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EXHIBIT 99.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of August 29, 2001, among HEI, Inc., a Minnesota corporation
(the "Company"), the individuals and entities listed on Schedule 1 hereto (each
a "Purchaser" and, collectively, the "Purchasers"), and ThinkEquity Partners,
LLC, a Delaware limited liability company (the "Agent").
RECITALS:
WHEREAS, the parties hereto have executed the Stock Purchase Agreement
(the "Purchase Agreement") of even date herewith pursuant to which the
Purchasers are purchasing shares of the Company's Common Stock (defined below)
(capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Purchase Agreement); and
WHEREAS, in connection with the Purchase Agreement the parties desire
to provide certain registration rights and benefits with respect to the Common
Stock;
NOW, THEREFORE, in consideration of the respective covenants and
agreements contained herein, and for other valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:
"Agent's Warrant" means the warrant issued to the Agent in connection
with the closing of the transactions contemplated by the Stock Purchase
Agreement.
"Common Stock" means the Company's common stock, par value $.05 per
share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Form S-3" means such form under the Securities Act in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means a Purchaser, any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Article 2.
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"Register," "Registered," and "Registration" mean a registration
effected by preparing and filing a Registration Statement in compliance with the
Securities Act, and the declaration or ordering by the SEC of effectiveness of
such Registration Statement.
"Registrable Securities" means the Common Stock issued pursuant to the
Purchase Agreement and the shares of Common Stock issuable to the Agent pursuant
to the Agent's Warrant. Notwithstanding the foregoing, Registrable Securities
shall not include any securities sold by a person to the public either pursuant
to a Registration Statement or Rule 144 under the Securities Act or sold in a
private transaction in which the transferor's rights under Article 2 of this
Agreement are not assigned.
"Registration Expenses" means all expenses incurred by the Company in
complying with Article 2 hereof, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, reasonable fees and disbursements of a single
special counsel for the Holders of Registrable Securities, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or the Holders are required to bear such fees and
disbursements), all internal Company expenses, all legal fees and disbursements
and other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, and the premiums and other costs of policies of insurance against
liability (if any) arising out of such public offering and underwriting
discounts and commissions and transfer taxes relating to the shares included in
the offering by the Holders.
"Registration Statement" means any Registration Statement filed by the
Company with the SEC for a public offering and sale of Common Stock (other than
a Registration Statement on Form S-8 or Form S-4, or their successors, or any
other form for a similar purpose).
"Rule 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar successor rule.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Selling Expenses" means all underwriting discounts and commissions,
transfer taxes, filing fees, any and all fees, commission, discounts or similar
payments made to any brokers or dealers, and any fees and disbursements of
counsel, accountant or any other advisor to the Purchasers (other than counsel
referred to in the definition of Registration Expenses above) applicable to a
sale of Registrable Securities.
"Termination Event" means that (a) prior to the Registration Statement
being declared effective, either (i) the Common Stock is suspended from trading
for 5 or more consecutive trading days, or (ii) the Common Stock is no longer
listed on Nasdaq, AMEX, or NYSE, or (b) the Registration Statement has not been
declared effective within 180 days of Closing, and such
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holdup is not due to backlog or other delay at or by the SEC unrelated to any
action or inaction by the Company.
ARTICLE 2
REGISTRATION RIGHTS
2.1 REQUIRED REGISTRATIONS.
(a) The Company shall, within 30 days of the Closing Date file
with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable
Securities. The Company shall use its best efforts to cause such
Registration Statement to be declared effective under the Securities
Act within 90 days of the Closing. In the event that the Registration
Statement is not declared effective within 90 days of the date of the
Closing, and such holdup is not due to backlog or other delay at or by
the SEC unrelated to any action or inaction by the Company, the Company
shall, on the 120th day following the Closing and each 30th day
thereafter, pay to each of the Purchasers, in cash or Common Stock (at
the option of the Company), their ratable portion of 1% of the
aggregate Purchase Price paid for the Common Stock, until the Common
Stock is either registered or there has occurred a Termination Event.
(b) The Registration Statement shall be on Form S-3 or another
appropriate form permitting registration of such Registrable Securities
for resales by holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings).
The Company shall not permit any securities other than the Registrable
Securities to be included in any Registration Statement without the
consent of the Purchasers, except to the extent the Company may be
obligated to include additional securities pursuant to that certain
Registration Rights Agreement, dated as of March 3, 2000, among the
Company and the Selling Shareholders identified therein. The Company
shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the date which is
five (5) years from the date of filing (the "Effectiveness Period") or
such shorter period ending when (i) all Registrable Securities covered
by the Registration Statement have been sold in the manner set forth
and as contemplated in the Registration Statement or (ii) may be sold
without limitation under Rule 144(k).
2.2 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration under Section 2.1 shall be borne by the
Company. All Selling Expenses incurred in connection with any such registration
shall be borne by the Holder of the securities so registered incurring such
expense, unless all Holders have consented to the Selling Expense, in which
case, such Selling Expenses shall be borne by the Holders pro rata on the basis
of the number of shares so registered.
