EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") entered into and made
effective as of _________, 1997, by and among Dril-Quip, Inc., a Delaware
corporation (the "Company"), and the stockholders of the Company whose
signatures appear on the signature pages of this Agreement under the caption
"Stockholders" (referred to herein individually as a "Stockholder" and
collectively as the "Stockholders"),
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company deems it in the best
interests of the Company to complete an initial public offering of shares of
common stock of the Company (the "IPO"); and
WHEREAS, in connection with the IPO, in order to facilitate future sales of
Common Stock of the Company held by the Stockholders, the Stockholders and the
Company desire to enter into this Agreement as herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated:
"Agreement" shall have the meaning set forth above.
"Commission" shall mean the Securities and Exchange Commission, and any
successor thereto.
"Common Stock" shall mean the Company's Common Stock, par value $.01 per
share, or any successor class of the Company's Common Stock.
"Company" shall have the meaning set forth above.
"Demand Registration" shall have the meaning given it in Section 3 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a share of Common Stock means, as of a particular
date, (i) if shares of Common Stock are listed on a national securities
exchange, the mean between the highest and
-1-
lowest sales price per share of Common Stock on the consolidated transaction
reporting system for the principal national securities exchange on which shares
of Common Stock are listed on that date, or, if there shall have been no such
sale so reported on that date, on the last preceding date on which such a sale
was so reported, (ii) if shares of Common Stock are not so listed but are quoted
on the Nasdaq National Market, the mean between the highest and lowest sales
price per share of Common Stock reported by the Nasdaq National Market on that
date, or, if there shall have been no such sale so reported on that date, on the
last preceding date on which such a sale was so reported, (iii) if the Common
Stock is not so listed or quoted, the mean between the closing bid and asked
price on that date, or, if there are no quotations available for that date, on
the last preceding date for which those quotations are available, as reported by
the Nasdaq Stock Market, or, if not reported by the Nasdaq Stock Market, by the
National Quotation Bureau Incorporated, or (iv) if shares of Common Stock are
not publicly traded, the most recent value determined by an independent
appraiser appointed by the Company for that purpose.
"Holder" shall mean any Person holding Registrable Securities.
"Inspectors" shall have the meaning given it in Section 5(a)(xiii) hereof.
"Management Stockholders" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and J.
▇▇▇▇ ▇▇▇▇▇▇ and each of their permitted successors and assigns.
"Person" shall mean any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or a political subdivision, agency or
instrumentality thereof or other entity or organization of any kind.
"Piggy-back Registration" shall have the meaning given it in Section 2(a)
hereof.
"Records" shall have the meaning given it in Section 5(a)(xiii) hereof.
"Registrable Securities" shall mean (i) the outstanding shares of Common
Stock held by the Stockholders as of the date hereof, (ii) shares of Common
Stock issuable upon exercise of options to purchase Common Stock granted on the
date of the IPO and (iii) any securities issued in exchange for, as a dividend
on, or in replacement of, or otherwise issued or distributed in respect of
(including securities issued in a stock dividend, split or recombination), any
shares of Common Stock referred to in clause (i) above; provided, however, that
any securities described in clause (i) or (ii) above shall cease to be
Registrable Securities when and to the extent that such securities (A) have been
distributed to the public pursuant to a registration statement covering such
securities that has been declared effective under the Securities Act, (B) may be
freely distributed in accordance with the provisions of Rule 144(k) (or any
similar provision then in force) under the Securities Act, (C) have been
transferred to any Person in a manner such that such securities are deemed to
cease being Registrable Securities pursuant to the provisions of Section 10(h)
of this Agreement, or (D) have been repurchased by the Company.
"Registration Expenses" shall have the meaning given it in Section 6
hereof.
-2-
"Registration Notice" shall have the meaning given it in Section 2 hereof.
"Requesting Holders" shall have the meaning given it in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stockholder" and "Stockholders" shall have the meaning set forth above.
