SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) NOVEMBER 18, 1996
INDUSTRIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1-9580
(State of other jurisdiction of (Commission File Number)
incorporation)
76-0289495
(IRS Employer Identification No.)
7135 ARDMORE HOUSTON, TEXAS 77054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 747-1025
_________________________________________________________________
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OF DISPOSITION OF ASSETS
(a) ACQUISITION OF AMERICAN RIVET COMPANY, INC.
On November 18, 1996, Industrial Holdings, Inc., a Texas corporation
(the "Company") acquired all the capital stock of American Rivet Company, Inc.
("American"), an Illinois corporation, pursuant to the terms of a stock purchase
agreement by and among the Company, Trust "B" Under the Will of Bernard J.
Bauer, Sr. ("Trust B") and the Gertrude Bauer Trust dated December 24, 1993 (the
"G Bauer Trust") (collectively "the Shareholders"). Trust B and the G Bauer
Trust were all the shareholders of American.
The total purchase price (the "Purchase Price") of the capital stock of
American was $11.2 million, including purchase price adjustments. The purchase
price was determined through arm's-length negotiations between the Company and
the Shareholders which had no pre-existing relationship with the Company or any
of its affiliates, directors, officers or associates. The purchase price was
financed as described below
American is a manufacturer of semi-tubular rivets and cold-headed
specials located in a suburb of Chicago, Illinois. American's customers are
primarily national manufacturers in the office furniture, automotive and
appliance industries. Net sales of American were $8,742,373 and $9,188,341 for
its fiscal years ended August 31, 1996 and 1995, respectively. American will
operate within the Fastener Manufacturing and Sales Division as part of Landreth
Engineering Company.
(b) COMERICA BANK-TEXAS ("COMERICA") FINANCING.
On November 1, 1996, the Company increased its Line of Credit Facility
and Demand Note ("Demand Note") with Comerica to $12 million from $10 million.
The Demand Note, is by and among the Company and its wholly owned subsidiaries
and bears interest at the prime rate. This Demand Note allows each subsidiary to
borrow funds based on 80% of eligible accounts receivable and 40 to 50% of
eligible inventory with specified sublimits for each individual subsidiary. $3.7
million of the proceeds of the Demand Note were used to fund the acquisition of
American.
On November 1, 1996, the Company, its wholly owned subsidiaries and
Comerica entered into a $1,900,000 Term Loan with interest at the prime rate,
payable in 60 monthly installments of $30,000,000 plus interest. The Term Loan
is secured by the machinery and equipment of American.
(c) ST. JAMES CAPITAL PARTNERS L.P. ("ST. JAMES") FINANCING.
On November 18, 1996, the Company entered into an agreement with St.
James, a Delaware limited partnership, which provided for the sale of a 12%
Promissory Note in the amount of $1,900,000, a 12% Promissory Note in the amount
of $1,600,000 and the sale of
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warrants (the "Warrants") to purchase 380,000 and 160,000 shares of the
Company's Common Stock.
Interest on the Promissory Notes is due at maturity. The Promissory
Notes mature on October 31, 1997. The Warrants are at an exercise price of $7.00
per share and expire on November 18, 2001. All the proceeds of the Promissory
Notes (or $3.5 million) were used to fund the acquisition of American.
In connection with the Warrants, the Company has granted to St. James
registration rights with regard to the Common Stock issuable upon exercise of
the Warrants ("Warrant Shares"). On or before May 31, 1997, the Company has
agreed to file with the Securities and Exchange Commission a shelf registration
covering the resale of the Warrant Shares.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements for Acquired Companies
At this time, it is impracticable to provide the required
financial statements for American Rivet Company, Inc.
Therefore, the required financial statements will be filed as
soon as they are available and in any event within sixty days
after the consummation of the acquisition.
(b) Proforma Financial Information
At this time, it is impracticable to provide the required pro
forma financial information for American Rivet Company, Inc.
Therefore, the required pro forma financial information will
be filed as soon as they are available and in any event within
sixty days after the consummation of the acquisition.
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EXHIBITS
2.1 Purchase Agreement dated October 3, 1996 by and among Industrial
Holdings, Inc., Trust "B" Under the Will of Bernard J. Bauer, Sr. and
the Gertrude Bauer Trust Dated December 29, 1993.
10.1 Line of Credit Facility and Demand Note by and among Industrial
Holdings, Inc., Pipeline Valve Specialty, Inc., Landreth Engineering
Company, American Rivet Company, Rex (the "Company and its
subsidiaries") and Comerica Bank Texas, N.A. ("Comerica").
10.2 Term Loan in the amount of $1.8 million by and among the Company and
its subsidiaries and Comerica.
10.3 12% Promissory Note in the amount of $1,900,000 by and among the
Company and St. James Capital Partners, L.P. ("St. James")
10.4 12% Promissory Note in the amount of $1,600,000 by and among the
Company and St. James.
10.5 Warrants to Purchase 380,000 shares of Common Stock of the Company
10.6 Warrant to Purchase 160,000 shares of Common Stock of the Company.
10.7 Registration Rights Agreement by and among the Company and St. James.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned hereunto duly authorized.
INDUSTRIAL HOLDINGS, INC.
By: /S/ CHRISTINE A. SMITH
CHIEF FINANCIAL OFFICER
Date: November 27, 1996
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EXHIBIT INDEX
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<CAPTION>
EXHIBIT NUMBER AND DESCRIPTION PAGE
<S> <C> <C>
2.1 Purchase Agreement dated October 3, 1996 by and among Industrial
Holdings, Inc. (the "Company"), Trust "B" Under the Will of Bernard
J. Bauer, Sr. and the Gertrude Bauer Trust dated December 29, 1993
is incorporated by reference from the Company's Report on Form 8-K
dated October 15, 1996..................................................
10.1 Line of Credit Facility and Demand Note by and among Industrial
Holdings, Inc., Pipeline Valve Specialty, Inc., Landreth Engineering
Company, American Rivet Company, Rex (the "Company and its
subsidiaries"), and Comerica Bank Texas, N.A. ("Comerica").............. Ex-1
10.2 Term Loan in the amount of $1.8 million by and among the Company
and its subsidiaries and Comerica....................................... Ex-3
10.3 12% Promissory Note in the amount of $1,900,000 by and among the
Company and St. James Capital Partners, L.P. ("St. James").............. Ex-5
10.4 12% Promissory Note in the amount of $1,600,000 by and among the
Company and St. James................................................... Ex-14
10.5 Warrants to Purchase 380,000 shares of Common Stock of the
Company................................................................. Ex-22
10.6 Warrant to Purchase 160,000 shares of Common Stock of the
Company................................................................. Ex-36
10.7 Registration Rights Agreement by and among the Company
and St. James........................................................... Ex-50
</TABLE>
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EXHIBIT 10.1
<TABLE>
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MASTER NOTE
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<S> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURIT LOAN NO CALL COLLATERA ACCOUNT OFFICER INITIALS
$12,000,000.00 11-01-1996 Y 514 L 2313836285 43542
120
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</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
================================================================================
BorrowerIndustrial Holdings, Inc., Landreth Engineering
Company, Pipeline Valve Specialty, Inc., The Rex
Group, Inc., Rex Machinery Sales, Inc., Rex Machinery
Movers, Inc., U.S. Crating, Inc., Rex International
Corporation, First Texas Credit Corporation, XTEL
Corporation, Losco, Inc., Rex Supply Corporation &
American Rivet Company, Inc. (TIN: 760289495)
7135 Ardmore
Houston, Texas 77054
LendeComerica Bank - Texas
Houston-One Shell-Middle Market
P.O. Box 650282
Dallas, TX 75265-0282
================================================================================
FOR VALUE RECEIVED, the undersigned promise(s) to pay ON DEMAND to the order of
Comerica Bank-Texas ("Lender"), at any office of the Lender in the State of
Texas, Twelve Million AND NO/100 DOLLARS ($12,000,000.00) (or such portion
thereof as shall have been advanced by the Lender and not repaid as hereinafter
provided) with interest until demand at a per annum rate equal to the Lender's
prime rate from time to time in effect plus zero percent (%), and thereafter at
a default rate equal to the rate of interest otherwise prevailing hereunder plus
three percent (3%) per annum (but in no event in excess of the maximum rate
permitted by law). The Lender's "prime rate" is that annual rate of interest so
designated by the Lender and which is changed by the Lender from time to time.
Interest rate changes will be effective for interest computation purposes as and
when the Lender's prime rate changes. Interest shall be calculated on the basis
of a 360-day year for the actual number of days outstanding. The Lender's "prime
rate" is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any of its customers. The Lender may make commercial
loans at rates of interest at, above or below its "prime rate."
If at any time the interest rate which would otherwise prevail hereunder exceeds
the Maximum Legal Rate (as hereinafter defined), any subsequent reductions in
such otherwise prevailing rate shall nor reduce the rate of interest hereunder
below the Maximum Legal Rate until the amount of accrued interest hereunder
equals the amount that wold have accrued if the prevailing rate had at all times
equalled the Maximum Legal Rate.
The principal amount payable hereunder shall be the sum of all advances made by
the Lender to or at the request of the undersigned, less principal payments
actually received in cash by the Lender. The books and records of the Lender
shall be the best evidence of the principal amount and the unpaid interest
amount owing at any time hereunder and shall be conclusive absent manifest
error. No interest shall accrue hereunder until the date of the first advance
made by the Lender; thereafter, interest on all advances shall accrue and be
computed ont he principal balance outstanding from time to time hereunder until
the same is paid in full. Advances made hereunder shall be made at the sole
discretion of the Lender, and the Lender shall have no obligation whatsoever to
make advances.
This Master Note (herein called the "Note") and any other indebtedness and
liabilities whatsoever of the undersigned (or any of them) to the Lender, and
any and all renewals, modifications or extensions thereof, whether joint or
several, contingent or absolute, now existing or hereafter arising, and
howsoever evidenced (herein collectively called "Indebtedness") are secured by
all items deposited in any account of any of the undersigned with the Lender and
by all proceeds of such items (cash or otherwise), all account balances of any
of the undersigned from time to time with the Lender, by all property of any of
the undersigned from time to time in the possession of the Lender and by any
other collateral, rights and properties described in each and every mortgage,
security agreement, pledge, assignment and other security or collateral
agreement which has been, or will hereafter from time to time be, executed by
any (or all) of the undersigned to or for the benefit of the Lender (all herein
collectively called the "Collateral").
If the undersigned or any indorser, guarantor or accommodation party (or any of
them) fails to pay this Note on demand, or any other Indebtedness when due, by
demand, maturity, acceleration or otherwise, then the Lender may at its option
and without prior notice to the undersigned (or any of them) declare any or all
of such other indebtedness to be immediately due and payable (notwithstanding
any provisions contained in the evidence thereof to the contrary), sell or
liquidate all or any portion of the Collateral offset against the Indebtedness
any amounts owing by the Lender to the undersigned (or any of them), charge
interest at the default rate herein provided and exercise an one or more of the
rights and remedies granted to the Lender by the agreement with the undersigned
(or any of them) or given to the Lender under applicable law.
If the Note is signed by two or more (whether by all as makes or by one or more
as accommodation party), the obligations hereunder and each undertaking hereby
made shall be that of all and any two or more jointly and also of each
severally. This Note shall bind the undersigned and the undersigned's respective
heirs, personal representatives, successors and assigns.
Each maker and indorsor waives presentment, demand, protest and notice of
dishonor and agrees that no extension or indulgence to the undersigned (or any
of them) or release or nonenforcement of any security, or release of any party,
whether with or without notice, shall affect the obligations of any maker,
indorser or accommodation party.
Each Maker and indorser agrees to reimburse to the holder of this Note for any
and all costs and expenses (including, but not limited to, reasonable attorney
fees) incurred in collecting or attempting to collect the Note.