2.3 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
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(a) Prepare and file with the SEC a Registration Statement, on
such form as is then available to the Company in connection with such
registration, with respect to such Registrable Securities and use its
best efforts to cause such Registration Statement to become effective
and, upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such Registration Statement
effective throughout the Effectiveness Period.
(b) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement.
(c) Furnish to the Holders 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 they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Use its best efforts to register or qualify the
Registrable Securities covered by such Registration Statement under
such other securities or blue sky laws of such jurisdictions as shall
be reasonably requested by the Holders within twenty (20) days
following the original filing of such Registration Statement, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
occurrence of any event as a result of which the prospectus included in
such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements contained
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such
Registrable Securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that
the Registration Statement with respect to such securities becomes
effective, an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form
and substance as is customarily given with respect to such registration
and reasonably satisfactory to a majority in interest of the Holders
requesting registration,
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addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
2.4 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Article 2 shall terminate and be of no further force and effect after
the Effectiveness Period or such shorter period ending when all Registrable
Securities covered by the shelf registration (i) have been sold in the manner
set forth and as contemplated in the Registration Statement or (ii) may be sold
without limitation under Rule 144(k), other than as it relates to Section 2.6
herein.
2.5 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article 2.
2.6 INDEMNIFICATION. If any Registrable Securities are included in a
Registration Statement under Section 2.1:
(a) The Company will indemnify and hold harmless each Holder,
the partners, officers, and directors of each Holder, and each person,
if any, who controls such Holder within the meaning of the Securities
Act or the Exchange Act, and each underwriter, if any, and each person,
if any, who controls any underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act, or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions, or violations (collectively a "Company
Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement,
including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act,
or any state securities law in connection with the offering covered by
such Registration Statement; and the Company will reimburse each such
Holder, partner, officer, director, underwriter, and controlling person
for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 2.6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is
based upon a Company Violation that occurs in reliance upon and in
conformity with written information furnished expressly for use in
connection with such registration by such Holder, partner, officer,
director, or controlling person of such Holder.
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(b) Each selling Holder will indemnify and hold harmless the
Company, each of its officers and directors, each person, if any, who
controls the Company within the meaning of the Securities Act or the
Exchange Act, and each underwriter, if any, and each person, if any,
who controls any underwriter within the meaning of the Securities Act
or the Exchange Act, and any other Holder selling securities under such
Registration Statement or any of such other Holder's partners,
directors, or officers or any person who controls such Holder, against
any losses, claims, damages, or liabilities (joint or several) to which
the Company or any such director, officer, underwriter, controlling
person, or other such Holder, or partner, director, officer, or
controlling person of such other Holder may become subject under the
Securities Act, the Exchange Act, or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Holder
Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such Registration Statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Holder of the
Securities Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act,
or any state securities law in connection with the offering covered by
such Registration Statement, in each case to the extent (and only to
the extent) that such Holder Violation occurs in reliance upon and in
conformity with written information furnished by such Holder and stated
to be specifically for use in connection with such registration; and
each such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, underwriter,
controlling person, or other Holder, or partner, officer, director, or
controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in
this Section 2.6(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement
is effected without the consent of the Holder, which consent shall not
be unreasonably withheld; provided, further, that in no event shall any
indemnity under this Section 2.6(b) exceed the proceeds from the
offering received by such Holder unless the Holder Violation is the
result of fraud on the part of such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 2.6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party (or, if there is more than one indemnified
party, the indemnifying party shall pay the fees and expenses of one
counsel for any and all indemnified parties,
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to be mutually agreed upon by such indemnified parties), if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 2.6, but the
omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 2.6.
(d) If the indemnification provided for in this Section 2.6 is
held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages, or
liabilities referred to herein, the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall to the extent
permitted by applicable law contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage, or
liability in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Company Violation(s) or the
Holder Violation(s), as the case may be, that resulted in such loss,
claim, damage, or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.
(e) The foregoing indemnity agreements of the Company and
Holders are subject to the condition that, insofar as they relate to
any Company Violation(s) or the Holder Violation(s), as the case may be
made in a preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the Registration
Statement in question becomes effective or the final prospectus is
filed with the SEC pursuant to SEC Rule 424(b), such indemnity
agreement shall not inure to the benefit of any person if a copy of
such final prospectus was furnished to the indemnified party and was
not furnished to the person asserting the loss, liability, claim, or
damage at or prior to the time such action is required by the
Securities Act.
(f) The obligations of the Company and Holders under this
Section 2.6 shall survive the termination of any offering in a
Registration Statement, and otherwise.
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ARTICLE 3
OTHER PROVISIONS
3.1 COMPLETE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof
3.2 WAIVER, DISCHARGE, AMENDMENT, ETC. The failure of any party hereto
to enforce at any time any of the provisions of this Agreement shall not, absent
an express written waiver signed by the party making such waiver specifying the
provision being waived, be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of the party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to be a waiver of any other
or subsequent breach.