2. PIGGY-BACK REGISTRATION RIGHTS.
(a) Whenever the Company proposes to file a registration statement under
the Securities Act with the Commission with respect to an offering of Common
Stock for cash by the Company for its own account or for the account of any
other Person, other than a registration relating to the offering or issuance of
Common Stock in connection with (i) employee compensation or benefit plans on
Form S-8 or (ii) one or more acquisition transactions under a registration
statement on Form S-1 or S-4 (or their successor forms), then the Company shall
in each case give written notice (a "Registration Notice") of such proposed
filing to the Holders at least 20 days before the anticipated filing date. Such
notice shall specify the approximate date on which the Company proposes to file
such registration statement and shall offer the Holders the opportunity to
register such number of Registrable Securities as each such Holder may request
(a "Piggy-back Registration"). Each Holder desiring to participate in such
offering shall notify the Company no later than ten days following the receipt
of the Registration Notice of the aggregate number of shares of Registrable
Securities that such Holder desires to sell in the offering. The Company shall
use reasonable efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the Holders requested to be included in
the registration for such offering to include such securities in such offering
on the same terms and conditions as any similar securities of the Company
included therein. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering advises the Company that the total amount of
Common Stock which the Company, such Holders and any other Persons intend to
include in such offering is sufficiently large to materially and adversely
affect the success of such offering, then the amount of Registrable Securities
to be offered for the accounts of Holders shall be reduced and allocated among
such Holders on a pro rata basis based upon the number of shares of Common Stock
that each such Holder has requested to be included in such registration
statement to the extent necessary, in the opinion of such managing underwriter,
to reduce the total amount of securities to be included in such offering to the
amount recommended by such managing underwriter; provided, however, that the
reduction imposed upon Holders shall not be greater, on a percentage basis with
respect to the Registrable Securities requested to be included, than the
reduction imposed upon other Persons whose piggy-back registration rights are
pari passu with those granted hereby with respect to the amount of securities
requested for inclusion in such registration.
(b) The Company may withdraw any registration statement and abandon any
proposed offering initiated by the Company without the consent of any Holder,
notwithstanding the request
-3-
of any such Holder to participate therein in accordance with this provision, if
the Company determines to do so in its sole discretion.
3. DEMAND REGISTRATION RIGHTS.
(a) At any time after 180 days after the date of the final prospectus
relating to the IPO, any Management Stockholder beneficially owning Registrable
Securities then outstanding may request (the Management Stockholders making such
request being referred to herein as the "Requesting Holders") in writing that
the Company file a registration statement under the Securities Act covering the
registration of all or a part of the shares of Registrable Securities then
beneficially owned by such Requesting Holders (a "Demand Registration");
provided, however, that for such request to be effective, it must request the
registration of Registrable Securities having an aggregate Fair Market Value of
$10 million calculated as of the date the request for Demand Registration is
made; and provided, further, that the Company shall not be obligated to effect
more than six Demand Registrations pursuant to this Section 3, two of which may
be exercised by each of the Management Stockholders. Within ten days of the
receipt of such request, the Company shall give written notice of such request
to all other Holders and shall use its best efforts to effect as soon as
practicable the registration under the Securities Act in accordance with Section
5 hereof (including, without limitation, the execution of an undertaking to file
post-effective amendments) of all shares of Registrable Securities which the
Holders request be registered within 30 days after the mailing of such notice.
If the managing underwriter or underwriters of such offering advises the Company
that the total amount of securities which the Holders intend to include in such
offering is sufficiently large to materially and adversely affect the success of
such offering, then the amount of Registrable Securities to be offered shall be
reduced and allocated among such Holders (other than the Requesting Holder) on a
pro rata basis based upon the number of shares of Common Stock that each such
Holder has requested to be included in such registration statement to the extent
necessary, in the opinion of such lead managing underwriter, to reduce the total
amount of securities to be included in such offering to the amount recommended
by such managing underwriter. In connection with a Demand Registration, the
Requesting Holder in his sole discretion, shall determine whether (a) to proceed
with, withdraw from or terminate such offering, (b) to select, subject to the
approval of the Company, a managing underwriter or underwriters in connection
with such offering, (c) to enter into an underwriting agreement for such
offering, and (d) to take such actions as may be necessary to close the sale of
Registrable Securities contemplated by such offering, including, without
limitation, waiving any conditions to closing such sale that may not have been
fulfilled. In the event such Requesting Holder exercises its discretion under
this Section 3(a) to terminate a proposed Demand Registration, the terminated
Demand Registration shall not constitute a Demand Registration under this
Section 3 if the determination to terminate such Demand Registration (i) follows
the exercise by the Company of any of its rights provided by Section 3(b) or
(c), (ii) results from a material adverse change in the condition (financial or
other), results of operations or business of the Company or (iii) occurs prior
to the effective date of the registration statement. Notwithstanding the
foregoing, a registration will not count as the Demand Registration under this
-4-
Section 3 unless the Requesting Holder is able to register and sell 100% of the
shares of Registrable Securities requested by him to be included in such
registration.
