EXHIBIT 10.2
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made by and between Intelect Communications
Systems Limited, a Bermuda corporation (the "Company") and Xxxxx Xxxxxx, Xx.
("Xxxxxx"). Each of the parties hereby agree as follows:
1. AGREEMENT TO SUBSCRIBE AND PURCHASE. Xxxxxx hereby subscribes for
Thirty Thousand (30,000) of the Company's Common Shares (the "Shares") for a
purchase price of $5.00 per share. Xxxxxx shall pay an aggregate of One Hundred
Fifty Thousand Dollars ($150,000) (the "Purchase Price") for the shares by
delivering same day funds in United States dollars. The Shares will be issued by
the Company's transfer agent, American Stock Transfer & Trust Company, within 15
days of the date of this Agreement.
2. REPRESENTATIONS AND COVENANTS.
(a) Xxxxxx represents, warrants and covenants to the Company as follows:
(i) This Agreement has been duly authorized, validly executed and
delivered on behalf of Xxxxxx and is a valid and binding agreement of
Xxxxxx in accordance with its terms, subject to general principles of
equity and to the effect of bankruptcy or other similar laws affecting the
enforcement of creditors' rights;
(ii) Xxxxxx is purchasing the shares for its own account for
investment purposes and not with a view towards distribution. Xxxxxx
understands and agrees that it must bear the economic risks of its
investment for an indefinite period of time. Xxxxxx has received and
carefully reviewed copies of the Company's Form 10-K for the fiscal year
ending December 31, 1997 and the Forms 10-Q for the first and second
quarterly periods of 1997 (the "Public Documents"). Xxxxxx understands
that the offer and sale of the shares are being made only by means of this
Agreement. No representations or warranties have been made to Xxxxxx by
Seller, the officers or directors of Seller, or any agent, employee or
affiliate of any of them except as set forth herein. Xxxxxx is aware that
the purchase of the shares involves a high degree of risk and that it may
sustain, and has the financial ability to sustain, the loss of its entire
investment. Xxxxxx has had the opportunity to ask questions of, and
receive answers and satisfactory to it from, the Company's management
regarding the Company. Xxxxxx understands that no Federal or state
governmental authority has made any finding or determination relating to
the fairness of an investment in the shares and that no Federal or state
governmental authority has recommended or endorsed, or will recommend or
endorse, the investment herein. Xxxxxx, in making the decision to purchase
the shares subscribed for, has relied upon independent investigations made
by it and has not relied on any information or representations made by
third parties other than pursuant to this Agreement. Xxxxxx has
significant assets, and upon consummation of the purchase of the shares,
will continue to have significant assets
1
exclusive of the shares. Xxxxxx has not been organized for the purpose of
acquiring the shares;
(iii) Xxxxxx is an "accredited investor" within the meaning of Rule
501 of the Securities Act of 1933, as amended (the "Securities Act");
(iv) Xxxxxx understands that the shares are being offered and sold
to it in reliance on specific provisions of Federal and state securities
laws and that the Company is relying in part upon the truth and accuracy
of the representations, warranties, agreements acknowledgments and
understandings of Xxxxxx set forth herein in order to determine the
applicability of such provisions;
(v) Xxxxxx, in making the decision to purchase the shares subscribed
for, has relied upon independent investigations made by it and has not
relied on any information or representations made by third parties other
than pursuant to this Agreement; and
(vi) Xxxxxx understands that the Shares have not been registered
under the Securities Act and therefore it cannot dispose of any or all of
the Shares unless such Shares are subsequently registered under the
Securities Act or exemptions from such registration are available. Xxxxxx
acknowledges that a legend substantially as follows will be placed on the
certificates representing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED WITHOUT A VIEW TO
THE DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER OF THESE SHARES
WILL NOT TRANSFER SUCH SHARES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO
THE COMPANY THAT THE REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH
OR THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT
VIOLATE ANY APPLICABLE STATE SECURITIES LAWS.
(b) The Company represents, warrants and covenants that the Public
Documents do not contain any misstatement of material fact or omit to include
any material information necessary to make the statements contained therein not
misleading.
