EXHIBIT 99.4
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of October 15,
1996 by and among INTELLIGENT ELECTRONICS, INC., a Pennsylvania corporation,
with headquarters located at 000 Xxxxxxxxx Xxxxxxxxx, Xxxxx, XX 00000 (the
"Company"), and the undersigned (together with its affiliates and any
assignee or transferee of all of its rights hereunder, the "Initial
Investor").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and between
the parties hereto of even date herewith (the "Securities Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investor (i)
shares of its Series B Convertible Preferred Stock (the "Preferred Stock")
that are convertible into shares (the "Conversion Shares") of the Company's
common stock (the "Common Stock") upon the terms and subject to the
limitations and conditions set forth in the Statement with Respect to Shares
in respect thereof (the "Statement with Respect to Shares"), (ii) warrants
(the "First Warrants") to acquire 225,000 shares of Common Stock (the
"Closing Warrant Shares") and (iii) under certain circumstances, additional
warrants (together with the First Warrants, the "Warrants") to acquire
225,000 shares of Common Stock (together with the Closing Warrant Shares, the
"Warrant Shares"); and
B. To induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute
(collectively, the "1933 Act"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
each of the Initial Investors hereby agree as follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investors" means the Initial Investor and any
transferees or assignees who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares
and the Warrant Shares issued or issuable and any shares of capital stock
issued or issuable as a dividend on or in exchange for or otherwise with
respect to any of the foregoing (including all shares of capital stock
issuable pursuant to Articles V.B., VI.E. and VI.F. of the Statement with
Respect to Shares) together with all rights issuable under the Rights Plan
(as defined in the Statement with Respect to Shares) with respect to other
Registrable Securities.
(iv) "Registration Statement" means a registration statement
of the Company under the 0000 Xxx.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall prepare, and, on or
prior to the date which is twenty (20) business days after the date with
respect to the First Closing under the Securities Purchase Agreement (the
"Closing Date"), file with the SEC a Registration Statement on Form S-3 (or,
if Form S-3 is not then available to the Company, on such form of
Registration Statement as is then available to effect a registration of the
Registrable Securities, subject to the consent of the Initial Investor, which
consent will not be unreasonably withheld, provided that the Company's
obligation hereunder to file a Registration Statement shall be suspended so
long as the Investor's consent is withheld for any reason and the Investor
fails to consent to the use of another form available and which is reasonable
for use by the Company) covering the resale of at least 6,000,000 shares of
Registrable Securities underlying the securities issued or issuable at the
First Closing and Second Closing, which Registration Statement, to the extent
allowable under the 1933 Act and the Rules promulgated thereunder (including
Rule 416), shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of the Preferred Stock and exercise of the Warrants
(i) to prevent dilution resulting from stock splits, stock dividends or
similar transactions or (ii) by reason of changes in the Conversion Price (as
defined in the Statement with Respect to Shares) of the Preferred Stock or
the Exercise Price of the Warrants in accordance with the terms thereof.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Investors who hold a majority in interest of the
Registrable Securities subject to such underwritten offering, with the
consent of the Initial Investor, shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
c. Effectiveness of Registration Statement. The Company shall
use its best efforts to obtain effectiveness of the Registration Statement as
soon as practicable and shall continue to use such best efforts to maintain
such effectiveness for the Registration Period (as defined herein).
Notwithstanding the foregoing, if the Second Closing does not occur under the
Securities Purchase Agreement as a result of a material breach by the Initial
Investor of its obligations thereunder, the Company shall have no further
obligation to maintain the effectiveness of the Registration Statement after
the first anniversary of the First Closing thereunder. For the avoidance of
doubt, the Company's obligations to use its best efforts to cause the
Registration Statement to become effective and to maintain the effectiveness
of such Registration Statement through the first anniversary of the First
Closing under the Securities Purchase Agreement shall continue
notwithstanding any breach by the Initial Investor of its obligations under
the Securities Purchase Agreement.
