY DATE", when used with respect to this Note, means the date which is
the earlier of (1) January 31, 2002, and (2) or such earlier date upon which
this Note becomes due and payable under Section 3.2.
"NOTE" means this $_______ 11% Subordinated Convertible Promissory Note, as
hereafter amended, modified, substituted or replaced.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
other entity, unincorporated organization or government or any agency or
political subdivision thereof.
"SIGNIFICANT SUBSIDIARY" means at any time, any Subsidiary of the Company that
constitutes a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 of Regulation S-X under the Securities Act of 1933, as amended.
"SUBORDINATION AGREEMENT" means that certain Subordination Agreement dated as of
June 30, 2000 by and between the Company, the Holder and Comerica Bank-Texas as
Agent, the terms of which are incorporated by reference as if fully set forth
herein, and by which the repayment of this Note are subordinated to certain
indebtedness owing by the Company to Comerica Bank-Texas, National Bank of
Canada and Hibernia National Bank all as more fully provided therein.
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"SUBSIDIARY" means a corporation or other entity more than 50% of the
outstanding voting stock of which, or more than 50% of the equity interest in
which, is owned, directly or indirectly, by the Company or by one or more other
Subsidiaries of the Company, or by any combination of the Company and one or
more other Subsidiaries. For purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, and
equity interests means the right to receive the profits of the entity, when
disbursed, or the assets of the entity upon liquidation or dissolution.
"TRADING DAYS" shall mean any days during the course of which the principal
securities exchange on which the Common Stock is listed or admitted to trading
is open for the exchange of securities.
ARTICLE II
INTEREST AND REPAYMENT
2.1 INTEREST. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate equal to eleven percent (11%) per annum calculated on the basis
of a 360-day year. All past due amounts of principal and interest shall bear
interest at fifteen percent (15%) per annum calculated on the basis of a 360-day
year until paid.
2.2 PAYMENT OF Principal AND INTEREST. Subject to the terms of the
Subordination Agreement the principal and all accrued and unpaid interest under
this Note shall be due and payable in full on the Maturity Date.
2.3 PREPAYMENTS. Subject to the terms of the Subordination Agreement and
also subject to Holder's right to convert, at any time before the Maturity Date,
the Company may prepay this Note, in whole or in part, without penalty or
discount, upon five days' prior written notice given to Holder pursuant to
Section 7.5. All payments made under this Note shall be applied first to accrued
interest, and the balance, if any, to principal; provided, however, that
interest shall accrue on any remaining principal balance and shall be payable at
the rate provided above.
2.4 MANNER OF PAYMENT. Payments of principal and interest on this Note
will be made by delivery of a check to Holder at its address as set forth in
this Note or a wire transfer pursuant to instructions from Holder.
If the date upon which the payment of principal and interest is required
to be made pursuant to this Note occurs other than on a Business Day, then such
payment of principal and interest shall be made on the next occurring Business
Day following said payment date and shall include interest through said next
occurring Business Day.
ARTICLE III
REMEDIES
3.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
(a) the Company defaults in the payment or mandatory prepayment of
the principal or interest on this Note or any other note that may be
issued pursuant to the Reimbursement Agreement, if any ("Other
Reimbursement Notes"), when such principal or interest becomes due and
payable; or
(b) the Company defaults in the performance of any covenant made by
the Company in and of (i) the Reimbursement Agreement,; (ii) the Warrants
to purchase Common Stock issued by the Company to SJMB, L.P. pursuant to
the terms of the Reimbursement Agreement (the "Reimbursement Warrants");
(iii) the Registration Rights Agreement dated June 16, 2000 between the
Company and the initial Holder hereof; (iv) that certain Letter Agreement
dated as of the date hereof among the Company, SJMB, L.P., OF Acquisition,
L.P., St. Xxxxx Management, L.L.C. and Philform, Inc. (the "OF Letter
Agreement"); (v) this Note, and such default remains uncured for a period
of 30 days (other than a default in the performance of a
I-34
covenant specifically addressed elsewhere in this Section 3.1); (vi) the
Other Reimbursement Notes; or (vii) any document or agreement pursuant to
which this Note is secured by assets of the Company or any of its
Subsidiaries and all applicable cure periods in respect of the foregoing
have run; PROVIDED THAT a default in the performance of any covenant in
Section 6.1 of this Note shall be an Event of Default immediately upon
occurrence; or
(c) any representation or warranty made by the Company or any
Significant Subsidiary in the Reimbursement Warrants, the Registration
Rights Agreement, the OF Letter Agreement, this Note, the Other
Reimbursement Notes or the Reimbursement Agreement or in any certificate
furnished by the Company in connection with the consummation of the
transaction contemplated thereby or hereby, is untrue in any material
respect as of the date of making thereof; or
(d) a default or event of default occurs under any document
evidencing any Indebtedness of the Company or any Significant Subsidiary
(other than the Indebtedness evidenced by this Note or the Other
Reimbursement Notes or good-faith disputes with trade creditors) having an
aggregate principal amount in excess of $500,000 and all applicable cure
periods have run with respect thereto without such default or event of
default having been cured to the satisfaction of the holder of such
Indebtedness; PROVIDED, HOWEVER, that the Company's current defaults
existing as of the date of the Reimbursement Agreement under certain
indebtedness owed to EnSerCo, L.L.C. and Trinity Industries, Inc. shall
not be considered a default hereunder; or
(e) a court of competent jurisdiction enters a final and
non-appealable judgment or judgments against the Company or any
Significant Subsidiary, or any property or assets of the Company or any
Significant Subsidiary, for the payment of money aggregating $100,000 or
more in excess of applicable insurance coverage; or
(f) a court of competent jurisdiction enters (i) a decree or order
for relief in respect of the Company or any Significant Subsidiary in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (ii) a
decree or order adjudging the Company or any Significant Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Significant Subsidiary under any applicable federal or
state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any
Significant Subsidiary or of any substantial part of the property of the
Company or any Significant Subsidiary or ordering the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary
and any such decree or order of relief or any such other decree or order
remains unstayed for a period of 90 days from its date of entry; or
(g) the Company or any Significant Subsidiary commences a voluntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the Company or
any Significant Subsidiary files a petition, answer or consent seeking
reorganization or relief under any applicable federal or state law, or the
Company or any Significant Subsidiary makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts
generally as they become due; or
(h) any person or group (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) becomes the beneficial owner of 40% or
more of the total voting power of the Company and was not the beneficial
owner of 40% or more of the total voting power of the Company as of the
date hereof; provided that the foregoing shall not include the initial
Holder hereof, its affiliates or any person or group who or which acquires
the Reimbursement Warrants or shares of the Company's Common Stock
issuable upon exercise of the Reimbursement Warrants or upon conversion of
this Note or the Other Reimbursement Notes; and further provided that such
I-35
default has not been cured or waived within ninety (90) days following
such change of beneficial ownership; or
(i) the Company or any Significant Subsidiary (1) merges or
consolidates with or into any other Person (unless the Company or any
Significant Subsidiary is the surviving or acquiring party); (2) dissolves
or liquidates; or (3) sells all or any substantial portion of its assets
(unless the purchaser is a Significant Subsidiary of the Company).
3.2 ACCELERATION OF MATURITY. This Note and all accrued interest shall
automatically become immediately due and payable if an Event of Default
described in Sections 3.1(f), 3.1(g) or 3.1(i) occurs and, this Note shall, at
the option of the Holder in its sole discretion, become immediately due and
payable if any other Event of Default occurs, and in every such case the Holder
of the Note may declare the principal and interest on the Note to be due and
payable immediately.