3. REGISTRATION RIGHTS.
(a) The Company contemplates filing a registration statement on Form S-3
(the "Form S-3 Registration Statement") providing for the resale of the Shares,
and the Company will use its best efforts to cause such Form S-3 Registration
Statement to be declared effective on or before
2
the earlier of September 30, 1997 or two business days following receipt of a
"no-review" or similar letter from the Securities and Exchange Commission. In
the event such Form S-3 Registration Statement is not declared effective by
October 15, 1997, then if after October 15, 1997, the Company or any shareholder
of the Company shall determine to register any of its securities (except for
registration statements relating to employee benefit plans or exchange offers),
either for its own account or the account of a security holder, the Company will
promptly give to Xxxxxx written notice thereof no less than 10 days prior to the
filing of any registration statement; and include in such registration (and any
related qualification under blue sky laws or other compliance), and in the
underwriting involved therein, if any, such Shares as Xxxxxx may request in a
writing delivered to the Company within 5 days after Xxxxxx'x receipt of
Company's written notice. Xxxxxx may participate in any number of such
registrations until all of the Shares held by Xxxxxx have been distributed
pursuant to a registration or until the Shares are transferable pursuant to Rule
144(k) under the Securities Act.
(b) The Company further agrees that in the event the Shares are not
registered with the SEC by October 15, 1997, then if, on the date the Shares are
eventually registered with the SEC, the average closing market bid price of the
Company's Common Stock for the five (5) consecutive trading days preceding such
date (the "Registration Date Average Trading Price") is below $5.00 per share,
then the Company will issue to Xxxxxx an additional number of shares of the
Company's Common Stock which, taken together with the shares issued to Xxxxxx
under Section 1 of this Agreement, would be equal to the quotient of $150,000.00
divided by the Registration Date Average Trading Price. Notwithstanding the
foregoing, for purposes of this Section 3(b), in no event will the Registration
Date Trading Price ever be deemed to be below $3.00 per share. As an example of
the foregoing, if the Registration Date Trading Price is $4.00 per share, then
the Company will be required to issue an additional 7,500 shares of its Common
Stock to Xxxxxx ($150,000 divided by $4.00 = an aggregate of 37,500 shares;
37,500 shares minus 30,000 issued pursuant to Section 1 of this Agreement =
7,500 additional shares).
(c) If any registration statement described in this Section 3 is an
underwritten public offering, the right of Xxxxxx to registration pursuant to
this Section shall be conditioned upon each such holder's participation in such
reasonable underwriting arrangements as the Company shall make regarding the
offering, and the inclusion of Shares in the underwriting shall be limited to
the extent provided herein. Xxxxxx and all other shareholders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section, if the managing underwriter
concludes in its reasonable judgment that the number of shares to be registered
for selling shareholders (including Xxxxxx) would materially adversely effect
such offering, the number of Shares to be registered, together with the number
of shares of Common Stock or other securities held by other shareholders
proposed to be registered in such offering, shall be reduced on a pro rata basis
based on the number of Shares proposed to be sold by Xxxxxx as compared to the
number of shares proposed to be sold by all shareholders.
3
(d) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness of
such registration whether or not Xxxxxx has elected to include securities in
such registration.
(e) All registration expenses shall be borne by the Company. Unless
otherwise stated herein, all selling expenses relating to securities registered
on behalf of the holders of Registrable Securities shall be borne by the holders
of Registrable Securities.
4. TRANSFERABILITY. No party may assign this Agreement or the rights and
obligations hereunder without the express written consent of the other parties.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of each of the parties hereto and its respective successors and
assigns, including any corporation with which, or into which, a party hereto may
be merged or which may succeed thereto.
5. GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Texas.
6. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and Xxxxxx.
7. NOTICES, ETC. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed to such party
at its address set forth below or at such other address as either of the parties
hereby may hereafter notify the other in writing.
To Corporation: INTELECT COMMUNICATIONS SYSTEMS LIMITED
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxx Xxxxxxxx, Chairman and CEO
with a copy to: Xxxxxx X. Sudan, Jr.
Xxxx & Sudan, L.L.P.
000 Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
4
To Xxxxxx: Xxxxx Xxxxxx, Xx.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
8. DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
10. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
11. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the Company and Xxxxxx have executed this Agreement
this 22 day of August, 1997.
INTELECT COMMUNICATIONS SYSTEMS LIMITED
By: /s/ XXXXX X. XXXXXXX, XX.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Vice President/Chief Financial Officer
XXXXX XXXXXX, XX.