Ex-1
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No agreements, conditions, provisions or stipulations contained in this Note, or
the default of the undersigned, or the exercise by the holder hereof of the
right to accelerate the payment or the maturity of principal and interest, or to
exercise any option whatsoever contained herein, or in any other agreements
between the undersigned and Lender, or the arising of any contingency
whatsoever, shall entitle the holder of this Note to contract for, charge or
collect, in any event, interest exceeding the maximum rate of nonusurious
interest allowed from time to time by applicable state or federal law as now or
as may hereinafter be in effect, including, as to article 5069-1.04 Vernon's
Texas Civil Statutes (and as the same may be incorporated by reference in other
Texas statutes), but otherwise without limitation, that rate based upon the
"indicated rate ceiling" (herein referred to as the "Maximum Legal Rate") and in
no event shall the undersigned be obligated to pay interest exceeding such
Maximum Legal Rate; and all agreements, conditions or stipulations, if any,
which may in any event or contingency whatsoever operate to bind, obligate or
compel the undersigned to pay a rate of interest exceeding the Maximum Legal
Rate shall be without binding force or effect, at law or in equity, to the
extent only of the excess of interest over such Maximum Legal Rate. In the event
any interest is contracted for, charged or collected in excess of the Maximum
Legal Rate (hereinafter referred to as the "Excess"), the undersigned
acknowledges and stipulates that any such contract, charge or receipt shall be
the result of an accidental and bona fide error, and that any Excess received by
Lender shall be first applied to reduce the principal then unpaid hereunder;
second, applied to reduce any other Indebtedness; and third, returned to the
undersigned, it being the intention of the parties hereto not to enter at any
time into an usurious or other illegal relationship. The undersigned recognizes
that such an unintentional result could inadvertently occur. By the execution of
this Note, the undersigned covenants that (a) the credit or return of any Excess
shall constitute the acceptance by the undersigned of such Excess, and (b) the
undersigned shall not seek or pursue any other remedy, legal or equitable,
against Lender, or any holder hereof based, in whole or in part, upon the
contracting for, charging or receiving of any interest in excess of the Maximum
Legal Rate. For the purpose of determining whether or not any Excess has been
contracted for, charged or received by Lender or any holder hereof, all interest
at any time contracted for, charged or received by Lender or any holder hereof,
in connection with this note, shall be amortized, prorated, allocated and spread
in equal parts during the entire term of this Note.
THIS NOTE SHALL BE CONSTRUED UNDER ANY GOVERNED BY THE LAWS OF THE STATE OF
TEXAS AND APPLICABLE FEDERAL LAW, BUT IN ANY EVENT CHAPTER 15 OF TITLE 79,
VERNON'S TEXAS CIVIL STATUTES (AND AS THE SAME MAY BE INCORPORATED BY REFERENCE
IN OTHER TEXAS STATUTES) SHALL NOT APPLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE. BORROWER HEREBY WAIVES THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER BORROWER OR LENDER AGAINST THE
OTHER.
The undersigned acknowledges and agrees that this Note is payable on demand at
any time notwithstanding any provisions for acceleration or events of default
contained herein or in any security agreement, deed of trust or other agreement
securing payment hereof.
BORROWER:
Industrial Holdings, Inc., Landreth Engineering Company, Pipeline Valve
Specialty, Inc., The Rex Group, Inc., Rex Machinery Sales, Inc., Rex
Machinery Movers, Inc., U.S. Crating, Inc., Rex International
Corporation, First Texas Credit Corporation, XTEL Corporation,Losco,
Inc., Rex Supply Corporation & American Rivet Company, Inc.
By: S/ROBERT E. CONE
Robert E. Cone, President of Industrial Holdings, Inc.
By: S/ROBERT E. CONE
Robert E. Cone, Chief Executive Officer of the following: American
Rivet Company, Inc., Landreth Engineering Company, Pipeline Valve
Specialty, Inc., The Rex Group, Inc., Rex Supply Corporation, Rex
Machinery Sales, Inc., Rex Machinery Movers, Inc., U.S. Crating, Inc.,
Rex International Corporation, First Texas Credit Corporation, XTEL
Corporation & Losco, Inc.
Ex-2
EXHIBIT 10.2
11-01-96 PROMISSORY NOTE Page 2
Loan No (Continued)
PROMISSORY NOTE
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<CAPTION>
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PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,800,000.00 10-01-1996 11-01-2001 514 090 2313836285 43542
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</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
================================================================================
BorrowerIndustrial Holdings, Inc., Landreth Engineering
Company, Pipeline Valve Specialty, Inc., The Rex
Group, Inc., Rex Machinery Sales, Inc., Rex Machinery
Movers, Inc., U.S. Crating, Inc., Rex International
Corporation, First Texas Credit Corporation, XTEL
Corporation, Losco, Inc., Rex Supply Corporation &
American Rivet Company, Inc. (TIN: 760289495)
7135 Ardmore
Houston, Texas 77054
LendeComerica Bank - Texas
Houston-One Shell-Middle Market
P.O. Box 650282
Dallas, TX 75265-0282
================================================================================
PRINCIPAL AMOUNT: $1,800,000,00 Initial Rate: 8.25%
Date of Note: November 1, 1996
PROMISE TO PAY. Industrial Holdings, Inc., Landreth Engineering Company,
Pipeline Valve Specialty, Inc., The Rex Group, Inc., Rex Machinery Sales, Inc.,
Rex Machinery Movers, Inc., U.S. Crating, Inc., Rex International Corporation,
First Texas Credit Corporation, XTEL Corporation, Losco, Inc., Rex Supply
Corporation & American Rivet Company, Inc. ("Borrower") promises to pay to
Comerica Bank - Texas ("Lender"), or order, in lawful money of the United States
of America, the principal amount of One Million Eight Hundred Thousand & 00/100
Dollars ($1,800,000.00), together with interest on the unpaid principal balance
from November 1, 1996, until maturity.
PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan on demand, or if no demand is made, in 59 principal
payments of $30,000.00 each and one final principal and interest payment of
$30,213.13. Borrower's first principal payment is due December 1, 1996, and all
subsequent principal payments are due on the same day of each month after that.
In addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date. Borrower's first interest payment is due
December 1, 1996, and all subsequent interest payments are due on the same day
of each month after that. Borrower's final payment due November 1, 2001, will be
for all principal and accrued interest not yet paid. Interest on this Note is
computed on a 365/360 simple interest basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding, unless such calculation would result in a usurious rate, in
which case interest shall be calculated on a per diem basis of a year of 365 or
366 days, as the case may be. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90 day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each day. THE INDEX CURRENTLY IS 8.250%
PER ANNUM. THE INTEREST RATE TO BE APPLIED PRIOR TO MATURITY TO THE UNPAID
PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE EQUAL TO THE INDEX, RESULTING
IN AN INITIAL RATE OF 8.250% PER ANNUM. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law. For purposes of this Note, the "maximum rate allowed by applicable law"
means the greater of (a) the maximum rate of interest permitted under federal or
other law applicable to the indebtedness evidenced by this Note, or (b) the
"Indicated Rate Ceiling" as referred to in Article 5069-1.04(a)(1) V.T.C.S.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower's obligation to continue to make payments under the
payment schedule. Rather, they will reduce the principal balance due and may
result in Borrower making fewer payments.
POST MATURITY RATE. The Post Maturity Rate on this Note is the maximum rate
allowed b applicable law. Borrower will pay interest on all sums due after final
maturity, whether by acceleration or otherwise, at that rate, with the exception
of any amounts added to the principal balance of this Note based on Lender's
payment of insurance premiums, which will continue to accrue interest at the
pre-maturity rate.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note. (g) A
Ex-3
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11-01-96 PROMISSORY NOTE Page 2
Loan No (Continued)
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is impaired.
(h) Lender in good faith deems itself insecure.
If any default, other than default in payment, is curable, it may be cured (and
no event of default will have occurred) if Borrower, after receiving written
notice from Lender demanding cure of such default: (a) cures the default within
fifteen (15) days; or (b) if the cure requires more than fifteen (15) days,
immediately initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably pratical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire indebtedness,
including the unpaid principal balance on this Note, all accrued unpaid
interest, and all other amounts, costs and expenses for which Borrower is
responsible under this Note or any other agreement with Lender pertaining to
this loan, immediately due, without notice, and then Borrower will pay that
amount. Lender may hire an attorney to help collect this Note if Borrower does
not pay, and Borrower will pay Lender's reasonable attorneys' fees. Borrower
also will pay Lender all other amounts actually incurred by Lender as court
costs, lawful fees for filing, recording, or releasing to any public office any
instrument securing this loan; the reasonable cost actually expended for
repossessing, storing, preparing for sale, and selling any security; and fees
for noting a lien on or transferring a certificate of title to any motor vehicle
offered a security for this loan, or premiums or identifiable charges received
in connection with the sale of authorized insurance. THIS NOTE HAS BEEN
DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF TEXAS. IF T HERE IS A
LAWSUIT, AND IF THE TRANSACTION EVIDENCED BY THIS NOTE OCCURRED IN DALLAS
COUNTY, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF
THE COURTS OF DALLAS COUNTY, THE STATE OF TEXAS. LENDER AND BORROWER HEREBY
WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. (INITIAL HERE S/REC )
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation on accounts for which the grant of a security interest would
be prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. In particular, this
section means (among other things) that Borrower does not agree or intend to
pay, and Lender does not agree or intend to contract for,charge, collect, take,
reserve or receive (collectively referred to herein as "charge or collect"), any
amount in the nature of interest or in the nature of a fee for this loan, which
would in any way or event (including demand, prepayment, or acceleration) cause
Lender to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Texas
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. The right to accelerate maturity of sums due under this Note does
not include the right to accelerate any interest which has not otherwise accrued
on the date of such acceleration, and Lender does not intend to charge or
collect any unearned interest in the event of acceleration. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the loan evidenced by
this Note until payment in full so that the rate or amount of interest on
account of the loan evidenced hereby does not exceed the applicable usury
ceiling. Lender may delay or forgo enforcing any of its rights or remedies under
this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest, notice of dishonor, notice of intent
to accelerate the maturity of this Note, and notice of acceleration of the
maturity of this Note. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation make or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
Industrial Holdings, Inc., Landreth Engineering Company, Pipeline Valve
Specialty, Inc., The Rex Group, Inc., Rex Machinery Sales, Inc., Rex Machinery
Movers, Inc., U.S. Crating, Inc., Rex International Corporation, First Texas
Credit Corporation, XTEL Corporation,Losco, Inc., Rex Supply Corporation &
American Rivet Company, Inc.
By: S/ROBERT E. CONE
Robert E. Cone, President of Industrial Holdings, Inc.
By: S/ROBERT E. CONE
Robert E. Cone, Chief Executive Officer of the following: American Rivet
Company, Inc., Landreth Engineering Company, Pipeline Valve Specialty, Inc., The
Rex Group, Inc., Rex Supply Corporation, Rex Machinery Sales, Inc., Rex
Machinery Movers, Inc., U.S. Crating, Inc., Rex International Corporation, First
Texas Credit Corporation, XTEL Corporation & Losco, Inc.
Ex-4
EXHIBIT 10.3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
INDUSTRIAL HOLDINGS, INC.
12% Promissory Note
$1,900,000 Houston, Texas November 18, 1996
Industrial Holdings, Inc., a Texas corporation (hereinafter called the
"Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to St. James Capital Partners, L.P., a Delaware limited partnership (hereinafter
called "Holder"), or its registered assigns, the principal sum of One Million
Nine Hundred Thousand Dollars ($1,900,000), together with accrued interest on
the amount of such principal sum, payable in accordance with the terms set forth
below.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO THE
TERMS OF A SECURITY AGREEMENT BETWEEN THE COMPANY AND THE HOLDER DATED AS OF THE
DATE HEREOF (THE "SECURITY AGREEMENT") AND A SUBORDINATION AGREEMENT AMONG THE
COMPANY, COMERICA BANK-TEXAS, AND THE HOLDER DATED AS OF THE DATE HEREOF (THE
"SUBORDINATION AGREEMENT").
ARTICLE I
Definitions
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires: (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular; (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants; and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision.
"BOARD OF DIRECTORS" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
Ex-5
<PAGE>
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
"COMMON STOCK" means shares of common stock, par value $.01 per share,
of the Company.
"COMPANY FINANCIAL STATEMENTS" shall mean those audited financial
statements of the Company included in the Company's most recent annual report as
filed with the United States Securities and Exchange Commission on Form 10-K,
and any amendments thereto.
