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EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as
of the ___ day of July, 1998, by and among Inet Technologies, Inc., a Delaware
corporation (the "Company"), and each of Xxxxxx X. Xxxxxxxx, Xxxx X. Xxxxxxx
and Xxxx X. Xxxxxxxxx (each, a "Stockholder" and collectively, the
"Stockholders").
RECITALS:
WHEREAS, the Stockholders have facilitated the reincorporation
of INET, Inc., a Texas corporation, in Delaware, by merging Inet, Inc. with and
into the Company, and
WHEREAS, as consideration for such efforts of the
Stockholders, the Company has agreed to grant certain registration rights with
respect to the shares of capital stock of the Company as provided herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, and certain other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Stockholders hereby agree as follows:
Section 1. Registration Rights.
1.1 Definitions. For purposes of this Section 1:
(a) The term "1933 Act" means the Securities Act
of 1933, as amended.
(b) The term "1934 Act" means the Securities
Exchange Act of 1934, as amended.
(c) The term "Form S-3" means such form under the
1933 Act as in effect on the date hereof or any registration form under the
1933 Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(d) The term "Holder" means any person owning
Registrable Shares or any assignee thereof in accordance with Section 1.11
hereof.
(e) The terms "register", "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933 Act, and
the declaration or ordering of effectiveness of such registration statement or
document.
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(f) The term "Registrable Shares" means (i)
shares of Common Stock of the Company held by the Stockholders and their
affiliates listed on Schedule I hereto and (ii) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of the shares referenced in
(i) above, excluding in all cases, however, any Registrable Shares sold by the
Stockholder in a transaction in which such Stockholder's rights under this
Section 1 are not assigned.
(g) The term "SEC" means the Securities and
Exchange Commission.
1.2 Company Registration. If (but without any obligation
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for its own account or for stockholders
other than the Stockholders) any of its stock or other securities under the
1933 Act (other than a registration relating solely to the sale of securities
to participants in a Company stock plan or a registration on Form S-4 or any
other form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Shares), the Company shall, at such time, promptly give each of the
Holders written notice of such registration. Upon the written request of any
one or more of the Holders given within twenty (20) days after mailing of such
notice by the Company, then, subject to Section 1.6 hereof, the Company shall
cause to be registered under the 1933 Act all of the Registrable Shares that
any such Holder has requested to be registered.
1.3 Request for Registration.
(a) At any time after the date which is at least
six (6) months after the effective date of the first registration statement for
a public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a transaction
effected under SEC Rule 145), each Stockholder on two occasions may deliver to
the Company a written request that the Company file a registration statement
under the 1933 Act covering the registration of Registrable Securities with an
anticipated aggregate offering price, net of underwriting discounts and
commissions, of not less than $20,000,000, in which case the Company shall:
(i) within ten (10) days of the receipt
thereof, give written notice of such request to all Holders; and
(ii) effect as soon as practicable, and
in any event within 60 days of the receipt of such request, the registration
under the 1933 Act of all Registrable Securities which the Holders request to
be registered, subject to the limitations of subsection 1.3(b), within twenty
(20) days of such notice by the Company.
(b) If the Stockholder(s) initiating the
registration request hereunder (the "Initiating Stockholders") intend to
distribute the Registrable Securities covered by their request
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by means of an underwriting, they shall so advise the Company as a part of
their request made pursuant to subsection 1.3(a) and the Company shall include
such information in the written notice referred to in subsection 1.3(a). The
underwriter will be selected by the Company and shall be reasonably acceptable
to a majority in interest of the Initiating Stockholders. In such event, the
right of any Holder to include such Holder's Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by the Initiating Stockholders
[holding a majority of the Registrable Shares requested to be included in such
registration] and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 1.3, if the underwriters
advise the Initiating Stockholders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Stockholders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Stockholders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to be included in such underwriting shall not
be reduced unless all other securities are first entirely excluded from the
underwriting.
(c) Notwithstanding the foregoing, if the Company
shall furnish to the Initiating Stockholders requesting a registration
statement pursuant to this Section 1.3, a certificate signed by the Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be filed and
therefore is essential to defer the filing of such registration statement, the
Company shall have the right to defer taking action with respect to such filing
for a period of not more than 120 days after receipt of the request of the
Initiating Stockholders; provided, however, that the Company may not utilize
this right more than once in any twelve-month period.
(d) In addition, the Company shall not be
obligated to effect, or to take any action to effect, a registration requested
pursuant to this Section 1.3:
(i) After the Company has effected a
total of six registrations pursuant to this Section 1.3 (no more than two of
which registrations may be initiated by any one Stockholder) and such
registrations have been declared or ordered effective; or
(ii) (A) During the period starting with
the date 60 days prior to the Company's good faith estimate of the date of
filing of, and ending on a date 180 days after the effective date of, a
registration subject to Section 1.2 hereof and (B) during the period starting
with the Company's prior receipt of another request given pursuant to Section
1.3(a), and ending on the date 180 days after the effective date of such
registration; provided that the Company is actively employing in good faith all
reasonable efforts to cause any such registration statement to become effective.
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1.4 Expenses of Company Registration. The Company shall
bear and pay all expenses incurred in connection with any registration, filing
or qualification of Registrable Shares with respect to a registration pursuant
to Section 1.2, including (without limitation) all registration, filing and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for the Company in its
capacity as counsel to the selling Stockholders hereunder, but excluding
underwriting discounts and commissions relating to Registrable Shares.
1.5 Expenses of Demand Registration. All expenses other
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.3, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements (not to exceed $20,000) of a single counsel
for the selling Holders, if the Holders desire to employ counsel, shall be
borne by the Company; provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to
Section 1.3 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.3.
