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EXHIBIT 4.3
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January __, 2000
(this "Agreement"), is entered into by and among INTELECT COMMUNICATIONS, INC.,
a Delaware corporation, with principal executive offices located at 0000
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx 00000 (the "Company"), and each of the
entities or individuals identified on Schedule 10(c) hereto (collectively, the
"Investors" and individually an "Investor").
WHEREAS, upon the terms and subject to the conditions of the
respective Subscription Agreements entered into by and between each Investor and
the Company (collectively, the "Subscription Agreements" and individually a
"Subscription Agreement"), the Company has agreed to issue and sell to the
Investors an aggregate of __________ shares of the Company's common stock, par
value $.01 per share (the "Common Stock") and Warrants to purchase an aggregate
of _____ shares of the Company's Common Stock as described in the Subscription
Agreements (the "Warrants"); and
WHEREAS, to induce the Investors to execute and deliver the
Subscription Agreements, the Company has agreed to provide with respect to the
Registrable Securities (as defined below) certain registration rights under the
Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "Affiliate," of any specified Person means any other
Person who directly, or indirectly through one or more intermediaries,
is in control of, is controlled by, or is under common control with,
such specified Person. For purposes of this definition, control of a
Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by
contract, securities, ownership or otherwise; and the terms
"controlling" and "controlled" have the respective meanings correlative
to the foregoing.
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(ii) "Commission" means the Securities and Exchange
Commission.
(iii) "Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(iv) "Final Closing Date" means the date and time of the final
issuance and sale of the Common Stock and the Warrants pursuant to the
Subscription Agreements.
(v) "Investors" means the Investors and any permitted
transferee or assignee of Registrable Securities who agrees to become
bound by all of the terms and provisions of this Agreement and the
Subscription Agreements.
(vi) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
(vii) "Prospectus" means the prospectus (excluding any
preliminary prospectus but including, without limitation, any final
prospectus filed pursuant to Rule 424(b) under the Securities Act and
any prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement and by
all other amendments and supplements to such prospectus, including all
material incorporated by reference in such prospectus and all documents
filed after the date of such prospectus by the Company under the
Exchange Act and incorporated by reference therein.
(viii) "Public Offering" means an offer registered with the
Commission and the appropriate state securities commissions by the
Company of its Common Stock and made pursuant to the Securities Act.
(ix) "Registrable Securities" means the shares of Common Stock
and the Common Stock underlying the Warrants purchased pursuant to the
Subscription Agreements; provided, however, a share of Common Stock
shall cease to be a Registrable Security for purposes of this Agreement
when it no longer is a Restricted Security.
(x) "Registration Statement" means a registration statement of
the Company filed on an appropriate form under the Securities Act
providing for the registration of, and the sale on a continuous or
delayed
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basis by the holders of, all of the Registrable Securities pursuant to
Rule 415 under the Securities Act, including the Prospectus contained
therein and forming a part thereof, any amendments to such registration
statement and supplements to such Prospectus, and all exhibits and
other material incorporated by reference in such registration statement
and Prospectus.
(xi) "Restricted Security" means any share of Common Stock any
Warrant, or any Common Stock underlying the Warrants except any of
those that (i) have been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the prospectus included in such registration statement,
(ii) have been transferred in compliance with the resale provisions of
Rule 144 under the Securities Act (or any successor provision thereto)
or is transferable pursuant to paragraph (k) of Rule 144 under the
Securities Act (or any successor provision thereto), or (iii) otherwise
has been transferred and a new share of Common Stock or a Warrant not
subject to transfer restrictions under the Securities Act has been
delivered by or on behalf of the Company.
(xii) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Subscription Agreements.
2. Registration.
(a) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission not later than 30 days after the
Final Closing Date, a Registration Statement relating to the offer and sale of
the Registrable Securities and shall use its best efforts to cause the
Commission to declare such Registration Statement effective under the Securities
Act as promptly as practicable but not later than 70 days after the Final
Closing Date. The shares of Common Stock underlying warrants issued to Stonegate
Securities, Inc. may be included in the Registration Statement at the option of
the Company. The Company shall notify the Investors by written notice that such
Registration Statement has been declared effective by the Commission within
three (3) business days of such declaration by the Commission.
(b) Registration Default. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) is not (i) filed with the Commission within 30 days after the Closing Date
or (ii) declared effective by the Commission within 90 days after the Closing
Date (either of which, without duplication, an "Initial Date"), then the Company
shall make the payments to the Investors as provided in the next sentence as
liquidated damages and not as a penalty. The amount to be paid by the Company to
the Investors shall be determined as of each Computation Date (as defined
below), and such amount shall be equal to 2.5% (the
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"Liquidated Damage Rate") of the Purchase Price (as defined in the Subscription
Agreements) from the Initial Date to the first Computation Date and for each
Computation Date thereafter, calculated on a pro rata basis to the date on which
the Registration Statement is filed with (in the event of an Initial Date
pursuant to clause (i) above) or declared effective by (in the event of an
Initial Date pursuant to clause (ii) above) the Commission (the "Periodic
Amount") provided, however, that in no event shall the liquidated damages be
less than $25,000. The full Periodic Amount shall be paid by the Company to the
Investors, pro rata, by wire transfer of immediately available funds within
three days after each Computation Date.
