EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is made and entered into
as of September 8, 1997, by and between ERC Industries, Inc., a Delaware
corporation (the "COMPANY") and Xxxx Xxxx Group PLC, a company incorporated in
the United Kingdom and registered in Scotland (the "INVESTOR").
RECITALS:
WHEREAS, the Company and the Investor have entered into an Investment
Agreement dated as of September 8, 1997 (the "INVESTMENT AGREEMENT"), pursuant
to which the Investor has acquired 6,250,000 shares (the "SHARES") of the
Company's $0.01 per share par value common stock (the "COMMON STOCK"); and
WHEREAS, the Investor is willing to enter into the Investment Agreement and
to consummate the transactions contemplated by the Investment Agreement only if
the Company grants the registration rights provided in this Agreement; and
WHEREAS, the Company has agreed to grant the registration rights provided
in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"INVESTOR" shall mean collectively, Xxxx Xxxx Group PLC, a company
incorporated in the United Kingdom and registered in Scotland and any
transferees of Registrable Securities from the Investor, provided such
transfer complies with Section 3.2 of this Agreement.
"REGISTRABLE SECURITIES" shall mean (i) the Shares, and (ii) any
Common Stock issued or issuable at any time or from time to time in respect
of the Shares upon a stock split, stock dividend, recapitalization or other
similar event involving the Company.
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
Sections 2.1 and 2.2 hereof, 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 and 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 only the underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities
registered by the Investor and all fees and disbursements of counsel for
the Investor.
"UNDERWRITTEN PUBLIC OFFERING" shall mean a public offering in which
the Common Stock is offered and sold on a firm commitment or best efforts
basis through one or more underwriters, all pursuant to an underwriting
agreement between the Company and such underwriters.
2. REGISTRATION RIGHTS.
2.1 DEMAND REGISTRATION RIGHTS. If the Company shall receive from
the Investor at any time from and after the date of this Agreement a
written request that the Company effect any registration with respect to
all or a part of the Registrable Securities, the Company will use its best
efforts to effect such registration within 120 days thereafter (including,
without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws,
and appropriate compliance with the Securities Act) and as would permit or
facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request. The Company shall
not be required to effect more than two registrations pursuant to this
Section 2.1.
2.2 COMPANY REGISTRATION - "PIGGY-BACK REGISTRATION RIGHTS".
(a) Notice of Registration. Subject to the terms hereof, if at
any time or from time to time prior to the expiration of five (5)
years from the date of this Agreement (except as otherwise provided in
Section 3.2), the Company shall determine to register any of its
Common Stock, for its own account relating to an Underwritten Public
Offering, the Company shall:
(i) promptly, but in any event at least 30 days before the
Company files a registration statement pursuant to an
Underwritten Public Offering, give to the Investor written notice
thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
the underwriting involved therein, such Registrable Securities as
the Investor may request in a writing delivered to the Company
within 20 days after the Investor's receipt of the Company's
written notice delivered pursuant to Section 2.2(a)(i) above.
(b) Underwriting. The right of the Investor to registration
pursuant to Section 2.2 shall be conditioned upon the Investor's
participation in such underwriting, and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided
herein. The Investor and all other stockholders 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. Subject only to the provisions of
Section 2.2(c) below, if the managing underwriter determines that
marketing factors require a limitation on the number of shares to be
underwritten, the managing underwriter may limit some or all of the
Registrable Securities that may be included in the registration and
underwriting as follows: the number of Registrable Securities that may
be included in the registration and underwriting by the Investor shall
be determined by multiplying the number of shares of Registrable
Securities of all selling stockholders of the Company which the
managing underwriter is willing to include in such registration and
underwriting, times a fraction, the numerator of which is the number
of Registrable Securities requested to be included in such
registration and underwriting by the Investor, and the denominator of
which is the total number of Registrable
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Securities which all selling stockholders of the Company have
requested to have included in such registration and underwriting (but
taking into account for this purpose, only those stockholders of the
Company who have been granted registration rights with respect to
their shares of Common Stock. To facilitate the allocation of shares
in accordance with the above provisions, the Company may round the
number of shares allocable to any such person to the nearest 100
shares. If the Investor 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
seven days before the effective date.
(c) Subordination of Registration Rights. The registration
rights granted pursuant to this Agreement shall not be subordinate to
the registration rights granted to any other person or entity.
(d) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under
this Section 2.2 prior to the effectiveness of such registration
whether or not the Investor has elected to include its Registrable
Securities in such registration, provided, however, that in such
event, the Company shall promptly pay all reasonable out-of-pocket
costs and expenses of the Investor (including, without limitation, all
reasonable fees and disbursements of one law firm chosen to represent
the Investor) incurred in connection with such terminated
registration.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with all registrations pursuant to Sections 2.1 and 2.2 shall be
borne by the Company. Unless otherwise stated herein, all Selling Expenses
relating to securities registered on behalf of the Investor shall be borne
by the Investor.
2.4 COMPANY'S OBLIGATIONS IN REGISTRATION. In the case of each
registration, qualification or compliance effected by the Company pursuant
to this Agreement, the Company will keep the Investor 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:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable
best efforts to cause such registration statement to become and remain
effective with respect to a registration statement filed regarding an
Underwritten Public Offering, for the lesser of (i) 90 days or (ii)
until the distribution described in such registration statement has
been completed; and
(b) 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 Investor notice of any stop-order or similar notice
issued by the Commission or any state agency charged with the
regulation of securities, and notice of any NASDAQ or securities
exchange listing; and
(c) Furnish prospectuses, including preliminary prospectuses and
amendments and supplements thereto, to the Investor electing to sell
any of its Registrable Securities pursuant to Section 2.2 hereof, all
in accordance with applicable securities laws; and
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(d) Notify the Investor in the event that the Company becomes
aware that a prospectus relating to the Registrable Securities
contains a materially untrue statement or omits to state a material
fact; and
(e) Apply to register or otherwise qualify the Registrable
Securities offered by the Investor under all applicable blue sky laws
of any state.
