Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
October__, 2002, by and between GLOBETEL COMMUNICATIONS CORP., a
corporation organized under the laws of state of Delaware, with its
principal executive office at 000 Xxxxxxxx Xxx., Xxxxx 000, Xxxxx Xx.
00000 (the "Company"), and the undersigned investor (the "Investor").
WHEREAS, upon the terms and subject to the conditions of the Subscription
Agreement between the Investor and the Company (the "Subscription Agreement"),
the Company has agreed to issue and sell to the Investor a convertible note of
the Company, which will be convertible into shares of the common stock, $.001
par value per share (the "Common Stock"), of the Company; and
WHEREAS, to induce the Investor to execute and deliver the Subscription
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of Common Stock
issuable upon conversion of the Note.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained hereinafter and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
following meanings:
(a) "Closing Date" means the date funds are received by the Company
pursuant to the Subscription Agreement.
(b) "Holder" means the Investor.
(c) "Note" means the convertible debenture issued by the Company to the
Investor.
(d) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
(e) "Principal Market" means either The American Stock Exchange, Inc., The
New York Stock Exchange, Inc., the Nasdaq National Market, The Nasdaq SmallCap
Market or the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board whichever is the principal market on which the Common Stock is
listed.
(f) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing with the United States Securities and Exchange
Commission (the "SEC") one or more Registration Statements in compliance with
the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and effectiveness of such Registration
Statement(s).
(g) "Registrable Securities" means the shares of Common Stock issued or
issuable (i) upon conversion of the Note, and (iii) any shares of capital stock
issued or issuable with respect to the such shares of Common Stock , if any, as
a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, which have not been (x) included in a Registration
Statement that has been declared effective by the SEC, or (y) sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the 1933 Act.
(h) "Registration Statement" means a registration statement of the Company
filed under the 1933 Act.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Subscription
Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare, and, on or before
the 60th day after the earlier of the date of this agreement and the date of the
first agreement of like tenor with this relating to the Company's convertible
notes, file with the SEC a Registration Statement or Registration Statements (as
is necessary) on Form SB-2 (or, if such form is unavailable for such a
registration, on such other form as is available for such a registration),
covering the resale of all of the Registrable Securities, which Registration
Statement(s) shall state that, in accordance with Rule 416 promulgated under the
1933 Act, such Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon stock splits,
stock dividends or similar transactions. The Company shall initially register
for resale 60,000,000 shares of Common Stock (which number is intended to
include any shares issued as liquidated damages under the circumstances
described in Section 2(b)). In the event the Company cannot register sufficient
shares of Common Stock, due to the remaining number of authorized shares of
Common Stock being insufficient, the Company will use its best efforts to
register the maximum number of shares it can based on the remaining balance of
authorized shares and will use its best efforts to increase the number of its
authorized shares as soon as reasonably practicable.
(b) Timing. If the Registration Statement covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not filed by November 25, 2002, then the Company shall issue to the Investor
upon initial conversion of the Note an additional 2,000,000 shares of Common
Stock as liquidated damages, and not as a penalty, for each thirty (30) calendar
day period, pro rata, after such date until the Registration Statement is filed.
Notwithstanding the foregoing, the shares otherwise issuable by the
Company pursuant to this Section shall not be issuable to the extent any delay
in the filing of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Investor. The damages set forth in this
Section shall continue until the Registration Statement is filed. Failure of the
Company to issue such shares on or before the time specified in this Section
shall be considered a default.
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The Company acknowledges that its failure to have the Registration
Statement filed by November 25, 2002 will cause the Investor to suffer damages
in an amount that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this Section represents the parties' good faith effort to quantify
such damages and, that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to register the Common Stock
and deliver the Common Stock upon conversion of the Note.
(c) Effectiveness. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as practicable
after the Closing Date.
3. Related Obligations. The Company shall have the following further
obligations:
(a) The Company shall keep such Registration Statement effective pursuant
to Rule 415 until the earlier of (i) the date as of which the Investor may sell
all of the Registrable Securities without restriction as to time or amount
pursuant to Rule 144 promulgated under the 1933 Act or (ii) the date on which
(A) the Investor shall have sold all the Registrable Securities and (B) the
Investor has no right to convert the Notes it owns into Common Stock (the
"Registration Period"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state 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.
(b) Amendments. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the Investor
thereof as set forth in such Registration Statement. In the event the number of
shares of Common Stock available under a Registration Statement filed pursuant
to this Agreement is at any time insufficient to cover all of the Registrable
Securities, the Company shall amend such Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within thirty (30) calendar days after the
necessity therefor arises (based on the then Purchase Price of the Common Stock
and other relevant factors on which the Company reasonably elects to rely),
assuming the Company has sufficient authorized shares at that time, and if it
does not, within thirty (30) calendar days after such shares are authorized. The
Company shall use it best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof.