ARTICLE IV
CONVERSION OF NOTE
Subject to and upon compliance with the provisions of this Article, at the
option of Holder, all or any part of this Note may be converted at any time, at
the principal amount then outstanding hereunder, together with accrued and
unpaid interest thereon, into fully paid and nonassessable shares (calculated as
to each conversion to the nearest 1/100 of a share) of Common Stock. The
Conversion Price shall initially be $1.25 per share. Notwithstanding anything
else to the contrary set forth herein, the Holder shall have the right to
convert this Note pursuant to the terms set forth herein at any time, including
the 30 Business Days following (i) the Maturity Date or (ii) any prepayment
pursuant to Section 2.4 hereof. If Holder elects to convert this Note after a
prepayment has been made pursuant to Section 2.4, then Holder shall return all
or such portion of the funds paid to Holder as to which Holder has elected to
convert.
ARTICLE V
ADJUSTMENT OF CONVERSION PRICE
5.1 ANTI-DILUTION PROVISIONS. The Conversion Price shall be subject to
adjustment from time to time as hereinafter provided.
5.2 ADJUSTMENT OF CONVERSION Price UPON ISSUANCE OF COMMON STOCK.
5.2.1 (A) If and whenever after the date hereof the Company shall
issue or sell any Common Stock for no consideration or for a consideration
per share less than the Conversion Price, issue convertible securities
other than this Note, issue warrants other than the Warrants issued as of
the date hereof, grant stock options, or issue any other common stock
equivalent (other than shares reserved for issuance to officers,
employees, directors, consultants or advisors of the Company pursuant to
existing stock option or restricted stock purchase plans) then, forthwith,
upon such issue or sale, the Conversion Price shall be reduced (but not
increased), to the lower price per share (calculated as provided in this
Section 5.2 to the nearest one-ten thousandth of a cent) but in any event
not less than $.001 per share.
(B) Notwithstanding the provisions of this Section 5.2, no
adjustment shall be made in the Conversion Price in the event that the
Company issues, in one or more transactions, (i) Common Stock upon
exercise of any options issued to officers, directors or employees of the
Company pursuant to a stock option plan or an employment, severance or
consulting agreement as now or hereafter in effect, in each case approved
by the Board of Directors (provided that the aggregate number of shares of
Common Stock which may be issuable, including options issued prior to the
date hereof, under all such employee plans and agreements shall at no time
exceed the number of such shares of Common Stock outstanding on the date
hereof on a fully diluted basis that are issuable under currently
effective employee plans and agreements); (ii) Common Stock upon
conversion of this Note, (iv) Common Stock upon exercise of any stock
purchase warrant or option (other than the options referred to in clause
(i) above) or other convertible security
I-36
outstanding on the date hereof; (v) Common Stock issued as consideration
in acquisitions (including warrants, options or convertible securities
issued as consideration for an acquisition or to officers, directors or
employees of the acquired entity in conjunction therewith); or (vi)
warrants or convertible notes pursuant to the transactions contemplated by
that certain Amended and Restated Letter of Intent dated June 12, 2000,
among Holder, the Company and St. Xxxxx Capital Partners, L.P. or Common
Stock upon exercise of such warrants or conversion of such convertible
notes. In addition for purposes of calculating any adjustment of the
Conversion Price as provided in this Section 5.2, all of the shares of
Common Stock issuable pursuant to any of the foregoing shall be assumed to
be outstanding prior to the event causing such adjustment to be made.
5.2.2 For purposes of this Section 5.2, the following shall be
applicable:
(A) ISSUANCE OF RIGHTS OR OPTIONS. In case at any time after the
date hereof the Company shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") (other than warrants, options or convertible
securities issued as consideration for or assumed in conjunction with an
acquisition or to officers, directors, or employees of the acquired entity
in conjunction therewith), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which shares of
Common Stock are issuable upon the exercise of such rights or options or
upon conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of such rights or options, or plus, in
the case of such rights or options that relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than
the Conversion Price in effect as of the date of granting such rights or
options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon conversion or exchange
of all such Convertible Securities issuable upon the exercise of such
rights or options shall be deemed to be outstanding as of the date of the
granting of such rights or options and to have been issued for such price
per share, with the effect on the Conversion Price specified in Section
5.2.1 hereof. Except as provided in Section 5.2.2 hereof, no further
adjustment of the Conversion Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Securities upon exercise of
such rights or options or upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Securities.
(B) CHANGE IN OPTION PRICE OR CONVERSION RATE. If: (i) the purchase
price provided for in any right or option, (ii) the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock shall be
decreased (other than under or by reason of provisions designed to protect
against dilution), the Conversion Price then in effect hereunder shall
forthwith be decreased to the Conversion Price that would have been in
effect at such time had such rights, options or Convertible Securities
provided for such changed purchase price, additional consideration or
conversion rate, at the time initially issued.
(C) CONSIDERATION FOR STOCK. In case at any time Common Stock or
Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash,
the consideration therefor shall be deemed to be the amount received by
the Company therefor. In case at any time any Common Stock, Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for consideration other
than cash, the amount of the consideration other than cash
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received by the Company shall be deemed to be the fair value of such
consideration, as determined reasonably and in good faith by the Board of
Directors of the Company. In case at any time any Common Stock,
Convertible Securities or any rights or options to purchase any Common
Stock or Convertible Securities shall be issued in connection with any
merger or consolidation in which the Company is the surviving corporation,
the amount of consideration received therefor shall be deemed to be the
fair value, as determined reasonably and in good faith by the Board of
Directors of the Company, of such portion of the assets and business of
the nonsurviving corporation as such Board of Directors may determine to
be attributable to such Common Stock, Convertible Securities, rights or
options as the case may be. In case at any time any rights or options to
purchase any shares of Common Stock or Convertible Securities shall be
issued in connection with the issuance and sale of other securities of the
Company, together consisting of one integral transaction in which no
consideration is allocated to such rights or options by the parties, such
rights or options shall be deemed to have been issued without
consideration.
(D) RECORD DATE. In the case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock or
Convertible Securities, or (ii) to subscribe for or purchase Common Stock
or Convertible Securities, then such record date shall be deemed to be the
date of the issuance or sale of the Common Stock or Convertible Securities
deemed to have been issued or sold as a result of the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(E) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned directly by
the Company in treasury, and the disposition of any such shares shall be
considered an issuance or sale of Common Stock for the purpose of this
Section 5.2.
5.3 STOCK DIVIDENDS. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.4 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares into which
this Note may be converted immediately prior to such subdivision shall be
proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares into which this Note
may be converted immediately prior to such combination shall be proportionately
reduced. Except as provided in this Section 5.4 no adjustment in the Conversion
Price and no change in the number of Shares shall be made under this Article V
as a result of or by reason of any such subdivision or combination.
5.5 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
5.5.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in Section 5.5.3), lawful and adequate
provisions shall be made whereby the holder of this Note shall thereafter
have the right to purchase and receive upon the terms and conditions
specified in this Note and in lieu of the shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares
of capital stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such
Common Stock equal to
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the number of shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or
sale not taken place, and in any such case appropriate provision
reasonably satisfactory to such holder shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the
Conversion Price and of the number of shares receivable upon the exercise)
shall thereafter be applicable, as nearly as possible, in relation to any
shares of capital stock, securities or assets thereafter deliverable upon
the exercise of this Note.
5.5.2 In the event of a merger, share exchange or consolidation of
the Company with or into another Person as a result of which a number of
shares of common stock or its equivalent of the successor Person greater
or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are
issuable to holders of Common Stock, then the Conversion Price in effect
immediately prior to such merger, share exchange or consolidation shall be
adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock.