(b) Notwithstanding the provisions of Section 3(a), if the Company shall
furnish to the Requesting Holders a certificate signed by any Co-Chairman of the
Board of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be detrimental to the Company and its
stockholders for such registration statement to be filed or to become effective
and it is therefore beneficial to defer the filing or effectiveness of such
registration statement, the Company shall have the right to defer such filing or
effectiveness for a period of not more than 90 days after receipt of the request
of the Requesting Holders. The Company shall promptly give notice to the
Holders at the end of any delay period under this Section 3(b).
(c) Notwithstanding the foregoing provisions of this Section 3, if at the
time of any request by the Requesting Holders for a Demand Registration, the
Company has fixed plans to file within 90 days after such request for the sale
of any of its securities in a public offering under the Securities Act, no
Demand Registration shall be initiated under this Section 3 until 90 days after
the effective date of such registration unless the Company is no longer
proceeding diligently to effect such registration; provided, however, that the
Company shall provide the holders of Registrable Securities the right to
participate in such public offering pursuant to, and subject to, the provisions
of Section 2 hereof.
4. HOLDBACK AGREEMENTS; REQUIREMENTS OF HOLDERS.
(a) Restrictions on Public Sale by Holders of Registrable Securities. To
the extent not inconsistent with applicable law, each Holder agrees not to
effect any public sale or other distribution of equity securities of the Company
(or any securities convertible into or exchangeable or exercisable for equity
securities of the Company) during the 90-day period beginning on the effective
date of a registration statement filed by the Company with the Commission
(except for securities that may be included in such registration pursuant to the
provisions hereof or otherwise), but only if and to the extent requested in
writing by the Company or the managing underwriter or underwriters in the case
of an underwritten public offering.
(b) Cooperation by Holders. The offering of Registrable Securities by any
Holder shall comply in all respects with the applicable terms, provisions and
requirements set forth in this Agreement, and such Holder shall timely provide
the Company with all information and materials required to be included in a
registration statement that relate to such Holder, and to take all such action
as may be reasonably required in order not to delay the registration and
offering of the securities by the Company. The Company shall have no obligation
to include in such registration statement shares of a Holder who has failed to
furnish such information which, in the written opinion of counsel to the
Company, is required in order for the registration statement to be in compliance
with the Securities Act.
-5-
5. REGISTRATION PROCEDURES.
(a) Whenever any Registrable Securities are to be registered pursuant to
Section 2 or 3 of this Agreement, the Company will use reasonable efforts to
effect the registration of such Registrable Securities as contemplated by such
Section. In connection with any Piggy-back Registration or Demand Registration,
the Company will, subject to Section 2 or 3 hereof (as applicable), as
expeditiously as possible:
(i) prepare and file with the Commission a registration statement
which includes the Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective for a period of
at least 90 days (or such shorter period during which holders shall have
sold all Registrable Securities that they requested to be registered);
provided, however, that such 90-day period shall be extended for a period
equal to the period that a Stockholder agrees to refrain from selling any
securities included in such registration statement in accordance with
Section 5(b) hereof;
(ii) prepare and file with the Commission such amendments (including
post-effective amendments) to the registration statement, and such
supplements to the related prospectus as may be necessary (i) to keep the
registration statement effective, (ii) to appropriately reflect the plan of
distribution of the securities registered thereunder, (iii) for so long
thereafter as a dealer is required by law to deliver a prospectus in
connection with the offer and sale of the shares of Registrable Securities
covered by such registration statement and/or (iv) so that neither such
registration statement nor the related prospectus shall contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading and so that such registration statement and the related
prospectus will otherwise comply with applicable legal requirements;
(iii) provide to any Holder requesting to include shares of
Registrable Securities in such registration statement and a single counsel
for all holders of Registrable Securities requesting to include shares of
Registrable Securities in such registration statement, which counsel shall
be selected by the holders of a majority of shares of Registrable
Securities requested to be included in such registration statement in the
case of a registration under Section 2 hereof, and by the Requesting Holder
in the case of a registration under Section 3 hereof, and shall be
reasonably satisfactory to the Company, an opportunity to review and
provide comments with respect to such registration statement (and any post-
effective amendment thereto) prior to such registration statement (or post-
effective amendment) becoming effective;
(iv) furnish to any Holder of Registrable Securities included in such
registration statement and the underwriter or underwriters thereof, if any,
without charge, such number of conformed copies of the registration
statement and any post-effective amendment thereto and such number of
copies of the prospectus (including each preliminary prospectus) and any
-6-
amendments or supplements thereto, and any documents incorporated by
reference therein, as such Holder or underwriter may reasonably request in
order to facilitate the disposition of the Registrable Securities being
sold by such Holder (it being understood that the Company consents to the
use of the prospectus and any amendment or supplement thereto by each
Holder of Registrable Securities covered by the registration statement and
the underwriter or underwriters thereof, if any, in connection with the
