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Exhibit 6
REGISTRATION RIGHTS AGREEMENT
between
TERAGLOBAL COMMUNICATIONS CORP.,
and
WALLERSUTTON 2000, L.P.
and
The Parties Set Forth On Exhibit A Hereto
Dated as of December 10, 2001
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TABLE OF CONTENTS
Page
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1. Certain Definitions.........................................................1
2. Registration Rights.........................................................2
2.1. Registrations......................................................2
2.2. Piggyback Registration.............................................4
2.3. Registration Procedures............................................5
2.4. Registration Expenses..............................................9
2.5. Certain Limitations on Registration Rights........................10
2.6. Limitations on Sale or Distribution of Other Securities...........10
2.7. No Required Sale..................................................11
2.8. Indemnification...................................................11
3. Underwritten Offerings.....................................................14
3.1. Requested Underwritten Offerings..................................14
3.2. Piggyback Underwritten Offerings..................................14
4. General....................................................................14
4.1. Rule 144..........................................................14
4.2. Nominees for Beneficial Owners....................................15
4.3. Amendments and Waivers............................................15
4.4. Notices...........................................................15
4.5. Transfer or Assignment of Registration Rights.....................16
4.6. Miscellaneous.....................................................16
4.7. No Inconsistent Agreements........................................17
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REGISTRATION RIGHTS AGREEMENT
This AGREEMENT, is made as of December 10, 2001, between TERAGLOBAL
COMMUNICATIONS CORP., a Delaware corporation (the "Company"), WALLERSUTTON 2000,
L.P., a Delaware limited partnership ("WallerSutton") and the parties set forth
on Exhibit A attached hereto (the "Bridge Financiers") and, collectively, with
WallerSutton, the "Purchasing Parties").
WHEREAS, as of the date hereof, the Company, WallerSutton and the
other Bridge Financiers are entering into a Convertible Promissory Note and
Warrant Purchase Agreement (the "Purchase Agreement"), pursuant to which
WallerSutton and the Bridge Financiers are purchasing Convertible Promissory
Notes (the "Notes") and Warrants (the "Warrants");
WHEREAS, in connection with the Company and WallerSutton and the
Bridge Financiers entering into the Purchase Agreement, and as a condition
precedent to such purchase, the Company desires to provide the Purchasing
Parties, pursuant to this Agreement, certain registration rights with respect to
the shares of Common Stock underlying the Notes and the Warrants.
ACCORDINGLY, the parties hereto agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with, such specified Person.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company and any and all securities of any kind whatsoever of the Company
which may be issued after the date hereof in respect of, or in exchange for,
shares of Common Stock of the Company pursuant to a merger, consolidation, stock
split, stock dividend or recapitalization of the Company or otherwise.
"Common Stock Equivalents" means any securities convertible into, or
exercisable or exchangeable for, shares of Common Stock, including, but in no
way limited to, the shares of Common Stock issuable upon conversion of the Notes
or exercise of the Warrants pursuant to the Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" or "Holders" means any party who is a signatory to this
Agreement any party and any party who shall hereafter acquire and hold
Registrable Securities.
"Next Qualified Financing" means TeraGlobal's next round of
additional debt and/or equity financing.
"Person" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
"Preferred Stock" means the Series A Preferred Stock.
"Registrable Securities" means any (i) shares of Common Stock held
by any Purchasing Party underlying the Notes and (ii) shares of Common Stock
issued or issuable upon the exercise of the Warrants held by any Purchasing
Party and any permitted Holder thereof and (iii) any shares of Common Stock
issued or issuable, directly or indirectly, with respect to the Common Stock
referenced in clauses (i) or (ii) above by way of stock dividend, stock split or
combination of shares. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement or (ii) such securities shall
have been sold (other than in a privately negotiated sale) or become eligible
for sale pursuant to Rule 144 (or any successor provision) under the Securities
Act and in compliance with the requirements of paragraphs (f) and (g) of Rule
144 (notwithstanding the provisions of paragraph (k) of such Rule).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration Rights.
2.1. Registrations.
(a) (i) Subject to Sections 2.1(b) below, the Company shall file a
registration statement under the Securities Act and list with the Nasdaq or the
current exchange upon wich the Common Stock is then traded, all the Registrable
Securities, within 120 days of the Next Qualified Financing in which TeraGlobal
has received gross proceeds of at least $6.6 million; provided, however, if
TeraGlobal shall not have completed the Next Qualified Financing before June
[__], 2002, then TeraGlobal will register the Registrable Securities promptly
after such date.