As used in this Section 2(b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not filed with the Commission by the 30th day after the Closing
Date, the Company shall be in default of this Registration Rights Agreement, and
the Investors shall be entitled to liquidated damages as set forth above.
(c) (i) If the Company proposes to register any of its warrants, Common
Stock or any other shares of common stock of the Company under the Securities
Act (other than a registration (A) on Form S-8 or S-4 or any successor or
similar forms, (B) relating to Common Stock or any other shares of common stock
of the Company issuable upon exercise of employee share options or in connection
with any employee benefit or similar plan of the Company or (C) in connection
with a direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision) under
the Securities Act applies), whether or not for sale for its own account, it
will each such time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to such
registration to the Investors, which notice shall set forth such Investors'
rights under this Section 2(c) and shall offer the Investors the opportunity to
include in such registration statement such number of Registrable Securities as
the Investors may request. Upon the written request of an Investor made within
10 days after the receipt of notice from the Company (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Investors), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities that the Company has been
so requested to register by the Investors, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided,
however, that (A) if such registration involves a Public Offering, the Investors
must sell their Registrable Securities to the underwriters selected as provided
in Section 3(b) hereof on the same terms and conditions as apply to the Company
and (B) if, at any time after giving written notice of its intention to register
any Registrable Securities pursuant to this Section 2(c) and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
Registrable
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Securities, the Company shall give written notice to the Investors and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(c) shall terminate on the date that the registration statement to
be filed in accordance with Section 2(a) is declared effective by the
Commission. (ii) If a registration pursuant to this Section 2(c) involves a
Public Offering and the managing underwriter thereof advises the Company that,
in its view, the number of shares of Common Stock, if any, or other shares of
Common Stock that the Company and the Investors intend to include in such
registration exceeds the largest number of shares of Common Stock (including any
other shares of Common Stock or warrants of the Company) that can be sold
without having an adverse effect on such Public Offering (the "Maximum Offering
Size"), the Company will include in such registration only that number of shares
of Common Stock which does not exceed the Maximum Offering Size, in the
following order of priorities: (1) first, all securities the Company proposes to
sell for its own account (the "Company Shares"), (2) second, up to the full
number of securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights ("Demand Shares"), and (3)
third, the securities requested to be registered by other holders of securities
entitled to participate in the registration, drawn from them pro-rata based on
the number of shares each has requested to be included in such registration
("Third Party Shares") and the Investors pursuant to this Agreement.
If as a result of the proration provisions of this Section 2(c)(ii),
the Investors are not entitled to include all such Registrable Securities in
such registration, such Investors may elect to withdraw their request to include
any Registrable Securities in such registration.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall use its reasonable best efforts to:
(a) Subject to the provisions of Section 3(r) hereof, promptly (i)
prepare and file with the Commission such amendments (including post-effective
amendments) to the Registration Statement and supplements to the Prospectus as
may be necessary to keep the Registration Statement continuously effective and
in compliance with the provisions of the Securities Act applicable thereto so as
to permit the Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a period of two (2)
years from the date on which the Registration Statement is first declared
effective by the Commission (the "Effective Time") or such shorter period that
will terminate when all the Registrable Securities covered by the Registration
Statement have been sold pursuant thereto in accordance with the plan of
distribution provided in the Prospectus, transferred pursuant to Rule 144 under
the Securities Act or otherwise transferred in a manner that results in the
delivery of new securities not subject to transfer restrictions under the
Securities Act (the "Registration Period") and (ii) take all lawful action such
that each of (A) the Registration Statement and any amendment thereto does not,
when it becomes effective, contain an 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, not misleading and (B) the Prospectus forming part of
the Registration
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Statement, and any amendment or supplement thereto, does not at any time during
the Registration Period include an 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 under which they were made,
not misleading;
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
(including a copy of the accountant's consent letter to be included in the
filing) to Stonegate Securities, Inc. and reflect in such documents all such
comments as Stonegate reasonably may propose ("Stonegate"); provided, however,
in the event of a good faith disagreement as to the reasonableness of the
comments or objections of Stonegate, the deadline for filing the Registration
Statement or any amendments or supplements thereto shall be extended for the
period of such bona-fide disagreement, and (ii) furnish to Stonegate for
delivery to each Investor whose Registrable Securities are included in the
Registration Statement, (A) promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, one copy of
the Registration Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful 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 (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the 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
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make the statements therein, in light of the circumstances under which they were
made, not misleading, and promptly prepare an amendment to the Registration
Statement and supplement to the Prospectus to correct such untrue statement or
omission, and deliver a number of copies of such supplement and amendment to
each Investor as such Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Investors of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus
which are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
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(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(n) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(o) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(p) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(q) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the
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Registration Statement, whether as a holder of such Registrable Securities or as
an underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker- dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
(r) Notwithstanding anything to the contrary in Section 3, 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
Company and its counsel, in the best interest of the Company (a "Grace Period");
provided, that the Company shall promptly (i) notify the Investors 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 the Investors
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 two Grace
Periods, such Grace Periods 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 the holders receive the notice referred to
in clause (i) and shall end on and include the date the holders receive the
notice referred to in clause (ii).