offering and sale of the Registrable Securities covered by the prospectus
or any amendment or supplement thereto);
(v) notify each Holder of Registrable Securities included in such
registration statement, and the managing underwriters participating in the
distribution pursuant to such registration statement promptly (A) when the
Company is informed that such registration statement or any post-effective
amendment to such registration statement becomes effective, (B) of any
request by the Commission for an amendment or any supplement to such
registration statement or any related prospectus, (C) of the issuance by
the Commission of any stop order suspending the effectiveness of such
registration statement or of any order preventing or suspending the use of
any related prospectus or the initiation or threat of any proceeding for
that purpose, (D) of the suspension of the qualification of any shares of
Registrable Securities included in such registration statement for sale in
any jurisdiction or the initiation or threat of a proceeding for that
purpose, (E) of any determination by the Company that any event has
occurred which makes untrue any statement of a material fact made in such
registration statement or any related prospectus or which requires the
making of a change in such registration statement or any related prospectus
in order that the same will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (F) of the
completion of the distribution contemplated by such registration statement
if it relates to an offering by the Company;
(vi) if at any time the Commission shall issue any stop order
suspending the effectiveness of a registration statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Registrable Securities under state securities or Blue Sky laws, the Company
shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(vii) upon the occurrence of any event (A) contemplated by Section
5(a)(v)(E) above or (B) that would cause such registration statement or the
prospectus contained therein not to be effective and usable for resale of
the Registrable Securities, the Company shall, as promptly as practicable
thereafter, prepare and file with the Commission a post-effective amendment
to the registration statement of a supplement to the related prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts to cause such amendment to
be declared effective and
-7-
such registration statement and the related prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(viii) use its best efforts to cause all Registrable Securities
included in such registration statement to be listed, by the date of the
first sale of Registrable Securities pursuant to such registration
statement, on each securities exchange (including, for this purpose, the
Nasdaq National Market) on which the Common Stock of the Company is then
listed or proposed to be listed, if any;
(ix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and use reasonable efforts to make
generally available to its securities holders within 18 months after the
effective date of the applicable registration statement an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act;
(x) as promptly as practicable after filing with the Commission of any
document which is incorporated by reference into a registration statement,
deliver a copy of such document to each Holder of Registrable Securities
covered by such registration statement who requests such document;
(xi) on or prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify, and
cooperate with the Holders of Registrable Securities included in such
registration statement, the underwriter or underwriters thereof, if any,
and their counsel, in connection with the registration or qualification of
the Registrable Securities covered by the registration statement for offer
and sale under the securities or Blue Sky laws of each state and other
jurisdiction of the United States as any such Holder or underwriter
reasonably requests in writing, to use reasonable efforts to keep each such
registration or qualification effective, including through new filings, or
amendments or renewals, during the period such registration statement is
required to be kept effective and to do any and all other acts or things
necessary or advisable to enable the disposition in all such jurisdictions
of the Registrable Securities covered by the applicable registration
statement; provided, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service
of process or taxation in any such jurisdiction where it is not then so
subject;
(xii) cooperate with the Holders of Registrable Securities covered by
the registration statement and the managing underwriter or underwriters
thereof, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities
to be sold under the registration statement, and enable such securities to
be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or such Holders may request, subject
to the underwriters' obligation to return any certificates representing
securities not sold;
-8-
(xiii) make available for inspection by any Holder of Registrable
Securities included in such registration statement, any underwriter
participating in any disposition pursuant to such registration statement,
and any attorney, accountant or other agent retained by any such seller or
underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to enable
them to exercise their due diligence responsibilities, and cause the
Company's officers, directors and employees to supply all Records
reasonably requested by any such Inspector in connection with such
registration statement; provided, that with respect to any Records that are
confidential, the Inspectors shall execute such confidentiality agreements
as the Company may reasonably request in order to ensure that the
confidentiality of confidential Records will be maintained;
(xiv) use its best efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort letters as the
Holders of a majority of the Registrable Securities being sold may
reasonably request;
(xv) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(xvi) enter into such customary agreements (including an underwriting
agreement in customary form) as the underwriters, if any, may reasonably
request in order to expedite or facilitate the disposition of such shares
of Registrable Securities; and
(xvii) take such other actions as are reasonable and necessary to
comply with the requirements of the Securities Act.