(ii) The Company, subject to Sections 2.5, shall include in such
Registration all of the Registrable Securities.
(iii) The Company shall, as expeditiously as possible, use its best
efforts to (A) (x) effect the registration under the Securities Act (including,
without limitation, by means of a shelf registration pursuant to Rule 415 under
the Securities Act if so requested
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and if the Company is then eligible to use such a registration) of the
Registrable Securities for distribution in accordance with such intended method
of distribution and (y) obtain acceleration of the effective date of the
registration statement relating to such registration and (B) list all such
Registrable Securities with the Nasdaq or the current exchange on which the
Common Stock is then traded.
(b) The Registration rights granted in Section 2.1(a) to the Holders
are subject to the following limitations: (i) the registration shall be made on
Form S-3 or any equivalent form then in effect (or, if Form S-3 or any
equivalent form is not available, on a Form S-1 or S-2 as determined by the
Company, if the use of such forms is then available); and (ii) if the Board of
Directors of the Company, in its good faith judgment, determines that any
registration of Registrable Securities should not be made or continued because
it would materially interfere with any material financing, acquisition,
corporate reorganization or merger or other transaction involving the Company or
any of its subsidiaries (a "Valid Business Reason"), (x) the Company may
postpone filing a registration statement until such Valid Business Reason no
longer exists, but in no event for more than 90 days, and (y) in case a
registration statement has been filed relating to a Registration, if the Valid
Business Reason has not resulted from actions taken by the Company, the Company
may cause such registration statement to be withdrawn and its effectiveness
terminated or may postpone amending or supplementing such registration statement
until such Valid Business Reason no longer exists, but in no event for more than
three months (such period of postponement or withdrawal under subclause(s) (x)
or (y) of this clause (ii), the "Postponement Period"); and the Company shall
give written notice of its determination to postpone or withdraw a registration
statement and of the fact that the Valid Business Reason for such postponement
or withdrawal no longer exists, in each case, promptly after the occurrence
thereof, provided, however, the Company shall not be permitted to postpone or
withdraw a registration statement after the expiration of any Postponement
Period until 4 months after the expiration of such Postponement Period.
If the Company shall give any notice of postponement or withdrawal
of any registration statement, the Company shall not, during the period of
postponement or withdrawal, register any Common Stock, other than pursuant to a
registration statement on Form S-4 or S-8 (or an equivalent registration form
then in effect). Each Holder of Registrable Securities agrees that, upon receipt
of any notice from the Company that the Company has determined to withdraw any
registration statement pursuant to clause (ii) above, such Holder will
discontinue its disposition of Registrable Securities pursuant to such
registration statement and, if so directed by the Company, will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. If the
Company shall have withdrawn or prematurely terminated a registration statement
filed under Section 2.1 (a)(i) (whether pursuant to clause (ii) above or as a
result of any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court), the Company shall not be considered to
have effected an effective registration for the purposes of this Agreement until
the Company shall have filed a new registration statement covering the
Registrable Securities covered by the withdrawn registration statement and such
registration statement shall have been declared effective and shall not have
been withdrawn. If the Company shall give any notice of withdrawal or
postponement of a registration statement, the Company shall, at such time as the
Valid Business Reason that caused such withdrawal or postponement no longer
exists
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(but in no event later than three months after the date of the postponement or
withdrawal), use its best efforts to effect the registration under the
Securities Act of the Registrable Securities covered by the withdrawn or
postponed registration statement in accordance with this Section 2.1 (unless the
Holder participating in such registration shall have withdrawn such request, in
which case the Company shall not be considered to have effected an effective
registration for the purposes of this Agreement).
(c) In connection with any registration set forth in Section 2.1(a),
the Holders of a majority of the Registrable Securities participating in such
registration shall have the right to designate an underwriter to facilitate the
sale of the Registrable Securities.
