REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights Agreement")
is made as of February _, 1998, by and between Intelect Communications, Inc., a
Delaware corporation (the"Company"), and St. James Capital Partners, L.P., a
Delaware limited partnership ("Purchaser").
WHEREAS, on the date hereof, Purchaser acquired from the Company a
Convertible Promissory Note (the "Note") in the original principal amount of
$15,000,000 convertible pursuant to the terms thereof to a certain number of
shares of the Company's common stock, $.01 par value (the "Common Stock"),
subject to adjustment (the "Note Shares");
WHEREAS, on the date hereof, Purchaser received from the Company (a)
warrants to purchase shares of the Company's Common Stock (b) the right to
receive additional such warrants upon additional advances under the Note and (c)
the right to receive additional such warrants upon the extension of the maturity
date of the Note, each of which may be exercised to acquire a certain number of
shares of Common Stock, subject to adjustment (collectively, the "Warrant
Shares" and together with the Note Shares, the "Shares");
WHEREAS, the Company wishes to grant Purchaser certain registration rights
in respect of the Shares, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"PURCHASER" shall mean St. James Capital Partners, L.P., a Delaware
limited partnership.
"REGISTRABLE SECURITIES" shall mean (i) the Shares; and (ii) any Common
Stock issued or issuable at any time or from time to time in respect of the
Shares upon a conversion stock split, stock dividend, recapitalization or other
similar event involving the Company.
The terms "REGISTER", "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Registration Rights Agreement, including, without
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limitation, all registration, qualification and filing fees, exchange listing
fees, printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the holders of the Registrable Securities and, except as set forth above, all
fees and disbursements of counsel for such holders.
"UNDERWRITTEN PUBLIC OFFERING" shall mean a public offering in which the
Common Stock is offered and sold on a firm commitment basis through one or more
underwriters, all pursuant to (i) an effective registration statement under the
Securities Act and (ii) an underwriting agreement between the Company and such
underwriters.
ARTICLE II
REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION.
2.1.1 At any time and from time to time (but in no event before May
31, 1998), a holder or holders of Registrable Securities holding in the
aggregate at least 10% of the then existing Registrable Securities may
make a one-time written demand upon the Company, to file, within 60 days
after such written demand is made, with the Securities and Exchange
Commission a shelf registration statement covering the resale of all of
the Registrable Securities on Form S-1, S-2 or S-3 (the "Registration
Statement"). The Company shall use its reasonable best efforts to cause
such Registration Statement to become effective as soon as practicable and
to cause all of the Registrable Securities to be qualified in such state
jurisdictions as the holders may request.
2.1.2 Except as set forth herein, the Company shall take all
reasonable steps necessary to keep the Registration Statement current and
effective until the lesser of: (i) two years and (ii) until the
Registrable Securities are transferable pursuant to Rule 144 under the
Securities Act without the volume limitations set forth in such rule.
2.1.3 The Company shall be entitled to require that a holder or
holders of Registrable Securities refrain from effecting any public sales
or distributions of the Registrable Securities pursuant to a Registration
Statement that has been declared effective by the Commission or otherwise,
if the board of directors of the Company reasonably determines that such
public sales or distributions would interfere in any material respect with
any transaction involving the Company that the board of directors
reasonably determines to be material to the Company. The board of
directors shall, as promptly as practicable, give the holders of the
Registrable Securities written notice of any such development. In the
event of a request by the board of directors of the Company that the
holders of Registrable Securities refrain from effecting any public sales
or distributions of the Registrable Securities, the Company shall be
required to lift such restrictions regarding
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effecting public sales or distributions of the Registrable Securities as
soon as reasonably practicable after the board of directors shall
reasonably determine public sales or distributions by the holders of the
Registrable Securities shall not interfere with such transaction,
PROVIDED, that in no event shall any requirement that the holders of
Registrable Securities refrain from effecting public sales or
distributions in the Registrable Securities extend for more than 90 days.
