REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement") dated as of this 29th day of
June 1998 between Intelect Communications, Inc., a Delaware corporation (the
"Company") and Lifeline Industries, Inc., a New Jersey corporation ("Lifeline").
WHEREAS, the Company recently completed the private placement of 5,000
shares of its Convertible Preferred Stock, Series D (the "Series D Preferred
Shares") to certain investment funds controlled by the Citadel Investment Group,
L.L.C.;
WHEREAS, in connection with the private placement of the Series D
Preferred Shares, Lifeline served as a placement agent for such Series D
Preferred Shares;
WHEREAS, in connection with such services, the Company agreed to pay
certain placement fees to Lifeline, which included the issuance to Lifeline of a
warrant expiring April 30, 2005 with an exercise price of $5.00 per share to
purchase 30,000 shares of common stock, par value $0.01 of the Company, (the
"Warrant");
WHEREAS, in connection with the issuance of such Warrant, the Company
desires to provide to Lifeline certain registration rights relating to the
resale of the 30,000 shares of common stock issuable upon exercise of the
Warrant (the "Warrant Shares");
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. REGISTRATION RIGHTS. The Company hereby agrees to file a registration
statement on Form S-3 or such other form as the Company is then eligible to use
(the "Registration Statement") with the Securities and Exchange Commission (the
"SEC") registering the resale of the Warrant Shares, on or before August 10,
1998. The Company will use its commercially reasonable best efforts to have such
registration statement declared effective by the SEC within 45 days of the
filing of such Registration Statement. Subject to the provisions of Section 2
hereof, the Company will use its commercially reasonable best efforts to have
the Registration Statement remain effective for a period of 2 years following
the date it is declared effective by the SEC, unless the Warrant Shares may be
resold earlier under Rule 144 of the Securities Act of 1933 (the "Securities
Act"). Lifeline shall not be entitled to any other registration rights for the
Warrant Shares other than as expressly provided for in this Section.
2. SUSPENSION OF EFFECTIVENESS. Notwithstanding anything to the contrary in
Section 1, at any time after the Registration Statement has been declared
effective, the Company may delay the disclosure of material non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required, and may upon written notice to Lifeline suspend
any sales of Warrant Shares under the
Registration Statement (a "Grace Period"); provided, that the Company shall
promptly (i) notify Lifeline in writing of the existence of material non-public
information giving rise to a Grace Period and the date on which the Grace Period
will begin, and (ii) notify Lifeline in writing of the date on which the Grace
Period ends; and, provided further, that during any consecutive 365 day period,
there shall be only one Grace Period, such Grace Period not to exceed 30 days
(an "Allowable Grace Period"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date Lifeline
receives the notice referred to in clause (i) and shall end on and include the
date Lifeline receives the notice referred to in clause (ii).
3. EXPENSES. In connection with the filing of a registration statement,
notification, or post-effective amendment under this section, the Company
covenants and agrees:
(A) to pay all expenses of such Registration Statement,
notification, or post-effective amendment, including, without
limitation, printing charges, legal fees and disbursements of
counsel for the Company, blue sky expenses, accounting fees and
filing fees, but not including legal fees and disbursements of
counsel to the holders and any sales commissions on Warrant Shares
offered and sold; and
(B) to take all necessary action which may reasonably be
required in qualifying or registering the Warrant Shares included in
the Registration Statement, notification or post-effective amendment
for the offer and sale under the securities or blue sky laws of such
states as requested by Lifeline; PROVIDED that the Company shall not
be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to Lifeline that (i) the Company is a corporation, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to enter into this Agreement, and (ii) this
Agreement is a valid and binding obligation of the Company and is enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy and insolvency laws and general principals of equity.
5. REPRESENTATIONS AND WARRANTIES OF LIFELINE. Lifeline represents and warrants
to the Company that (i) Lifeline is a corporation, validly existing and in good
standing under the laws of the State of New Jersey and that its has the
requisite corporate power and authority to enter into this Agreement, and (ii)
this Agreement is a valid and binding obligation of Lifeline and is enforceable
against Lifeline in accordance with its terms, subject to applicable bankruptcy
and insolvency laws and general principals of equity.