2.2. Piggyback Registration.
(a) If, at any time, the Company proposes or is required to register
any of its equity securities (including pursuant to any registration statement
which generally registers equity and debt securities without specifying the type
of security or the amount) under the Securities Act (other than pursuant to (i)
registrations on such form or similar form(s) solely for registration of
securities in connection with an employee benefit plan or dividend reinvestment
plan or a merger or consolidation or (ii) a Registration under Section 2.1) on a
registration statement on Form S-1, Form S-2 or Form S-3 (or an equivalent
general registration form then in effect), whether or not for its own account,
the Company shall give prompt written notice of its intention to do so to each
of the Holders of record of Registrable Securities. Upon the written request of
any Holder, made within 15 days following the receipt of any such written notice
(which request shall specify the maximum number of Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof), the Company shall, subject to Sections 2.2(b) and 2.6
hereof, use its best efforts to cause all such Registrable Securities, the
Holders of which have so requested the registration thereof, to be registered
under the Securities Act (with the securities which the Company at the time
proposes to register) to permit the sale or other disposition by the Holders (in
accordance with the intended method of distribution thereof) of the Registrable
Securities to be so registered. There is no limitation on the number of such
piggyback registrations pursuant to the preceding sentence which the Company is
obligated to effect. No registration effected under this Section 2.2(a) shall
relieve the Company of its obligations to effect Registrations hereby.
(b) If, at any time after giving written notice of its intention to
register any equity securities 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 or to delay registration of such
equity securities, the Company may, at its election, give written notice of such
determination to all Holders of record of Registrable Securities who have
requested registration of the Registrable Securities pursuant to this Section
2.2 and in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
abandoned registration, without prejudice, however, to the rights of Holders
under Section 2.1.
(c) Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 2.2 by giving written notice to the Company of its request to
withdraw; provided, however, that (i) such
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request must be made in writing prior to the earlier of the execution of the
underwriting agreement or the execution of the custody agreement with respect to
such registration and (ii) such withdrawal shall be irrevocable and, after
making such withdrawal, a Holder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal was made.
2.3. Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
or cause the registration of any Registrable Securities under the Securities Act
as provided in this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement on an
appropriate registration form of the SEC for the disposition of such Registrable
Securities in accordance with the intended method of disposition thereof, which
form (i) shall be selected by the Company and (ii) shall, in the case of a shelf
registration, be available for the sale of the Registrable Securities by the
selling Holders thereof and such registration statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith, and
the Company shall use its best efforts to cause such registration statement to
become and remain effective (provided, however, that before filing a
registration statement or prospectus or any amendments or supplements thereto,
or comparable statements under securities or blue sky laws of any jurisdiction,
the Company will furnish to one counsel for the Holders participating in the
planned offering (selected by Holders of a majority of the Registrable
Securities included in such registration) and the underwriters, if any, copies
of all such documents proposed to be filed (including all exhibits thereto),
which documents will be subject to the reasonable review and reasonable comment
of such counsel, and the Company shall not file any registration statement or
amendment thereto or any prospectus or supplement thereto to which the holders
of a majority of the Registrable Securities covered by such registration
statement or the underwriters, if any, shall reasonably object in writing);
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for such period
(which shall not be required to exceed 180 days in the case of a registration
pursuant to Section 2.1 or 120 days in the case of a registration pursuant to
Section 2.2, unless reasonably requested by any underwriter pursuant to an
underwritten offering) as any seller of Registrable Securities pursuant to such
registration statement shall request and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all Registrable
Securities covered by such registration statement in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement;
(c) furnish, without charge, to each seller of such Registrable
Securities and each underwriter, if any, of the securities covered by such
registration statement such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits), and
the prospectus included in such registration statement (including each
preliminary prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such seller and underwriter may reasonably request
in order to
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facilitate the public sale or other disposition of the Registrable Securities
owned by such seller (the Company hereby consenting to the use in accordance
with all applicable law of each such registration statement (or amendment or
posteffective amendment thereto) and each such prospectus (or preliminary
prospectus or supplement thereto) by each such seller of Registrable Securities
and the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such registration statement or prospectus);
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions as any sellers of Registrable Securities
or any managing underwriter, if any, shall reasonably request, and do any and
all other acts and things which may be reasonably necessary or advisable to
enable such sellers or underwriter, if any, to consummate the disposition of the
Registrable Securities in such jurisdictions, except that in no event shall the
Company be required to qualify to do business as a foreign corporation in any