/s/ XXXXX XXXXXX, XX.
Xxxxx Xxxxxx, Xx.
5
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made by and between Intelect Communications
Systems Limited, a Bermuda corporation (the"Company") and Xxxxxx Corporation, a
Texas corporation ("Xxxxxx"). Each of the parties hereby agree as follows:
1. AGREEMENT TO SUBSCRIBE AND PURCHASE. Xxxxxx hereby subscribes for Ten
Thousand (10,000) of the Company's Common Shares (the "Shares") for a purchase
price of $5.00 per share. Xxxxxx shall pay an aggregate of Fifty Thousand
Dollars ($50,000) (the "Purchase Price") for the shares by delivering same day
funds in United States dollars. The Shares will be issued by the Company's
transfer agent, American Stock Transfer & Trust Company, within 15 days of the
date of this Agreement.
2. REPRESENTATIONS AND COVENANTS.
(a) Xxxxxx represents, warrants and covenants to the Company as follows:
(i) This Agreement has been duly authorized, validly executed and
delivered on behalf of Xxxxxx and is a valid and binding agreement of
Xxxxxx in accordance with its terms, subject to general principles of
equity and to the effect of bankruptcy or other similar laws affecting the
enforcement of creditors' rights;
(ii) Xxxxxx is purchasing the shares for its own account for
investment purposes and not with a view towards distribution. Xxxxxx
understands and agrees that it must bear the economic risks of its
investment for an indefinite period of time. Xxxxxx has received and
carefully reviewed copies of the Company's Form 10-K for the fiscal year
ending December 31, 1997 and the Forms 10-Q for the first and second
quarterly periods of 1997 (the "Public Documents"). Xxxxxx understands
that the offer and sale of the shares are being made only by means of this
Agreement. No representations or warranties have been made to Xxxxxx by
Seller, the officers or directors of Seller, or any agent, employee or
affiliate of any of them except as set forth herein. Xxxxxx is aware that
the purchase of the shares involves a high degree of risk and that it may
sustain, and has the financial ability to sustain, the loss of its entire
investment. Xxxxxx has had the opportunity to ask questions of, and
receive answers and satisfactory to it from, the Company's management
regarding the Company. Xxxxxx understands that no Federal or state
governmental authority has made any finding or determination relating to
the fairness of an investment in the shares and that no Federal or state
governmental authority has recommended or endorsed, or will recommend or
endorse, the investment herein. Xxxxxx, in making the decision to purchase
the shares subscribed for, has relied upon independent investigations made
by it and has not relied on any information or representations made by
third parties other than pursuant to this Agreement. Xxxxxx has
significant assets, and upon consummation of the purchase of the shares,
will continue to have significant assets
1
exclusive of the shares. Xxxxxx has not been organized for the purpose of
acquiring the shares;
(iii) Xxxxxx is an "accredited investor" within the meaning of Rule
501 of the Securities Act of 1933, as amended (the "Securities Act");
(iv) Xxxxxx understands that the shares are being offered and sold
to it in reliance on specific provisions of Federal and state securities
laws and that the Company is relying in part upon the truth and accuracy
of the representations, warranties, agreements acknowledgments and
understandings of Xxxxxx set forth herein in order to determine the
applicability of such provisions;
(v) Xxxxxx, in making the decision to purchase the shares subscribed
for, has relied upon independent investigations made by it and has not
relied on any information or representations made by third parties other
than pursuant to this Agreement; and
(vi) Xxxxxx understands that the Shares have not been registered
under the Securities Act and therefore it cannot dispose of any or all of
the Shares unless such Shares are subsequently registered under the
Securities Act or exemptions from such registration are available. Xxxxxx
acknowledges that a legend substantially as follows will be placed on the
certificates representing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED WITHOUT A VIEW TO
THE DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER OF THESE SHARES
WILL NOT TRANSFER SUCH SHARES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO
THE COMPANY THAT THE REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH
OR THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT
VIOLATE ANY APPLICABLE STATE SECURITIES LAWS.
(b) The Company represents, warrants and covenants that the Public
Documents do not contain any misstatement of material fact or omit to include
any material information necessary to make the statements contained therein not
misleading.