5.5.3 The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if
other than the Company) resulting from such consolidation, share exchange
or merger or the Person purchasing or otherwise acquiring such assets
shall have assumed by written instrument executed and mailed or delivered
to the Holder hereof at the last address of such Holder appearing on the
books of the Company the obligation to deliver to such Holder such shares
of capital stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to receive, and all
other liabilities and obligations of the Company hereunder. Upon written
request by the Holder hereof, such Successor Person will issue a new Note
revised to reflect the modifications in this Note effected pursuant to
this Section 5.5.
5.5.4 If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share
exchange or sale, transfer or other disposition of all or substantially
all of the Company's assets with the Person having made such offer or with
any affiliate of such Person, unless prior to the consummation of such
consolidation, merger, share exchange, sale, transfer or other disposition
the holder hereof shall have been given a reasonable opportunity to then
elect to receive upon the conversion of this Note either the capital
stock, securities or assets then issuable with respect to the Common Stock
or the capital stock, securities or assets, or the equivalent, issued to
previous holders of the Common Stock in accordance with such offer.
5.6 ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Conversion Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per share
of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
5.7 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of the Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in the Conversion Price; provided, however, that any
adjustments which by reason of this Section 5.7
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are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the nearest full
share or nearest one hundredth of a dollar, as applicable.
5.8 NOTICE OF ADJUSTMENT. Whenever the Conversion Price or the number of
Shares issuable upon the conversion of the Note shall be adjusted as herein
provided, or the rights of the holder hereof shall change by reason of other
events specified herein, the Company shall compute the adjusted Conversion Price
and the adjusted number of Shares in accordance with the provisions hereof and
shall prepare an Officer's Certificate setting forth the adjusted Conversion
Price and the adjusted number of Shares issuable upon the conversion of this
Note or specifying the other shares of stock, securities or assets receivable as
a result of such change in rights, and showing in reasonable detail the facts
and calculations upon which such adjustments or other changes are based. The
Company shall cause to be mailed to the Holder hereof copies of such Officer's
Certificate together with a notice stating that the Conversion Price and the
number of Shares purchasable upon conversion of this Note have been adjusted and
setting forth the adjusted Conversion Price and the adjusted number of Shares
purchasable upon conversion of this Note.
5.9 NOTIFICATIONS TO HOLDER. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution
(other than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders
of its Common Stock any additional shares of capital stock of any
class or other rights;
(iii) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation, merger or share exchange of the Company with another
Person, or sale, transfer or other disposition of all or
substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then, in any one or more of such cases, the Company shall give the Holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock, as the case may be, for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
as the case may be.
5.10 COMPANY TO PREVENT DILUTION. If any event or condition occurs as to which
other provisions of this Article are not strictly applicable or if strictly
applicable would not fairly protect the exercise or purchase rights of this Note
evidenced hereby in accordance with the essential intent and principles of such
provisions, or that might materially and adversely affect the exercise or
purchase rights of the holder hereof under any provisions of this Note, then the
Company shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
exercise and purchase rights as aforesaid, and any adjustments necessary with
respect to the Conversion Price and the number of shares purchasable hereunder
so as to preserve the rights of the holder hereunder. In no event shall any such
adjustment have the effect of increasing the Conversion Price as otherwise
determined
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pursuant to this Article except in the event of a combination of shares of the
type contemplated in Section 5.4 hereof, and then in no event to an amount
greater than the Conversion Price as adjusted pursuant to Section 5.4 hereof.
ARTICLE VI
COVENANTS
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 PAYMENT OF PRINCIPAL AND ACCRUED INTEREST. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
6.2 CORPORATE EXISTENCE. The Company will, and will cause each Subsidiary
to, do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights (charter and statutory) and
franchises; provided, however, that the Company or a Subsidiary shall not be
required to preserve any such right or franchise if it shall reasonably
determine that the preservation thereof is no longer desirable in the conduct of
its business.
6.3 TAXES; CLAIMS; ETC. The Company will, and will cause each Subsidiary
to, promptly pay and discharge all lawful taxes, assessments, and governmental
charges or levies imposed upon it or upon its income or profits, or upon any of
its properties, real, personal, or mixed, before the same shall become in
default, as well as all lawful claims for labor, materials, and supplies or
otherwise which, if unpaid, might become a lien or charge upon such properties
or any part thereof, and which lien or charge will have a material adverse
effect on the business of the Company; provided, however, that neither the
Company nor any Subsidiary shall be required to pay or cause to be paid any such
tax, assessment, charge, levy, or claim prior to institution of foreclosure
proceedings if the validity thereof shall concurrently be contested in good
faith by appropriate proceedings and if the Company shall have established
reserves deemed by the Company adequate with respect to such tax, assessment,
charge, levy, or claim.
6.4 MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
6.5 RESERVATION OF SHARES. The Company shall reserve at all times so long
as all or any part of this Note remains outstanding, free from preemptive
rights, out of its treasury Common Stock or its authorized but unissued shares
of Common Stock, or both, solely for the purpose of effecting the conversion of
this Note pursuant to Article IV hereof, a sufficient number of shares of Common
Stock to provide for the conversion of this Note.
6.6 NOTICE OF DEFAULTS. The Company will promptly notify the Holder in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting holders to accelerate the maturity of such Indebtedness.
ARTICLE VII
MISCELLANEOUS
7.1 CONSENT TO AMENDMENTS. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the written consent
to such amendment, action or omission to act from the holders of a majority of
the aggregate principal amount of this Note.
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7.2 BENEFITS OF NOTE; NO IMPAIRMENT OF RIGHTS OF HOLDER OF SENIOR
INDEBTEDNESS. Nothing in this Note, express or implied, shall give to any
Person, other than the Company, Holder, and their successors any benefit or any
legal or equitable right, remedy or claim under or in respect of this Note.
7.3 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
7.4 ASSIGNMENTS. Holder may sell, transfer and assign this Note and any
rights hereunder upon written notice to the Company. Any lender to which Holder
grants a security interest in this Note shall be entitled to exercise all
remedies to which it is entitled by contract or by law, including (without
limitation) transferring this Note into its own name or into the name of any
purchaser at any sale undertaken in connection with enforcement by such lender
of its remedies.
7.5 NOTICE; ADDRESS OF PARTIES. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to the
Company: Industrial Holdings, Inc., 0000 Xxxxxxx, Xxxxxxx, Xxxxx 00000, Attn:
President, or at any other address designated by the Company in writing to
Holder; if to Holder: SJMB, L.P., c/o SJMB, L.L.C., 000 Xxxx Xxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attn: Xxxx X. Xxxxxxxx, or at any other address
designated by Holder to the Company in writing.
7.6 SEPARABILITY CLAUSE. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
7.7 GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Texas (without regard to
principles of choice of law).
7.8 USURY. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Texas and the United States of America,
and judicial or administrative interpretations or determinations thereof
regarding the contracting for, charging and receiving of interest for the use,
forbearance, and detention of money (hereinafter referred to in this Section 7.8
as "Applicable Law"). The Holder shall have no right to claim, to charge or to
receive any interest in excess of the maximum rate of interest, if any,
permitted to be charged on that portion of the amount representing principal
which is outstanding and unpaid from time to time by Applicable Law.
Determination of the rate of interest for the purpose of determining whether
this Note is usurious under Applicable Law shall be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
actual time of this Note, all interest or other sums deemed to be interest
(hereinafter referred to in this Section 7.8 as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.
7.9 COLLECTION FEES. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the Company
hereby undertakes to pay all costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Holder.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
INDUSTRIAL HOLDINGS, INC.