jurisdiction where it would not, but for the requirements of this paragraph (d),
be required to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) promptly notify each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any:
(i) when the registration statement, any pre-effective amendment, the prospectus
or any prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or state securities authority for amendments or
supplements to the registration statement or the prospectus related thereto or
for additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose; (v) of the
existence of any fact of which the Company becomes aware which results in the
registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein not misleading; and (vi) if at any time
the representations and warranties contemplated by any underwriting agreement,
securities sale agreement, or other similar agreement relating to the offering
shall cease to be true and correct in all material respects; and, if the
notification relates to an event described in clause (v), the Company shall
promptly prepare and furnish to each such seller and each underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to the purchasers of such Registrable 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 in the light of the circumstances under which they were made
not misleading;
(f) comply with all applicable rules and regulations of the SEC, and
make generally available to its security holders, as soon as reasonably
practicable after the effective date of the registration statement (and in any
event within 16 months thereafter), an
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earnings statement (which need not be audited) covering the period of at least
twelve consecutive months beginning with the first day of the Company's first
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(g) (i) cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange or (ii) if no similar securities are then so listed, to either cause
all such Registrable Securities to be listed on a national securities exchange
or to secure designation of all such Registrable Securities as a National
Association of Securities Dealers, Inc. (the "NASD") Automated Quotation System
("NASDAQ") "national market system security" within the meaning of Rule 11Aa2-1
of the Exchange Act or, failing that, secure NASDAQ authorization for such
shares and, without limiting the generality of the foregoing, take all actions
that may be required by the Company as the issuer of such Registrable Securities
in order to facilitate the managing underwriter's arranging for the registration
of at least two market makers as such with respect to such shares with the NASD;
(h) provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if applicable,
an underwriting agreement) and take such other actions as the Holders of a
majority of the Registrable Securities participating in such offering shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities. The Holders of the Registrable Securities which are to
be distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that the Company make to and for the
benefit of such Holders the representations, warranties and covenants of the
Company which are being made to and for the benefit of such underwriters and
which are of the type customarily provided to institutional investors in
secondary offerings. The Holders of a majority of the Registrable Securities
participating in such offering shall have the right to participate in due
diligence activities in the preparation of the registration statement through
their counsel;
(j) for underwritten offerings, obtain an opinion from the Company's
counsel and a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters as are customarily
covered by such opinions and "cold comfort" letters delivered to underwriters in
underwritten public offerings, which opinion and letter shall be reasonably
satisfactory to the underwriter, if any, and to the Holders of a majority of the
Registrable Securities participating in such offering, and furnish to each
Holder participating in the offering and to each underwriter, if any, a copy of
such opinion and letter addressed to such Holder or underwriter;
(k) deliver promptly to each Holder participating in the offering
and each underwriter, if any, copies of all correspondence between the SEC and
the Company, its counsel or auditors and all memoranda relating to discussions
with the SEC or its staff with respect to the registration statement, other than
those portions of any such memoranda which
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contain information subject to attorney-client privilege with respect to the
Company, and, upon receipt of such confidentiality agreements as the Company may
reasonably request, make reasonably available for inspection by any seller of
such Registrable Securities covered by such registration statement, by any
underwriter, if any, participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of the Company, and
cause all of the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(l) use its best efforts to obtain the withdrawal of an order
suspending the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the registration statement;
(n) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Company's businesses and the requirements of the marketing
process) in the marketing of Registrable Securities in any underwritten
offering;
(o) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold, and cause such Registrable Securities to be
issued in such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the selling Holders of Registrable Securities at least three
business days prior to any sale of Registrable Securities and instruct any
transfer agent and registrar of Registrable Securities to release any stop
transfer orders in respect thereto; and
(p) take all such other commercially reasonable actions as are
necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.
The Company may require as a condition precedent to the Company's
obligations under this Section 2.3 that each seller of Registrable Securities as
to which any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request provided that such information shall be
used only in connection with such registration. No seller of Registrable
Securities shall be required to make any representations or warranties to or
agreements with the Company or the Underwriters (except, with respect to the
Underwriter, such as are required for the consumation of the registration and
are customary and reasonable for registrations of such type) other than as
specifically set forth herein and any other representation required by law.