3. REGISTRATION RIGHTS.
(a) The Company contemplates filing a registration statement on Form S-3
(the "Form S-3 Registration Statement") providing for the resale of the Shares,
and the Company will use its best efforts to cause such Form S-3 Registration
Statement to be declared effective on or before
2
the earlier of September 30, 1997 or two business days following receipt of a
"no-review" or similar letter from the Securities and Exchange Commission. In
the event such Form S-3 Registration Statement is not declared effective by
October 15, 1997, then if after October 15, 1997, the Company or any shareholder
of the Company shall determine to register any of its securities (except for
registration statements relating to employee benefit plans or exchange offers),
either for its own account or the account of a security holder, the Company will
promptly give to Xxxxxx written notice thereof no less than 10 days prior to the
filing of any registration statement; and include in such registration (and any
related qualification under blue sky laws or other compliance), and in the
underwriting involved therein, if any, such Shares as Xxxxxx may request in a
writing delivered to the Company within 5 days after Xxxxxx'x receipt of
Company's written notice. Xxxxxx may participate in any number of such
registrations until all of the Shares held by Xxxxxx have been distributed
pursuant to a registration or until the Shares are transferable pursuant to Rule
144(k) under the Securities Act.
(b) The Company further agrees that in the event the Shares are not
registered with the SEC by October 15, 1997, then if, on the date the Shares are
eventually registered with the SEC, the average closing market bid price of the
Company's Common Stock for the five (5) consecutive trading days preceding such
date (the "Registration Date Average Trading Price") is below $5.00 per share,
then the Company will issue to Xxxxxx an additional number of shares of the
Company's Common Stock which, taken together with the shares issued to Xxxxxx
under Section 1 of this Agreement, would be equal to the quotient of $50,000.00
divided by the Registration Date Average Trading Price. Notwithstanding the
foregoing, for purposes of this Section 3(b), in no event will the Registration
Date Trading Price ever be deemed to be below $3.00 per share. As an example of
the foregoing, if the Registration Date Trading Price is $4.00 per share, then
the Company will be required to issue an additional 2,500 shares of its Common
Stock to Xxxxxx ($50,000 divided by $4.00 = an aggregate of 12,500 shares;
12,500 shares minus 10,000 issued pursuant to Section 1 of this Agreement =
2,500 additional shares).
(c) If any registration statement described in this Section 3 is an
underwritten public offering, the right of Xxxxxx to registration pursuant to
this Section shall be conditioned upon each such holder's participation in such
reasonable underwriting arrangements as the Company shall make regarding the
offering, and the inclusion of Shares in the underwriting shall be limited to
the extent provided herein. Xxxxxx and all other shareholders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section, if the managing underwriter
concludes in its reasonable judgment that the number of shares to be registered
for selling shareholders (including Xxxxxx) would materially adversely effect
such offering, the number of Shares to be registered, together with the number
of shares of Common Stock or other securities held by other shareholders
proposed to be registered in such offering, shall be reduced on a pro rata basis
based on the number of Shares proposed to be sold by Xxxxxx as compared to the
number of shares proposed to be sold by all shareholders.
3
(d) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness of
such registration whether or not Xxxxxx has elected to include securities in
such registration.
(e) All registration expenses shall be borne by the Company. Unless
otherwise stated herein, all selling expenses relating to securities registered
on behalf of the holders of Registrable Securities shall be borne by the holders
of Registrable Securities.
4. TRANSFERABILITY. No party may assign this Agreement or the rights and
obligations hereunder without the express written consent of the other parties.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of each of the parties hereto and its respective successors and
assigns, including any corporation with which, or into which, a party hereto may
be merged or which may succeed thereto.
5. GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Texas.
6. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and Xxxxxx.
7. NOTICES, ETC. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed to such party
at its address set forth below or at such other address as either of the parties
hereby may hereafter notify the other in writing.
To Corporation: INTELECT COMMUNICATIONS SYSTEMS LIMITED
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxx Xxxxxxxx, Chairman and CEO
with a copy to: Xxxxxx X. Sudan, Jr.
Xxxx & Sudan, L.L.P.
000 Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
4
To Xxxxxx: Xxxxxx Corporation
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
8. DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
10. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
11. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the Company and Xxxxxx have executed this Agreement
this 22 day of August, 1997.