By: __________________________________
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Executive Officer
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EXHIBIT "C" TO REIMBURSEMENT AGREEMENT
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
INDUSTRIAL HOLDINGS, INC.
Expiring on [FIVE YEARS FROM THE DATE OF ISSUANCE OF A SUBORDINATED
REIMBURSEMENT NOTE] ___, 2005
This Warrant to Purchase Common Stock (the "Warrant") certifies that for value
received, SJMB, L.P., a Delaware limited partnership (the "Holder"), or its
assigns, is entitled to subscribe for and purchase from the Company (as
hereinafter defined), in whole or in part, ____________ shares of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
(as hereinafter defined) at an initial Exercise Price (as hereinafter defined),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of shares of Common Stock purchasable
hereunder and the Exercise Price therefor are subject to adjustment as
hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00 p.m., Houston, Texas time, on [FIVE YEARS FROM THE DATE OF ISSUANCE OF A
SUBORDINATED REIMBURSEMENT NOTE] ___, 2005.
As used herein, the following terms shall have the meanings set forth
below:
"COMPANY" shall mean Industrial Holdings, Inc., a Texas corporation, and
shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
"COMMON STOCK" shall mean and include the Company's Common Stock, par
value $0.01 per share, authorized on the date of the original issue of this
Warrant and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets of the character referred to in Section 3.5 hereof,
the stock, securities provided for in such Section 3.5, and (ii) any other
shares of common stock of the Company into which such shares of Common Stock may
be converted.
"EXERCISE PRICE" The initial purchase price for each share of Common Stock
payable upon exercise of the Warrants shall be $1.25 The Exercise Price shall be
adjusted from time to time pursuant to the provisions hereof.
"MARKET PRICE" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (i) the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers National Market System or
SmallCap Market on such date, or, if there shall have been no trading on such
date or if the Common Stock shall not be listed on such system, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any NASD member firm selected from time to time by the Company for such purpose,
in each such case, unless otherwise provided herein, averaged over a period of
ten (10) consecutive Trading Days
I-44
prior to the date as of which the determination is to be made; or (ii) if the
Common Stock shall not be listed or admitted to trading or the closing bid and
asked prices are unable to be furnished by an NASD member firm, as provided in
clause (i) above, the fair market value of the Common Stock as determined in
good faith by the Board of Directors of the Company.
"NOTE" shall mean any Subordinated Reimbursement Note of the Company
issued to Holder pursuant to the terms and conditions of the Reimbursement
Agreement, as hereinafter defined.
"OUTSTANDING," when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the Company.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"TRADING DAYS" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
"WARRANT SHARES" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrants.
ARTICLE I
EXERCISE OF WARRANTS
1.1 METHOD OF EXERCISE. The Warrants represented hereby may be exercised
by the holder hereof, in whole or in part, at any time and from time to time on
or after the date hereof until 5:00 p.m., Houston, Texas time, on ____________,
200__. To exercise the Warrants, the holder hereof shall deliver to the Company,
at the Warrant Office designated in Section 2.1 hereof, (i) a written notice in
the form of the Subscription Notice attached as an exhibit hereto, stating
therein the election of such holder to exercise the Warrants in the manner
provided in the Subscription Notice; (ii) payment in full of the Exercise Price
(A) in cash or by bank check for all Warrant Shares purchased hereunder, or (B)
through a "cashless" or "net-issue" exercise of each such Warrant ("Cashless
Exercise"); the holder shall exchange each Warrant subject to a Cashless
Exercise for that number of Warrant Shares determined by multiplying the number
of Warrant Shares issuable hereunder by a fraction, the numerator of which shall
be the difference between (x) the Market Price and (y) the Exercise Price for
each such Warrant, and the denominator of which shall be the Market Price; the
Subscription Notice shall set forth the calculation upon which the Cashless
Exercise is based, or (C) a combination of (A) and (B) above; and (iii) this
Warrant. The Warrants shall be deemed to be exercised on the date of receipt by
the Company of the Subscription Notice, accompanied by payment for the Warrant
Shares and surrender of this Warrant, as aforesaid, and such date is referred to
herein as the "Exercise Date". Upon such exercise, the Company shall, as
promptly as practicable and in any event within ten (10) business days, issue
and deliver to such holder a certificate or certificates for the full number of
the Warrant Shares purchased by such holder hereunder, and shall, unless the
Warrants have expired, deliver to the holder hereof a new Warrant representing
the number of Warrants, if any, that shall not have been exercised, in all other
respects identical to this Warrant. As permitted by applicable law, the Person
in whose name the certificates for Common Stock are to be issued shall be deemed
to have become a holder of record of such Common Stock on the Exercise Date and
shall be entitled to all of the benefits of such holder on the Exercise Date,
including without limitation, the right to receive dividends and other
distributions for which the record date falls on or after the Exercise Date and
the right to exercise voting rights.
1.2 EXPENSES AND TAXES. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes
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attributable to the preparation, issuance or delivery of the Warrants and of the
shares of Common Stock issuable upon exercise of the Warrants.
1.3 RESERVATION OF SHARES. The Company shall reserve at all times so long
as the Warrants remain outstanding, free from preemptive rights, out of its
treasury Common Stock or its authorized but unissued shares of Common Stock, or
both, solely for the purpose of effecting the exercise of the Warrants, a
sufficient number of shares of Common Stock to provide for the exercise of the
Warrants.
1.4 VALID ISSUANCE. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof and, without limiting the generality of the
foregoing, the Company shall take no action or fail to take any action which
will cause a contrary result (including, without limitation, any action that
would cause the Exercise Price to be less than the par value, if any, of the
Common Stock).
1.5 REIMBURSEMENT AGREEMENT. The Warrants represented hereby are part of a
duly authorized issuance and sale of warrants to purchase Common Stock issued
pursuant to the terms and conditions of that certain Reimbursement Agreement
dated as of June 16, 2000 (the "Reimbursement Agreement") between the Company
and the Holder. The holder hereof shall be entitled to registration rights with
respect to the underlying shares of Common Stock under the Securities Act and
any applicable state securities or blue sky laws to the extent set forth in the
Registration Rights Agreement among Holder, SJCP and the Company dated as of
June 16, 2000 (the "Registration Rights Agreement"), as amended or modified. The
terms of the Reimbursement Agreement are hereby incorporated herein for all
purposes and shall be considered a part of this Warrant as if they had been
fully set forth herein. Notwithstanding the previous sentence, in the event of
any conflict between the provisions of the Reimbursement Agreement and of this
Warrant, the provisions of this Warrant shall control.
1.6 ACKNOWLEDGMENT OF RIGHTS. At the time of the exercise of the Warrants
in accordance with the terms hereof and upon the written request of the holder
hereof, the Company will acknowledge in writing its continuing obligation to
afford to such holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of this Warrant;
PROVIDED, HOWEVER, that if the holder hereof shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.7 NO FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of this Warrant. If more than
one Warrant shall be presented for exercise at the same time by the same holder,
the number of full shares of Common Stock which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of whole shares
of Common Stock purchasable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 1.7, be issuable on the exercise of this Warrant, the Company shall pay
an amount in cash calculated by it to be equal to the Market Price of one share
of Common Stock at the time of such exercise multiplied by such fraction
computed to the nearest whole cent.
ARTICLE II
TRANSFER
2.1 WARRANT OFFICE. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 7135 Ardmore, Xxxxxxx, Xxxxx 00000 and may
subsequently be such other office of the Company or of any transfer agent of the
Common Stock in the continental United States as to which written notice has
previously been given to the holder hereof. The Company shall maintain, at the
Warrant Office, a register for the Warrants in which the Company shall record
the name and address of the Person in whose name this Warrant has been issued,
as well as the name and address of each permitted assignee of the rights of the
registered owner hereof.