6. INDEMNIFICATION. In the event that such Warrant Shares are registered, the
following indemnification provisions shall apply:
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(A) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless Lifeline from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation) attributable to any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
prospectus contained therein or in any amendment or supplement thereto or
in any preliminary prospectus, or attributable to 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, except insofar as
such losses, claims, damages, liabilities or expenses arise out of, or are
based upon, any such untrue statement or omission or allegation thereof
based upon information furnished in writing to the Company by Lifeline or
on Lifeline's behalf expressly for use therein.
(B) INDEMNIFICATION BY HOLDERS. Lifeline agrees to indemnify and
hold harmless, severally and not jointly, the Company, its directors and
officers and each person, if any, who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the
Company to Lifeline, but only with respect to information furnished in
writing by Lifeline or on Lifeline's behalf expressly for use in any such
Registration Statement or prospectus relating to the Warrant Shares, any
amendment or supplement thereto or any preliminary prospectus, and only in
an amount not to exceed the proceeds of any Warrant Shares sold by
Lifeline. In case any action or proceeding shall be brought against the
Company or its directors or officers, or any such controlling person, in
respect of which indemnity may be sought against Lifeline, Lifeline shall
have the rights and duties given to the Company, and the Company or its
directors or officers or such controlling person shall have the rights and
duties given to the holder, by the preceding subsection hereof.
(C) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any person entitled to indemnification under subsections
(i) or (ii) above (an "Indemnified Party") in respect of which indemnity
may be sought from any party who has agreed to provide such
indemnification (an "Indemnifying Party"), the Indemnifying Party shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Party, and shall assume the payment of
all expenses. Such Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (A) the Indemnifying Party has agreed to
pay such fees and expenses or (B) the named parties to any such action or
proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have
been advised by counsel that there is a conflict of interest on the part
of counsel employed by the Indemnifying Party to represent such
Indemnified Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense of such action
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or proceeding on behalf of such Indemnified Party; it being understood,
however, that the Indemnifying Party shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for all such Indemnified Parties, which firm
shall be designated in writing by such Indemnified Parties). The
Indemnifying Party shall not be liable for any settlement of any such
action or proceeding effected without its written consent, but if settled
with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any
loss or liability (to the extent stated above) by reason of such
settlement or judgment.
(D) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to the Indemnified Parties in respect of any
losses, claims, damages, liabilities or judgments referred to herein, 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, liabilities and judgments in
the following manner as between the Company on the one hand and each
holder on the other, in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and each holder on the other
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company on
the one hand and of the holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the
party's relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. No person guilty of
fraudulent misrepresentation (within the meaning of subsection 11(f) of
the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
(E) SURVIVAL. The indemnity and contribution agreements contained in
this Section 6 shall remain operative and in full force and effect
regardless of (A) any termination of the Agreement or the Warrant, (B) any
investigation made by or on behalf of any Indemnified Party or by or on
behalf of the Company and (C) the consummation of the sale or successive
resale of the Warrant Shares.
7. RULE 144 INFORMATION. The Company agrees to:
a. make and keep public information available, as those terms are
defined in Rule 144; and
b. file with the SEC in a timely manner all reports and other
documents
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required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144.
8. ASSIGNMENT. The rights under this Agreement shall not be assignable by the
Lifeline without the prior written consent of the Company. Subject to the
foregoing, this Agreement is binding on each party's successors and assigns.
9. MISCELLANEOUS.
(A) Any notices consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically generated and kept on file by the sending
party); or (iii) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Intelect Communications, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
With a copy to:
Xxxx & Sudan, L.L.P.
Two Houston Center
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Sudan, Jr., Esq.
If to Lifeline:
Lifeline Industries, Inc.
000 Xxxxxxxx Xxx.
Xxxxx 00X
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxx
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The notices may be provided at such other address as may be designated in
writing by a party to the other party at least five business days prior to the
effectiveness of such change.
(B) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(C) This Agreement shall be governed by the laws of the State of
Texas. Venue for any dispute arising hereunder shall lie in the state or federal
courts of Xxxxxx County, Texas.
(D) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(E) This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(F) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(G) This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.
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IN WITNESS WHEREOF, the parties have executed this Agreement this 30th day
of July, 1998, but effective for all purposes as of the date first written
above.
INTELECT COMMUNICATIONS, INC.
By:___________________________________
Xxxxxx X. Xxxxxxxx, Chairman and CEO
LIFELINE INDUSTRIES, INC.
By:___________________________________
Xxxx Xxxx, President
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