1.6 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock,
the Company shall not be required under Section 1.2 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters), and then only
in such quantity as the underwriters determine in their sole discretion will
not jeopardize the success of the offering by the Company. If the total amount
of securities, including Registrable Shares, requested by stockholders to be
included in an offering effected under Section 1.2 exceeds the amount of
securities that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Shares, which the underwriters determine in their sole discretion
will not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the Holders according to the total amount of
securities entitled to be included therein owned by each Holder or in such
other proportions as shall mutually be agreed to by such Holders, provided that
in no event shall any shares being sold by a Holder be excluded from such
offering until all shares which other stockholders (other than Holders) propose
to include in such offering are first excluded).
1.7 Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Shares that the Holders shall furnish
to the Company such information regarding the Holders, the Registrable Shares
held by the Holders, and the intended method of disposition of such securities
as shall be required to effect the registration of the Registrable Shares.
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1.8 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 Section 1.
1.9 Indemnification. In the event any Registrable Shares
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder from and against any losses,
claims, damages, or liabilities (or actions in respect thereof) (joint or
several) (including reasonable legal or other out-of-pocket expenses incurred
by such Holder as a consequence of any such loss, claim, damage or liability
(or actions in respect thereof)) to which they may become subject under the
1933 Act, the 1934 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 "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 Company of the 1933 Act, the 1934 Act, or any rule or
regulation promulgated under the 1933 Act, or the 1934 Act; provided, however,
that the indemnity agreement contained in this subsection 1.9(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action in respect thereof 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 in respect thereof to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder.
(b) To the extent permitted by law, each of the
Holders, severally and not jointly, will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within
the meaning of the 1933 Act, any other holder selling securities in such
registration statement, against any losses, claims, damages, or liabilities (or
actions in respect thereof) (joint or several) to which any of the foregoing
persons may become subject (including reasonable legal or other out-of-pocket
expenses incurred by any such person as a consequence of any such loss, claim
damage or liability (or action in respect thereof)), under the 1933 Act, or the
1934 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 Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and such Holder will pay any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this subsection
1.9(b), in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.9(b) shall not apply to amounts paid in
settlement of any
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such loss, claim, damage, liability or action if such settlement is effected
without the consent of such Holder, which consent shall not be unreasonably
withheld.
(c) Promptly after receipt by an indemnified
party under this Section 1.9 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
1.9, 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 (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the indemnifying
party, 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 prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.9, 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 1.9.
(d) If the indemnification provided for in this
Section 1.9 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage or expense 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 statements or omissions that resulted
in such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined 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 obligations of the Company and Holders
under this Section 1.9 shall survive the completion of any offering of
Registrable Shares in a registration statement under this Section 1, and
otherwise.
1.10 Reports Under the 1934 Act. With a view to making
available to the Stockholders the benefits of Rule 144 promulgated under the
1933 Act and any other rule or regulation of the SEC that may at any time
permit the Stockholder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
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(a) make and keep public information available,
as those terms are understood and defined in SEC Rule 144;
(b) file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
1934 Act; and
(c) furnish to a Stockholder, so long as such
Stockholder owns any Registrable Shares, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting requirements
of SEC Rule 144, the 1933 Act and the 1934 Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of
the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing such Stockholder of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
1.11 Assignment of Registration Rights. The rights to
include Registrable Shares in a registered offering pursuant to Section 1.2 or
1.3 may be assigned by a Holder of Registrable Shares to another person who
receives at least 10,000 Registrable Shares from the transferring Holder.
1.12 Termination of Registration Rights. No Holder shall
be entitled to exercise the registration rights provided for in Sections 1.2 or
1.3 after the earlier to occur of (i) October 1, 2003, or (ii) the date on
which such Holder may sell all of the Registrable Securities held by such
Holder in any 90-day period pursuant to the terms of SEC Rule 144 as such rule
is then in effect.
Section 2. Covenant of the Stockholders. Each of the
Stockholders covenant and agree that such Stockholder shall comply in all
respects with the requirements of the 1933 Act and the 1934 Act, including the
rules and regulations promulgated thereunder, in the sale of Registrable
Shares.
Section 3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Shares). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of Texas, without giving effect to
conflicts of law principles.
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3.3 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. All notices and other communications
hereunder shall be in writing and shall be given personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties,
addressed as follows:
To the Company: Inet Technologies, Inc.
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxx 00000-0000
Attention: Chief Financial Officer
Fax: 972/000-0000
With a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: 512/000-0000
To the Stockholders: c/o such Stockholder at the Company or such
Stockholder's most recent home address shown
on the Company's records,
or such other address as such party shall have specified pursuant to this
Section. Notice given by personal delivery, courier service or mail shall be
effective upon actual receipt. Notice given by telecopier shall be confirmed
by appropriate answer back and shall be effective upon actual receipt if
received during the recipient's normal business hours, or at the beginning of
the recipient's next business day after receipt of not received during the
recipient's normal business hours. All notices by telecopier should be
confirmed promptly after transmission in writing by certified mail or personal
delivery.
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3.6 Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
Stockholders holding a majority of the Registrable Shares held by the
Stockholders.
3.7 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.8 Entire Agreement. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject matter hereof.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first above written.
INET TECHNOLOGIES, INC.
By:
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Xxxxxxx Xxxx, Senior Vice President and
Chief Financial Officer
STOCKHOLDERS:
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XXXXXX X. XXXXXXXX
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XXXX X. XXXXXXX
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XXXX X. XXXXXXXXX
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Schedule I
Affiliates of Stockholders
Affiliates of Xxxx X. Xxxxxxx:
Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Affiliates of Xxxxxx X. Xxxxxxxx:
Sevahn Xxxxxxxx
Gahreen Xxxxxxxx
Xxxxx Xxxxxxxx
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