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(c) Information. The Company shall furnish to the Investor whose
Registrable Securities are included in any Registration Statement and its legal
counsel without charge (i) promptly after the same is prepared and filed with
the SEC at least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus included in
such Registration Statement and, with regard to such Registration Statement(s),
any correspondence by or on behalf of the Company to the SEC or the staff of the
SEC and any correspondence from the SEC or the staff of the SEC to the Company
or its representatives, (ii) upon the effectiveness of any Registration
Statement, ten (10) copies of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as the Investor may reasonably request) and (iii) such other documents,
including copies of any prospectus, as the Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities.
(d) Blue Sky. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under the
applicable securities or "blue sky" laws of such states of the United States as
specified by the Holder, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Holder who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
(e) Certain Events. As promptly as practicable after becoming aware of
such event, the Company shall notify each Holder in writing of the happening of
any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, ("Registration Default") and use all diligent efforts to
promptly prepare a supplement or amendment to such Registration Statement and
take any other necessary steps to cure the Registration Default, (which, if such
Registration Statement is on Form S-3, may consist of a document to be filed by
the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
1934 Act (as defined below) and to be incorporated by reference in the
prospectus) to correct such untrue statement or omission, and deliver ten (10)
copies of such supplement or amendment to each Holder (or such other number of
copies as such Holder may reasonably request). The Company shall also promptly
notify each Holder in writing (i) when a prospectus
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or any prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to each Holder
by facsimile on the same day of such effectiveness and by overnight mail), (ii)
of any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate, (iv) in the event the Registration Statement is
no longer effective or, (v) the Registration Statement is stale for a period of
more than five (5) Trading Days as a result of the Company's failure to timely
file its financials.
(f) Stop Orders. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Holder who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) Review and Comment. The Company shall permit each Holder and a single
firm of counsel, designated as selling shareholders' counsel by the Holders who
hold a majority of the Registrable Securities being sold, to review and comment
upon a Registration Statement and all amendments and supplements thereto at
least three (3) business days prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects. The Company
shall not submit to the SEC a request for acceleration of the effectiveness of a
Registration Statement or file with the SEC a Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which approval shall not be unreasonably withheld.
(h) Availability of Information. The Company shall make available for
inspection by (i) any Holder and (ii) one firm of attorneys and one firm of
accountants or other agents retained by the Holders (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably deemed necessary by each Inspector, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to a Holder) or use
of any Record or other information which the Company determines in good faith to
be confidential, and of which determination the Inspectors are so notified,
unless (a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement of which the Inspector has knowledge. Each Holder agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the
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Company, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, the Records deemed confidential.
(i) Confidentiality. The Company shall hold in confidence and not make any
disclosure of information concerning a Holder provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(j) Listing or Quotation. The Company shall use its best efforts to secure
designation and quotation of all the Registrable Securities covered by any
Registration Statement on the Principal Market. If, despite the Company's best
efforts, the Company is unsuccessful in satisfying the preceding sentence, it
shall use its best efforts to cause all the Registrable Securities covered by
any Registration Statement to be listed on each other national securities
exchange and automated quotation system, if any, on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange
or system. If, despite the Company's best efforts, the Company is unsuccessful
in satisfying the two preceding sentences, it will use its best efforts to
secure the inclusion for quotation with Pink Sheets, LLC. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) Amendment of Registration Statement. If requested by the Holders
holding a majority of the Registrable Securities, the Company shall (i) as soon
as reasonably practical incorporate in a prospectus supplement or post-effective
amendment such information as such Holders reasonably determine should be
included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
offering of the Registrable Securities to be sold in such offering; (ii) make
all required filings of such prospectus supplement or post-effective amendment
as soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) supplement or make amendments
to any Registration Statement if reasonably requested by such Holders.
(l) Other Approvals. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
(m) Certain Financial Statements. The Company shall make generally
available to its security holders as soon as reasonably practical, but not later
than ninety (90) calendar days after the close of the period covered thereby, an
earnings statement (in form complying with the
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provisions of Rule 158 under the 0000 Xxx) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of any Registration Statement.
(n) Compliance with SEC Regulations. The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
(o) Other Actions. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Holders of Registrable
Securities pursuant to a Registration Statement.