2.1.4 Notwithstanding the foregoing, the one-time demand
registration rights provided in this Section 2.1 shall be subject to the
following additional limitations:
(i) Company shall not be obligated to file such Registration
Statement on a Form S-2 or S-3 if it does not then meet the
requirements (including the financial statement requirements) of
such Form, and if the Company is required to file a Form S-1, it
should not be obligated to file the Form S-1 until it shall have
prepared current financial statements as required by Form S-1;
(ii) If, upon receipt of any request for registration of
Registrable Securities pursuant to this Section 2.1, the Company is
then engaged by a reputable and nationally or regionally recognized
investment banking firm regarding a good faith proposed registered
public offering of shares of Common Stock, then the Company shall
give notice of such negotiations to all holders of Registrable
Securities within 15 days of the date upon which the Company
received such holder's request and the Company shall not, for 60
days after giving such notice to such holders, be required to
undertake a required registration of the Registrable Securities
pursuant to this Section 2.1 in response to such holder's request;
provided, however, that if such registration statement of such
proposed public offering is not filed within 60 days after the
Company gives such notice to holders of the Registrable Securities,
the Company shall respond to the holder's request for registration
of Registrable Securities and, unless otherwise required by the
provisions of this Section 2.1, register such Registrable
Securities, no later than 20 days after the expiration of such
60-day period and as provided herein.
2.2 PIGGYBACK REGISTRATION.
2.2.1 Subject to the terms hereof, if at any time or from time to
time (but in no event before May 31, 1998) the Company or any shareholder
of the Company shall determine to register any of its securities (except
for registration statements relating to employee benefit plans or exchange
offers), either for its own account or the account of a security holder,
the Company will promptly give to the holders of Registrable Securities
written notice thereof no less the 30 days prior to the filing of any
registration statement; and include in such registration (and any related
qualification under blue sky laws or other compliance), and in the
underwriting involved therein, if any, such Registrable Securities as such
holders may request in a writing delivered to the Company within 20 days
after the holders' receipt of Company's written notice.
2.2.2 The holders of Registrable Securities may participate in any
number of registrations until all of the Shares held by holders of
Registrable Securities have been registered or until the Shares are
transferable pursuant to Rule 144 under the Securities Act.
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2.2.3 If any registration statement is an Underwritten Public
Offering, the right of holders of Registrable Securities to registration
pursuant to this Section shall be conditioned upon each such holder's
participation in such reasonable underwriting arrangements as the Company
shall make regarding the offering, and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided
herein. Holders of Registrable Securities and all other shareholders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section, if the managing underwriter concludes in its reasonable judgment
that the number of shares to be registered for selling shareholders
(including the holders of Registrable Securities) would materially
adversely effect such offering, the number of Shares to be registered,
together with the number of shares of Common Stock or other securities
held by other shareholders proposed to be registered in such offering,
shall be reduced on a pro rata basis based on the number of Shares
proposed to be sold by the holders of Registrable Securities as compared
to the number of shares proposed to be sold by all shareholders, except to
the extent there may be a conflict with the rights set forth in that
certain Registration Rights Agreement dated March 29, 1996 between the
Company and those certain purchasers therein. If any holder of Registrable
Securities disapproves of the terms of any such underwriting, it may elect
to withdraw therefrom by written notice to the Company and the managing
underwriter, delivered not less than 10 days before the effective date.
The Registrable Securities excluded by the managing underwriter or
withdrawn from such underwriting shall be withdrawn from such
registration, and shall not be transferred in a public distribution prior
to 120 days after the effective date of the registration statement
relating thereto, or such other shorter period of time as the underwriters
may require.
2.2.4 The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness
of such registration whether or not the holders of Registrable Securities
have elected to include securities in such registration.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses shall be borne by
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the holders of Registrable Securities shall
be borne by the holders of Registrable Securities.
