REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of June 7, 1996 among INTELECT COMMUNICATIONS SYSTEMS
LIMITED, a company organized under the laws of Bermuda (the "Company"), INFINITY
INVESTORS, LTD., a corporation organized under the laws of Nevis, West Indies
and SECREST CAPITAL LIMITED, a corporation organized under the laws of Nevis,
West Indies (collectively, the "Investor").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Convertible Securities Agreement
dated the date hereof (the "Subscription Agreement"), the Investor acquired a
series of Debentures, in an amount of $5,000,000 (collectively the "Initial
Debentures"), which are convertible into common shares, par value $0.01 (the
"Common Shares") of the Company (the shares into which the Debentures are
convertible are herein collectively referred to as the "Shares"); and
WHEREAS, the Company has agreed to register the Shares; and
WHEREAS, as used herein, "Registerable Securities" shall mean the
Common Shares issuable by the Company upon conversion of the Initial Debentures
pursuant to the terms thereof, which have not been previously sold pursuant to a
registration statement or Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Securities Act").
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties agree as follows:
1. DEMAND REGISTRATION UPON CLOSING.
(a) Subject to the terms and conditions hereof, within fifteen
(15) days after the closing of the transactions contemplated by the Subscription
Agreement (the "Closing Date"), the Company shall, at the Company's cost and
expense (other than the fees and disbursements of counsel for the Investor and
the underwriting discounts and brokerage commissions, if any, payable in respect
of the Registrable Securities sold by the Investor) prepare and file with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 (if the same is available), with respect to the Registerable
Securities requested to be registered by the Investor and will use all
reasonable efforts to cause such registration statement to become effective as
promptly as practicable. If Form S-3 is not available to the Company for such
registration statement, the Company shall use all reasonable efforts to promptly
file the registration statement on an appropriate alternative form.
REGISTRATION RIGHTS AGREEMENT - PAGE 1
(b) Except as set forth below, the Company shall keep effective
the registration statement contemplated by this Section 1 and shall from time to
time amend or supplement such registration statement, for a period of not less
than three hundred sixty (360) days, as extended by any period of time during
which the registration statement is not effective pursuant to Section 1(c)
below, unless all of the Registrable Securities set forth in such registration
statement have thereto been sold.
(c) The Company may terminate or suspend the effectiveness of any
registration statement to be filed pursuant to Section 1(a) one time for a
period of not more than forty five (45) days if the Company shall deliver to the
Investor a certificate signed by a Senior Vice President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company it would (i) be seriously detrimental to the Company
for such registration statement to be effected or remain effective at such time,
(ii) interfere with any proposed or pending material corporate transaction
involving the Company or any of its subsidiaries or (iii) any premature
disclosure thereof.
2. FUTURE DEMAND REGISTRATION.
(a) If, at any one time following thirty (30) days after the
termination of the effectiveness of the registration statement prepared and
filed in accordance with Section 1, the Company receives a written request from
the Investor, the Company shall, at the Company's sole cost and expense (other
than the fees and disbursements of counsel for the Investor and the underwriting
discounts and commissions, if any, payable in respect of the Registrable
Securities sold by the Investor), prepare and file with the Commission an
additional registration statement sufficient to permit the public offering and
sale of the number of shares of Registrable Securities set forth in such
request. The Company shall file such registration statement on Form S-3 (if the
same is available to the Company for such registration statement) within thirty
(30) days of the receipt of the request. If Form S-3 is not available to the
Company for such registration statement, the Company shall use all reasonable
efforts to promptly file the registration statement on appropriate alternative
form. The Company will use all reasonable efforts to cause such registration
statement to become effective as promptly as practicable. Notwithstanding
anything to the contrary set forth above, the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 2 (1) if the Investor, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public (net of any underwriters' discounts or commissions) of less than
$100,000, provided, however, that such exception shall not apply in the event
the number of Registrable Securities then held by the Investor exceeds the
maximum number of shares of Common Stock which the Investor could sell pursuant
to the provisions of Rule 144(e)(1) promulgated under the Securities Act; (2) if
the Company shall furnish to the Investor a certificate signed by a Senior Vice
President or the Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration to be
effected at such time, in which event the Company
REGISTRATION RIGHTS AGREEMENT - PAGE 2
shall have the right to defer the filing of the registration statement for a
period of not more than 30 days after receipt of the request of the Investor; or
(3) in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(b) The Company shall keep effective the registration statement
contemplated by this Section 2 and shall from time to time amend or supplement
such registration statement, for a period of not less than one hundred eighty
(180) days.