"DEFAULT" means any event which is, or after notice or passage of time
would be, an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in Section 3.1.
"INDEBTEDNESS" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or purchase money
indebtedness, or indebtedness secured by property ("Purchase Money
Indebtedness") at the time of the acquisition of such property by such Person,
for the payment of which the Person is directly or contingently liable; (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay over funds; (iii) for
all trade debt of the Person; and (iv) for all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.
"MATURITY DATE", when used with respect to the Note means October 31,
1997 (or such earlier date upon which the Note becomes due and payable).
"NOTE" means this 12% Promissory Note in the original principal amount
of $1,900,000.
"OUTSIDE FINANCING" shall be defined as (i) any transaction where the
Company sells or transfers its equity or debt securities for cash whether in
public or private offerings and (ii) any financing from a bank or other entity
acting as a financial institution made to the Company or any Subsidiary other
than pursuant to the existing demand facility of Comerica Bank-Texas on the date
hereof (but not to any increases in such facility) or Purchase Money
Indebtedness incurred in the ordinary course of business.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"SEC" means the United States Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act of 1933.
Ex-6
<PAGE>
"SIGNIFICANT SUBSIDIARY" means at any time, any Subsidiary of the
Company that constitutes a "Significant Subsidiary" of the Company within the
meaning of Rule 1-02 of Regulation S-X under the Securities Act of 1933, as
amended.
"SUBSIDIARY" means a corporation or other entity in which more than 50%
of the outstanding voting stock or equity interests is owned or controlled,
directly or indirectly, by the Company or any combination of the Company and one
or more other Subsidiaries. For the purposes of this definition, "VOTING STOCK"
means stock or other interests which ordinarily has voting power for the
election of directors, and equity interests means the right to receive the
profits of the entity, when disbursed, or the assets of the entity upon
liquidation or dissolution.
ARTICLE II
Payments
A. INTEREST. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate equal to 12% per annum calculated on the basis of a 360-day year.
All past due amounts of principal and interest shall bear interest at 17.5% per
annum calculated on the basis of a 360-day year until paid.
B. PAYMENT OF PRINCIPAL AND INTEREST. Subject to Section 2D hereof, the
principal and unpaid interest of this Note shall be due and payable in full on
the Maturity Date.
C. PREPAYMENTS. At any time before the Maturity Date, the Company may
prepay all or any part of this Note in whole or in part, upon five days' prior
written notice given to Holder pursuant to Section 5F; provided that this Note
shall be mandatorily prepaid upon the closing of an Outside Financing, such
prepayment to be in an amount equal to the net proceeds received by the Company
or any Subsidiary from such Outside Financing but not to exceed the then
outstanding principal and accrued and unpaid interest on this Note; provided,
further that the first $3.9 million in funds received by the Company pursuant to
the exercise of warrants covered by that certain Registration Statement on Form
S-3 (File No. 333-13323), shall be excluded from this mandatory prepayment
obligation. All payments made under this Note shall be applied first to accrued
interest, and the balance, if any, to principal; provided, however, that
interest shall accrue under any remaining principal balance and shall be payable
at the rate provided above.
D. MANNER OF PAYMENT UPON MATURITY. At maturity, payment of principal
and interest on this Note will be made by delivery of checks to Holder at its
address as set forth in this Note or wire transfers pursuant to instructions
from Holder. If the date upon which the payment of principal and interest is
required to be made pursuant to this Note occurs other than on a Business Day,
then such payment of principal and interest shall be made on the next occurring
Business Day following said payment date and shall include interest through said
next occurring Business Day.
Ex-7
<PAGE>
E. SECURITY. This Notes is secured by the collateral defined in the
Security Agreement.
ARTICLE III
Remedies
A. EVENTS OF DEFAULT. An "Event of Default" occurs if:
1. the Company defaults in the payment or a mandatory prepayment of
the principal or interest of the Note when such principal or interest becomes
due and payable; or
2. the Company defaults in the performance of any covenant made by
the Company, and such default remains uncured for a period of 15 days after
notice from the Holder, in (i) the Agreement of Purchase and Sale by and between
the Company and the Holder dated as of the date hereof (the "Purchase
Agreement"), (ii) the Common Stock Purchase Warrants issued by the Company to
the Holder as of the date hereof (the "Warrants"); (iii) the Registration Rights
Agreement dated as of the date hereof by and between the Company and the Holder
(the "Registration Rights Agreement"); (iv) the Security Agreement; (v) the
Subordination Agreement; or (vi) this Note, PROVIDED THAT a default in the
performance of any covenant in Sections 8(a), 8(c), 8(d), 8(e), 8(f), 8(h),
8(i), 8(j), 8(k), 8(l), 8(m) or 8(n) of the Security Agreement or Section 4A of
this Note shall be an event of Default immediately upon occurrence; or
3. any representation or warranty made by the Company in the
Purchase Agreement, the Warrants, the Registration Rights Agreement, this Note
or in any certificate furnished by the Company in connection with the
consummation of the transaction contemplated thereby, is untrue in any material
respect as of the date of making thereof; or
4. the Company or any Significant Subsidiary defaults in the payment
when due (whether by lapse of time, by declaration, by call for redemption or
otherwise) of the principal of or interest on any Indebtedness of the Company
(other than the Indebtedness evidenced by the Note or good-faith disputes with
trade creditors) having an aggregate principal amount in excess of $100,000 and
such default remains uncured for a period of 15 days; or
5. a court of competent jurisdiction enters a final and
non-appealable judgment or judgments against the Company or any Significant
Subsidiary or any property or assets of the Company or any Significant
Subsidiary for the payment of money aggregating $100,000 or more in excess of
applicable insurance coverage; or
6. a court of competent jurisdiction enters (i) a decree or order
for relief in respect of the Company or any Significant Subsidiary in an
involuntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (ii) a decree or order
adjudging the Company or any Significant Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Significant
Subsidiary under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official
of the Company or any Significant Subsidiary or of any substantial part
Ex-8
<PAGE>
of the property of the Company or any Significant Subsidiary or ordering the
winding up or liquidation of the affairs of the Company or any Significant
Subsidiary; or
7. the Company or any Significant Subsidiary: (i) commences a
voluntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or proceeding
to be adjudicated a bankrupt or insolvent; (ii) files a petition, answer or
consent seeking reorganization or similar relief under any applicable federal or
state law; (iii) makes an assignment for the benefit of creditors; or (iv)
admits in writing its inability to pay its debts generally as they become due;
or
8. any person or group (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) becomes the beneficial owner of 25% or more of
the total voting power of the Company and was not the beneficial owner of 25% or
more of the total voting power of the Company as of the date of this Agreement;
9. the Company or any Significant Subsidiary (i) merges or
consolidates with or into any other Person, unless the Company is the surviving
or acquiring party; or (ii) the Company or any Significant Subsidiary dissolves
or liquidates; or (iii) the Company or any Significant Subsidiary sells all or
any substantial portion of its assets.
B. ACCELERATION OF MATURITY. This Note and all accrued interest shall
(i) automatically become immediately due and payable if an Event of Default
described in Sections 3.1.6, 3.1.7, 3.1.8 or 3.1.9 occurs, and (ii) become
immediately due and payable at the option of the Holder in its sole discretion
if any other Event of Default occurs.
ARTICLE IV
Covenants
The Company covenants and agrees that, so long as this Note is
outstanding:
A. PAYMENT OF PRINCIPAL AND ACCRUED INTEREST. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
B. CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if it shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of its business.
C. TAXES; CLAIMS; ETC. The Company will, and will cause each Subsidiary
to, promptly pay and discharge all lawful taxes, assessments, and governmental
charges or levies imposed upon it or upon its income or profits, or upon any of
its properties, real, personal, or mixed, before the same shall become in
default, as well as all lawful claims for labor, materials, and supplies or
otherwise which, if unpaid, might become a lien or charge upon such properties
or any part thereof, and which lien or charges will have a material adverse
effect on the business
Ex-9
<PAGE>
of the Company; PROVIDED, however, that neither the Company nor any Subsidiary
shall not be required to pay or cause to be paid any such tax, assessment,
charge, levy, or claim prior to institution of foreclosure proceedings if the
validity thereof shall concurrently be contested in good faith by appropriate
proceedings and if the Company shall have established reserves deemed by the
Company adequate with respect to such tax, assessment, charge, levy, or claim.
D. MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
E. SEC REPORTS. The Company will deliver to the Holder within 20 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. The Company will timely comply with its
reporting and filing obligations under the applicable federal securities laws.
F. NOTICE OF DEFAULTS. The Company will promptly notify the Holder in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting holders to accelerate the maturity of such Indebtedness.
G. MERGERS AND ACQUISITIONS. Without the consent of the Holder the
Company or any Subsidiary will not dissolve, liquidate, consolidate or merge
with or sell or transfer all or a substantial portion of its assets to any
Person.
H. COMPLIANCE WITH LAWS. The Company will promptly comply with all laws,
ordinances and governmental rules and regulations to which it is subject.
ARTICLE V
Miscellaneous
A. COLLECTION FEES. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the Company
hereby undertakes to pay all costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Holder.
B. CONSENT TO AMENDMENTS. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the written consent
to such amendment, action or omission to act from the holders of a majority of
the aggregate principal amount of the Note.
C. BENEFITS OF NOTE; NO IMPAIRMENT OF RIGHTS OF HOLDER OF SENIOR
INDEBTEDNESS. Nothing in this Note, express or implied, shall give to any
Person, other than the Company,
Ex-10
<PAGE>
Holder, and their successors any benefit or any legal or equitable right, remedy
or claim under or in respect of this Note.
D. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
E. RESTRICTIONS ON TRANSFER. Subject to the provisions of this Section,
this Note is transferable in the same manner and with the same effect as in the
case of a negotiable instrument payable to a specified person.
F. NOTICE; ADDRESS OF PARTIES. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to the
Company: 7135 Ardmore, Houston, Texas 77054 or at any other address designated
by the Company in writing to Holder; if to Holder: St. James Capital Partners,
L.P., c/o St. James Capital Corp., 5599 San Felipe, Suite 301, Houston, Texas
77056, Attn: John L. Thompson, or at any other address designated by Holder to
the Company in writing.
G. SEPARABILITY CLAUSE. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
H. GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware (without regard to
principles of choice of law).
I. USURY. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Delaware and the United States of
America, and judicial or administrative interpretations or determinations
thereof regarding the contracting for, charging and receiving of interest for
the use, forbearance, and detention of money (referred to as "Applicable Law").
The Holder shall have no right to claim, to charge or to receive any interest in
excess of the maximum rate of interest, if any, permitted to be charged on that
portion of the amount representing principal which is outstanding and unpaid
from time to time by Applicable Law. Determination of the rate of interest for
the purpose of determining whether this Note is usurious under Applicable Law
shall be made by amortizing, prorating, allocating and spreading in equal parts
during the period of the actual time of this Note, all interest or other sums
deemed to be interest (referred to in this Section as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event
Ex-11
<PAGE>
that it has been accelerated prior to maturity, Holder shall refund to the
Company the amount of such excess, and shall not be subject to any of the
penalties provided by Applicable Law for contracting for, charging or receiving
Interest in excess of the maximum rate allowed by Applicable Law. Any such
excess which is unpaid shall be canceled.
Ex-12
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
INDUSTRIAL HOLDINGS, INC.
Robert E. Cone, President
Ex-13
EXHIBIT 10.4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
INDUSTRIAL HOLDINGS, INC.
12% Promissory Note
$1,600,000 Houston, Texas November 18, 1996
Industrial Holdings, Inc., a Texas corporation (hereinafter called the
"Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to St. James Capital Partners, L.P., a Delaware limited partnership (hereinafter
called "Holder"), or its registered assigns, the principal sum of One Million
Six Hundred Thousand Dollars ($1,600,000), together with accrued interest on the
amount of such principal sum, payable in accordance with the terms set forth
below.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO THE
TERMS OF A SECURITY AGREEMENT BETWEEN THE COMPANY AND THE HOLDER DATED AS OF THE
DATE HEREOF (THE "SECURITY AGREEMENT") AND A SUBORDINATION AGREEMENT AMONG THE
COMPANY, COMERICA BANK-TEXAS, AND THE HOLDER DATED AS OF THE DATE HEREOF (THE
"SUBORDINATION AGREEMENT").