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2.2 OWNERSHIP OF WARRANTS. The Company may deem and treat the Person in
whose name the Warrants are registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if properly assigned in compliance with this Article II, may
be exercised by an assignee for the purchase of Warrant Shares without having a
new Warrant issued.
2.3 RESTRICTIONS ON TRANSFER OF WARRANTS. The Company agrees to maintain
at the Warrant Office books for the registration and transfer of the Warrants.
Subject to the restrictions on transfer of the Warrants in this Section 2.3, the
Company, from time to time, shall register the transfer of the Warrants in such
books upon surrender of this Warrant at the Warrant Office properly endorsed or
accompanied by appropriate instruments of transfer and written instructions for
transfer satisfactory to the Company. Upon any such transfer and upon payment by
the holder or its transferee of any applicable transfer taxes, new Warrants
shall be issued to the transferee and the transferor (as their respective
interests may appear) and the surrendered Warrants shall be canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes
or income taxes) and all other expenses and charges payable in connection with
the transfer of the Warrants pursuant to this Section 2.3.
2.3.1 RESTRICTIONS IN GENERAL. The holder of the Warrants agrees
that it will not transfer the Warrants unless registration of such Warrant
Shares under the Securities Act and any applicable state securities or
blue sky laws has become effective or the holder has provided to the
Company an opinion of counsel acceptable to the Company that such
registration is not required. Prior to any transfer (other than the grant
of a security interest) as provided herein, the transferor shall provide
written notice to the Company and an opinion of counsel to the effect that
the proposed transfer is exempt from registration under all applicable
securities laws, all in form and substance reasonably satisfactory to the
Company. Any lender or lenders to which the Holder grants a security
interest in the Warrants shall be entitled to exercise all remedies to
which it is entitled by contract or by law, including (without limitation)
transferring the Warrants into its own name or into the name of any
purchaser at any sale undertaken in connection with enforcement by such
lender of its remedies.
2.4 COMPLIANCE WITH SECURITIES LAWS. Subject to the terms of the
Registration Rights Agreement, and notwithstanding any other provisions
contained in this Warrant except Section 2.3.1, the holder hereof understands
and agrees that the following restrictions and limitations shall be applicable
to all Warrant Shares and to all resales or other transfers thereof pursuant to
the Securities Act:
2.4.1 The holder hereof agrees that the Warrant Shares shall not be
sold or otherwise transferred unless the Warrant Shares are registered
under the Securities Act and applicable state securities or blue sky laws
or are exempt therefrom.
2.4.2 A legend in substantially the following form will be placed on
the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY OTHER APPLICABLE SECURITIES LAWS."
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2.4.3 Stop transfer instructions may be imposed with respect to the
Warrant Shares so as to restrict resale or other transfer thereof, subject
to this Section 2.4.
ARTICLE III
ANTI-DILUTION
3.1 ANTI-DILUTION PROVISIONS. The Exercise Price shall be subject to
adjustment from time to time as hereinafter provided.
3.2 ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF COMMON STOCK.
3.2.1 (A) If and whenever after the date hereof the Company shall
issue or sell any Common Stock for no consideration or for a consideration
per share less than the Exercise Price, issue convertible securities other
than this Warrant, including other warrants, grant stock options, or issue
any other common stock equivalent (other than shares reserved for issuance
to officers, employees, directors, consultants or advisors of the Company
pursuant to existing stock option or restricted stock purchase plans),
then, forthwith upon such issue or sale, the Exercise Price shall be
reduced (but not increased), to the lower price per share (calculated
pursuant to this Section 3.2 to the nearest one-ten thousandth of a cent)
but in any event not less than $.001 per share.
(B) Notwithstanding the provisions of this Section 3.2, no
adjustment shall be made in the Exercise Price in the event that the
Company issues, in one or more transactions, (i) Common Stock or
convertible securities upon exercise of any options issued to officers,
directors or employees of the Company pursuant to a stock option plan or
an employment, severance or consulting agreement as now or hereafter in
effect, in each case approved by the Board of Directors (provided that the
aggregate number of shares of Common Stock which may be issuable,
including options issued prior to the date hereof, under all such employee
plans and agreements shall at no time exceed the number of such shares of
Common Stock that are issuable under currently effective employee plans
and agreements); (ii) Common Stock upon exercise of the Warrants or any
other warrant issued pursuant to the terms of the Reimbursement Agreement
or otherwise issued to the Holder; (iii) Common Stock upon exercise of any
stock purchase warrant or option (other than the options referred to in
clause (i) above) or other convertible security outstanding on the date
hereof; (iv) Common Stock issued as consideration in acquisitions
(including warrants, options or convertible securities issued as
consideration for an acquisition or to officers, directors or employees of
the acquired entity in conjunction therewith); or (v) warrants or
convertible notes pursuant to the transactions contemplated by that
certain Amended and Restated Letter of Intent dated June 12, 2000, among
Holder, the Company and St. Xxxxx Capital Partners, L.P. or Common Stock
upon exercise of such warrants or conversion of such convertible notes. In
addition, for purposes of calculating any adjustment of the Exercise Price
as provided in this Section 2.3, all of the shares of Common Stock
issuable pursuant to any of the foregoing shall be assumed to be
outstanding prior to the event causing such adjustment to be made.
3.2.2 For purposes of this Section , the following Sections 3.2.2(A)
to 3.2.2(E) inclusive, shall be applicable:
(A) ISSUANCE OF RIGHTS OR OPTIONS. In case at any time after
the date hereof the Company shall in any manner grant (whether directly or
by assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") (other than warrants, options or convertible
securities issued as consideration for or assumed in conjunction with an
acquisition or to officers, directors or employees of the acquired entity
in conjunction therewith), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which shares of
Common Stock are issuable upon the exercise of such rights or options or
upon
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conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of such rights or options, or plus, in
the case of such rights or options that relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than
the Exercise Price in effect as of the date of granting such rights or
options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon conversion or exchange
of all such Convertible Securities issuable upon the exercise of such
rights or options shall be deemed to be outstanding as of the date of the
granting of such rights or options and to have been issued for such price
per share, with the effect on the Exercise Price specified in Section
3.2.1 hereof. Except as provided in Section 3.2.2 hereof, no further
adjustment of the Exercise Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon exercise of such
rights or options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(B) CHANGE IN OPTION PRICE OR CONVERSION RATE. If: (i) the
purchase price provided for in any right or option, (ii) the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock shall be
decreased (other than under or by reason of provisions designed to protect
against dilution), the Exercise Price then in effect hereunder shall
forthwith be decreased to the Exercise Price that would have been in
effect at such time had such rights, options or Convertible Securities
provided for such changed purchase price, additional consideration or
conversion rate, at the time initially issued.
(C) CONSIDERATION FOR STOCK. In case at any time Common Stock
or Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash,
the consideration therefor shall be deemed to be the amount received by
the Company therefor. In case at any time any Common Stock, Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. In case at any time any Common Stock, Convertible Securities or
any rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of
consideration received therefor shall be deemed to be the fair value, as
determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be attributable to
such Common Stock, Convertible Securities, rights or options as the case
may be. In case at any time any rights or options to purchase any shares
of Common Stock or Convertible Securities shall be issued in connection
with the issuance and sale of other securities of the Company, together
consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options
shall be deemed to have been issued with consideration.