(c) The Company shall not be obligated to file more than three (3)
registration statements under this Agreement.
3. THE COMPANY COVENANTS.
(a) The Company's obligations pursuant to Sections 1 and 2 hereof
shall continue for two years after the Closing Date or until all Registrable
Securities have been sold, whichever event occurs first.
(b) In the event of a registration pursuant to the provisions of
Sections 1 and 2, the Company shall use all reasonable efforts to cause the
Registrable Securities so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Investor may
reasonably request; provided, however, that the Company shall not be required to
qualify to do business in any state by reason of this Section 3(b) in which it
is not otherwise required to qualify to do business.
(c) The Company shall notify the Investor promptly when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed.
(d) The Company shall advise the Investor, promptly after it shall
receive notice or obtain knowledge of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement, or the
initiation or threatening of any proceeding for that purpose, and promptly use
all reasonable efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued.
(e) The Company shall promptly notify the Investor, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event of which it has knowledge as a
result of which the prospectus included in such registration statement, as then
in effect, would include an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the reasonable request of the Investor prepare and furnish to
them such number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers of such
REGISTRATION RIGHTS AGREEMENT - PAGE 3
Registrable Securities or securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made.
(f) If requested by the underwriter for any underwritten offering
of Registrable Securities on behalf of the Investor pursuant to a registration
requested under Sections 1 and 2, the Company and the Investor will enter into
an underwriting agreement with such underwriter for such offering, which shall
be reasonably satisfactory in substance and form to the Company and the
Company's counsel, the Investor, and the underwriter, and such agreement shall
contain such representations and warranties by the Company and the Investor and
such other terms and provisions as are customarily contained in an underwriting
agreement with respect to secondary distributions solely by selling
stockholders, including, without limitation, indemnities substantially to the
effect and to the extent provided in Section 4.
4. INDEMNIFICATION.
(a) Subject to the conditions set forth below, the Company agrees
to indemnify and hold harmless the Investor, its officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls any such
person within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act) from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 4, but not be
limited to, reasonable attorneys' fees and any and all reasonable expenses
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever), arising out of,
based upon, or in connection with any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented) or any amendment or supplement thereto, relating to the sale of
any of the Registrable Securities or (B) in any application or other document or
communication (in this Section 4 collectively called an "application") executed
by or on behalf of the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to register or
qualify any of the Registrable Securities under the securities or blue sky laws
thereof or filed with the Commission or any securities exchange; or any omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading, unless (x) such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Investor for
inclusion in any registration statement, preliminary prospectus, or final
prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or (y) such loss, liability, charge, claim, damage or expense
arises out of the Investor's failure to comply with the terms and provisions of
this Agreement. The foregoing agreement to indemnify shall be in addition to any
liability the Company may otherwise have, including liabilities arising under
this Agreement.
REGISTRATION RIGHTS AGREEMENT - PAGE 4
If any action is brought against the Investor or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 4 (a) unless, the
failure to so notify shall prejudice any rights or defenses with respect to such
claim) and the Company shall promptly assume the defense of such action,
including the employment of counsel (reasonably satisfactory to such indemnified
party or parties) provided that the indemnified party shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party or parties
unless:
(i) the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of such
action; or
(ii) such indemnified party or parties shall have
reasonably concluded, based on an opinion of counsel reasonably satisfactory to
the Company, that there may be one or more legal defenses available to it or
them or to other indemnified parties which are different from or additional to
those available to the Company, in any material respect, and that as a result
thereof a conflict of interest would arise absent separate representation of the
parties.
In the event of clauses (i) or (ii) above, such fees and expenses shall be borne
by the Company and the Company shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties. Anything in this
Section 4 to the contrary notwithstanding, the Company shall not be liable for
any settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld. the Company shall not, without the
prior written consent of each indemnified party that is not released as
described in this sentence, settle or compromise any action, or permit a default
or consent to the entry of judgment in or otherwise seek to terminate any
pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto) unless such
settlement, compromise, consent, or termination includes an unconditional
release of each indemnified party from all liability in respect of such action.
the Company agrees promptly to notify the Investor of the commencement of any
litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of any Registrable Securities or any
preliminary prospectus, prospectus, registration statement, or amendment or
supplement thereto, or any application relating to any sale of any Registrable
Securities.