ARTICLE I
Definitions
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires: (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular; (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants; and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision.
"BOARD OF DIRECTORS" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
Ex-14
<PAGE>
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
"COMMON STOCK" means shares of common stock, par value $.01 per share,
of the Company.
"COMPANY FINANCIAL STATEMENTS" shall mean those audited financial
statements of the Company included in the Company's most recent annual report as
filed with the United States Securities and Exchange Commission on Form 10-K,
and any amendments thereto.
"DEFAULT" means any event which is, or after notice or passage of time
would be, an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in Section 3.1.
"INDEBTEDNESS" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or purchase money
indebtedness, or indebtedness secured by property ("Purchase Money
Indebtedness") at the time of the acquisition of such property by such Person,
for the payment of which the Person is directly or contingently liable; (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay over funds; (iii) for
all trade debt of the Person; and (iv) for all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.
"MATURITY DATE", when used with respect to the Note means October 31,
1997 (or such earlier date upon which the Note becomes due and payable).
"NOTE" means this 12% Promissory Note in the original principal amount
of $1,600,000.
"OUTSIDE FINANCING" shall be defined as (i) any transaction where the
Company sells or transfers its equity or debt securities for cash whether in
public or private offerings and (ii) any financing from a bank or other entity
acting as a financial institution made to the Company or any Subsidiary other
than pursuant to the existing demand facility of Comerica Bank-Texas on the date
hereof (but not to any increases in such facility) or Purchase Money
Indebtedness incurred in the ordinary course of business.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Ex-15
<PAGE>
"SEC" means the United States Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act of 1933.
"SIGNIFICANT SUBSIDIARY" means at any time, any Subsidiary of the
Company that constitutes a "Significant Subsidiary" of the Company within the
meaning of Rule 1-02 of Regulation S-X under the Securities Act of 1933, as
amended.
"SUBSIDIARY" means a corporation or other entity in which more than 50%
of the outstanding voting stock or equity interests is owned or controlled,
directly or indirectly, by the Company or any combination of the Company and one
or more other Subsidiaries. For the purposes of this definition, "VOTING STOCK"
means stock or other interests which ordinarily has voting power for the
election of directors, and equity interests means the right to receive the
profits of the entity, when disbursed, or the assets of the entity upon
liquidation or dissolution.
ARTICLE II
Payments
A. INTEREST. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate equal to 12% per annum calculated on the basis of a 360-day year.
All past due amounts of principal and interest shall bear interest at 17.5% per
annum calculated on the basis of a 360-day year until paid.
B. PAYMENT OF PRINCIPAL AND INTEREST. Subject to Section 2D hereof, the
principal and unpaid interest of this Note shall be due and payable in full on
the Maturity Date.
C. PREPAYMENTS. At any time before the Maturity Date, the Company may
prepay all or any part of this Note in whole or in part, upon five days' prior
written notice given to Holder pursuant to Section 5F; provided that this Note
shall be mandatorily prepaid upon the closing of an Outside Financing, such
prepayment to be in an amount equal to the net proceeds received by the Company
or any Subsidiary from such Outside Financing but not to exceed the then
outstanding principal and accrued and unpaid interest on this Note; provided,
further that the first $3.9 million in funds received by the Company pursuant to
the exercise of warrants covered by that certain Registration Statement on Form
S-3 (File No. 333-13323), shall be excluded from this mandatory prepayment
obligation. All payments made under this Note shall be applied first to accrued
interest, and the balance, if any, to principal; provided, however, that
interest shall accrue under any remaining principal balance and shall be payable
at the rate provided above.
D. MANNER OF PAYMENT UPON MATURITY. At maturity, payment of principal
and interest on this Note will be made by delivery of checks to Holder at its
address as set forth in this Note or wire transfers pursuant to instructions
from Holder. If the date upon which the payment of principal and interest is
required to be made pursuant to this Note occurs other than on a Business Day,
then such payment of principal and interest shall be made on the next occurring
Business Day following said payment date and shall include interest through said
next occurring Business Day.
Ex-16
<PAGE>
E. SECURITY. This Notes is secured by the collateral defined in the
Security Agreement.
ARTICLE III
Remedies
C. EVENTS OF DEFAULT. An "Event of Default" occurs if:
1. the Company defaults in the payment or a mandatory prepayment
of the principal or interest of the Note when such principal or interest becomes
due and payable; or
2. the Company defaults in the performance of any covenant made
by the Company, and such default remains uncured for a period of 15 days after
notice from the Holder, in (i) the Agreement of Purchase and Sale by and between
the Company and the Holder dated as of the date hereof (the "Purchase
Agreement"), (ii) the Common Stock Purchase Warrants issued by the Company to
the Holder as of the date hereof (the "Warrants"); (iii) the Registration Rights
Agreement dated as of the date hereof by and between the Company and the Holder
(the "Registration Rights Agreement"); (iv) the Security Agreement; (v) the
Subordination Agreement; or (vi) this Note, PROVIDED THAT a default in the
performance of any covenant in Sections 8(a), 8(c), 8(d), 8(e), 8(f), 8(h),
8(i), 8(j), 8(k), 8(l), 8(m) or 8(n) of the Security Agreement or Section 4A of
this Note shall be an event of Default immediately upon occurrence; or
3. any representation or warranty made by the Company in the
Purchase Agreement, the Warrants, the Registration Rights Agreement, this Note
or in any certificate furnished by the Company in connection with the
consummation of the transaction contemplated thereby, is untrue in any material
respect as of the date of making thereof; or
4. the Company or any Significant Subsidiary defaults in the
payment when due (whether by lapse of time, by declaration, by call for
redemption or otherwise) of the principal of or interest on any Indebtedness of
the Company (other than the Indebtedness evidenced by the Note or good-faith
disputes with trade creditors) having an aggregate principal amount in excess of
$100,000 and such default remains uncured for a period of 15 days; or
5. a court of competent jurisdiction enters a final and
non-appealable judgment or judgments against the Company or any Significant
Subsidiary or any property or assets of the Company or any Significant
Subsidiary for the payment of money aggregating $100,000 or more in excess of
applicable insurance coverage; or
6. a court of competent jurisdiction enters (i) a decree or order
for relief in respect of the Company or any Significant Subsidiary in an
involuntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (ii) a decree or order
adjudging the Company or any Significant Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Significant
Subsidiary under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official
of the Company or any Significant Subsidiary or of any substantial part
Ex-17
<PAGE>
of the property of the Company or any Significant Subsidiary or ordering the
winding up or liquidation of the affairs of the Company or any Significant
Subsidiary; or
7. the Company or any Significant Subsidiary: (i) commences a
voluntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or proceeding
to be adjudicated a bankrupt or insolvent; (ii) files a petition, answer or
consent seeking reorganization or similar relief under any applicable federal or
state law; (iii) makes an assignment for the benefit of creditors; or (iv)
admits in writing its inability to pay its debts generally as they become due;
or
8. any person or group (within the meaning of Section 13(d) of
the Securities Exchange Act of 1934) becomes the beneficial owner of 25% or more
of the total voting power of the Company and was not the beneficial owner of 25%
or more of the total voting power of the Company as of the date of this
Agreement;
9. the Company or any Significant Subsidiary (i) merges or
consolidates with or into any other Person, unless the Company is the surviving
or acquiring party; or (ii) the Company or any Significant Subsidiary dissolves
or liquidates; or (iii) the Company or any Significant Subsidiary sells all or
any substantial portion of its assets.
D. ACCELERATION OF MATURITY. This Note and all accrued interest shall
(i) automatically become immediately due and payable if an Event of Default
described in Sections 3.1.6, 3.1.7, 3.1.8 or 3.1.9 occurs, and (ii) become
immediately due and payable at the option of the Holder in its sole discretion
if any other Event of Default occurs.
ARTICLE IV
Covenants
The Company covenants and agrees that, so long as this Note is
outstanding:
A. PAYMENT OF PRINCIPAL AND ACCRUED INTEREST. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
B. CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if it shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of its business.
C. TAXES; CLAIMS; ETC. The Company will, and will cause each Subsidiary
to, promptly pay and discharge all lawful taxes, assessments, and governmental
charges or levies imposed upon it or upon its income or profits, or upon any of
its properties, real, personal, or mixed, before the same shall become in
default, as well as all lawful claims for labor, materials, and supplies or
otherwise which, if unpaid, might become a lien or charge upon such properties
or any part thereof, and which lien or charges will have a material adverse
effect on the business
Ex-18
<PAGE>
of the Company; PROVIDED, however, that neither the Company nor any Subsidiary
shall not be required to pay or cause to be paid any such tax, assessment,
charge, levy, or claim prior to institution of foreclosure proceedings if the
validity thereof shall concurrently be contested in good faith by appropriate
proceedings and if the Company shall have established reserves deemed by the
Company adequate with respect to such tax, assessment, charge, levy, or claim.
D. MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
E. SEC REPORTS. The Company will deliver to the Holder within 20 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. The Company will timely comply with its
reporting and filing obligations under the applicable federal securities laws.
F. NOTICE OF DEFAULTS. The Company will promptly notify the Holder in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting holders to accelerate the maturity of such Indebtedness.
G. MERGERS AND ACQUISITIONS. Without the consent of the Holder the
Company or any Subsidiary will not dissolve, liquidate, consolidate or merge
with or sell or transfer all or a substantial portion of its assets to any
Person.
H. COMPLIANCE WITH LAWS. The Company will promptly comply with all laws,
ordinances and governmental rules and regulations to which it is subject.
ARTICLE V
Miscellaneous
A. COLLECTION FEES. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the Company
hereby undertakes to pay all costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Holder.
B. CONSENT TO AMENDMENTS. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the written consent
to such amendment, action or omission to act from the holders of a majority of
the aggregate principal amount of the Note.
Ex-19
<PAGE>
C. BENEFITS OF NOTE; NO IMPAIRMENT OF RIGHTS OF HOLDER OF SENIOR
INDEBTEDNESS. Nothing in this Note, express or implied, shall give to any
Person, other than the Company, Holder, and their successors any benefit or any
legal or equitable right, remedy or claim under or in respect of this Note.
D. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
E. RESTRICTIONS ON TRANSFER. Subject to the provisions of this Section,
this Note is transferable in the same manner and with the same effect as in the
case of a negotiable instrument payable to a specified person.
F. NOTICE; ADDRESS OF PARTIES. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to the
Company: 7135 Ardmore, Houston, Texas 77054 or at any other address designated
by the Company in writing to Holder; if to Holder: St. James Capital Partners,
L.P., c/o St. James Capital Corp., 5599 San Felipe, Suite 301, Houston, Texas
77056, Attn: John L. Thompson, or at any other address designated by Holder to
the Company in writing.
G. SEPARABILITY CLAUSE. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
H. GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware (without regard to
principles of choice of law).
I. USURY. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Delaware and the United States of
America, and judicial or administrative interpretations or determinations
thereof regarding the contracting for, charging and receiving of interest for
the use, forbearance, and detention of money (referred to as "Applicable Law").
The Holder shall have no right to claim, to charge or to receive any interest in
excess of the maximum rate of interest, if any, permitted to be charged on that
portion of the amount representing principal which is outstanding and unpaid
from time to time by Applicable Law. Determination of the rate of interest for
the purpose of determining whether this Note is usurious under Applicable Law
shall be made by amortizing, prorating, allocating and spreading in equal parts
during the period of the actual time of this Note, all interest or other sums
deemed to be interest (referred to in this Section as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event
Ex-20
<PAGE>
that it has been accelerated prior to maturity, Holder shall refund to the
Company the amount of such excess, and shall not be subject to any of the
penalties provided by Applicable Law for contracting for, charging or receiving
Interest in excess of the maximum rate allowed by Applicable Law. Any such
excess which is unpaid shall be canceled.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
INDUSTRIAL HOLDINGS, INC.
S/ROBERT E. CONE
Robert E. Cone, President
Ex-21
EXHIBIT 10.5
THE SECURITIES REPRESENTED BY THESE WARRANTS AND THE COMMON STOCK ISSUABLE
THEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THESE WARRANTS MAY NOT BE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
INDUSTRIAL HOLDINGS, INC.