2.4 [INTENTIONALLY LEFT BLANK]
2.5 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep the holders of Registrable
Securities advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its expense,
the Company will:
2.5.1 Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable
efforts to cause such registration statement to become and remain
effective until the distribution described in such registration statement
has been completed;
2.5.2 Furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other
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documents as such underwriter may reasonably request in order to
facilitate the public sale of the shares by such underwriter, and promptly
furnish to each underwriter and the holders of Registrable Securities
notice of any stop-order or similar notice issued by the Commission or any
state agency charged with the regulation of securities, and notice of any
Nasdaq or securities exchange listing; and
2.5.3 Cause the Shares to be listed on the Nasdaq small-cap market
or a securities exchange on which the Common Stock is approved for
listing.
2.6 INDEMNIFICATION.
2.6.1 To the extent permitted by law, the Company will indemnify
each holder of Registrable Securities, each of its officers and directors
and partners, and each person controlling such holder within the meaning
of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement,
and each underwriter, if any, and each person who controls any underwriter
within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to the extent such expenses, claims,
losses, damages or liabilities arise out of or are based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any registration statement, prospectus, offering circular or other similar
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by
the Company of the Securities Act or any rule or regulation promulgated
under the Securities Act applicable to the Company in connection with any
such registration, qualification or compliance, and the Company will
reimburse each holder of Registrable Securities, each of its officers and
directors and partners, and each person controlling each holder of
Registrable Securities, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action; provided, however, that the
indemnity contained herein shall not apply to amounts paid in settlement
of any claim, loss, damage, liability or expense if settlement is effected
without the consent of the Company (which consent shall not unreasonably
be withheld); provided, further, that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission
or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by a holder
of Registrable Securities, such controlling person or such underwriter
specifically for use therein; provided, however, that the indemnity
contained herein shall not apply to amounts paid in settlement of any
claim, loss, damage, liability, or expense if settlement is effected
without the consent of such holder of Registrable Securities (which
consent shall not be unreasonably withheld). Notwithstanding the
foregoing, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission)
made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the final prospectus filed
with the Commission pursuant to the applicable rules of the Commission or
in any supplement or addendum thereto, the indemnity agreement herein
shall not inure to the benefit of any
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underwriter if a copy of the final prospectus filed pursuant to such
rules, together with all supplements and addenda thereto, was not
furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the
Securities Act.
2.6.2 To the extent permitted by law, each holder of Registrable
Securities will, if securities held by such holder are included in the
securities as to which such registration, qualification or compliance is
being effected pursuant to terms hereof, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15
of the Securities Act, and each other person selling the Company's
securities covered by such registration statement, each of such person's
officers and directors and each person controlling such persons within the
meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by a holder of
Registrable Securities of any rule or regulation promulgated under the
Securities Act applicable to holders of Registrable Securities and
relating to action or inaction required of holders of Registrable
Securities in connection with any such registration, qualification or
compliance, and will reimburse the Company, such other persons, such
directors, officers, persons, underwriters or control persons for any
legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by such holder of Registrable
Securities specifically for use therein; provided, however, that the
indemnity contained herein shall not apply to amounts paid in settlement
of any claim, loss, damage, liability or expense if settlement is effected
without the consent of such holder of Registrable Securities (which
consent shall not be unreasonably withheld). Notwithstanding the
foregoing, the liability of such holder of Registrable Securities under
this subsection (b) shall be limited in an amount equal to the net
proceeds from the sale of the shares sold by such holder of Registrable
Securities, unless such liability arises out of or is based on willful
conduct by such holder of Registrable Securities. In addition, insofar as
the foregoing indemnity relates to any such untrue statement (or alleged
untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration
statement becomes effective or in the final prospectus filed pursuant to
applicable rules of the Commission or in any supplement or addendum
thereto, the indemnity agreement herein shall not inure to the benefit of
the Company or any underwriter, if a copy of the final prospectus filed
pursuant to such rules, together with all supplements and addenda thereto,
was not furnished to the person or entity asserting the loss, liability,
claim or damage at or prior to the time such furnishing is required by the
Securities Act.