(D) RECORD DATE. In the case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (i)
to receive a dividend or other distribution payable in Common Stock or
Convertible Securities, or (ii) to subscribe for or purchase Common Stock
or Convertible Securities, then such record date shall be deemed to be the
date of the issuance or sale of the Common Stock or Convertible Securities
deemed to have been issued or sold as a result of the declaration of such
dividend or the making of such other
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distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(E) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned directly by
the Company in treasury, and the disposition of any such shares shall be
considered an issuance or sale of Common Stock for the purpose of this
Section 3.2.
4.3 STOCK DIVIDENDS. In case the Company shall declare a dividend or
make any other distribution upon any shares of the Company, payable in
Common Stock or Convertible Securities, any Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
3.4 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased and the number of Warrant Shares purchasable upon
the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced. Except as provided in this Section 3.4, no adjustment
in the Exercise Price and no change in the number of Warrant Shares purchasable
shall be made under this Article III as a result of, or by reason of, any such
subdivision or combination.
3.5 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that a holder of Common Stock of
the Company shall be entitled to receive capital stock, securities or assets
with respect to or in exchange for their shares, then the following provisions
shall apply:
3.5.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in this Section 3.5), lawful and
adequate provisions shall be made whereby the holder of Warrants shall
thereafter have the right to purchase and receive upon the terms and
conditions specified in this Warrant and in lieu of the Warrant Shares
immediately theretofore receivable upon the exercise of the rights
represented hereby, such shares of capital stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of Warrant
Shares immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger, share exchange or sale not taken
place, and in any such case appropriate provision reasonably satisfactory
to such holder shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital
stock, securities or assets thereafter deliverable upon the exercise of
Warrants.
3.5.2 In the event of a merger, share exchange or consolidation of
the Company with or into another Person as a result of which a number of
shares of Common Stock or its equivalent of the successor Person greater
or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are
issuable to holders of Common Stock, then the Exercise Price in effect
immediately prior to such merger, share exchange or consolidation shall be
adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock.
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3.5.3 The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if
other than the Company) resulting from such consolidation, share exchange
or merger of the Person purchasing or otherwise acquiring such assets
shall have assumed by written instrument executed and mailed or delivered
to the holder hereof at the last address of such holder appearing on the
books of the Company the obligation to deliver to such holder such shares
of capital stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to receive, and all
other liabilities and obligations of the Company hereunder. Upon written
request by the holder hereof, such successor Person will issue a new
warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section 3.5
3.5.4 If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share
exchange or sale, transfer or other disposition of all or substantially
all of the Company's assets with the Person having made such offer or with
any affiliate of such Person, unless prior to the consummation of such
consolidation, merger, share exchange, sale, transfer or other disposition
the holder hereof shall have been given a reasonable opportunity to then
elect to receive upon the exercise of the Warrants either the capital
stock, securities or assets then issuable with respect to the Common Stock
or the capital stock, securities or assets, or the equivalent, issued to
previous holders of the Common Stock in accordance with such offer.
3.6 ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Exercise Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per share
of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for the
purpose of such dividend or distribution or, if a record is not taken, the date
as of which holders of record of Common Stock entitled to such dividend or
distribution are determined.
3.7 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments which by reason of this Section 3.7 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
3.8 NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number of
Warrant Shares issuable upon the exercise of the Warrants shall be adjusted as
herein provided, or the rights of the holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock, securities
or assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based and shall obtain an opinion of the Company's independent
accountants as to the correctness of such adjustments and calculations and to
the effect that such adjustments and calculations have been made in accordance
with the terms hereof. The Company shall cause to be mailed to the holder hereof
copies of such Officer's Certificate and its independent accountants' opinion
together with a notice stating that the Exercise Price and the number of
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Warrant Shares purchasable upon exercise of the Warrants have been adjusted and
setting forth the adjusted Exercise Price and the adjusted number of Warrant
Shares purchasable upon the exercise of the Warrants.
3.9 NOTIFICATIONS TO HOLDERS. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in capital
stock or make any special dividend or other distribution (other than cash
dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders of its
Common Stock any additional shares of capital stock of any class or other
rights;
(iii) to effect any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation, merger or share
exchange of the Company with another Person, or sale, transfer or other
disposition of all or substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution, liquidation
or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days' (but not more than 90 days') prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days'
(but not more than 90 days') prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto,
and such notice in accordance with the foregoing clause (b) shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock, as the case may be, for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
share exchange, sale, transfer, disposition, dissolution, liquidation or winding
up, as the case may be.
3.10 COMPANY TO PREVENT DILUTION. If any event or condition occurs as to
which other provisions of this Article III are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Warrants evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Warrant, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Exercise Price and the number of Warrant Shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Exercise
Price as otherwise determined pursuant to this Article III except in the event
of a combination of shares of the type contemplated in Section 3.4 hereof, and
then in no event to an amount greater than the Exercise Price as adjusted
pursuant to Section 3.4 hereof.
ARTICLE IV
MISCELLANEOUS
4.1 ENTIRE AGREEMENT. This Warrant, together with the Agreement and the
Registration Rights Agreement, contains the entire agreement between the holder
hereof and the Company with respect to the Warrant Shares purchasable upon
exercise hereof and the related transactions and supersedes all prior
arrangements or understandings with respect thereto.
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4.2 GOVERNING LAW. This warrant shall be governed by and construed in
accordance with the laws of the State of Texas.
4.3 WAIVER AND AMENDMENT. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant shall be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
4.4 ILLEGALITY. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
4.5 COPY OF WARRANT. A copy of this Warrant shall be filed among the
records of the Company.
4.6 NOTICE. Any notice or other document required or permitted to be given
or delivered to the holder hereof shall be in writing and delivered at, or sent
by certified or registered mail to such holder at, the last address shown on the
books of the Company maintained at the Warrant Office for the registration of
this Warrant or at any more recent address of which the holder hereof shall have
notified the Company in writing. Any notice or other document required or
permitted to be given or delivered to the Company, other than such notice or
documents required to be delivered to the Warrant Office, shall be delivered at,
or sent by certified or registered mail to, the offices of the Company at 7135
Ardmore, Xxxxxxx, Xxxxx 00000, or such other address within the continental
United States of America as shall have been furnished by the Company to the
holder of this Warrant.
4.7 LIMITATION OF LIABILITY; NOT STOCKHOLDERS. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
4.8 EXCHANGE, LOSS, DESTRUCTION, ETC. OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
this Warrant, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity or such other security in such form and amount
as shall be reasonably satisfactory to the Company, or in the event of such
mutilation upon surrender and cancellation of this Warrant, the Company will
make and deliver a new warrant of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any warrant issued under the provisions of this
Section 4.8 in lieu of any Warrant alleged to be lost, destroyed or stolen, or
in lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company. This Warrant shall be promptly canceled
by the Company upon the surrender hereof in connection with any exchange or
replacement. The Company shall pay all taxes (other than securities transfer
taxes or income taxes) and all other expenses and charges payable in connection
with the preparation, execution and delivery of warrants pursuant to this
Section 4.8.
4.9 REGISTRATION RIGHTS. The Warrant Shares shall be entitled to such
registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
4.10 HEADINGS. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated as of ________, 2000.
INDUSTRIAL HOLDINGS, INC.
By: _______________________________
Xxxxxxx X. Xxxxx, President and
Chief Executive Officer
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SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for, and to purchase thereunder,
_______ shares of the Common Stock covered by such Warrant through a "cashless"
or "net issue" exercise of such Warrant ("Cashless Exercise") pursuant to
Section 1.1 of such Warrant, and requests that certificates for such shares (and
any other securities or other property issuable upon such exercise) be issued in
the name of, and delivered to ________________.