Expiring on November 18, 2001
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, St. James Capital Partners, L.P. (the "Holder") or its assigns,
is entitled to subscribe for and purchase from the Company (as hereinafter
defined), in whole or in part, 380,000 shares of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (as hereinafter
defined) at an initial Exercise Price (as hereinafter defined) per share of
$7.00, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of Warrants (as hereinafter defined), the
number of shares of Common Stock purchasable hereunder, and the Exercise Price
therefor are subject to adjustment as hereinafter set forth. These Warrants and
all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, on November
18, 2001 (the "Expiration Date").
ARTICLE I.
Definitions
As used herein, the following terms shall have the meanings set forth
below:
A. "COMPANY" shall mean Industrial Holdings, Inc., a Texas corporation,
and shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
B. "COMMON STOCK" shall mean and include the Company's Common Stock, par
value $.01 per share, authorized on the date of the original issue of these
Warrants and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets, the stock or other securities provided for herein,
Ex-22
<PAGE>
and (ii) any other shares of common stock of the Company into which such shares
of Common Stock may be converted.
C. "EXERCISE PRICE" shall mean the initial purchase price of $7.00 per
share of Common Stock payable upon exercise of the Warrants, as adjusted from
time to time pursuant to the provisions hereof.
D. "MARKET PRICE" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (i) the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers national market system on such
date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose.
E. "OUTSTANDING," when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the Company.
F. "TRADING DAYS" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
G. "WARRANT" shall mean the right upon exercise to purchase one Warrant
Share.
H. "WARRANT SHARES" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrants.
ARTICLE II.
Exercise of Warrants
A. METHOD OF EXERCISE. The Warrants represented hereby may be exercised
by the holder hereof, in whole or in part, at any time and from time to time on
or after the date hereof until 5:00 p.m., Houston, Texas time, on the Expiration
Date. To exercise the Warrants, the holder hereof shall deliver to the Company,
at the Warrant Office designated herein, (i) a written notice in the form of the
Subscription Notice attached as an exhibit hereto, stating therein the election
of such holder to exercise the Warrants in the manner provided in the
Subscription Notice; (ii) payment in full of the Exercise Price (A) in cash or
by bank check for all Warrant Shares purchased hereunder, or (B) through a
"cashless" or "net-issue" exercise of each such Warrant ("Cashless Exercise");
the holder shall exchange each Warrant subject to a Cashless Exercise for that
number of Warrant Shares determined by multiplying the number of Warrant Shares
issuable hereunder by a fraction, the numerator of which shall be the difference
between
Ex-23
<PAGE>
(x) the Market Price and (y) the Exercise Price for each such Warrant, and the
denominator of which shall be the Market Price; the Subscription Notice shall
set forth the calculation upon which the Cashless Exercise is based, or (C) a
combination of (A) and (B) above; and (iii) these Warrants. The Warrants shall
be deemed to be exercised on the date of receipt by the Company of the
Subscription Notice, accompanied by payment for the Warrant Shares and surrender
of these Warrants, as aforesaid, and such date is referred to herein as the
"Exercise Date". Upon such exercise, the Company shall, as promptly as
practicable and in any event within five business days, issue and deliver to
such holder a certificate or certificates for the full number of the Warrant
Shares purchased by such holder hereunder, and shall, unless the Warrants have
expired, deliver to the holder hereof a new Warrant representing the number of
Warrants, if any, that shall not have been exercised, in all other respects
identical to these Warrants. As permitted by applicable law, the Person in whose
name the certificates for Common Stock are to be issued shall be deemed to have
become a holder of record of such Common Stock on the Exercise Date and shall be
entitled to all of the benefits of such holder on the Exercise Date, including
without limitation the right to receive dividends and other distributions for
which the record date falls on or after the Exercise Date and to exercise voting
rights.
B. EXPENSES AND TAXES. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
C. RESERVATION OF SHARES. The Company shall reserve at all times so long
as the Warrants remain outstanding, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrants, a sufficient number of shares of Common
Stock to provide for the exercise of the Warrants.
D. VALID ISSUANCE. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof and, without limiting the generality of the
foregoing, the Company shall take no action or fail to take any action which
will cause a contrary result (including, without limitation, any action that
would cause the Exercise Price to be less than the par value, if any, of the
Common Stock).
E. PURCHASE AGREEMENT. The Warrants represented hereby are part of a
duly authorized issue and sale of warrants to purchase Common Stock issued and
sold pursuant to that certain Agreement of Purchase and Sale dated as of the
date hereof (the "Agreement"), between the Company and the Holder. The Holder
shall be entitled to the rights to registration under the Securities Act and any
applicable state securities or blue sky laws to the extent set forth in the
Registration Rights Agreement between the Company and the Holder dated as of the
date hereof (the "Registration Rights Agreement"). The terms of the Agreement
and Registration Rights Agreement are hereby incorporated herein for all
purposes and shall be considered a part of this Warrant as if they had been
fully set forth herein. Notwithstanding the previous sentence, in the event of
any conflict between the provisions of the Agreement and of this Warrant, the
provisions of this Warrant shall control.
Ex-24
<PAGE>
F. ACKNOWLEDGMENT OF RIGHTS. At the time of the exercise of the Warrants
in accordance with the terms hereof and upon the written request of the holder
hereof, the Company will acknowledge in writing its continuing obligation to
afford to such holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of these
Warrants; PROVIDED, however, that if the Holder hereof shall fail to make any
such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
G. NO FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of these Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of whole
shares of Common Stock purchasable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of this Warrant, the Company shall pay an
amount in cash calculated by it to be equal to the Market Price of one share of
Common Stock at the time of such exercise multiplied by such fraction computed
to the nearest whole cent.
ARTICLE III.
Transfer
A. WARRANT OFFICE. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 7135 Ardmore, Houston Texas 77054, and may
subsequently be such other office of the Company or of any transfer agent of the
Common Stock in the continental United States as to which written notice has
previously been given to the Holder. The Company shall maintain, at the Warrant
Office, a register for the Warrants in which the Company shall record the name
and address of the Person in whose name these Warrants has been issued, as well
as the name and address of each permitted assignee of the rights of the
registered owner hereof.
B. OWNERSHIP OF WARRANTS. The Company may deem and treat the Person in
whose name the Warrants are registered as the holder and owner hereof until
provided with notice to the contrary. The Warrants may be exercised by an
assignee for the purchase of Warrant Shares without having new Warrants issued.
C. RESTRICTIONS ON TRANSFER OF WARRANTS. These Warrants may be
transferred, in whole or in part, by the Holder. The Company agrees to maintain
at the Warrant Office books for the registration and transfer of the Warrants.
The Company, from time to time, shall register the transfer of the Warrants in
such books upon surrender of this Warrant at the Warrant Office properly
endorsed or accompanied by appropriate instruments of transfer and written
instructions for transfer. Upon any such transfer and upon payment by the holder
or its transferee of any applicable transfer taxes, new Warrants shall be issued
to the transferee and the transferor (as their respective interests may appear)
and the surrendered Warrants shall be cancelled by the Company. The Company
shall pay all taxes (other than securities transfer taxes or income taxes)
Ex-25
<PAGE>
and all other expenses and charges payable in connection with the transfer of
the Warrants pursuant to this Section.
D. COMPLIANCE WITH SECURITIES LAWS. Subject to the terms of the
Registration Rights Agreement and notwithstanding any other provisions contained
in these Warrants, the Holder understands and agrees that the following
restrictions and limitations shall be applicable to all Warrant Shares and to
all resales or other transfers thereof pursuant to the Securities Act:
1. The holder hereof agrees that the Warrant Shares may not be sold
or otherwise transferred unless the Warrant Shares are registered under the
Securities Act and applicable state securities or blue sky laws or are exempt
therefrom.
2. A legend in substantially the following form will be placed on
the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED,
OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE
SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES
LAWS."
3. Stop transfer instructions will be imposed with respect to the
Warrant Shares so as to restrict resale or other transfer thereof.
ARTICLE IV.
Anti-Dilution
A. ANTI-DILUTION PROVISIONS. The Exercise Price shall be subject to
adjustment from time to time as provided herein. Upon each adjustment of the
Exercise Price, the holder of this Warrant shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
Ex-26
<PAGE>
B. ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF COMMON STOCK.
1. If and whenever after the date hereof the Company shall issue
or sell any Common Stock for no consideration or for a consideration per share
less than the Exercise Price, the Exercise Price shall be reduced (but not
increased, except as otherwise specifically provided herein) to the price
(calculated to the nearest one-tenth of a cent) determined by dividing (x) an
amount equal to the sum of (1) the aggregate number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by then existing
Exercise Price plus (2) the consideration received by the Company upon such
issue or sale by (y) the aggregate number of shares of Common Stock outstanding
immediately after such issue or sale.
2. No adjustment shall be made in the Exercise Price in the event
that the Company issues, in one or more transactions, (i) Common Stock or
convertible securities upon exercise of any options issued to officers,
directors or employees of the Company pursuant to a stock option plan or an
employment, severance or consulting agreement as now or hereafter in effect, in
each case approved by the Board of Directors, provided that the aggregate number
of shares of Common Stock which may be issuable, including options issued prior
to the date hereof, under all such employee plans and agreements shall at no
time exceed the number of such shares of Common Stock that are issuable under
currently effective employee plans and agreements; (ii) Common Stock upon
exercise of the Warrants or any other warrant issued pursuant to the terms of
the Agreement; (iii) Common Stock upon exercise of any stock purchase warrant or
option (other than the options referred to in clause (i) above) or other
convertible security outstanding on the date hereof; or (iv) Common Stock issued
as consideration in acquisitions. In addition, for purposes of calculating any
adjustment of the Exercise Price, all of the shares of Common Stock issuable
pursuant to any of the foregoing shall be assumed to be outstanding prior to the
event causing such adjustment to be made.
3. In case at any time after the date hereof the Company shall in
any manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase Common Stock or any options, except
for options issued to officers, directors or employees of the Company pursuant
to a stock option plan in effect as of the date hereof, for the purchase of
Common Stock or any stock or securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities being herein
called "Convertible Securities"), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon the exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
such rights or options, or plus, in the case of such rights or options that
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options) shall be less
than the Exercise Price in effect as of the date of granting such rights or
options, then the total maximum number of shares of Common Stock issuable upon
the exercise of such rights or
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<PAGE>
options or upon conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options shall be deemed to be
outstanding as of the date of the granting of such rights or options and to have
been issued for such price per share, with the effect on the Exercise Price
specified herein. Except as provided herein, no further adjustment of the
Exercise Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
4. If: (i) the purchase price provided for in any right or
option, (ii) the additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
shall be decreased (other than under or by reason of provisions designed to
protect against dilution), the Exercise Price then in effect shall be decreased
to the Exercise Price that would have been in effect had such rights, options or
Convertible Securities provided for such changed purchase price, additional
consideration or conversion rate at the time initially issued.
5. In case at any time Common Stock or Convertible Securities or
any rights or options to purchase Common Stock or Convertible Securities shall
be issued or sold for cash, the total amount of cash consideration shall be
deemed to be the amount received by the Company. If at any time any Common
Stock, Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. If at any time any Common Stock, Convertible Securities or any rights
or options to purchase any Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration received therefor shall
be deemed to be the fair value, as determined reasonably and in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board of Directors may
determine to be attributable to such Common Stock, Convertible Securities,
rights or options as the case may be. In case at any time any rights or options
to purchase any shares of Common Stock or Convertible Securities shall be issued
in connection with the issuance and sale of other securities of the Company,
together consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options shall
be deemed to have been issued without consideration.
6. In the case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock or Convertible Securities, or (ii) to
subscribe for or purchase Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a result
of the declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
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<PAGE>
7. The number of shares of Common Stock outstanding at any given
time shall not include shares owned directly by the Company in treasury, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.
C. STOCK DIVIDENDS. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
D. STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased and the number of Warrant Shares purchasable upon
the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced.
E. REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
1. As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition,
lawful and adequate provisions shall be made whereby the Holder shall thereafter
have the right to purchase and receive upon the terms and conditions specified
in these Warrants and in lieu of the Warrant Shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares of
capital stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of outstanding shares of such Common Stock equal to
the number of Warrant Shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision reasonably
satisfactory to such holder shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the exercise of Warrants.