(b) Each Holder, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(a)(v)(E), will
forthwith discontinue disposition of the Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5(a)(vii) or until it is advised in writing by the
Company that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the prospectus, and, if so directed by the Company, such Holder will, or will
request the managing underwriter or underwriters of such Registrable Securities,
if any, to deliver to the Company (at the Company's expense) all copies in their
possession or control, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
(c) If such registration statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance satisfactory to such Holder, to the effect that the holding by such
Holder of such securities is not to be construed as a recommendation of such
Holder of the investment quality of the Company's securities covered thereby and
that such holding does not imply
-9-
that such Holder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such Holder by name or
otherwise is not required by the Securities Act (or the rules or regulations
thereunder) or any similar federal statute (or regulation) then in force, the
deletion of the reference to such Holder.
6. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all Commission or National
Association of Securities Dealers, Inc. registration and filing fees, fees and
expenses (other than the pro rata portion of filing fees attributable, as
required by state law, to the securities to be sold) of compliance with
securities or Blue Sky laws (including fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Securities), printing
expenses, messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing of the securities to be registered on each securities exchange
(including, for this purpose, the Nasdaq National Market) on which similar
securities issued by the Company are then listed, fees and disbursements of
counsel for the Company and its independent certified public accountants
(including the expenses of any special audit or "cold comfort" letters required
by or incident to such performance), fees and disbursements of counsel for the
Holders, the fees and expenses of any special experts retained by the Company in
connection with such registration, and any out-of-pocket expenses of the Holders
of Registrable Securities incurred in connection with the registration of
Registrable Securities, excluding any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities (all such
expenses being herein called "Registration Expenses"), will be borne by the
Company; provided, that, with respect to the fees and expenses of legal counsel
for the Holders of Registrable Securities, the Company shall only be obligated
to pay the fees and expenses of one firm of legal counsel retained by Holders as
selected in accordance with Section 5(a)(iii) hereof. All Registration Expenses
will be paid by the Company whether or not the related registration statement is
declared effective. All expenses of Holders of Registrable Securities incident
to this Agreement which are not required to be paid for by the Company pursuant
to this Section 6 (including, without limitation, all underwriting commissions
and discounts applicable to shares of Registrable Securities included in a
registration statement pursuant to this Agreement) shall be paid by Holders of
Registrable Securities included or to be included in a registration statement,
with such Holders each paying their own expenses and a pro rata part (based on
the same proportion that the number of a Holder's Registrable Securities
included or to be included in the registration statement bears to the total
number of all Holders' Registrable Securities included or to be included in the
registration statement) of the common expenses of such Holders.
(b) Notwithstanding anything herein to the contrary, each seller of
Registrable Securities shall pay such portion of the Registration Expenses as
may be required by applicable law.