INTELECT COMMUNICATIONS SYSTEMS LIMITED
By: /s/ XXXXX X. XXXXXXX, XX.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Vice President/Chief Financial Officer
XXXXXX CORPORATION
By: ____________________________________________
Its: ___________________________________________
5
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made by and between Intelect Communications
Systems Limited, a Bermuda corporation (the"Company") and Meridian Fund, Ltd., a
Texas limited partnership ("Meridian"). Each of the parties hereby agree as
follows:
1. AGREEMENT TO SUBSCRIBE AND PURCHASE. Meridian hereby subscribes for
Twenty Thousand (20,000) of the Company's Common Shares (the "Shares") for a
purchase price of $5.00 per share. Meridian shall pay an aggregate of One
Hundred Thousand Dollars ($100,000) (the "Purchase Price") for the shares by
delivering same day funds in United States dollars. The Shares will be issued by
the Company's transfer agent, American Stock Transfer & Trust Company, within 15
days of the date of this Agreement.
2. REPRESENTATIONS AND COVENANTS.
(a) Meridian represents, warrants and covenants to the Company as follows:
(i) This Agreement has been duly authorized, validly executed and
delivered on behalf of Meridian and is a valid and binding agreement of
Meridian in accordance with its terms, subject to general principles of
equity and to the effect of bankruptcy or other similar laws affecting the
enforcement of creditors' rights;
(ii) Meridian is purchasing the shares for its own account for
investment purposes and not with a view towards distribution. Meridian
understands and agrees that it must bear the economic risks of its
investment for an indefinite period of time. Meridian has received and
carefully reviewed copies of the Company's Form 10-K for the fiscal year
ending December 31, 1997 and the Forms 10-Q for the first and second
quarterly periods of 1997 (the "Public Documents"). Meridian understands
that the offer and sale of the shares are being made only by means of this
Agreement. No representations or warranties have been made to Meridian by
Seller, the officers or directors of Seller, or any agent, employee or
affiliate of any of them except as set forth herein. Meridian is aware
that the purchase of the shares involves a high degree of risk and that it
may sustain, and has the financial ability to sustain, the loss of its
entire investment. Meridian has had the opportunity to ask questions of,
and receive answers and satisfactory to it from, the Company's management
regarding the Company. Meridian understands that no Federal or state
governmental authority has made any finding or determination relating to
the fairness of an investment in the shares and that no Federal or state
governmental authority has recommended or endorsed, or will recommend or
endorse, the investment herein. Meridian, in making the decision to
purchase the shares subscribed for, has relied upon independent
investigations made by it and has not relied on any information or
representations made by third parties other than pursuant to this
Agreement. Meridian has significant assets, and upon consummation of the
purchase of the shares, will continue to
1
have significant assets exclusive of the shares. Meridian has not been
organized for the purpose of acquiring the shares;
(iii) Meridian is an "accredited investor" within the meaning of
Rule 501 of the Securities Act of 1933, as amended (the "Securities Act");
(iv) Meridian understands that the shares are being offered and sold
to it in reliance on specific provisions of Federal and state securities
laws and that the Company is relying in part upon the truth and accuracy
of the representations, warranties, agreements acknowledgments and
understandings of Meridian set forth herein in order to determine the
applicability of such provisions;
(v) Meridian, in making the decision to purchase the shares
subscribed for, has relied upon independent investigations made by it and
has not relied on any information or representations made by third parties
other than pursuant to this Agreement; and
(vi) Meridian understands that the Shares have not been registered
under the Securities Act and therefore it cannot dispose of any or all of
the Shares unless such Shares are subsequently registered under the
Securities Act or exemptions from such registration are available.
Meridian acknowledges that a legend substantially as follows will be
placed on the certificates representing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED WITHOUT A VIEW TO
THE DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER OF THESE SHARES
WILL NOT TRANSFER SUCH SHARES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO
THE COMPANY THAT THE REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH
OR THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT
VIOLATE ANY APPLICABLE STATE SECURITIES LAWS.
(b) The Company represents, warrants and covenants that the Public
Documents do not contain any misstatement of material fact or omit to include
any material information necessary to make the statements contained therein not
misleading.