2. In the event of a merger, share exchange or consolidation of
the Company with or into another Person as a result of which a number of shares
of common stock or its equivalent of the successor Person greater or lesser than
the number of shares of Common Stock outstanding immediately prior to such
merger, share exchange or consolidation are issuable to holders of Common Stock,
then the Exercise Price in effect immediately prior to such merger,
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<PAGE>
share exchange or consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock.
3. The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the holder hereof at the
last address of such holder appearing on the books of the Company the obligation
to deliver to such holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the holder hereof, such successor Person will issue a
new Warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section.
4. If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the holder hereof shall have been
given a reasonable opportunity to then elect to receive upon the exercise of the
Warrants either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
F. ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Exercise Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per share
of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
G. DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments are not required to be made shall be carried forward and taken into
account in any
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<PAGE>
subsequent adjustment. All calculations shall be made to the nearest full share
or nearest one hundredth of a dollar, as applicable.
H. NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number of
Warrant Shares issuable upon the exercise of the Warrants shall be adjusted as
herein provided, or the rights of the holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock, securities
or assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based, and shall obtain an opinion of the Company's
independent accountants as to the correctness of such adjustments and
calculations and to the effect that such adjustments and calculations have been
made in accordance with the terms hereof. The Company shall cause to be mailed
to the holder hereof copies of such Officer's Certificate and an independent
accountants' opinion together with a notice stating that the Exercise Price and
the number of Warrant Shares purchasable upon exercise of the Warrants have been
adjusted and setting forth the adjusted Exercise Price and the adjusted number
of Warrant Shares purchasable upon the exercise of the Warrants.
I. NOTIFICATIONS TO HOLDERS. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution (other
than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders of
its Common Stock any additional shares of capital stock of any class or
other rights;
(iii) to effect any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation, merger or share
exchange of the Company with another Person, or sale, transfer or other
disposition of all or substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassi- fication, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the
Ex-31
<PAGE>
foregoing clause (b) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock, as the case may be, for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, as the case may be.
J. COMPANY TO PREVENT DILUTION. If any event or condition occurs as to
which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Warrants evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Warrant, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Exercise Price and the number of Warrant Shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Exercise
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares.
ARTICLE V.
Miscellaneous
A. ENTIRE AGREEMENT. These Warrants, together with the Agreement,
contain the entire agreement between the holder hereof and the Company with
respect to the Warrant Shares purchasable upon exercise hereof and the related
transactions and supersedes all prior arrangements or understandings with
respect thereto.
B. GOVERNING LAW. This warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
C. WAIVER AND AMENDMENT. Any term or provision of these Warrants may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of these Warrants may be amended or supplemented at any
time by agreement of the holder hereof and the Company, except that any waiver
of any term or condition, or any amendment or supplementation, of these Warrants
shall be in writing. A waiver of any breach or failure to enforce any of the
terms or conditions of these Warrants shall not in any way effect, limit or
waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of these Warrants.
D. ILLEGALITY. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of these Warrants shall not, at the election of the party for whom
the benefit of the provision exists, be in any way impaired.
E. COPY OF WARRANT. A copy of these Warrants shall be filed among the
records of the Company.
Ex-32
<PAGE>
F. NOTICE. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be in writing and delivered at, or
sent by certified or registered mail to such holder at, the last address shown
on the books of the Company maintained at the Warrant Office for the
registration of these Warrants or at any more recent address of which the holder
hereof shall have notified the Company in writing. Any notice or other document
required or permitted to be given or delivered to the Company, other than such
notice or documents required to be delivered to the Warrant Office, shall be
delivered at, or sent by certified or registered mail to, the offices of the
Company at 7135 Ardmore, Houston, Texas 77054 or such other address within the
continental United States of America as shall have been furnished by the Company
to the holder of this Warrant.
G. LIMITATION OF LIABILITY; NOT SHAREHOLDERS. No provision of these
Warrants shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of shareholders for the election of
directors of the Company or any other matter whatsoever as a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
shareholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
H. EXCHANGE, LOSS, DESTRUCTION, ETC. OF WARRANT. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, mutilation
or destruction of these Warrants, and in the case of any such loss, theft or
destruction upon delivery of an appropriate affidavit in such form as shall be
reasonably satisfactory to the Company and include reasonable indemnification of
the Company, or in the event of such mutilation upon surrender and cancellation
of these Warrants, the Company will make and deliver new Warrants of like tenor,
in lieu of such lost, stolen, destroyed or mutilated Warrants. Any Warrants
issued under the provisions of this Section in lieu of any Warrants alleged to
be lost, destroyed or stolen, or in lieu of any mutilated Warrants, shall
constitute an original contractual obligation on the part of the Company. These
Warrants shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange or replacement. The Company shall pay all taxes
(other than securities transfer taxes or income taxes) and all other expenses
and charges payable in connection with the preparation, execution and delivery
of Warrants pursuant to this Section.
I. REGISTRATION RIGHTS. The Warrant Shares shall be entitled to such
registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
J. HEADINGS. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
Ex-33
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: November 18, 1996
INDUSTRIAL HOLDINGS, INC.
_________________________
Robert E. Cone, President
Ex-34
<PAGE>
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrants, hereby elects to
exercise purchase rights represented thereby for, and to purchase
thereunder,________________ shares of the Common Stock covered by such Warrants,
and herewith makes payment in full for such shares, and requests (a) that
certificates for such shares (and any other securities or other property
issuable upon such exercise) be issued in the name of, and delivered to,
_______________________ _______________________ and (b), if such shares shall
not include all of the shares issuable as provided in such Warrants, that new
Warrants of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
__________________________________
Date:_______________________
Ex-35
EXHIBIT 10.6
THE SECURITIES REPRESENTED BY THESE WARRANTS AND THE COMMON STOCK ISSUABLE
THEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THESE WARRANTS MAY NOT BE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
INDUSTRIAL HOLDINGS, INC.
Expiring on November 18, 2001
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, St. James Capital Partners, L.P. (the "Holder") or its assigns,
is entitled to subscribe for and purchase from the Company (as hereinafter
defined), in whole or in part, 160,000 shares of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (as hereinafter
defined) at an initial Exercise Price (as hereinafter defined) per share of
$7.00, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of Warrants (as hereinafter defined), the
number of shares of Common Stock purchasable hereunder, and the Exercise Price
therefor are subject to adjustment as hereinafter set forth. These Warrants and
all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, on November
18, 2001 (the "Expiration Date").
ARTICLE VI.
Definitions
As used herein, the following terms shall have the meanings set forth
below:
A. "COMPANY" shall mean Industrial Holdings, Inc., a Texas corporation,
and shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
B. "COMMON STOCK" shall mean and include the Company's Common Stock, par
value $.01 per share, authorized on the date of the original issue of these
Warrants and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets, the stock or other securities provided for herein,
Ex-36
<PAGE>
and (ii) any other shares of common stock of the Company into which such shares
of Common Stock may be converted.
C. "EXERCISE PRICE" shall mean the initial purchase price of $7.00 per
share of Common Stock payable upon exercise of the Warrants, as adjusted from
time to time pursuant to the provisions hereof.
D. "MARKET PRICE" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (i) the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers national market system on such
date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose.
E. "NOTE" shall mean the 12% Promissory Note of the Company issued to
St. James Capital Partners, L.P. in the original principal amount of $1,600,000.
F. "OUTSTANDING," when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the Company.
G. "TRADING DAYS" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
H. "WARRANT" shall mean the right upon exercise to purchase one Warrant
Share.
I. "WARRANT SHARES" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrants.
ARTICLE VII.
Exercise of Warrants
A. METHOD OF EXERCISE. The Warrants represented hereby may be exercised
by the holder hereof, in whole or in part, at any time and from time to time on
or after the date hereof until 5:00 p.m., Houston, Texas time, on the Expiration
Date. To exercise the Warrants, the holder hereof shall deliver to the Company,
at the Warrant Office designated herein, (i) a written notice in the form of the
Subscription Notice attached as an exhibit hereto, stating therein the election
of such holder to exercise the Warrants in the manner provided in the
Subscription Notice; (ii) payment in full of the Exercise Price (A) in cash or
by bank check for all Warrant Shares purchased hereunder, or (B) through a
"cashless" or "net-issue" exercise of each such
Ex-37
<PAGE>
Warrant ("Cashless Exercise"); the holder shall exchange each Warrant subject to
a Cashless Exercise for that number of Warrant Shares determined by multiplying
the number of Warrant Shares issuable hereunder by a fraction, the numerator of
which shall be the difference between (x) the Market Price and (y) the Exercise
Price for each such Warrant, and the denominator of which shall be the Market
Price; the Subscription Notice shall set forth the calculation upon which the
Cashless Exercise is based, or (C) a combination of (A) and (B) above; and (iii)
these Warrants. The Warrants shall be deemed to be exercised on the date of
receipt by the Company of the Subscription Notice, accompanied by payment for
the Warrant Shares and surrender of these Warrants, as aforesaid, and such date
is referred to herein as the "Exercise Date". Upon such exercise, the Company
shall, as promptly as practicable and in any event within five business days,
issue and deliver to such holder a certificate or certificates for the full
number of the Warrant Shares purchased by such holder hereunder, and shall,
unless the Warrants have expired, deliver to the holder hereof a new Warrant
representing the number of Warrants, if any, that shall not have been exercised,
in all other respects identical to these Warrants. As permitted by applicable
law, the Person in whose name the certificates for Common Stock are to be issued
shall be deemed to have become a holder of record of such Common Stock on the
Exercise Date and shall be entitled to all of the benefits of such holder on the
Exercise Date, including without limitation the right to receive dividends and
other distributions for which the record date falls on or after the Exercise
Date and to exercise voting rights.
B. EXPENSES AND TAXES. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
C. RESERVATION OF SHARES. The Company shall reserve at all times so long
as the Warrants remain outstanding, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrants, a sufficient number of shares of Common
Stock to provide for the exercise of the Warrants.
D. VALID ISSUANCE. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof and, without limiting the generality of the
foregoing, the Company shall take no action or fail to take any action which
will cause a contrary result (including, without limitation, any action that
would cause the Exercise Price to be less than the par value, if any, of the
Common Stock).
E. PURCHASE AGREEMENT. The Warrants represented hereby are part of a
duly authorized issue and sale of warrants to purchase Common Stock issued and
sold pursuant to that certain Agreement of Purchase and Sale dated as of the
date hereof (the "Agreement"), between the Company and the Holder. The Holder
shall be entitled to the rights to registration under the Securities Act and any
applicable state securities or blue sky laws to the extent set forth in the
Registration Rights Agreement between the Company and the Holder dated as of the
date hereof (the "Registration Rights Agreement"). The terms of the Agreement
and Registration Rights Agreement are hereby incorporated herein for all
purposes and shall be considered a part of this Warrant as if they had been
fully set forth herein. Notwithstanding the previous sentence, in the
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<PAGE>
event of any conflict between the provisions of the Agreement and of this
Warrant, the provisions of this Warrant shall control.
F. ACKNOWLEDGMENT OF RIGHTS. At the time of the exercise of the Warrants
in accordance with the terms hereof and upon the written request of the holder
hereof, the Company will acknowledge in writing its continuing obligation to
afford to such holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of these
Warrants; PROVIDED, however, that if the Holder hereof shall fail to make any
such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
G. NO FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of these Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of whole
shares of Common Stock purchasable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of this Warrant, the Company shall pay an
amount in cash calculated by it to be equal to the Market Price of one share of
Common Stock at the time of such exercise multiplied by such fraction computed
to the nearest whole cent.
ARTICLE VIII.
Transfer
A. WARRANT OFFICE. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 7135 Ardmore, Houston Texas 77054, and may
subsequently be such other office of the Company or of any transfer agent of the
Common Stock in the continental United States as to which written notice has
previously been given to the Holder. The Company shall maintain, at the Warrant
Office, a register for the Warrants in which the Company shall record the name
and address of the Person in whose name these Warrants has been issued, as well
as the name and address of each permitted assignee of the rights of the
registered owner hereof.