The calculation upon which the Cashless Exercise is based is as follows:
(No. of Warrants) ((Market Price - Exercise Price)/Market Price) = No. of
shares of Common Stock
OR -
The undersigned, the holder of the foregoing Warrant, hereby elects to exercise
purchase rights represented thereby for, and to purchase thereunder, _______
shares of the Common Stock covered by such Warrant, and herewith makes payment
in full for such shares, and requests (a) that certificates for such shares (and
any other securities or other property issuable upon such exercise) be issued in
the name of, and delivered to ________________, and (b) if such shares shall not
include all of the shares issuable as provided in such Warrant, that a new
Warrant of like tenor and date for the balance of the shares issuable thereunder
be delivered to the undersigned.
Signature: _____________________________________
Date: _________________________________________
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ASSIGNMENT
For value received, _______________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer such Warrant on the books
of the Company, with full power of substitution.
_______________________________________
Date: ______________________________
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EXHIBIT "D" TO REIMBURSEMENT AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights Agreement")
is made as of June 16, 2000, among Industrial Holdings, Inc., a Texas
corporation (the "Company"), SJMB, L.P., a Delaware limited partnership ("SJMB"
or the "Holder").
WHEREAS, pursuant to the terms of that certain Reimbursement Agreement
dated as of June 16, 2000, between the Company and the Holder (the
"Reimbursement Agreement") the Holder acquired from the Company as of this date
Common Stock Purchase Warrants (the "400,000 Warrants") to purchase shares of
the common stock, par value $0.01 per share, of the Company (the "Common Stock")
which may be exercised to initially acquire up to an aggregate of 400,000 shares
of Common Stock, subject to adjustment (the "400,000 Shares");
WHEREAS, pursuant to the terms of (i) the Reimbursement Agreement and (ii)
that certain Optional Credit Support Agreement dated as of June 30, 2000 among
the Company, SJMB and the Agent for the benefit of the Bank Group (the "CSA"),
in the event the Holder is either (a) required to make advances for the benefit
of the Company pursuant to the terms of that certain Limited Guaranty Agreement
dated as of June 16, 2000, between the Holder and the Bank Group (the "Guaranty
Agreement"), or (b) chooses makes discretionary advances for the purpose of
curing or preventing breaches of certain covenants of the Company under its loan
documentation with the Bank Group, then, in each instance, the Company is
required to reimburse the Holder for such advances by issuing to the Holder
notes (each such note a "Subordinated Reimbursement Note"), which Subordinated
Reimbursement Notes (including the interest accruing thereon) are convertible
into shares of Common Stock, subject to adjustment (the "Subordinated
Reimbursement Note Shares"), and Common Stock Purchase Warrants (all such
warrants "Reimbursement Warrants") which may be exercised to acquire additional
shares of Common Stock, subject to adjustment (the "Reimbursement Warrant
Shares" and, together with the 400,000 Shares and the Subordinated Reimbursement
Note Shares, the "Shares" ); and
WHEREAS, the Company wishes to grant the Holder certain registration
rights in respect of the Shares issuable upon the exercise of any warrant or the
conversion of any promissory note describe above, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Registration Rights Agreement, the following terms shall
have the meanings set forth below:
"BANK GROUP" means, collectively, Comerica Bank-Texas, a Texas banking
corporation, National Bank of Canada, a Canadian chartered banking organization
and Hibernia National Bank, a national bank.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"HOLDER" shall mean SJMB, L.P., a Delaware limited partnership.
"REGISTRABLE SECURITIES" shall mean the Shares, which includes any Common
Stock or other capital stock of the Company issued or issuable at any time or
from time to time as more fully set forth in (i) Article III of the 400,000
Warrants, (ii) Article III of a Reimbursement Warrant and (iii) Article V of a
Reimbursement Note. Shares of Common Stock that are Registrable Securities shall
cease to be Registrable Securities upon any sale pursuant to a registration
statement or the exemption from registration under Rule 144(k) (or successor
Rule) under the Securities Act is available with respect to the Shares.
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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.
"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).
"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.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holder and, except as set forth above, all fees and disbursements of counsel
for the Holder.
"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 (i) an effective registration statement under the
Securities Act and (ii) an underwriting agreement between the Company and such
underwriters.
ARTICLE II
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION.
2.1.1 As soon as practicable upon the first date after the date of
this Registration Rights Agreement that the Company is eligible pursuant to
General Instructions I.A. and I.B.3. to Form S-3 of the Securities Act to
register and sell on a Form S-3 securities held by selling shareholders, but in
any event no later than ten days after such date, the Company shall file with
the Commission a shelf registration statement on Form S-3 covering the resale of
the Registrable Securities on a continuous basis in accordance with Rule 415
under the Securities Act (the "REGISTRATION STATEMENT"). The Company shall use
its reasonable best efforts to cause such Registration Statement to become
effective as soon as practicable, but in no event later than ninety (90) days
after the date the Registration Statement was filed, and to cause the sale of
the Registrable Securities to be qualified in such state jurisdictions as the
Holder may request.
2.1.2 Except as set forth herein, the Company shall take all
reasonable steps necessary to keep the Registration Statement current and
effective until the lesser of: (i) two years and (ii) until the Registrable
Securities are transferable pursuant to Rule 144 under the Securities Act
without the volume limitations set forth in such rule.
2.1.3 If at any time the Company is requested to file the
Registration Statement pursuant hereto, the Company (i) has previously initiated
bona fide discussions with underwriters in preparation for a public offering of
its securities and its underwriters reasonably believe (as evidenced by a letter
to the Company) that such public offering would be materially adversely affected
by the registration so requested, or (ii) is in possession of material
information it reasonably deems advisable not to disclose in a registration
statement, the Company may, by prompt notice, postpone the filing of the
Registration Statement for so long as (x) its underwriters state in writing is
necessary or (y) such information continues to be material and non-public, but
in no event shall the Company delay filing of the Registration Statement if as a
result thereof, the effective date of the Registration Statement would be
delayed for longer than three (3) months after the registration request;
provided, however, that the Company shall have the right to postpone any filing
pursuant to this Section 2.1.3 no more than one time.
2.1.4 The Company shall be entitled to require that a holder or
holders of Registrable Securities 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
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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 holders of the Registrable
Securities written notice of any such development. In the event of a request by
the board of directors of the Company that the holders of Registrable Securities
refrain from effecting any public sales or distributions of the Registrable
Securities, the Company shall be required to 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 holders of the Registrable Securities shall
not interfere with such transaction, PROVIDED, that in no event shall any
requirement that the holders of the Registrable Securities refrain from
effecting public sales or distributions in the Registrable Securities extend for
more than 90 days.
2.2 PIGGYBACK REGISTRATION.
2.2.1 Subject to the terms hereof, if at any time or from time to
time the Company proposes to register any of its equity securities (except for
registration statements on Forms S-8 or S-4 or otherwise relating to employee
benefit plans or exchange offers), either for its own account or the account of
a security holder; and the holders of the Registrable Securities, the Company
will promptly give to the holders of the Registrable Securities written notice
thereof no less than 20 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 the holders of Registrable Securities may request
in a writing delivered to the Company within 10 days after such holder's receipt
of Company's written notice.
2.2.2 The holders of the Registrable Securities may participate in
any number of registrations until all of the Shares held by such holder have
been distributed pursuant to a registration.
2.2.3 If any registration statement registers an offering that is an
Underwritten Public Offering, the right of the holders of Registrable Securities
to registration pursuant to this Section 2.2 shall be conditioned upon such
holders' 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 holders of the Registrable Securities 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 2.2, if the managing
underwriter concludes in its reasonable judgment that the number of shares to be
registered for selling shareholders (including the holders of the Registrable
Securities) 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 holders of Registrable Securities as compared to the
number of shares proposed to be sold by all stockholders. If the holders of
Registrable Securities 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.
