REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is made and entered into
as of May 14, 1999, 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 a Share Sale and
Purchase Agreement dated as of May 14, 1999 (the "INVESTMENT AGREEMENT"),
pursuant to which the Investor has acquired 1,350,000 shares of the Company's
$0.01 per share par value common stock (the "COMMON STOCK") and 1,850,000 shares
of the Company's Series A Cumulative Convertible Preferred (the "PREFERRED
STOCK") Stock (collectively with the Common Stock, the "SHARES"); 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 of Common Stock
included in the Shares , and (ii) any Common Stock issued or issuable at
any time or from time to time in respect of the Shares, including those
shares of Common Stock issuable upon conversion of the Preferred Stock and
shares issuable 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.
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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 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
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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
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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
(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
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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 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
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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
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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 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).
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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 Registrable 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 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
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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. Xxxxx Xxxxx
Fax: 713/000-0000
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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 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 alter native.
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.
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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:
----------------------------
INVESTOR:
XXXX XXXX GROUP PLC
a U. K. company
By:
----------------------------
Its:
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