B. OWNERSHIP OF WARRANTS. The Company may deem and treat the Person in
whose name the Warrants are registered as the holder and owner hereof until
provided with notice to the contrary. The Warrants may be exercised by an
assignee for the purchase of Warrant Shares without having new Warrants issued.
C. RESTRICTIONS ON TRANSFER OF WARRANTS. These Warrants may be
transferred, in whole or in part, by the Holder. The Company agrees to maintain
at the Warrant Office books for the registration and transfer of the Warrants.
The Company, from time to time, shall register the transfer of the Warrants in
such books upon surrender of this Warrant at the Warrant Office properly
endorsed or accompanied by appropriate instruments of transfer and written
instructions for transfer. Upon any such transfer and upon payment by the holder
or its transferee of any applicable transfer taxes, new Warrants shall be issued
to the transferee and the transferor (as
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<PAGE>
their respective interests may appear) and the surrendered Warrants shall be
cancelled by the Company. The Company shall pay all taxes (other than securities
transfer taxes or income taxes) and all other expenses and charges payable in
connection with the transfer of the Warrants pursuant to this Section.
D. COMPLIANCE WITH SECURITIES LAWS. Subject to the terms of the
Registration Rights Agreement and notwithstanding any other provisions contained
in these Warrants, the Holder understands and agrees that the following
restrictions and limitations shall be applicable to all Warrant Shares and to
all resales or other transfers thereof pursuant to the Securities Act:
1. The holder hereof agrees that the Warrant Shares may not be
sold or otherwise transferred unless the Warrant Shares are registered under the
Securities Act and applicable state securities or blue sky laws or are exempt
therefrom.
2. A legend in substantially the following form will be placed
on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED,
OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE
SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES
LAWS."
3. Stop transfer instructions will be imposed with respect to
the Warrant Shares so as to restrict resale or other transfer thereof.
ARTICLE IX.
Anti-Dilution
A. ANTI-DILUTION PROVISIONS. The Exercise Price shall be subject to
adjustment from time to time as provided herein. Upon each adjustment of the
Exercise Price, the holder of this Warrant shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
Ex-40
<PAGE>
B. ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF COMMON STOCK.
1. If and whenever after the date hereof the Company shall issue
or sell any Common Stock for no consideration or for a consideration per share
less than the Exercise Price, the Exercise Price shall be reduced (but not
increased, except as otherwise specifically provided herein) to the price
(calculated to the nearest one-tenth of a cent) determined by dividing (x) an
amount equal to the sum of (1) the aggregate number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by then existing
Exercise Price plus (2) the consideration received by the Company upon such
issue or sale by (y) the aggregate number of shares of Common Stock outstanding
immediately after such issue or sale.
2. No adjustment shall be made in the Exercise Price in the event
that the Company issues, in one or more transactions, (i) Common Stock or
convertible securities upon exercise of any options issued to officers,
directors or employees of the Company pursuant to a stock option plan or an
employment, severance or consulting agreement as now or hereafter in effect, in
each case approved by the Board of Directors, provided that the aggregate number
of shares of Common Stock which may be issuable, including options issued prior
to the date hereof, under all such employee plans and agreements shall at no
time exceed the number of such shares of Common Stock that are issuable under
currently effective employee plans and agreements; (ii) Common Stock upon
exercise of the Warrants or any other warrant issued pursuant to the terms of
the Agreement; (iii) Common Stock upon exercise of any stock purchase warrant or
option (other than the options referred to in clause (i) above) or other
convertible security outstanding on the date hereof; or (iv) Common Stock issued
as consideration in acquisitions. In addition, for purposes of calculating any
adjustment of the Exercise Price, all of the shares of Common Stock issuable
pursuant to any of the foregoing shall be assumed to be outstanding prior to the
event causing such adjustment to be made.
3. In case at any time after the date hereof the Company shall in
any manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase Common Stock or any options, except
for options issued to officers, directors or employees of the Company pursuant
to a stock option plan in effect as of the date hereof, for the purchase of
Common Stock or any stock or securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities being herein
called "Convertible Securities"), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon the exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
such rights or options, or plus, in the case of such rights or options that
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options) shall be less
than the Exercise Price in effect as of the date of granting such rights or
options, then the total maximum number of shares of Common Stock issuable upon
the exercise of such rights or
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<PAGE>
options or upon conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options shall be deemed to be
outstanding as of the date of the granting of such rights or options and to have
been issued for such price per share, with the effect on the Exercise Price
specified herein. Except as provided herein, no further adjustment of the
Exercise Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
4. If: (i) the purchase price provided for in any right or
option, (ii) the additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
shall be decreased (other than under or by reason of provisions designed to
protect against dilution), the Exercise Price then in effect shall be decreased
to the Exercise Price that would have been in effect had such rights, options or
Convertible Securities provided for such changed purchase price, additional
consideration or conversion rate at the time initially issued.
5. In case at any time Common Stock or Convertible Securities or
any rights or options to purchase Common Stock or Convertible Securities shall
be issued or sold for cash, the total amount of cash consideration shall be
deemed to be the amount received by the Company. If at any time any Common
Stock, Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. If at any time any Common Stock, Convertible Securities or any rights
or options to purchase any Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration received therefor shall
be deemed to be the fair value, as determined reasonably and in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board of Directors may
determine to be attributable to such Common Stock, Convertible Securities,
rights or options as the case may be. In case at any time any rights or options
to purchase any shares of Common Stock or Convertible Securities shall be issued
in connection with the issuance and sale of other securities of the Company,
together consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options shall
be deemed to have been issued without consideration.
6. In the case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock or Convertible Securities, or (ii) to
subscribe for or purchase Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a result
of the declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
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<PAGE>
7. The number of shares of Common Stock outstanding at any given
time shall not include shares owned directly by the Company in treasury, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.
C. STOCK DIVIDENDS. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
D. STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased and the number of Warrant Shares purchasable upon
the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced.
E. REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
1. As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition,
lawful and adequate provisions shall be made whereby the Holder shall thereafter
have the right to purchase and receive upon the terms and conditions specified
in these Warrants and in lieu of the Warrant Shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares of
capital stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of outstanding shares of such Common Stock equal to
the number of Warrant Shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision reasonably
satisfactory to such holder shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the exercise of Warrants.
2. In the event of a merger, share exchange or consolidation of
the Company with or into another Person as a result of which a number of shares
of common stock or its equivalent of the successor Person greater or lesser than
the number of shares of Common Stock outstanding immediately prior to such
merger, share exchange or consolidation are issuable to holders of Common Stock,
then the Exercise Price in effect immediately prior to such merger,
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<PAGE>
share exchange or consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock.
3. The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the holder hereof at the
last address of such holder appearing on the books of the Company the obligation
to deliver to such holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the holder hereof, such successor Person will issue a
new Warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section.
4. If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the holder hereof shall have been
given a reasonable opportunity to then elect to receive upon the exercise of the
Warrants either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
F. ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Exercise Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per share
of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
G. DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments are not required to be made shall be carried forward and taken into
account in any
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<PAGE>
subsequent adjustment. All calculations shall be made to the nearest full share
or nearest one hundredth of a dollar, as applicable.
H. NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number of
Warrant Shares issuable upon the exercise of the Warrants shall be adjusted as
herein provided, or the rights of the holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock, securities
or assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based, and shall obtain an opinion of the Company's
independent accountants as to the correctness of such adjustments and
calculations and to the effect that such adjustments and calculations have been
made in accordance with the terms hereof. The Company shall cause to be mailed
to the holder hereof copies of such Officer's Certificate and an independent
accountants' opinion together with a notice stating that the Exercise Price and
the number of Warrant Shares purchasable upon exercise of the Warrants have been
adjusted and setting forth the adjusted Exercise Price and the adjusted number
of Warrant Shares purchasable upon the exercise of the Warrants.
I. NOTIFICATIONS TO HOLDERS. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution (other
than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders of
its Common Stock any additional shares of capital stock of any class or
other rights;
(iii) to effect any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation, merger or share
exchange of the Company with another Person, or sale, transfer or other
disposition of all or substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassi- fication, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the
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<PAGE>
foregoing clause (b) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock, as the case may be, for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, as the case may be.
J. COMPANY TO PREVENT DILUTION. If any event or condition occurs as to
which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Warrants evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Warrant, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Exercise Price and the number of Warrant Shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Exercise
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares.
ARTICLE X.
Miscellaneous
A. ENTIRE AGREEMENT. These Warrants, together with the Agreement,
contain the entire agreement between the holder hereof and the Company with
respect to the Warrant Shares purchasable upon exercise hereof and the related
transactions and supersedes all prior arrangements or understandings with
respect thereto.
B. GOVERNING LAW. This warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
C. WAIVER AND AMENDMENT. Any term or provision of these Warrants may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of these Warrants may be amended or supplemented at any
time by agreement of the holder hereof and the Company, except that any waiver
of any term or condition, or any amendment or supplementation, of these Warrants
shall be in writing. A waiver of any breach or failure to enforce any of the
terms or conditions of these Warrants shall not in any way effect, limit or
waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of these Warrants.
D. ILLEGALITY. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of these Warrants shall not, at the election of the party for whom
the benefit of the provision exists, be in any way impaired.
E. COPY OF WARRANT. A copy of these Warrants shall be filed among the
records of the Company.
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<PAGE>
F. NOTICE. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be in writing and delivered at, or
sent by certified or registered mail to such holder at, the last address shown
on the books of the Company maintained at the Warrant Office for the
registration of these Warrants or at any more recent address of which the holder
hereof shall have notified the Company in writing. Any notice or other document
required or permitted to be given or delivered to the Company, other than such
notice or documents required to be delivered to the Warrant Office, shall be
delivered at, or sent by certified or registered mail to, the offices of the
Company at 7135 Ardmore, Houston, Texas 77054 or such other address within the
continental United States of America as shall have been furnished by the Company
to the holder of this Warrant.
G. LIMITATION OF LIABILITY; NOT SHAREHOLDERS. No provision of these
Warrants shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of shareholders for the election of
directors of the Company or any other matter whatsoever as a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
shareholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
H. EXCHANGE, LOSS, DESTRUCTION, ETC. OF WARRANT. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, mutilation
or destruction of these Warrants, and in the case of any such loss, theft or
destruction upon delivery of an appropriate affidavit in such form as shall be
reasonably satisfactory to the Company and include reasonable indemnification of
the Company, or in the event of such mutilation upon surrender and cancellation
of these Warrants, the Company will make and deliver new Warrants of like tenor,
in lieu of such lost, stolen, destroyed or mutilated Warrants. Any Warrants
issued under the provisions of this Section in lieu of any Warrants alleged to
be lost, destroyed or stolen, or in lieu of any mutilated Warrants, shall
constitute an original contractual obligation on the part of the Company. These
Warrants shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange or replacement. The Company shall pay all taxes
(other than securities transfer taxes or income taxes) and all other expenses
and charges payable in connection with the preparation, execution and delivery
of Warrants pursuant to this Section.
I. REGISTRATION RIGHTS. The Warrant Shares shall be entitled to such
registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
J. HEADINGS. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: November 18, 1996
INDUSTRIAL HOLDINGS, INC.
S/ROBERT E. CONE
Robert E. Cone, President
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<PAGE>
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrants, hereby elects to
exercise purchase rights represented thereby for, and to purchase
thereunder,___________ shares of the Common Stock covered by such Warrants, and
herewith makes payment in full for such shares, and requests (a) that
certificates for such shares (and any other securities or other property
issuable upon such exercise) be issued in the name of, and delivered
to,_________________________ _____________________________ and (b), if such
shares shall not include all of the shares issuable as provided in such
Warrants, that new Warrants of like tenor and date for the balance of the shares
issuable thereunder be delivered to the undersigned.
Ex-49
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement") is made November 18, 1996, by and between Industrial Holdings, Inc.,
a Texas corporation (the "Company"), and St. James Capital Partners, L.P., a
Delaware limited partnership (the "Purchaser").