2.5 INDEMNIFICATION.
(a) To the extent permitted by law, the Company will indemnify
and hold harmless the Investor, each of its officers and directors and
stockholders, and each person controlling the Investor 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, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof) to the extent to which
such person or entity is subject, including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, to
the extent such expenses, claims, losses, damages or liabilities (or
proceedings in respect thereof) 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 document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or arise out of or
are 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 the Investor, each of its officers and directors and
stockholders, and each person controlling the Investor 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 be unreasonably
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 expressly for inclusion in such registration by the Investor
or such controlling person 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 or (if there is no underwriter) the Investor 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.
(b) To the extent permitted by law, the Investor will, if
securities held by the Investor are included in the securities as to
which such registration, qualification or compliance is being effected
pursuant to the terms hereof, indemnify and hold harmless the Company,
each of its directors and officers, each person who controls the
Company 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
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and liabilities (or actions in respect thereof) to the extent to which
such person or entity is subject, 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 arising out of 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 not
misleading, or any violation by the Investor of any rule or regulation
promulgated under the Securities Act applicable to the Investor and
relating to any action or inaction required of the Investor in
connection with any such registration, qualification or compliance,
and will reimburse the Company, such other persons, such directors,
officers, persons 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 information furnished
to the Company by the Investor expressly for inclusion in such
registration; 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 Investor (which consent shall not be unreasonably
withheld). 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 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, any underwriter or any other person 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.
(c) Each party entitled to indemnification under this Section 2.5
(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 action or proceeding
commenced against, or written demand made on any such party in respect
of 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 be
unreasonably 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.
(d) If the indemnification provided for in this Section 2.5 is
unavailable to an Indemnified Party in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as
a result of such losses, claims, damages or
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liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and all
stockholders offering securities in the offering (the "Selling
Stockholders") 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 Stockholders 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 Stockholders 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 Stockholders on the other. The
relative fault of the Company on the one hand and the Selling
Stockholders 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
Stockholders and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company and the Selling Stockholders agree that it would
not be just and equitable if contribution pursuant to this Section
2.5(d) 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 2.5(d). 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 2.5(d) 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 of Section 2.5(c)
hereof. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act).
2.6 CERTAIN INFORMATION. The Investor agrees, with respect to any
Registrable Securities included in any registration, to furnish to the
Company such information regarding the Investor, the Regis trable
Securities and the distribution proposed by the Investor as the Company may
reasonably request in writing and as shall be required in connection with
any registration, qualification or compliance referred to in Section 2.2.
2.7 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 the 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:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at
all times during which the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT");
(b) 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
(c) So long as the Investor owns any Restricted Securities, to
furnish to the Investor 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 non-confidential reports and
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documents of the Company and other non-confidential information in the
possession of or reasonably obtainable by the Company as the Investor
may reasonably request in availing itself of any rule or regulation of
the Commission allowing it to sell any such securities without
registration.
3. MISCELLANEOUS.
3.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the internal laws of the State of Texas. In the event any dispute
arises between the parties, venue of any such dispute shall be proper only
in Xxxxxx County, Texas.
3.2 TRANSFERABILITY; TERMINATION. The registration rights
contemplated herein are transferable by the Investor to any person or
entity, in whole or in part, which acquires all or part of the shares which
the Investor is acquiring pursuant to the Investment Agreement. The
registration rights granted herein shall terminate, and the registration
rights will not be exercisable by the Investor (or the Investor's lawful
transferees pursuant to this Section 3.2) after said termination date, on
the earlier of (i) the fifth anniversary date of this Agreement, or (ii) at
such time as all shares of Registrable Securities held by the Investor may
immediately be sold under Rule 144 (as amended from time to time) during
any 90-day period.
3.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to
the subject hereof. This Agreement, or any provision hereof, may be
amended, waived, discharged or terminated only upon the written consent of
the Company and those Investors (assuming the original Investor has
transferred part of its Shares) who are the record holders of a majority of
the Shares.
3.4 NOTICES. All notices or other communications which are required
or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered in person, transmitted by
telecopier or mailed by registered or certified first class mail, postage
prepaid, return receipt requested to the parties hereto at the address set
forth below (as the same may be changed from time to time by notice
similarly given) or the last known business or residence address of such
other person as may be designated by either party hereto in writing.
If to the Investor:
Xxxx Xxxx Group PLC
Xxxx Xxxx Xxxxx
Xxxxxxxxx Xxxx
Xxxxxxxx, XX0 0XX
Scotland
Attention: Group Financial Director
Fax: 000-00-0-000-000000
If to the Company:
ERC Industries, Inc.
00000 Xxxx Xxx
Xxxxxxx, Xxxxx 00000
Attn.: Xx. Xxxxxxx X. Xxxxxx, President
Fax: 713/000-0000
3.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any
party to this Agreement shall impair any such right, power or remedy of
such party nor shall it be construed to be a waiver of any such breach or
default, or
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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 Agreement, or
any waiver on the part of any party of any provisions or conditions of this
agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party to this Agreement,
shall be cumulative and not alternative.
3.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument.
3.7 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
3.8 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this agreement effective
upon the date first set forth above.
COMPANY:
ERC INDUSTRIES, INC.
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx, President
__________________________________
INVESTOR:
XXXX XXXX GROUP PLC
a U. K. company
By: /s/ J. Xxxxx X. Xxxxx, Director
__________________________________
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