REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of October 15, 1996 among INTELECT COMMUNICATIONS SYSTEMS
LIMITED, a company organized under the laws of Bermuda (the "Company"), INFINITY
INVESTORS, LTD., a corporation organized under the laws of Nevis, West Indies
and SEACREST CAPITAL LIMITED, a Corporation organized under the laws of Nevis,
West Indies (collectively, the "Investor").
W I T N E S S E T H:
WHEREAS, pursuant to that Certain Convertible Securities Agreement
dated the date hereof (the "Subscription Agreement"), the Investor acquired
Series A Debentures, in an aggregate principal amount of $5,000,000, and Series
B Debentures, in an aggregate principal amount of $5,000,000 (collectively the
"Initial Debentures"), which are convertible into common shares, par value $0.01
(the "Common Shares") of the Company (the shares into which the Debentures are
convertible are herein collectively referred to as the "Shares"); and
WHEREAS, the Company has agreed to register the Shares; and
WHEREAS, as used herein, "Registerable Securities" shall mean the
Common Shares issuable by the Company upon conversion of the Initial Debentures
pursuant to the terms thereof, which have not been previously sold pursuant to a
registration statement or Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Securities Act").
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties agree as follows:
1. DEMAND REGISTRATION UPON CLOSING.
(a) Subject to the terms and conditions hereof, within fifteen (15)
days after the closing of the transactions contemplated by the Subscription
Agreement (the "Closing Date"), the Company shall, at the Company's cost and
expense (other than the fees and disbursements of counsel for the Investor and
the underwriting discounts and brokerage commissions, if any, payable in respect
of the Registrable Securities sold by the Investor) prepare and file with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 (if the same is available), with respect to the Registerable
Securities requested to be registered by the Investor and will use all
reasonable efforts to cause such registration statement to become effective as
promptly as practicable. If Form S-3 is not available to the Company for such
registration
REGISTRATION RIGHTS AGREEMENT - Page 1
statement, the Company shall use all reasonable efforts to promptly file the
registration statement on an appropriate alternative form.
(b) Except as set forth below, the Company shall keep effective the
registration statement contemplated by this Section 1 and shall from time to
time amend or supplement such registration statement, for a period of not less
than three hundred sixty (360) days, as extended by any period of time during
which the registration statement is not effective pursuant to Section 1(c)
below, unless all of the Registrable Securities set forth in such registration
statement have thereto been sold.
(c) The Company may terminate or suspend the effectiveness of any
registration statement to be filed pursuant to Section 1(a) one time for a
period of not more than forty five (45) days if the Company shall deliver to the
Investor a certificate signed by a Senior Vice President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company it would (i) be seriously detrimental to the Company
for such registration statement to be effected or remain effective at such time,
(ii) interfere with any proposed or pending material corporate transaction
involving the Company or any of its subsidiaries or (iii) require any premature
disclosure thereof.
(d) The Company acknowledges that the number of Shares issuable upon
conversion of the Debentures is subject to variation depending upon the market
price of the Common Shares of the Company. The Company shall register at least
2.3 million Common Shares pursuant to subsection (a) above.
2. FUTURE DEMAND REGISTRATION.
(a) If, at any one time following thirty (30) days after the
termination of the effectiveness of the registration statement prepared and
filed in accordance with Section 1, the Company receives a written request from
the Investor, the Company shall, at the Company's sole cost and expense (other
than the fees and disbursements of counsel for the Investor and the underwriting
discounts and commissions, if any, payable in respect of the Registrable
Securities sold by the Investor), prepare and file with the Commission an
additional registration statement sufficient to permit the public offering and
sale of the number of shares of Registrable Securities set forth in such
request. The Company shall file such registration statement on Form S-3 (if the
same is available to the Company for such registration statement) within thirty
(30) days of the receipt of the request. If Form S-3 is not available to the
Company for such registration statement, the Company shall use all reasonable
efforts to promptly file the registration statement on appropriate alternative
form. The Company will use all reasonable efforts to cause such registration
statement to become effective as promptly as practicable. Notwithstanding
anything to the contrary set forth above, the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 2 (1) if the Investor, together with the holders of any other securities
of the Company entitled to
REGISTRATION RIGHTS AGREEMENT - Page 2
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000, provided,
however, that such exception shall not apply in the event the number of
Registrable Securities then held by the Investor exceeds the maximum number of
shares of Common Stock which the Investor could sell pursuant to the provisions
of Rule 144(e)(1) promulgated under the Securities Act; (2) if the Company shall
furnish to the Investor a certificate signed by a Senior Vice President or the
Chief Executive Officer of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such registration to be effected at such
time, in which event the Company shall have the right to defer the filing of the
registration statement for a period of not more than 30 days after receipt of
the request of the Investor; or (3) in any particular jurisdiction in which the
Company would be required to quality to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(b) The Company shall keep effective the registration statement
contemplated by this Section 2 and shall from time to time amend or supplement
such registration statement, for a period of not less than three hundred
sixty-five (365) days.