4. Obligations of the Investors. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
(a) 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 Investor that such Investor shall furnish
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 be reasonably 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. As least four (4) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor elects to
have any of its Registrable Securities included in the Registration Statement.
If at least two business days prior to the anticipated filing date the Company
has not received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor and have no
further registration obligations to the Non-Responsive Investor;
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(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) As promptly as practicable after becoming aware of such event,
notify the Company of the occurrence of any event, as a result of which the
Prospectus included in the 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 therein, in
light of the circumstances under which they were made, not misleading;
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company, and
the reasonable fees, not to exceed $5,000.00, of one firm of counsel to the
holders of a majority in interest of the Registrable Securities shall be borne
by the Company.
6. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Investor and
each underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
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
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein
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or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person written notice that such Prospectus is
outdated or defective.
(b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its 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, against any losses, claims,
damages or liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or Prospectus or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
light of the circumstances under which they were made, in the case of the
Prospectus), not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such holder or underwriter expressly for use
therein; provided, however, that no Investor or underwriter shall be liable
under this Section 6(b) for any amount in excess of the gross proceeds paid to
such Investor or underwriter in respect of shares sold by it, and (ii) reimburse
the Company for any legal or other expenses incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the
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Indemnifying Party shall not relieve it from any liability that it otherwise may
have to the Indemnified Party, except to the extent that the Indemnifying Party
is materially prejudiced and forfeits substantive rights and defenses by reason
of such failure. In connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified Party shall have
the right to employ separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, costs and expenses, (y) the Indemnified Party and the
Indemnifying Party shall reasonably have concluded that representation of the
Indemnified Party by the Indemnifying Party by the same legal counsel would not
be appropriate due to actual or, as reasonably determined by legal counsel to
the Indemnified Party, potentially differing interests between such parties in
the conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party shall not,
in connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnified Party shall not,
without the prior written consent of the Indemnifying Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnifying Party from all liabilities with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated
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as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in this Section
6(d). The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Investors and any
underwriters in this Section 6(d) to contribute shall be several in proportion
to the percentage of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the gross
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. Rule 144. With a view to making available to the Investors the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Investors to sell securities of
the Company to the public without registration ("Rule 144"), the Company agrees
to use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement may be assigned or transferred only with
the prior written consent of the Company, and any such assignment or transfer
without such consent shall be void and of no effect. In the event of any such
permitted assignment or transfer by the Investors to any permitted transferee of
all or any portion of such
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Registrable Securities such transfer will be allowed only if: (a) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
9. Amendment and Waiver. Any provision 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 Investors who hold a majority-in-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. Miscellaneous.
(a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities 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) If after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company grants to any Person any registration rights with
respect to any Company securities which are more favorable to such other Person
than those provided in this Agreement, then the Company forthwith shall grant
(by means of an amendment to this Agreement or otherwise) identical registration
rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
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if to the Company, to:
Intelect Communications, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxx & Sudan, L.L.P.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Sudan, Jr.
if to the Investors, to:
Each individual or entity identified on
Schedule 10(c) attached hereto
with a copy to:
Stonegate Securities, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
If to any other Investor, at such address as such Investor shall have
provided in writing to the Company.
The Company or any Investor may change the foregoing address by notice
given pursuant to this Section 10(c).
(d) 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.
(e) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Texas. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Dallas or the state courts of the State of Texas sitting in the City of
Dallas in connection with
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any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(g) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are pari passu to the prior rights of the holders of Registrable
Securities set forth herein, and are not otherwise in conflict or inconsistent
with the provisions of this Agreement. The restrictions on the Company's rights
to grant registration rights under this paragraph shall terminate on the date
the Registration Statement to be filed pursuant to Section 2(a) is declared
effective by the Commission.
(h) This Agreement and the Subscription Agreements constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein. This Agreement and the Subscription
Agreements supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
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(k) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3, or any delay in such performance could result
in direct damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company may be liable for all direct damages caused by such failure or
delay.
(m) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
INTELECT COMMUNICATIONS, INC.
By:
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Name:
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Title:
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INVESTORS: [See attached signature page]
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INVESTOR SIGNATURE PAGE
Investor Name:
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By:
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Its:
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