d. Piggy-Back Registrations. Subject to the last sentence of
this Section 2(d), if at any time prior to the expiration of the Registration
Period (as hereinafter defined) the Company shall file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock
option or other employee benefit plans), the Company shall send to each
Investor who is entitled to registration rights under this Section 2(d)
written notice of such determination and, if within fifteen (15) days after
the effective date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of
the Registrable Securities such Investor requests to be registered, except
that if, in connection with any underwritten public offering for the account
of the Company the managing underwriter(s) thereof shall impose a limitation
on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing
or other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion
hereunder as the underwriter shall permit, if any. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that
the Company shall not exclude any Registrable Securities unless the Company
has first excluded all outstanding securities, the holders of which are not
entitled to inclusion of such securities in such Registration Statement or
are not entitled to pro rata inclusion with the Registrable Securities; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights. No right to registration of
Registrable Securities under this Section 2(d) shall be construed to limit
any registration required under Section 2(a) hereof. If an offering in
connection with which an Investor is entitled to registration under this
Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall,
unless otherwise agreed by the Company, offer and sell such Registrable
Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Common Stock included in such
underwritten offering. Notwithstanding anything herein to the contrary, at
any time a Registration Statement is effective and available for use by
Investors to resell all of the Registrable Securities then held by the
Investors, the rights and obligations contained in this Section 2(d) shall
only be applicable to a Registration Statement relating to an underwritten
offering.
e. Eligibility for Form S-3. The Company represents and warrants
that it meets as of the date hereof the requirements for the use of Form S-3
for registration of the sale by the Initial Investor and any other Investor
of the Registrable Securities and the Company shall use its best efforts to
file all reports required to be filed by the Company with the SEC in a timely
manner so as to maintain such eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
--------------------------
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC not
later than twenty (20) business days after the Closing Date, a Registration
Statement with respect to the number of Registrable Securities provided in
Section 2(a), and thereafter use its best efforts to cause such Registration
Statement relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of (i)
the date on which all of the Registrable Securities have been sold and (ii)
the date on which all Registrable Securities (in the reasonable opinion of
counsel to the Initial Investor or the Company) may be immediately sold
without registration (the "Registration Period"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or necessary
to make the statements therein not misleading. The Registration Statement
will include a broad description of the Plan of Distribution, which
description shall be substantially in the form attached hereto as Schedule
3(a).
b. The Company shall use its best efforts to prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in
connection with the Registration Statement as may be necessary to keep the
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the Company's obligations under the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such
time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event the number
of shares available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of such Registrable Securities then
reserved for issuance by the Company, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short
form available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any
event within twenty (20) business days after the necessity therefor arises
and is brought to the attention of the Company by written notice (based on
the market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely after consultation with the Initial
Investor). The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with
the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and
each amendment or supplement thereto, and, in the case of the Registration
Statement referred to in Section 2(a), each letter written by or on behalf of
the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents in the Company's possession as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States, to the extent required pursuant to such laws, as the Investors
who hold a majority in interest of the Registrable Securities being offered
reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (iv) take all
other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject
itself to general taxation in any such jurisdiction, (c) file a general
consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause the Company undue expense or burden, or (e) make any
change in its charter or bylaws, which in each case the Board of Directors of
the Company determines to be contrary to the best interests of the Company
and its stockholders.
e. In the event Investors who hold a majority in interest of the
Registrable Securities being offered in the offering (with the approval of
the Initial Investor) select underwriters for the offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included
in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and use its best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and
deliver such number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request; provided, that, not more
than once in any twelve month period, for up to a period of thirty (30) days,
the Company may delay the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the
good faith opinion of the Board of Directors of the Company, in the best
interest of the Company and, in the opinion of counsel to the Company,
otherwise required by applicable law (an "Allowed Delay"); provided, further,
that the Company shall promptly (i) notify the Investors in writing of the
existence of material non-public information giving rise to an Allowed Delay
and (ii) advise the Investors in writing to cease all sales under the
Registration Statement until the end of the Allowed Delay. Notwithstanding
the first proviso of the immediately preceding sentence, the provisions of
Section 2(c) shall be applicable during the period of an Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the
first sentence of this Section 3(f) with respect to the information giving
rise thereto.