-10-
7. INDEMNIFICATION; CONTRIBUTION.
(a) Indemnification by the Company. The Company will indemnify and hold
harmless, to the full extent permitted by law, each Holder which is a seller of
Registrable Securities covered by such registration statement, its officers,
directors, employees, agents and general or limited partners (and the directors,
officers, employees and agents thereof) and each other Person, if any, who
controls such Holder (within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act) (collectively, the "Holder Indemnitees")
from and against any loss, claim, damage, liability or action, joint or several,
to which any such Holder Indemnitee may become subject under the Securities Act,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement in which
such Registrable Securities were included as contemplated hereby or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and in each such case the Company will reimburse each such Holder
Indemnitee for any legal or any other expenses incurred by him in connection
with investigating, defending or preparing to defend any such loss, claim,
damage, liability or action as such expenses are incurred; provided, that the
Company shall not be liable to any such Holder Indemnitee in any such case to
the extent that any such loss, claim, damage, liability or action arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or amendment thereof or
supplement thereto, or in any such preliminary, final or summary prospectus, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any such Holder Indemnitee relating to such Holder
Indemnitee specifically for inclusion therein; and provided, further, that the
Company shall not be liable to any such Holder Indemnitee with respect to any
preliminary prospectus to the extent that any such loss, claim, damage,
liability or expense of such Holder Indemnitee results from the fact that such
Holder Indemnitee sold Registrable Securities to a person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the prospectus (excluding documents incorporated by reference) or of the
prospectus as then amended or supplemented (excluding documents incorporated by
reference) if the Company has previously furnished copies thereof to such Holder
Indemnitee in compliance with Section 5 of this Agreement and the loss, claim,
damage, liability or expense of such Holder Indemnitee results from an untrue
statement or omission of a material fact contained in such preliminary
prospectus which was corrected in the prospectus (or the prospectus as amended
or supplemented). Such indemnity and reimbursement of expenses shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Holder Indemnitee and shall survive the transfer of such securities by such
Holder.
-11-
(b) Conduct of Indemnification Proceeding. Promptly after receipt by a
Holder Indemnitee under Section 7(a) above of notice of the commencement of any
action, suit, proceeding, investigation or threat thereof made in writing with
respect to which a claim for indemnification may be made pursuant to this
Section 7, such Holder Indemnitee shall, if a claim in respect thereto is to be
made against the Company, give written notice to the Company of the threat or
commencement thereof; provided that the failure so to notify the Company shall
not relieve it from any liability which it may have to any Holder Indemnitee
except to the extent that the Company is actually prejudiced by such failure to
give notice; and provided, further that the failure to notify the Company shall
not relieve it from any liability the Company may have to an Holder Indemnitee
otherwise than under this Section 7. In case any such claim, action, suit,
proceeding or investigation shall be brought against any Holder Indemnitee and
it shall notify the Company of the threat or commencement thereof, the Company
shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such Holder Indemnitee.
Such Holder Indemnitee shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Holder Indemnitee unless (i) the
Company has agreed to pay such fees and expenses or (ii) the named parties to
any such action or proceeding include both such Holder Indemnitee and the
Company, and such Holder Indemnitee shall have been advised by counsel that
there may be one or more legal defenses available to such Holder Indemnitee
which are different from or additional to those available to the Company, in
which case, if such Holder Indemnitee notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense of such action or proceeding on
behalf of such Holder Indemnitee; it being understood, however, that the Company
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Holder Indemnitees. The Company
shall not (i) without the prior written consent of the Holder Indemnitee (which
consent shall not be unreasonably withheld), settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the Indemnitee is an actual or potential
party to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each Holder Indemnitee from all liability
arising out of such claim, action, suit or proceeding or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent of
the Company or if there be a final judgment of the plaintiff in any such action,
the Company agrees to indemnify and hold harmless any Holder Indemnitee from and
against any loss or liability by reason of such settlement or judgment.
(d) Indemnification and Contribution of Underwriters. In connection with
any underwritten offering contemplated by this Agreement that includes
Registrable Securities, the Company will agree to customary provisions for
indemnification and contribution (consistent with
-12-
the other provisions of this Section 7, except as may be otherwise agreed in
writing by the Company) in respect of losses, claims, damages, liabilities and
expenses of the underwriters of such offering.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the terms of and on the basis
provided in any underwriting arrangements approved by the Company and (b)
completes and executes all questionnaires, powers of attorney, custody
agreements, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
9. RULE 144. The Company covenants that, upon any registration statement
covering Company securities becoming effective, it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the Commission thereunder (or, if the Company
is not required to file such reports, it will, upon the request of any Holder,
make publicly available other nonconfidential information so long as necessary
to permit sales under Rule 144 under the Securities Act), and it will take such
other action as any Holder may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
10. MISCELLANEOUS.
(a) Recapitalizations, Exchanges, etc. The provisions of this Agreement
shall apply, to the full extent set forth herein with respect to the Registrable
Securities, to any and all shares of equity capital of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) that may be issued in respect of, in exchange for, or in
substitution of the Registrable Securities, in each case as the amounts of such
securities outstanding are appropriately adjusted for any equity dividends,
splits, reverse splits, combinations, recapitalizations and the like occurring
after the date of this Agreement.