3. REGISTRATION RIGHTS.
(a) The Company contemplates filing a registration statement on Form S-3
(the "Form S-3 Registration Statement") providing for the resale of the Shares,
and the Company will use its best efforts to cause such Form S-3 Registration
Statement to be declared effective on or before
2
the earlier of September 30, 1997 or two business days following receipt of a
"no-review" or similar letter from the Securities and Exchange Commission. In
the event such Form S-3 Registration Statement is not declared effective by
October 15, 1997, then if after October 15, 1997, the Company or any shareholder
of the Company shall determine to register any of its securities (except for
registration statements relating to employee benefit plans or exchange offers),
either for its own account or the account of a security holder, the Company will
promptly give to Meridian written notice thereof no less than 10 days prior to
the filing of any registration statement; and include in such registration (and
any related qualification under blue sky laws or other compliance), and in the
underwriting involved therein, if any, such Shares as Meridian may request in a
writing delivered to the Company within 5 days after Meridian's receipt of
Company's written notice. Meridian may participate in any number of such
registrations until all of the Shares held by Meridian have been distributed
pursuant to a registration or until the Shares are transferable pursuant to Rule
144(k) under the Securities Act.
(b) The Company further agrees that in the event the Shares are not
registered with the SEC by October 15, 1997, then if, on the date the Shares are
eventually registered with the SEC, the average closing market bid price of the
Company's Common Stock for the five (5) consecutive trading days preceding such
date (the "Registration Date Average Trading Price") is below $5.00 per share,
then the Company will issue to Meridian an additional number of shares of the
Company's Common Stock which, taken together with the shares issued to Meridian
under Section 1 of this Agreement, would be equal to the quotient of $100,000.00
divided by the Registration Date Average Trading Price. Notwithstanding the
foregoing, for purposes of this Section 3(b), in no event will the Registration
Date Trading Price ever be deemed to be below $3.00 per share. As an example of
the foregoing, if the Registration Date Trading Price is $4.00 per share, then
the Company will be required to issue an additional 5,000 shares of its Common
Stock to Meridian ($100,000 divided by $4.00 = an aggregate of 25,000 shares;
25,000 shares minus 20,000 issued pursuant to Section 1 of this Agreement =
5,000 additional shares).
(c) If any registration statement described in this Section 3 is an
underwritten public offering, the right of Meridian to registration pursuant to
this Section shall be conditioned upon each such holder's participation in such
reasonable underwriting arrangements as the Company shall make regarding the
offering, and the inclusion of Shares in the underwriting shall be limited to
the extent provided herein. Meridian and all other shareholders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section, if the managing underwriter
concludes in its reasonable judgment that the number of shares to be registered
for selling shareholders (including Meridian) would materially adversely effect
such offering, the number of Shares to be registered, together with the number
of shares of Common Stock or other securities held by other shareholders
proposed to be registered in such offering, shall be reduced on a pro rata basis
based on the number of Shares proposed to be sold by Meridian as compared to the
number of shares proposed to be sold by all shareholders.
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(d) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness of
such registration whether or not Meridian has elected to include securities in
such registration.
(e) All registration expenses shall be borne by the Company. Unless
otherwise stated herein, all selling expenses relating to securities registered
on behalf of the holders of Registrable Securities shall be borne by the holders
of Registrable Securities.
4. TRANSFERABILITY. No party may assign this Agreement or the rights and
obligations hereunder without the express written consent of the other parties.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of each of the parties hereto and its respective successors and
assigns, including any corporation with which, or into which, a party hereto may
be merged or which may succeed thereto.
5. GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Texas.
6. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and Meridian.
7. NOTICES, ETC. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed to such party
at its address set forth below or at such other address as either of the parties
hereby may hereafter notify the other in writing.
To Corporation: INTELECT COMMUNICATIONS SYSTEMS LIMITED
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxx Xxxxxxxx, Chairman and CEO
with a copy to: Xxxxxx X. Sudan, Jr.
Xxxx & Sudan, L.L.P.
000 Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
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To Meridian: Meridian Fund, Ltd.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
8. DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
10. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
11. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the Company and Meridian have executed this Agreement
this 22 day of August, 1997.
INTELECT COMMUNICATIONS SYSTEMS LIMITED
By: /s/ XXXXX X. XXXXXXX, XX.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Vice President/Chief Financial Officer
MERIDIAN FUND, LTD.
By: ______________________________________
Its: _____________________________________
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