(c) The Company shall not be obligated to file more than three (3)
registration statements under this Agreement.
3. THE COMPANY COVENANTS.
(a) The Company's obligations pursuant to Sections 1 and 2 hereof shall
continue for two years after the Closing Date or until all Registrable
Securities have been sold, whichever event occurs first.
(b) In the event of a registration pursuant to the provisions of
Sections 1 and 2, the Company shall use all reasonable efforts to cause the
Registrable Securities so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Investor may
reasonably request; provided, however, that the Company shall not be required to
qualify to do business in any state by reason of this Section 3(b) in which it
is not otherwise required to quality to do business.
(c) The Company shall notify the Investor promptly when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed.
(d) The Company shall advise the Investor, promptly after it shall
receive notice or obtain knowledge of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement, or the
initiation or threatening of any proceeding for that purpose, and promptly use
all reasonable efforts
REGISTRATION RIGHTS AGREEMENT - Page 3
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
(e) The Company shall promptly notify the Investor, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as then in effect,
would include an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the reasonable request of the Investor prepare and furnish to them such number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities or securities, such prospectus shall not 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 not misleading in the light
of the circumstances under which they were made.
(f) If requested by the underwriter for any underwritten offering of
Registrable Securities on behalf of the Investor pursuant to a registration
requested under Sections 1 and 2, the Company and the Investor will enter into
an underwriting agreement with such underwriter for such offering, which shall
be reasonably satisfactory in substance and form to the Company and the
Company's counsel, the Investor, and the underwriter, and such agreement shall
contain such representations and warranties by the Company and the Investor and
such other terms and provisions as are customarily contained in an underwriting
agreement with respect to secondary distributions solely by selling
stockholders, including, without limitation, indemnities substantially to the
effect and to the extent provided in Section 4.
4. INDEMNIFICATION.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Investor, its officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls any such
person within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 4, but not be
limited to, reasonable attorneys' fees and any and all reasonable expenses
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever), arising out of,
based upon, or in connection with any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented) or any amendment or supplement thereto, relating to the sale of
any of the Registrable Securities or (B) in any application or other document or
communication (in this Section 4 collectively called an
REGISTRATION RIGHTS AGREEMENT - Page 4
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Registrable Securities under the
securities or blue sky laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements made
therein not misleading, unless (x) such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Investor for inclusion in any registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be, or (y) such loss,
liability, charge, claim, damage or expense arises out of the Investor's failure
to comply with the terms and provisions of this Agreement. The foregoing
agreement to indemnify shall be in addition to any liability the Company may
otherwise have, including liabilities arising under this Agreement.
If any action is brought against the Investor or any of its officers,
directors, partners, employees, agents, or counsel, or any controlling persons
of such person (an "indemnified party") in respect of which indemnity may be
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the institution
of such action (but the failure so to notify shall not relieve the Company from
any liability other than pursuant to this Section 4 (a) unless, the failure to
so notify shall prejudice any rights or defenses with respect to such claim) and
the Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) provided that the indemnified party shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless:
(i) the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action; or
(ii) such indemnified party or parties shall have reasonably concluded,
based on an opinion of counsel reasonably satisfactory to the Company, that
there may be one or more legal defenses available to it or them or to other
indemnified parties which are different from or additional to those available to
the Company, in any material respect, and that as a result thereof a conflict of
interest would arise absent separate representation of the parties.
In the event of clauses (i) or (ii) above, such fees and expenses shall be borne
by the Company and the Company shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties. Anything in this
Section 4 to the contrary notwithstanding, the Company shall not be liable for
any settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld, unless such settlement contains an
unconditional release of the Company. The Company
REGISTRATION RIGHTS AGREEMENT - Page 5
shall not, without the prior written consent of each indemnified party that is
not released as described in this sentence, settle or compromise any action, or
permit a default or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, in respect of which indemnity may be
sought hereunder (whether or not any indemnified party is a party thereto)
unless such settlement, compromise, consent, or termination includes an
unconditional release of each indemnified party from all liability in respect of
such action. The Company agrees to promptly notify the Investor of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of any Registrable Securities
or any preliminary prospectus, prospectus, registration statement, or amendment
or supplement thereto, or any application relating to any sale of any
Registrable Securities.