WHEREAS, on the date hereof, Purchaser loaned the Company money and in
consideration thereof acquired from the Company a 12% Promissory Note in the
original principal amount of $1,900,000 and a 12% Promissory Note in the
original principal amount of $1,600,000;
WHEREAS, on the date hereof, the Purchaser acquired from the Company
Common Stock Purchase Warrants (collectively, the "Warrants") which may be
exercised to initially acquire 380,000 shares and 160,000 shares of the
Company's Common Stock, par value $0.01 per share ("Common Stock"), subject to
adjustment (the "Shares");
WHEREAS, the Company wishes to grant the Purchaser certain registration
rights in respect of the Shares, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE XI.
Definitions
As used in this Agreement, the following terms shall have the meanings
set forth below:
A. "COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
B. "PURCHASER" shall mean St. James Capital Partners, L.P., a Delaware
limited partnership.
C. "REGISTRABLE SECURITIES" shall mean (i) the Shares; and (ii) any
Common Stock issued or issuable at any time or from time to time in respect of
the Shares upon a stock split, stock dividend, recapitalization or other similar
event involving the Company until such Common Stock is sold pursuant to a
Registration Statement or an exemption from registration under the Securities
Act.
D. The terms "REGISTER", "REGISTERED", and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
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<PAGE>
E. "REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Registration Rights Agreement, including, without limitation, all registration,
qualification and filing fees, exchange listing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
F. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
G. "SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Purchaser and, except as set forth above, all fees and disbursements of
counsel for the Purchaser.
H. "UNDERWRITTEN PUBLIC OFFERING" shall mean a public offering in which
the Common Stock is offered and sold on a firm commitment basis through one or
more underwriters, all pursuant to an underwriting agreement between the Company
and such underwriters.
ARTICLE XII.
Registration Rights
A. DEMAND REGISTRATION.
1. Before May 31, 1997, the Company shall file with the
Securities and Exchange Commission a shelf registration statement covering the
resale of the Shares on Form S-1, S-2, or S-3 (the "Registration Statement")
which shall remain effective for the lesser of: (i) 3 years, or (ii) until such
time as the Holder does not beneficially own any Registrable Securities. The
Company shall use its reasonable best efforts to cause such Registration
Statement to become effective as soon as practicable and to cause the Shares to
be qualified in such state jurisdictions as the Purchaser may request.
2. Except as set forth herein, the Company shall take all
reasonable steps necessary to keep the Registration Statement current and
effective until all Shares have been distributed by the Purchaser including any
necessary refiling of additional registration statements.
3. The Company shall be entitled to require that the parties
refrain from effecting any public sales or distributions of the Registrable
Securities pursuant to a Registration Statement that has been declared effective
by the Commission or otherwise, if the board of directors of the Company
reasonably determines that such public sales or distributions would interfere in
any material respect with any transaction involving the Company that the board
of directors reasonably determines to be material to the Company. The board of
directors shall, as promptly as practicable, give the Purchaser written notice
of any such development. In the event of a request by the board of directors of
the Company that the Purchaser refrain from effecting any public sales or
distributions of the Registrable Securities, the Company shall be required to
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<PAGE>
lift such restrictions regarding effecting public sales or distributions of the
Registrable Securities as soon as reasonably practicable after the board of
directors shall reasonably determine public sales or distributions by the
Purchaser of the Registrable Securities shall not interfere with such
transaction, PROVIDED, that in no event shall any requirement that the
Purchasers refrain from effecting public sales or distributions in the
Registrable Securities extend for more than 90 days.
B. PIGGYBACK REGISTRATION.
1. Subject to the terms hereof, if: (i) at any time or from time
to time the Company or any shareholder of the Company shall determine to
register any of its securities (except for registration statements relating to
employee benefit plans or exchange offers), either for its own account or the
account of a security holder; and (ii) the Purchaser is the beneficial owner of
any Registrable Securities; the Company will promptly give to the Purchaser
written notice thereof no less the 10 days prior to the filing of any
registration statement; and include in such registration (and any related
qualification under blue sky laws or other compliance), and in the underwriting
involved therein, if any, such Registrable Securities as Purchaser may request
in a writing delivered to the Company within 20 days after Purchaser's receipt
of Company's written notice.
2. The Purchaser may participate in any number of registrations
until all of the Shares held by such Purchaser have been distributed pursuant to
a registration.
3. If any registration statement is an Underwritten Public
Offering, the right of the Purchaser to registration pursuant to this Section
shall be conditioned upon such Purchaser's participation in such reasonable
underwriting arrangements as the Company shall make regarding the offering, and
the inclusion of Registrable Securities in the underwriting shall be limited to
the extent provided herein. The Purchaser and all other shareholders proposing
to distribute their securities through such underwriting shall (together with
the Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section, if the managing underwriter
concludes in its reasonable judgment that the number of shares to be registered
for selling shareholders (including the Purchaser) would materially adversely
effect such offering, the number of Shares to be registered, together with the
number of shares of Common Stock or other securities held by other shareholders
proposed to be registered in such offering, shall be reduced on a pro rata basis
based on the number of Shares proposed to be sold by the Purchaser as compared
to the number of shares proposed to be sold by all stockholders. If the
Purchaser disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter, delivered not less than ten days before the effective date. The
Registrable Securities excluded by the managing underwriter or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 120 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
4. The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness of
such registration whether or not the Purchaser has elected to include securities
in such registration.
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<PAGE>
C. EXPENSES OF REGISTRATION. All Registration Expenses shall be borne by
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the Purchaser shall be borne by the
Purchaser.
D. BEST REGISTRATION RIGHTS. If, on or after the date of this
Registration Rights Agreement, the Company grants to any person with respect to
any security issued by the Company or any of its Subsidiaries registration
rights that provide for terms that are in any manner more favorable to the
holder of such registration rights than the terms granted to the Purchaser (or
if the Company amends or waives any provision of any Agreement providing
registration rights of others or takes any other action whatsoever to provide
for terms that are more favorable to other holders than the terms provided to
the Purchaser) then this Registration Rights Agreement shall immediately be
deemed amended to provide the Purchaser with any (or all) of such more favorable
terms as the Purchaser shall elect to include herein.
E. REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep the Purchaser advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense, the Company will:
1. Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable efforts to
cause such registration statement to become and remain effective until the
distribution described in such registration statement has been completed;
2. Furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such underwriter
may reasonably request in order to facilitate the public sale of the shares by
such underwriter, and promptly furnish to each underwriter and the Purchaser
notice of any stop-order or similar notice issued by the Commission or any state
agency charged with the regulation of securities, and notice of any Nasdaq or
securities exchange listing.
3. Cause the Shares to be listed on the Nasdaq Stock Market's
National Market and each Securities Exchange on which the Common Stock is
approved for listing.
F. INDEMNIFICATION.
1. To the extent permitted by law, the Company will indemnify the
Purchaser, each of its officers and directors and partners, and each person
controlling the Purchaser within the meaning of Section 15 of the Securities
Act, with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to the extent such
expenses, claims, losses, damages or liabilities arise out of or are based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, offering circular or other similar
document, or any amendment or supplement thereto,
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incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse
Purchaser, each of its officers and directors and partners, and each person
controlling Purchaser, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss, damage,
liability or expense if settlement is effected without the consent of the
Company (which consent shall not unreasonably be withheld); provided, further,
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by Purchaser, such controlling person or such underwriter specifically
for use therein. Notwithstanding the foregoing, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus filed
with the Commission pursuant to the applicable rules of the Commission or in any
supplement or addendum thereto, the indemnity agreement herein shall not inure
to the benefit of any underwriter if a copy of the final prospectus filed
pursuant to such rules, together with all supplements and addenda thereto, was
not furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the Securities
Act.
2. To the extent permitted by law, the Purchaser will, if
securities held by the Purchaser are included in the securities as to which such
registration, qualification or compliance is being effected pursuant to terms
hereof, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other person selling the
Company's securities covered by such registration statement, each of such
person's officers and directors and each person controlling such persons within
the meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by Purchaser of any rule or regulation
promulgated under the Securities Act applicable to Purchaser and relating to
action or inaction required of Purchaser in connection with any such
registration, qualification or compliance, and will reimburse the Company, such
other persons, such directors, officers, persons, underwriters or control
persons for any legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other
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document in reliance upon and in conformity with written information furnished
to the Company by such Purchaser specifically for use therein; provided,
however, that the indemnity contained herein shall not apply to amounts paid in
settlement of any claim, loss, damage, liability or expense if settlement is
effected without the consent of such Purchaser (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, the liability of such
Purchaser under this subsection (b) shall be limited in an amount equal to the
net proceeds from the sale of the shares sold by Purchaser, unless such
liability arises out of or is based on willful conduct by Purchaser. In
addition, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the final prospectus filed pursuant to applicable rules
of the Commission or in any supplement or addendum thereto, the indemnity
agreement herein shall not inure to the benefit of the Company or any
underwriter if a copy of the final prospectus filed pursuant to such rules,
together with all supplements and addenda thereto, was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Securities Act.
3. Notwithstanding the foregoing paragraphs (a) and (b) of this
Section, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or as to which the
Indemnifying Party is asserting separate or different defenses, which defenses
are inconsistent with the defenses of the Indemnified Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. No Indemnified Party shall
consent to entry of any judgment or enter into any settlement without the
consent of each Indemnifying Party.
4. If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and all shareholders offering
securities in the offering (the "Selling Security Holders") on the other from
the offering of the Company's securities, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the
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<PAGE>
relative fault of the Company on the one hand and the Selling Security Holders
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Selling Security Holders on the other shall be the net proceeds
from the offering (before deducting expenses) received by the Company on the one
hand and the Selling Security Holders on the other. The relative fault of the
Company on the one hand and the Selling Security Holders on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Selling
Security Holders and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Selling Security Holders agree that it would not be just and
equitable if contribution pursuant to this Section were based solely upon the
number of entities from whom contribution was requested or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this Section. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages and liabilities referred to
above in this Section shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim, subject to the provisions hereof.
Notwithstanding the provisions of this Section, no Selling Shareholder shall be
required to contribute any amount or make any other payments under this
Agreement which in the aggregate exceed the proceeds received by such Selling
Shareholder. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
G. CERTAIN INFORMATION.
1. The Purchaser agrees, with respect to any Registrable
Securities included in any registration, to furnish to the Company such
information regarding Purchaser, the Regis- trable Securities and the
distribution proposed by the Purchaser as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
2. The failure of the Purchaser to furnish the information
requested pursuant to this Section shall not affect the obligation of the
Company to the other Selling Security Holders who furnish such information
unless, in the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs or may impair the legality of the Registration Statement or
the underlying offering.
H. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of Restricted Securities
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(used herein as defined in Rule 144 under the Securities Act) to the public
without registration, the Company agrees to use its best lawful efforts to:
1. Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times during
which the Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
2. File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at all times during which the Company is subject to such reporting
requirements); and
3. So long as the Purchaser owns any Restricted Securities (as
defined in Rule 144 promulgated under the Securities Act), to furnish to
Purchaser forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 and with regard to
the Securities Act and the Exchange Act (at all times during which the Company
is subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as the Purchaser may reasonably request in availing itself of any
rule or regulation of the Commission allowing the Purchaser to sell any such
securities without registration.
I. TRANSFERABILITY. The rights conferred by this Agreement shall be
freely transferable to a recipient of Registrable Securities.
J. GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Texas.
K. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and the
Purchaser.
L. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Purchaser: St. James Capital Partners, L.P., c/o St. James Capital Corp., 5599
San Felipe, Suite 301, Houston, Texas 77056, or at such other address as the
Purchaser shall have furnished to the Company in writing, or (b) if to the
Company: to Industrial Holdings, Inc., 7135 Ardmore, Houston, Texas 77054, or at
such other address as the Company shall have furnished to the Purchaser. Each
such notice or other communication shall for all purposes of this Agreement be
treated as effective upon receipt.
M. DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter
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<PAGE>
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
N. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
O. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
P. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
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<PAGE>
THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this agreement effective
upon the date first set forth above.
INDUSTRIAL HOLDINGS, INC.
S/ROBERT E. CONE
Robert E. Cone, President
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<PAGE>
THE PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Purchaser has signed this Agreement as of the
date first written above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its
General Partner
S/ JOHN L. THOMPSON
John L. Thompson, President
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