Each Holder of Registrable Securities agrees that upon receipt of
any notice from the Company of the happening of any event of the kind described
in clause (v) of paragraph (e)
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of this Section 2.3, such Holder will discontinue such Holder's disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph (e) of this Section
2.3 and, if so directed by the Company, will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the prospectus covering such Registrable Securities that
was in effect at the time of receipt of such notice. In the event the Company
shall give any such notice, the applicable period mentioned in paragraph (b) of
this Section 2.3 shall be extended by the number of days during such period from
and including the date of the giving of such notice to and including the date
when each seller of any Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by paragraph (e) of this Section 2.3.
If any such registration statement or comparable statement under
"blue sky" - laws refers to any Holder by name or otherwise as the Holder of any
securities of the Company, then such Holder shall have the right to require (i)
the insertion therein of language, in form and substance satisfactory to such
Holder and the Company, to the effect that the holding by such Holder of such
securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company or (ii) in the event that such reference
to such Holder by name or otherwise is not in the judgment of the Company, as
advised by counsel, required by the Securities Act or any similar federal
statute or any state "blue sky" or securities law then in force, the deletion of
the reference to such Holder.
2.4. Registration Expenses.
(a) "Expenses" shall mean any and all fees and expenses incident to
the Company's performance of or compliance with this Article 2, including,
without limitation: (i) SEC, stock exchange or NASD registration and filing fees
and all listing fees and fees with respect to the inclusion of securities in
NASDAQ, (ii) fees and expenses of compliance with state securities or "blue sky"
laws and in connection with the preparation of a "blue sky" survey, including
without limitation, reasonable fees and expenses of blue sky counsel, (iii)
printing and copying expenses, (iv) messenger and delivery expenses, (v)
expenses incurred in connection with any road show, (vi) fees and disbursements
of counsel for the Company, (vii) with respect to each registration, the fees
and disbursements of one counsel for the selling Holder(s) (selected by the
Holders of a majority of the Registrable Securities included in such
registration; (viii) fees and disbursements of all independent public
accountants (including the expenses of any audit and/or "cold comfort" letter)
and fees and expenses of other Persons, including special experts, retained by
the Company, (ix) fees and expenses payable to a Qualified Independent
Underwriter (as such term is defined in Conduct Rule 2720 of the NASD's By-Laws)
and (x) any other fees and disbursements of underwriters, if any, customarily
paid by issuers or sellers of securities.
(b) The Company shall pay all Expenses with respect to any
Registration whether or not such Registration becomes effective or does not
remain effective for
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the period contemplated by Section 2.3 (b) and with respect to any registration
effected under Section 2.2.
(c) Notwithstanding the foregoing, (x) the provisions of this
Section 2.4 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (y) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder and (z) the Company shall, in the case of all
registrations under this Article 2, be responsible for all its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties).
2.5. Certain Limitations on Registration Rights. In the case of any
registration under Section 2.1 pursuant to an underwritten offering, or in the
case of a registration under Section 2.2 if the Company has determined to enter
into an underwriting agreement in connection therewith, all securities to be
included in such registration shall be subject to an underwriting agreement and
no Person may participate in such registration unless such Person agrees to sell
such Person's securities on the basis provided therein and completes and
executes all reasonable questionnaires, and other documents (other than powers
of attorney) which must be executed in connection therewith, and provides such
other information to the Company or the underwriter as may be necessary to
register such Person's securities.
2.6. Limitations on Sale or Distribution of Other Securities. To the
extent requested in writing by a managing underwriter, if any, of any
registration effected pursuant to Section 2.1, each Holder of Registrable
Securities agrees not to sell, transfer or otherwise dispose of, including any
sale pursuant to Rule 144 under the Securities Act, any Common Stock, or any
other equity security of the Company or any security convertible into or
exchangeable or exercisable for any equity security of the Company (other than
as part of such underwritten public offering) during the time period (following
the effectiveness of the Registration Statement) reasonably requested by the
managing underwriter, not to exceed 90 days (and the Company hereby also so
agrees (except that the Company may effect any sale or distribution of any such
securities pursuant to a registration on Form S-4 (if reasonably acceptable to
such managing underwriter) or Form S- 8, or any successor or similar form which
is then in effect or upon the conversion, exchange or exercise of any then
outstanding Common Stock Equivalent) to use its reasonable best efforts to cause
each holder of any equity security or any security convertible into or
exchangeable or exercisable for any equity security of the Company purchased
from the Company at any time other than in a public offering so to agree and
shall include the limitations on sale or distribution of securities set forth in
this Section 2.6 in any future permitted issuances of any equity security or any
security convertible into or exchangeable or exercisable for any equity security
of the Company purchased from the Company, other than in a public offering and
other than the common stock specifically contemplated to be sold in the Purchase
Agreement).