2.2.4 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 holders of Registrable Securities have
elected to include securities in such registration.
2.3 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 holders of Registrable Securities shall
be borne by such holders.
2.4 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
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granted to the holders of Registrable Securities (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 holders of Registrable
Securities) then this Registration Rights Agreement shall immediately be deemed
amended to provide the holders of Registrable Securities with any (or all) of
such more favorable terms as such holders shall elect to include herein.
2.5 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 holders of the
Registrable Securities 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:
2.5.1 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, with
respect to the Registration Statement filed pursuant to Section 2.1, two years
after the date such Registration Statement is declared effective, and with
respect to any other registration statement filed pursuant to this Registration
Rights Agreement, the distribution described in such registration statement has
been completed;
2.5.2 provide the holders of the Registrable Securities with a
reasonable opportunity to review the registration statement before the filing of
the registration statement with the Commission;
2.5.3 with respect to an Underwritten Public Offering, 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 holders of Registrable Securities 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 Nasdaq or securities
exchange listing;
2.5.4 furnish, without charge, to the each seller of Registrable
Securities covered by such registration statement, such number of conformed
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus and, in each case, including all exhibits thereto and
documents incorporated by reference therein) and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities or other shares of Common Stock owned by such seller;
2.5.5 promptly furnish to each underwriter, if any, and the holders
of Registrable Securities notice of any stop-order or similar notice issued by
the Commission or any state agency charged with the regulation of securities and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered;
2.5.6 use its reasonable best efforts to register or qualify the
Registrable Securities or other shares of Common Stock covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions as the holders of the Registrable Securities shall reasonably
request, to keep such registration or qualification in effect for so long as
such registration statement remains in effect and to do any and all other acts
and things which may be reasonably necessary or advisable to enable the holders
of the Registrable Securities to consummate the disposition in such
jurisdictions of any such Registrable Securities or other shares of Common Stock
owned by the holders of the Registrable Securities; PROVIDED, HOWEVER, that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 2.5.6, (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction;
2.5.7 notify each holder of Registrable Securities, at a time when a
prospectus relating to such Registrable Securities is required to be delivered
under the Securities Act, of the occurrence of any event known to the Company as
a result of which the prospectus included in such registration statement, as
then in effect, contains an untrue statement of a material fact or omits to
state any fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made;
and, at the request of any holder of Registrable Securities, the Company shall
prepare and furnish such holder a reasonable number of
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copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
under which they were made;
2.5.8 during the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents required to be
filed with the Commission pursuant to Sections 12(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
2.5.9 on the prior written request of any holder of Registrable
Securities, file such prospectus supplements or post-effective amendments to any
registration statement filed pursuant to Article II hereof as may be required in
connection with any transfer of the rights under this Registration Rights
Agreement by such holder as permitted under Section 2.9 hereof.
2.6 LISTING APPLICATION; MAINTENANCE OF LISTED STATUS
2.6.1 The Company shall, within ten (10) business days following the
date hereof, file a supplemental listing application covering the Shares with
the Nasdaq Stock Market, Inc.
2.6.2 The Company shall use its reasonable best efforts to maintain
its status as a listed company on the National Market System of the Nasdaq Stock
Market, Inc. as such listing exists as of the date hereof. In the event the
Company should be de-listed, for whatever reason, the Company agrees to use its
reasonable best efforts to regain its status as a listed company on the National
Market System of the Nasdaq Stock Market, Inc. or, if not available, the
SmallCap Market.
2.7 INDEMNIFICATION.
2.7.1. To the extent permitted by law, the Company will indemnify
the holder of Registrable Securities, each of its officers and directors and
partners, and each person controlling such holder of Registrable Securities
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, 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 each holder of Registrable Securities, each of
its officers and directors and partners, and each person controlling such
holder, 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 each holder of
Registrable Securities, 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
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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.
2.7.2 To the extent permitted by law, each holder of Registrable
Securities will, if securities held by the such holder 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
each holder of the Registrable Securities of any rule or regulation promulgated
under the Securities Act applicable to such holder and relating to action or
inaction required of the holders of Registrable Securities 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 document in reliance upon and in conformity with written information
furnished to the Company by such holder 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 holder of Registrable Securities (which
consent shall not be unreasonably withheld). Notwithstanding the foregoing, the
liability of such holder of the Registrable Securities under this subsection (b)
shall be limited in an amount equal to the net proceeds from the sale of the
shares sold by such holder of Registrable Securities, unless such liability
arises out of or is based on willful conduct by such holder. 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.
2.7.3 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.
2.7.4 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
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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 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 Security
Holder 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 Security Holder. 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.
2.8 CERTAIN INFORMATION.
2.8.1 The holders of the Registrable Securities agree, with respect
to any Registrable Securities included in any registration, to furnish to the
Company such information regarding such holder, the Registrable Securities and
the distribution proposed by such holder as the Company may reasonably request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
2.8.2 The failure of the holders of the Registrable Securities to
furnish the information requested pursuant to this Section shall not affect the
obligation of the Company to any 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.
2.9 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 (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:
2.9.1 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 Exchange Act;
2.9.2 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
2.9.3 so long as any holders of Registrable Securities owns any
Restricted Securities (as defined in Rule 144 promulgated under the Securities
Act), to furnish to such holder 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
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as such holder of the Registrable Securities may reasonably request in availing
itself of any rule or regulation of the Commission allowing such holder to sell
any such securities without registration.
2.10 TRANSFERABILITY. The rights conferred by this Registration Rights
Agreement shall be freely transferable to a recipient of Registrable Securities
that agrees to become a party to this Agreement, subject to the same rights and
obligations of the Holder hereunder.
2.11 GOVERNING LAW. This Registration Rights Agreement shall be governed
in all respects by the laws of the State of Texas.
2.12 ENTIRE AGREEMENT; AMENDMENT. This Registration Rights Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subject hereof. This Registration Rights Agreement, or any
provision hereof, may be amended, waived, discharged or terminated upon the
written consent of the Company and the Holder.
2.13 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
Holder: SJMB, L.P. and St. Xxxxx Capital Partners, L.P., c/o SJMB, L.L.C., 000
Xxxx Xxx Xxxx., Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other address as the
Holder shall have furnished to the Company in writing, or (b) if to the Company:
to Industrial Holdings, Inc., 0000 Xxxxxxx, Xxxxxxx, Xxxxx 00000, or at such
other address as the Company shall have furnished to the Holder. Each such
notice or other communication shall for all purposes of this Agreement be
treated as effective upon receipt.
2.14 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
Registration Rights 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 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 Registration Rights
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Registration Rights Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Registration Rights Agreement or by law or otherwise
afforded to any party to this Registration Rights Agreement, shall be cumulative
and not alternative.
2.15 COUNTERPARTS. This Registration Rights 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.
2.16 SEVERABILITY. In the event that any provision of this Registration
Rights Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Registration Rights Agreement shall
continue in full force and effect without said provision.
2.17 TITLES AND SUBTITLES. The titles and subtitles used in this
Registration Rights Agreement are used for convenience only and are not
considered in construing or interpreting this Registration Rights Agreement.
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THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this Registration Rights
Agreement effective upon the date first set forth above.
INDUSTRIAL HOLDINGS, INC.
By: _________________________________
Xxxxxxx X. Xxxxx, President and
Chief Executive Officer
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THE HOLDER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Holder has signed this Registration Rights
Agreement as of the date first written above.
SJMB, L.P.
By: SJMB, L.L.C., its General Partner
_______________________________________
Xxxxx Xxxxxxxx, Vice President
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