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof.
h. The Company shall permit a single firm of counsel designated
by the Initial Investor to review the Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration
or effectiveness thereof) a reasonable period of time prior to their filing
with the SEC, and not file any document in a form to which such counsel
reasonably objects. The Company's obligations pursuant to Sections 2(c),
3(f) and 6 hereof shall be suspended during any period in which any filing by
the Company which is necessary in order to comply with such Sections is
delayed as a result of review or objection by such counsel.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 0000 Xxx) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish on
the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the Registration Statement or, if such securities
are not being sold by an underwriter, on the date of effectiveness thereof,
(i) an opinion, dated as of such date, from counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as
is customarily given in an underwritten public offering by issuer's counsel,
addressed to the underwriters, if any, and the Investors and (ii) a letter,
dated such date from the Company's independent certified public accountants
in form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and the Investors (to the extent permitted in
accordance with applicable accounting rules).
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to
the Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Initial Investor, (iv) one firm
of attorneys and one firm of accountants or other agents retained by all
other Investors, and (v) one firm of attorneys retained by all such
underwriters (collectively, the "Inspectors") all pertinent financial and
other records, and pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably
request for purposes of such due diligence; provided, however, that each
Inspector shall hold in confidence and shall not make any disclosure (except
to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement after a failure by the Company to make such disclosure for a period
of ten (10) business days after receiving written notice from the Inspector
of the need to make such disclosure (provided that no such disclosure shall
be made during any thirty (30) day period referred to in Section 3(f)
hereof), (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
The Company shall not be required to disclose any confidential information in
such Records to any Inspector until and unless such Inspector shall have
entered into confidentiality agreements (in form and substance satisfactory
to the Company) with the Company with respect thereto, substantially in the
form of this Section 3(k). Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. Nothing herein shall be deemed to limit the
Investor's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations. The Investors
shall cause all Inspectors to coordinate their review of the Records at the
Company's offices in the manner reasonably requested by the Company.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal
or state securities or other laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the public other than by disclosure in violation of this or any other
agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt notice to such Investor prior to making such disclosure, and allow the
Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by the Registration Statement to be listed
on each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the NASDAQ National Market ("NASDAQ-
NM") or, if not eligible for the NASDAQ-NM on the NASDAQ Small Cap Market
and, without limiting the generality of the foregoing, to arrange for at
least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than
the effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable
such certificates to be in such denominations or amounts, as the case may be,
as the managing underwriter or underwriters, if any, or the Investors may
reasonably request and registered in such names as the managing underwriter
or underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to the transfer
agent for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration Statement) an
instruction in the form attached hereto as Exhibit 1 and an opinion of such
counsel in the form attached hereto as Exhibit 2.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. At least three (3) business days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such Investor if
such Investor elects to have any of such Investor's Registrable Securities
included in the Registration Statement.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable Securities being registered (with the approval of the Initial
Investor) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in
writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and,
if so directed by the Company, such Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of
receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual
and customary form entered into by the Company, (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
f. Each Investor agrees to comply with all applicable laws and
regulations in connection with any sale, transfer or other disposition of
Registrable Securities.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting fees, discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation,
all registration, listing and qualifications fees, printers and the Company's
accounting fees, the fees and disbursements of counsel for the Company, and
the reasonable fees and disbursements of one counsel selected by the Initial
Investor pursuant to Section 2(b) hereof ("Initial Investor Counsel Fees")
shall be borne by the Company; provided, however, that the Company shall not
be responsible for Initial Investor Counsel Fees to the extent they aggregate
in excess of $15,000 for all registrations under this Agreement (except for
Initial Investor Counsel Fees incurred in connection with any registrations
effectuated pursuant to the penultimate sentence of Section 3(b) hereof, for
each of which registrations there shall be a separate $15,000 limitation).