-10-
2.7. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
2.8. Indemnification.
(a) In the event of any registration of any securities of the
Company under the Securities Act pursuant to this Article 2, the Company will,
and hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, each Holder of Registrable Securities, its directors, officers,
fiduciaries, employees and stockholders or general and limited partners (and the
directors, officers, employees and stockholders thereof), each other Person who
participates as an underwriter or a Qualified Independent Underwriter, if any,
in the offering or sale of such securities, each officer, director, employee,
stockholder or partner of such underwriter or Qualified Independent Underwriter,
and each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, against any and all losses, claims,
damages or liabilities, joint or several, actions or proceedings (whether
commenced or threatened) in respect thereof ("Claims") and expenses (including
reasonable fees of counsel and any amounts paid in any settlement effected with
the Company's consent, which consent shall not be unreasonably withheld or
delayed) to which each such indemnified party may become subject under the
Securities Act or otherwise, insofar as such Claims or expenses arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement under which such
securities were registered under the Securities Act or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus or any amendment or supplement thereto,
together with the documents incorporated by reference therein, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (iii) any
violation by the Company of any federal, state or common law rule or regulation
applicable to the Company and relating to action required of or inaction by the
Company in connection with any such registration, and the Company will reimburse
any such indemnified party for any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
Claim as such expenses are incurred; provided, however, that the Company shall
not be liable to any such indemnified party in any such case to the extent such
Claim or expense arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact made in such registration statement or amendment thereof or
supplement thereto or in any such prospectus or any preliminary, final or
summary prospectus in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such indemnified party specifically
for use therein. Such indemnity and reimbursement of expenses shall remain in
full force and effect regardless of any investigation made by as on behalf of
such indemnified party and shall survive the transfer of such securities by such
Holder.
(b) Each Holder of Registrable Securities that are included in the
securities as to which any registration under Section 2.1 or 2.2 is being
effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration
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statement filed in accordance with Section 2.1 or 2.2, any underwriter and
Qualified Independent Underwriter, if any) shall, severally and not jointly,
indemnify and hold harmless (in the same manner and to the same extent as set
forth in paragraph (a) of this Section 2.8) to the fullest extent permitted by
law the Company, its officers and directors, each Person controlling the Company
within the meaning of the Securities Act and all other prospective sellers and
their directors, officers, general and limited partners and respective
controlling Persons with respect to any untrue statement or alleged untrue
statement of any material fact in, or omission or alleged omission of any
material fact from, such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company or its representatives by or on behalf of such Holder or underwriter or
Qualified Independent Underwriter, if any, specifically for use therein and
reimburse such indemnified party for any legal or other expenses reasonably
incurred in connection with investigating or defending any such Claim as such
expenses are incurred; provided, however, that the aggregate amount which any
such Holder shall be required to pay pursuant to this Section 2.8(b) and
Sections 2.8(c) and (e) shall in no case be greater than the amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
pursuant to the registration statement giving rise to such claim. Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such Holder.
(c) Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 2.8 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any state securities and "blue sky" laws.