3.3 NOTICES. All notices or other communications to a party required or
permitted hereunder shall be in writing and shall be delivered personally or by
telecopy (receipt confirmed) to such party (or, in the case of an entity, to an
executive officer of such party) or shall be sent by a reputable express
delivery service or by certified mail, postage prepaid with return receipt
requested, addressed as follows:
if to a Purchaser:
To the address set forth on Schedule 1 or such other address
as may be designated in writing hereafter, in the same manner,
by such Purchaser.
if to the Agent to:
Patricia Bartholomew, Esq.
ThinkEquity Partners
222 South Ninth Street, Suite 2800
Minneapolis, Minnesota 55402
Fax: 612-692-8250
with copy to:
Thomas G. Lovett, IV, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South 8th Street
Minneapolis, MN 55402
Fax: 612-371-3207
if to the Company to:
HEI, Inc.
P.O. Box 5000
1495 Steiger Lake Lane
Victoria, MN 55386
Attention: Patrick Cockrell, Esq.
Fax: 952-443-2668
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with copy to:
Mark D. Williamson, Esq.
Gray, Plant, Mooty, Mooty & Bennett, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, MN 55402
Fax: 612-333-0066
Any party may change the above-specified recipient and/or mailing address by
notice to all other parties given in the manner herein prescribed. All notices
shall be deemed given on the day when actually delivered as provided above (if
delivered personally or by telecopy) or on the day shown on the return receipt
(if delivered by mail or delivery service).
3.4 ASSIGNMENT AND TRANSFER. The rights to have the Company register
Registrable Securities pursuant to this Agreement shall be automatically
assignable by the Purchasers to any Person (a "Transferee") of all or any
portion of Registrable Securities if: (i) the Purchaser agrees in writing with
the Transferee to assign such rights, and a copy of such agreement is furnished
to the Company within a reasonable time after such assignment; (ii) the Company
is, within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such Transferee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned; (iii) immediately following such transfer or assignment the further
disposition of such securities by the Transferee is restricted under the 1933
Act and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
Transferee agrees in writing with the Company to be bound by all of the
provisions contained herein; and (v) such Transferee shall be an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act.
3.5 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Minnesota, including all matters of
construction, validity, performance, and enforcement, without giving effect to
principles of conflict of laws.
3.6 TITLES AND HEADINGS; CONSTRUCTION. The titles and headings to the
Articles and Sections herein are inserted for the convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement. This Agreement shall be construed without regard to any
presumption or other rule requiring construction hereof against the party
causing this Agreement to be drafted.
3.7 BENEFIT. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors or assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
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3.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed as original and all of which
together shall constitute one instrument, and may be delivered in person or by
facsimile transmission.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed as of the date first written above.
HEI, INC.
By: /s/ Anthony J. Fant
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Name: Anthony J. Fant
Title: CEO
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ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in
the Registration Rights Agreement, dated August 29, 2001, among HEI, Inc., a
Minnesota corporation (the "Company") and certain Purchasers listed on Schedule
1 thereto. By execution of this Acceptance, the undersigned hereby acknowledges
the indemnification obligations contained in Section 2.6 of the Registration
Rights Agreement.
PURCHASER:
The Paisley Fund
By: /s/ John L. Wallace
--------------------------------------
Name: John L. Wallace
Title: Portfolio Manager
PURCHASER:
RS Paisley Pacific Master Fund Unit Trust
By: /s/ John L. Wallace
--------------------------------------
Name: John L. Wallace
Title: Portfolio Manager
PURCHASER:
RS Diversified Growth
By: /s/ John L. Wallace
--------------------------------------
Name: John L. Wallace
Title: Portfolio Manager
PURCHASER:
Constable, LLC
By: /s/ Donald W. Constable
--------------------------------------
Name: Donald W. Constable
Title: CEO
PURCHASER:
RS Smaller Company Growth Fund
By: /s/ William Wolfenden III
--------------------------------------
Name: William Wolfenden III
Title: Principal
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ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in
the Registration Rights Agreement, dated August 29, 2001, among HEI, Inc., a
Minnesota corporation (the "Company") and certain Purchasers listed on Schedule
1 thereto. By execution of this Acceptance, the undersigned hereby acknowledges
the indemnification obligations contained in Section 2.6 of the Registration
Rights Agreement.
AGENT:
THINKEQUITY PARTNERS, LLC
/s/ Patricia Bartholomew
-----------------------------------------
By: Patricia Bartholomew
Title: General Counsel
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SCHEDULE 1
SCHEDULE OF PURCHASERS
PURCHASER ADDRESS AND
PURCHASER NAME FACSIMILE NUMBER
-------------- ---------------------
RS Diversified Growth Fund 388 Market Street, Suite 200
San Francisco, CA 94111
RS Smaller Company 388 Market Street, Suite 200
Growth Fund San Francisco, CA 94111
The Paisley Fund, L.P. 388 Market Street, Suite 200
San Francisco, CA 94111
RS Paisley Pacific Master 388 Market Street, Suite 200
Fund Unit Trust San Francisco, CA 94111
Constable Capital LLC 19455 Cedarhurst
Deephaven, MN 55391