The Initial Investor Counsel Fees are in addition to the expenses payable by
the Company pursuant to Section 4(f) of the Securities Purchase Agreement.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and
each person who controls any Investor within the meaning of the 1933 Act or
the Securities Exchange Act of 1934, as amended (the "1934 Act"), if any, and
(iii) any underwriter (as defined in the 0000 Xxx) for the Investors; and the
directors, officers, partners, employees and each person who controls any
such underwriter within the meaning of the 1933 Act or the 1934 Act, if any,
(each, an "Indemnified Person"), against any joint or several losses, claims,
damages, liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any
of them may become subject insofar as such Claims arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus
if used prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading, (the matters in the
foregoing clauses (i) and (ii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(c) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply
to a Claim to the extent it arises out of or is based upon a Violation which
is based upon or arises out of information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent
shall not be unreasonably withheld; and (iii) with respect to any preliminary
prospectus or prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained therein
was corrected on a timely basis in the final prospectus or a corrected
prospectus, as then amended or supplemented, such final or corrected
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof, and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not
jointly to indemnify, hold harmless and defend, to the same extent and in the
same manner set forth in Section 6(a), the Company, each of its directors,
officers, employees, agents and each person who controls the Company within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any
of its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively,
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation, in each case to the extent (and
only to the extent) that such Violation is based upon or arises out of
written information furnished to the Company by such Investor expressly for
use in connection with such Registration Statement; and subject to Section
6(c) such Investor will reimburse any legal or other expenses (promptly as
such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b)
and Section 7) for only that amount as does not exceed the net proceeds
(i.e., after deduction of selling commissions and discounts) to such Investor
as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party,
as the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
fees and expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or likely differing
interests between such Indemnified Person or Indemnified Party and any other
party represented by such counsel in such proceeding. The indemnifying party
shall pay for only one separate legal counsel for the Indemnified Persons or
the Indemnified Parties, as applicable, and such legal counsel shall be
selected by Investors holding a majority-in-interest of the Registrable
Securities included in the Registration Statement to which the Claim relates
(with the approval of the Initial Investor), if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Section 6, except
to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section
6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as such expense, loss, damage or liability
is incurred and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault
standards set forth in Section 6, (ii) no seller of Registrable Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the 0000 Xxx) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification
or other obligations under this Agreement) by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities and provided,
further, that such contribution shall be made in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand, and
the Investor or Investors on the other, in connection with the statements or
omissions which resulted in such claims.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell restricted
securities of the Company to the public without registration ("Rule 144"),
the Company agrees to use its best efforts to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long
as the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of
the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company as to the status of its compliance with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant
to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee, and (b)
the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (iv) at
or before the time the Company receives the written notice contemplated by
clause (ii) of this sentence, the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, (v)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement, and (vi) such transferee
shall be an "accredited investor" as that term defined in Rule 501 of
Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company,
the Initial Investor (to the extent the Initial Investor still owns
Registrable Securities) and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) or which receipt is refused if delivered by hand or by courier
or sent by certified mail, return receipt requested, properly addressed and
with proper postage pre-paid,
If to the Company:
Intelligent Electronics, Inc.
000 Xxxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Attention: Chief Financial Officer
Telecopy: (000) 000-0000
With copy to:
Pepper, Xxxxxxxx & Xxxxxxx
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telecopy: (000)000-0000
Attention: Xxxxx Xxxxxxx, Esquire
and:
Xxxxxx X. Xxxxxxxx
General Counsel
Intelligent Electronics, Inc.
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
if to Capital Ventures International,
Capital Ventures International
c/o Bala International, Inc.
000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
with copy to:
Xxxx Xxxxxxxxx, Esq.
c/o Bala International, Inc.
000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
and:
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
and if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such
party furnishes by notice given in accordance with this Section 11(b), and
shall be effective, when personally delivered, upon receipt and, when so sent
by certified mail, four days after deposit with the United States Postal
Service.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof. The parties hereto
hereby submit to the exclusive jurisdiction of the United States Federal
Courts located in Philadelphia, Pennsylvania with respect to any dispute
arising under this Agreement or the transactions contemplated hereby.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement and the Securities Purchase Agreement supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made by Investors holding a
majority of the Registrable Securities, determined as if all shares of
Preferred Stock and Warrants then outstanding (including Warrants issuable
pursuant to the Securities Purchase Agreement) have been converted into or
exercised for Registrable Securities.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Company and the undersigned Initial Investor
have caused this Agreement to be duly executed as of the date first above
written.