(d) Any Person entitled to indemnification under this Agreement
shall notify promptly the indemnifying party in writing of the commencement of
any action or proceeding with respect to which a claim for indemnification may
be made pursuant to this Section 2.9, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 2.8, except to the
extent the indemnifying party is materially prejudiced thereby and shall not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Article 2. In case any action or
proceeding is brought against an indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, unless in the reasonable opinion of outside
counsel to the indemnified party a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, to assume the
defense thereof jointly with any other indemnifying party similarly notified, to
the extent that it chooses, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party that it so chooses, the indemnifying party shall not be liable
to such indemnified party for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that (i) if the
indemnifying party fails to take reasonable steps necessary to defend diligently
the action or proceeding within 20 days after receiving notice from such
indemnified party; or (ii) if such indemnified party who is a defendant in any
action or
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proceeding which is also brought against the indemnifying party reasonably shall
have concluded that there may be one or more legal defenses available to such
indemnified party which are not available to the indemnifying party; or (iii) if
representation of both parties by the same counsel is otherwise inappropriate
under applicable standards of professional conduct, then, in any such case, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel for all indemnified
parties in each jurisdiction, except to the extent any indemnified party or
parties reasonably shall have concluded that there may be legal defenses
available to such party or parties which are not available to the other
indemnified parties or to the extent representation of all indemnified parties
by the same counsel is otherwise inappropriate under applicable standards of
professional conduct) and the indemnifying party shall be liable for any
expenses therefor. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (A) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (B) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(e) If for any reason the foregoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Sections 2.8(a), (b) or
(c), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of any Claim in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and the indemnified party, on the other hand, with respect to such
offering of securities. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. If, however, the
allocation provided in the second preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative faults but also the relative benefits of the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 2.8(e) were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the preceding sentences
of this Section 2.8(e). The amount paid or payable in respect of any Claim shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such 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. Notwithstanding
anything in this Section 2.8(e) to the contrary, no indemnifying party (other
than the Company) shall be required pursuant to this Section 2.8(e) to
contribute any amount in excess of the net proceeds received by such
indemnifying party from the sale of Registrable Securities in the offering to
which the Claims of the indemnified parties relate, less the amount of any
indemnification payment made by such indemnifying party pursuant to Sections
2.8(b) and (c).
-13-
(f) The indemnification and contribution agreements contained herein
shall be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made or omitted by or on behalf of any indemnified party and shall survive the
transfer of the Registrable Securities by any such party.
(g) The indemnification and contribution required by this Section
2.8 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
3. Underwritten Offerings.
3.1. Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Holders pursuant to a
Registration under Section 2.1, the Company shall enter into a customary
underwriting agreement with the underwriters. Such underwriting agreement shall
be satisfactory in form and substance to the Holders and shall contain such
representations and warranties by, and such other agreements on the part of, the
Company and such other terms as are generally prevailing in agreements of that
type, including, without limitation, indemnities and contribution agreements.
Any Holder participating in the offering shall be a party to such underwriting
agreement and may, at its option, require that any or all of the representations
and warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters shall also be made to and for the benefit
of such Holder and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holder; provided, however, that the Company
shall not be required to make any representations or warranties with respect to
written information specifically provided by a selling Holder for inclusion in
the registration statement. Such underwriting agreement shall also contain such
representations and warranties by the participating Holders as are customary in
agreements of that type.
3.2. Piggyback Underwritten Offerings. In the case of a registration
pursuant to Section 2.2 hereof, if the Company shall have determined to enter
into an underwriting agreement in connection therewith, all of the Holders'
Registrable Securities to be included in such registration shall be subject to
such underwriting agreement. Any Holder participating in such registration may,
at its option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such Holder and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such Holder. Such underwriting agreement shall also contain such
representations and warranties by the participating Holders as are customary in
agreements of that type.
4. General.
4.1. Rule 144. The Company covenants that (i) so long as it remains
subject to the reporting provisions of the Exchange Act, it will timely file the
reports required to be filed
-14-
by it under the Securities Act or the Exchange Act (including, but not limited
to, the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 under the Securities Act), and (ii) will take
such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (A) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (B) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
4.2. Nominees for Beneficial Owners. If Registrable Securities are
held by a nominee for the beneficial owner thereof, the beneficial owner thereof
may, at its option, be treated as the Holder of such Registrable Securities for
purposes of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement (or any determination of any number or
percentage of shares constituting Registrable Securities held by any Holder or
Holders of Registrable Securities contemplated by this Agreement), provided that
the Company shall have received assurances reasonably satisfactory to it of such
beneficial ownership.
4.3. Amendments and Waivers. This Agreement may be amended,
modified, supplemented or waived only upon the written agreement of the party
against whom enforcement of such amendment, modification, supplement or waiver
is sought.
4.4. Notices. Except as otherwise provided in this Agreement, all
notices, requests, consents and other communications hereunder to any party
shall be deemed to be sufficient if contained in a written instrument delivered
in person or by telecopy, nationally recognized overnight courier or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by such party to the other parties:
(i) if to the Company, to:
TeraGlobal Communications Corp.
0000 Xxxxx Xxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
(ii) if to the Purchaser, to the address listed on Exhibit A
of the Purchase Agreement
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxxxxx, Esq.