(b) Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed (i) if to Company, to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
Attention: Co-Chairman of the Board, (ii) if to a Stockholder, at such
Stockholder's address as shown on the stock transfer records of the Company, or
to such other address (as to a Stockholder) as such Stockholder may furnish to
the Company, or (as to the Company) as the Company may furnish to the
Stockholders except that notices of changes of address shall be effective only
upon receipt.
-13-
(c) Applicable Law. This contract is entered into under, and shall be
construed in accordance with and governed for all purposes by, the laws of the
State of Texas, without regard to any principles of conflict of laws that, if
applied, might permit or require the application of the laws of a different
jurisdiction.
(d) Amendment and Waiver. This Agreement may be amended, and the
provisions hereof may be waived, only by a written instrument signed by (i) the
Holders of a majority of the Registrable Securities outstanding as of the date
of such determination and (ii) the Company; provided, that no amendment to this
Agreement may be made that materially and adversely affects the rights of any
Holder under this Agreement without the express written consent of such Holder.
No failure by either party hereto at any time to give notice of any breach by
the other party of, or to require compliance with, any condition or provision of
this Agreement shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
(e) Severability. It is a desire and intent of the parties that the terms,
provisions, covenants and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant or remedy of this Agreement or the application thereof to
any Person or circumstances shall, to any extent, be construed to be invalid or
unenforceable in whole or in part, then such term, provision, covenant or remedy
shall be construed in a manner so as to permit its enforceability under the
applicable law to the fullest extent permitted by law. In any case, the
remaining provisions of this Agreement or the application thereof to any Person
or circumstances other than those to which they have been held invalid or
unenforceable shall remain in full force and effect.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
(g) Headings; Use of Certain Terms. The section and paragraph headings in
this Agreement have been inserted for purposes of convenience of reference only
and shall not be used for interpretive purposes. As used in this Agreement, the
words "herein", "hereof", and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular paragraph,
subparagraph, section, subsection, or other subdivision. Whenever the context
may require, any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns, pronouns
and verbs shall include the plural and vice versa.
(h) Binding Effect; Transfer of Rights Under this Agreement. Unless
otherwise provided herein, the provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns, and is not intended to
confer upon any other Person any right or remedies hereunder; provided, however,
that the rights and obligations of a Holder under this Agreement may be
transferred or assigned by a Holder only if such transferee (or such
distributee) shall, in connection with the transfer of such
-14-
Registrable Securities, provide the Company with a duly executed addendum to
this Agreement, in form and substance reasonably satisfactory to the Company,
pursuant to which such transferee (or distributee) expressly and without
qualification (i) assumes all of the obligations of its transferor hereunder and
(ii) agrees itself to be bound by the terms hereof; provided, further, that any
such transfer shall not operate to release the transferring Holder from any of
its obligations hereunder existing on the date of such transfer. In the event
any Registrable Securities are transferred (or distributed) to a person who does
not provide the addendum referred to above in this Section 10(h), such
Registrable Securities shall be deemed to have ceased to be Registrable
Securities effective upon such transfer (or distribution).
(i) Entire Agreement; Termination. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
DRIL-QUIP, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
-15-
STOCKHOLDERS
------------
SHARES OWNED AT
STOCKHOLDERS TIME OF EXECUTION
------------ -----------------
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
J. ▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ FAMILY PARTNERS, LTD.
By:
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Managing
General Partner
FOUR ▇▇▇▇▇'▇ COMPANY, LTD.
By:
---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, Managing
General Partner
▇▇▇▇▇▇▇▇ ENTERPRISES, LTD.
By: ▇▇▇▇▇▇▇▇ ENTERPRISES, L.L.C.,
Its General Partner
By:
---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Manager
-16-