2.6.3 Notwithstanding the foregoing paragraphs (a) and (b) of this
Section, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and
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shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under
this Agreement unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action and
provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or as to which the
Indemnifying Party is asserting separate or different defenses, which
defenses are inconsistent with the defenses of the Indemnified Party. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim
or litigation. No Indemnified Party shall consent to entry of any judgment
or enter into any settlement without the consent of each Indemnifying
Party.
2.6.4 If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on
the one hand and all shareholders offering securities in the offering (the
"Selling Security Holders") on the other from the offering of the
Company's securities, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one
hand and the Selling Security Holders on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Selling
Security Holders on the other shall be the net proceeds from the offering
(before deducting expenses) received by the Company on the one hand and
the Selling Security Holders on the other. The relative fault of the
Company on the one hand and the Selling Security Holders on the other
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the Company or by the Selling Security Holders and the parties'
relevant intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Selling
Security Holders agree that it would not be just and equitable if
contribution pursuant to this Section were based solely upon the number of
entities from whom contribution was requested or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this Section. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages and
liabilities referred to above in this Section shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim,
subject to the provisions hereof. Notwithstanding the provisions of this
Section, no Selling Shareholder shall be required to contribute any amount
or make any other payments under this Agreement which in the aggregate
exceed the proceeds received by such Selling Shareholder. No person guilty
of fraudulent misrepresentation (within the meaning of the Securities Act)
shall
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be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
2.7 CERTAIN INFORMATION.
2.7.1 The holders of Registrable Securities agree, with respect to
any Registrable Securities included in any registration, to furnish to the
Company such information regarding such holder, the Registrable Securities
and the distribution proposed by the such holder as the Company may
reasonably request in writing and as shall be required in connection with
any registration, qualification or compliance referred to herein.
2.7.2 The failure of the holder of Registrable Securities to furnish
the information requested pursuant to Section 2.7.1 shall not affect the
obligation of the Company to the other Selling Security Holders who
furnish such information unless, in the reasonable opinion of counsel to
the Company or the underwriters, such failure impairs or may impair the
legality of the Registration Statement or the underlying offering.
2.8 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of Restricted Securities (used herein as defined in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to use
its best lawful efforts to:
2.8.1 Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
during which the Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
2.8.2 File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at all times during which the Company is subject to such
reporting requirements); and
2.8.3 So long as any holder of Registrable Securities owns any
Restricted Securities (as defined in Rule 144 promulgated under the
Securities Act), to furnish to such holder forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 and with regard to the Securities Act and
the Exchange Act (at all times during which the Company is subject to such
reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company
and other information in the possession of or reasonably obtainable by the
Company as such holder of Registrable Securities may reasonably request in
availing itself of any rule or regulation of the Commission allowing such
holder to sell any such securities without registration.
2.9 TRANSFERABILITY. The rights conferred by this Agreement shall be
freely transferable to a recipient of Registrable Securities.
2.10 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Texas.
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2.11 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and the
Purchaser.
2.12 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Purchaser: St. James Capital Partners, L.P., 1980 Post Oak Boulevard, Suite
2030, Houston, Texas 77056, or at such other address as the Purchaser shall have
furnished to the Company in writing, or (b) if to the Company: to Intelect
Communications, Inc., 1100 Executive Drive, Richardson, Texas 75081 or at such
other address as the Company shall have furnished to the Purchaser with a copy
to Philip P. Sudan, Jr., Ryan & Sudan, L.L.P., 909 Fannin, 39th Floor, Houston,
Texas 77010. Each such notice or other communication shall for all purposes of
this Agreement be treated as effective upon receipt.
2.13 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
2.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
2.15 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
2.16 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
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THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this agreement effective upon
the date first set forth above.
INTELECT COMMUNICATIONS, INC.
By:
Name:
Title:
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THE PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Purchaser has signed this Agreement as of the date
first written above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its General
Partner
By:
Name:
Title:
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