(b) Each Investor agrees, severally, and not jointly, to indemnify and
hold harmless the Company, each director of the Company, each officer of the
Company who shall have signed any registration statement covering Registrable
Securities held by the Investor, each other person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, and its or their respective counsel, to the same extent as
the foregoing indemnity from the Company to the Investor in Section 4 (a) but
only with respect to statements or omissions, if any, made in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented) or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written information
furnished to the Company with respect to the Investor by or on behalf of the
Investor, for inclusion in any such registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be. If any action shall be brought against the
Company or any other person so indemnified based on any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, and in respect of which indemnity may
be sought against the Investor pursuant to this Section 4(b) the Investor shall
have the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 4(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 4(a) or
4(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act or otherwise, then
the Company (including for this purpose any contribution made by or on behalf of
any director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company as one entity, and
the Investor, included in such registration in the aggregate (including for this
purpose any contribution by or on behalf of an indemnified party), as a second
entity, shall
REGISTRATION RIGHTS AGREEMENT - Page 6
contribute to the losses, liabilities, claims, damages, and expenses whatsoever
to which any of them may be subject, on the basis of relevant equitable
considerations such as the relative fault of the Company and the Investor in
connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission, or alleged omission shall be determined by,
among other things, whether such statement, alleged statement, omission or
alleged omission relates to information supplied by the Company or by the
Investor, and the parties' relative intent, knowledge, access to information,
and opportunity to correct or prevent such statement, alleged statement,
omission, or alleged omission, the Company and the Investor agree that it would
be unjust and inequitable if the respective obligations of the Company and the
Investor for contribution were determined by pro rata or per capita allocation
of the aggregate losses, liabilities, claims, damages, and expenses (even if the
Investor and the other indemnified parties were treated as one entity for such
purpose) or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 4(c). In no case shall the
Investor be responsible for a portion of the contribution obligation imposed on
the --Investor in excess of its pro rata share based on the number of shares of
Common Stock owned by it and included in such registration as compared to the
total number of Common Shares owned by the Investor and included in such
registration. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 4(c) each person, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee,
agent, and counsel of the Investor or control person shall have the same rights
to contribution as the Investor or control person and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, each officer of the Company who shall have
signed any such registration statement, each director of the Company, and its or
their respective counsel shall have the same rights to contribution as the
Company, subject to each case to the provisions of this Section 4(c). Anything
in this Section 4(c) to the contrary notwithstanding, no party shall be liable
for contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 4(c) is intended to supersede any
right to contribution under the Securities Act, the Exchange Act or otherwise.
5. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by any party of its obligations
under this Agreement, the other party, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. Such rights shall be in
addition to, and not in lieu of, the Investor's rights to receive the Damage
Payment as specified in the Subscription Agreement.
REGISTRATION RIGHTS AGREEMENT - Page 7
(b) AGREEMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
unless such amendment, modification or supplement is in writing and signed by
the parties hereto.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, or telecopies, initially to the address set forth
below, and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 5(c).
(i) if to the Company:
Intelect Communications Systems Limited
Xxxx House, 00 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx
Attn: Xxxxx X. Xxxxxxxx
Fax: 441/000-0000
(ii) with a copy to:
Xxxx and Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: 617/000-0000
Fax: 617/000-0000
Attn: Xxxxxx X. Xxxxxxxx
(iii) if to the Investor
Infinity Investors, Ltd.
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
Attn: Xxxxx X. X'Xxxxx
Fax: 000 00 000 000
Seacrest Capital Limited
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
Attn: Xxxxx X. X'Xxxxx
Fax: 000 00 000 000
REGISTRATION RIGHTS AGREEMENT - Page 8
(iv) with a copy to:
x/x XX Xxxxxxx
0000 Xxxxxxxxxxxx Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
(Telephone) 214/000-0000
(Fax) 214/000-0000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; two business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.
(d) REASONABLE COOPERATION OF THE INVESTOR. The Investor shall
cooperate in all reasonable respects with the filing of the registration
statement contemplated hereby. Without limiting the foregoing, the Investor
shall furnish to the Company (or any regulatory authority) such written
information and representations that the Company may reasonably request in order
to facilitate any registration of the Registrable Securities hereunder.
(e) SUCCESSORS AND ASSIGNS. This Agreement may be assigned by the
Investor to any purchaser or transferee of the Initial Debentures.
(f) COUNTERPARTS. This Agreement may be executed by facsimile signature
and in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
references only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to its
conflict of laws provisions.
(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application hereof in any circumstance is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any such
provisions in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
REGISTRATION RIGHTS AGREEMENT - Page 9
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of this agreement and under standing of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
concerning the registration rights granted by the Company pursuant to this
Agreement.
[Signature page follows]
REGISTRATION RIGHTS AGREEMENT - Page 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
INTELECT COMMUNICATIONS SYSTEMS
LIMITED
By:/s/ Xxxxx X. Xxxxxxxx
---------------------------
Xxxxx X. Xxxxxxxx, President
INFINITY INVESTORS, LTD.
By: /s/ X. X. Xxxxxxxx
---------------------------
Name: X. X. Xxxxxxxx
---------------------------
Title: Director
---------------------------
SEACREST CAPITAL LIMITED
By: /s/ Xxxxx X. Xxxxxx
---------------------------
Name: Xxxxx X. Xxxxxx
---------------------------
Title: President and Treasurer
---------------------------
REGISTRATION RIGHTS AGREEMENT - Page 11