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(iii) if to the Bridge Financiers, to the addresses listed on
Exhibit A with a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Telecopy: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
4.5. Transfer or Assignment of Registration Rights. The rights to
cause the Company to register securities granted to a Holder by the Company
under this Agreement may be transferred or assigned by a Holder only to a
transferee or assignee of not less than 250,000 shares of Registrable Securities
(as presently constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits and the like); provided, however,
that, a Holder may transfer such rights to affiliates or associates of such
Holder without the foregoing share restriction.
4.6. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and the respective successors, personal
representatives and assigns of the parties hereto, whether so expressed or not.
If any Person shall acquire Registrable Securities from any Holder, in any
manner, whether by operation of law or otherwise, such transferee shall promptly
notify the Company and such Registrable Securities acquired from such Holder
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to receive the
benefits of and be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement. If the Company shall
so request, any such successor or assign shall agree in writing to acquire and
hold the Registrable Securities acquired from such Holder subject to all of the
terms hereof. If any Holder shall acquire additional Registrable Securities,
such Registrable Securities shall be subject to all of the terms, and entitled
to all the benefits, of this Agreement.
(b) This Agreement (with the documents referred to herein or
delivered pursuant hereto embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
(c) This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. All section
references are to this Agreement unless otherwise expressly provided.
-16-
(e) This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
(f) Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
(g) The parties hereto acknowledge that there would be no adequate
remedy at law if any party fails to perform any of its obligations hereunder,
and accordingly agree that each party, in addition to any other remedy to which
it may be entitled at law or in equity, shall be entitled to injunctive relief,
including specific performance, to enforce such obligations without the posting
of any bond, and, if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(i) This Agreement may be amended, supplemented or modified only by
a written instrument (which may be executed in any number of counterparts) duly
executed by or on behalf of each of the Company and the Purchasing Parties.
(j) Subject to Section 4.7(i), any term or condition of this
Agreement may be waived at any time by the party that is entitled to the benefit
thereof, but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this Agreement, in
any one or more instances, shall be deemed to be or construed as a waiver of the
same term or condition of this Agreement on any future occasion.
(k) The terms and provisions of this Agreement are intended solely
for the benefit of each party hereto, their respective successors or permitted
assigns and any other holder of Registrable Securities, and it is not the
intention of the parties to confer third-party beneficiary rights upon any other
person other than any person entitled to indemnity hereunder.
4.7. No Inconsistent Agreements. The rights granted to the holders
of Registrable Securities hereunder do not in any way conflict with and are not
inconsistent with any other agreements to which the Company is a party or by
which it is bound. Without the prior written consent of WallerSutton and 50% of
the Bridge Financiers, the Company will not, on or after the date of this
Agreement, enter into any agreement with respect to its securities which is
inconsistent with the rights granted in this Agreement or otherwise conflicts
with the provisions hereof, other than any lock-up agreement with and required
by the underwriters in connection
-17-
with any registered offering effected hereunder, pursuant to which the Company
shall agree not to register for sale, and the Company shall agree not to sell or
otherwise dispose of, Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, for a specified period following
the registered offering. The Company further agrees that if any other
registration rights agreement entered into after the date of this Agreement with
respect to any of its securities contains terms which are more favorable to, or
less restrictive on, the other party thereto than the terms and conditions in
this Agreement are (insofar as they are applicable) to the Purchasing Parties,
then the terms and conditions of this Agreement shall immediately be deemed to
have been amended without further action by the Company or any of the Holders of
Registrable Securities so that the Purchasing Parties shall be entitled to the
benefit of any such more favorable or less restrictive terms or conditions. The
Company promptly shall deliver a copy of all such agreements to the Holders.
-18-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date set forth above.
TERAGLOBAL COMMUNICATIONS CORP.
By: _________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
WALLERSUTTON 2000, L.P.
By: WallerSutton 2000, L.L.C.,
general partner
By: ___________________________________
Name:
Title:
XXXXXXX XXXXX INVESTMENT PARTNERS, LLC
By: ___________________________________
Name:
Title:
_______________________________________
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EXHIBIT A
---------
SCHEDULE OF BRIDGE INVESTORS
Name and Address Principal Amount of Note
---------------- ------------------------
WallerSutton 2000, L.P. $__________
000 X. Xxxxxx Xxx. 0xx Xxxxx
Xxxxxxxxx, XX 00000
-2-