INTELLIGENT ELECTRONICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Its: Sr. V.P. & CFO
CAPITAL VENTURES INTERNATIONAL
By: Bala International, Inc., as authorized agent
By: /s/ Xxxxxx Xxxxx
-------------------------------------
Name: Xxxxxx Xxxxx
Its: Director
EXHIBIT 1
to
Registration
Rights
Agreement
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and
direction to you (1) to transfer or re-register the certificates for the
shares of Common Stock, $.01 par value (the "Common Stock"), of Intelligent
Electronics, Inc., a Pennsylvania corporation (the "Company"), represented by
certificate numbers _____ for an aggregate of _____ shares (the "Outstanding
Shares") of Common Stock presently registered in the name of [Name of
Investor] (which shares were previously issued upon conversion or exercise of
the Company's Series A Convertible Preferred Stock (the "Preferred Stock") or
Warrants (as hereinafter defined) upon surrender of such certificates to you
(or evidence of loss, theft or destruction thereof), notwithstanding the
legend appearing on such certificates, and (2) to issue shares (the
"Conversion Shares") of Common Stock to or upon the order of the registered
holder from time to time upon conversion of the Preferred Stock upon
surrender to you of a properly completed and duly executed Conversion Notice
and such Preferred Stock, notwithstanding the legend appearing on such
Preferred Stock and (3) to issue shares (the "Warrant Shares") of Common
Stock to or upon the order of the registered holder from time to time upon
exercise of the warrants of the Company issued pursuant to the terms of the
Securities Purchase Agreement dated as of October __, 1996 between the
Company and Capital Ventures International (the "Warrants") upon surrender
to you of a properly completed and duly executed Exercise Agreement and such
Warrants (or evidence of loss, theft or destruction thereof) and confirmation
from the Company that the exercise price has been paid to the Company,
notwithstanding the legend appearing on such Warrants. The transfer or re-
registration of the certificates for the Outstanding Shares by you should be
made at such time as you are requested to do so by the record holder of the
Outstanding, subject to the surrender and confirmation requirements set forth
in the preceding sentence. The certificate issued upon such transfer or re-
registration should be registered in such name as requested by the holder of
record of the certificate surrendered to you and should not bear any legend
which would restrict the transfer of the shares represented thereby. In
addition, you are hereby directed to remove any stop-transfer instruction
relating to the Outstanding Shares. Certificates for the Conversion Shares
and Warrant Shares should not bear any restrictive legend and should not be
subject to any stop-transfer restriction.
Contemporaneous with the delivery of this letter, the Company is
delivering to you an opinion of ___________________ as to registration of the
Outstanding Shares, the Conversion Shares and the Warrant Shares under the
Securities Act of 1933, as amended.
Should you have any questions concerning this matter, please
contact me.
Very truly yours,
INTELLIGENT ELECTRONICS, INC.
By: _________________________
Name:
Title:
Enclosures:
cc: [Name of Investor]
EXHIBIT 2
to
Registration
Rights
Agreement
[Date]
[Name and address
of transfer agent]
RE: Intelligent Electronics, Inc.
Ladies and Gentlemen:
We are counsel to Intelligent Electronics, Inc., a Pennsylvania
corporation (the "Company"), and we understand that [Name of Investor] (the
"Holder") has purchased from the Company (i) shares of the Company's Series
A Convertible Preferred Stock (the "Preferred Stock") that is convertible
into the Company's Common Stock, par value $.01 (the "Common Stock") and (ii)
warrants (the "Warrants") to acquire Common Stock. The Preferred Stock and
Warrants were purchased by the Holder pursuant to a Securities Purchase
Agreement, dated as of October ___, 1996, between the Holder and the Company
(the "Agreement"). Pursuant to a Registration Rights Agreement, dated as of
October ___, 1996, between the Company and the Holder (the "Registration
Rights Agreement"), the Company agreed with the Holder, among other things,
to register the Registrable Securities (as that term is defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended
(the "Securities Act"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the
Registration Rights Agreement, on _____ __, 1996, the Company filed a
Registration Statement on Form S-___ (File No. 333- _____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities, which names the Holder as a
selling stockholder thereunder.
[Other reasonable introductory and scope of examination language to be
inserted by counsel rendering the opinion]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Registration Statement for resale
by the Holder under the Securities Act.
Very truly yours,
cc: [Name of investor]