4. Obligations of the Holders.
(a) Required Information. At least five (5) calendar days prior to the
first anticipated filing date of a Registration Statement the Company shall
notify each Holder in writing of the information the Company requires from each
such Holder if such Holder elects to have any of such Holder's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Holder that such Holder shall furnish in writing to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
reasonably be required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. Each Holder covenants and agrees that, in
connection with any resale of Registrable Securities by it pursuant to a
Registration Statement, it shall comply with the "Plan of Distribution" section
of the current prospectus relating to such Registration Statement.
(b) Further Corporation. Each Holder shall cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Holder has notified
the Company in writing of such Holder's election to exclude all of such Holder's
Registrable Securities from such Registration Statement.
(c) Discontinuance of Disposition in Certain Events. Upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(f) or the first sentence of 3(e), each Holder will immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
3(f) or the first sentence of 3(e).
5. Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printing and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
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6. Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) Indemnification by Company. To the fullest extent permitted by law,
the Company will, and hereby does, indemnify, hold harmless and defend each
Holder who holds such Registrable Securities, the directors, officers, partners,
employees, agents, representatives of, and each Person, if any, who controls,
any Holder within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), (each, an "Indemnified Person"), against any
losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, attorneys' fees, amounts paid in settlement or expenses, joint or several
(collectively, "Claims"), incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("Indemnified Damages"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered, or the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(c) with respect to the number of
legal counsel, the Company shall reimburse the Holders and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus were timely made available by the Company pursuant to Section 3(c);
(ii) shall not be available to the extent such Claim is based on (a) a failure
of the Holder to deliver or to cause to be delivered the prospectus made
available by the Company or (b) the Indemnified Person's use of an incorrect
prospectus despite being promptly advised in advance by the Company in writing
not to use such incorrect prospectus; and (iii) shall not apply to amounts
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paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Holders pursuant to the
Registration Statement.
(b) Indemnification by Holders. In connection with any Registration
Statement in which a Holder is participating, each such Holder agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages 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 to the Company by such Holder expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Holder will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Holder, which consent shall not be unreasonably
withheld; provided, further, however, that the Holder shall be liable under this
Section 6(b) for only that amount of a Claim or Indemnified Damages as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the resale of the Registrable
Securities by the Holders pursuant to the Registration Statement.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
were corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) Indemnification Procedure. Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 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 control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the
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reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such counsel shall be selected by
Holders holding a majority-in-interest of the Registrable Securities included in
the Registration Statement to which the Claim relates, if the Holders are
entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The Indemnified Party or
Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully appraised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim.
Following indemnification as provided for hereunder, the indemnifying party
shall be surrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
(d) Payment of Indemnification. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
(e) Non-exclusivity. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any
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seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. Reports Under the 1934 Act. With a view to making available to the Holders
the benefits of Rule 144 promulgated under the 1933 Act or any other similar
rule or regulation of the SEC that may at any time permit the Holders to sell
securities of the Company to the public without registration ("Rule 144"), the
Company shall:
(a) make and keep public information available, as those terms are
understood and defined in 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 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; and
(c) furnish to the Investor, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (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
to permit the Investor to sell such securities pursuant to Rule 144 without
registration.
9. No Assignment of Registration Rights. The rights under this Agreement shall
not be assignable.
10. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Holders who hold two-thirds (2/3) of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Holder and the Company. No such amendment
shall be effective to the extent that it applies to less than all of the Holders
of the Registrable Securities. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of this Agreement unless the same consideration also is offered to all of the
parties to this Agreement.
11. Miscellaneous.
(a) Conflicting Notices. A Person is deemed to be a Holder of Registrable
Securities whenever such Person owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
(b) Waivers and Communications. 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
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mechanically or electronically 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:
GlobeTel Communications Corp.
000 Xxxxxxxx Xxx., Xxxxx 000,
Xxxxx Xx. 00000
Attention: _____________
Telephone: _____________
Facsimile: _____________
If to the Investor:
At the address listed in the Questionnaire.
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
(c) Non-waiver. 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.
(d) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
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(e) Entire Agreement. This Agreement and the Transaction Documents (as
defined in the Subscription Agreement) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein.
(f) Integration. This Agreement and the Transaction Documents supersede
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof and thereof.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Counterparts. This Agreement may be executed in two or more 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.
(i) Further Actions. 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.
(j) Determination by Holders. All consents and other determinations to be
made by the Holders pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Holders holding a majority of the Registrable
Securities.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the day and year first above written.
GLOBETEL COMMUNICATIONS CORP.
By: ____________________________________
Name:
Title:
INVESTOR:
By: ____________________________________
Name:
Title:
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