(b) The Investor agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who shall have signed
any registration statement covering Registrable Securities held by the Investor,
each other person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and its
or their respective counsel, to the same extent as the foregoing indemnity from
the Company to the Investor in Section 4 (a) but only with respect to statements
REGISTRATION RIGHTS AGREEMENT - PAGE 5
or omissions, if any, made in any registration statement, preliminary
prospectus, or final prospectus (as from time to time amended and supplemented)
or any amendment or supplement thereto, or in any application, in reliance upon
and in conformity with written information furnished to the Company with respect
to the Investor by or on behalf of the Investor, for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Investor pursuant to
this Section 4(b) the Investor shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
4(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 4(a) or
4(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act or otherwise, then
the Company (including for this purpose any contribution made by or on behalf of
any director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company as one entity, and
the Investor, included in such registration in the aggregate (including for this
purpose any contribution by or on behalf of an indemnified party), as a second
entity, shall contribute to the losses, liabilities, claims, damages, and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
the Investor in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses. The relative fault, in the case of
an untrue statement, alleged untrue statement, omission, or alleged omission
shall be determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by the
Company or by the Investor, and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement, alleged
statement, omission, or alleged omission. the Company and the Investor agree
that it would be unjust and inequitable if the respective obligations of the
Company and the Investor for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Investor and the other indemnified parties were treated as
one entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 4(c). In no
case shall the Investor be responsible for a portion of the contribution
obligation imposed on the Investor in excess of its pro rata share based on the
number of shares of Common Stock owned by it and included in such registration
as compared to the total number of Common Shares owned by the Investor and
included in such registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section
REGISTRATION RIGHTS AGREEMENT - PAGE 6
4(c) each person, if any, who controls the Investor within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee, agent, and counsel of the Investor or
control person shall have the same rights to contribution as the Investor or
control person and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed any such registration
statement, each director of the Company, and its or their respective counsel
shall have the same rights to contribution as the Company, subject to each case
to the provisions of this Section 4(c). Anything in this Section 4(c) to the
contrary notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written consent.
This Section 4(c) is intended to supersede any right to contribution under the
Securities Act, the Exchange Act or otherwise.
5. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by any party
of its obligations under this Agreement, the other party, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
Such rights shall be in addition to, and not in lieu of, the Investor's rights
to receive the Damage Payment as specified in the Subscription Agreement.
(b) AGREEMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, unless such amendment, modification or supplement is
in writing and signed by the parties hereto.
(c) NOTICES. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, or telecopies, initially to the address set
forth below, and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 5(c).
(i) if to the Company:
Intelect Communications Systems Limited
Reid House, 31 Church Street
Hamilton, Bermuda
Attn: Peter G. Leighton
Fax: 441/292-5560
(ii) if to the Investor
Infinity Investors, Ltd.
27 Wellington Road
Cork, Ireland
REGISTRATION RIGHTS AGREEMENT - PAGE 7
Attn: James G. O'Brien
Fax: 353 21 501 255
Secrest Capital Limited
27 Wellington Road
Cork, Ireland
Attn: James G. O'Brien
Fax: 353 21 501 255
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; two business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.
(d) REASONABLE COOPERATION OF THE INVESTOR. The Investor
shall cooperate in all reasonable respects with the filing of the registration
statement contemplated hereby. Without limiting the foregoing, the Investor
shall furnish to the Company (or any regulatory authority) such written
information and representations that the Company may reasonably request in order
to facilitate any registration of the Registrable Securities hereunder.
(e) SUCCESSORS AND ASSIGNS. This Agreement may be
assigned by the Investor to any purchaser or transferee of the Initial
Debentures.
(f) COUNTERPARTS. This Agreement may be executed by
facsimile signature and in any number of counterparts and by the parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
(g) HEADINGS. The headings in this Agreement are for
convenience of references only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of Bermuda without reference to its
conflict of laws provisions.
(i) SEVERABILITY. In the event that any one or more of
the provisions contained herein, or the application hereof in any circumstance
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of this agreement and under standing of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
REGISTRATION RIGHTS AGREEMENT - PAGE 8
or referred to herein, concerning the registration rights granted by the Company
pursuant to this Agreement.
[Signature page follows]
REGISTRATION RIGHTS AGREEMENT - PAGE 9
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
INTELECT COMMUNICATIONS SYSTEMS LIMITED
By:____________________________________
Peter G. Leighton, President
INFINITY INVESTORS, LTD.
By:____________________________________
Name:__________________________________
Title:_________________________________
SECREST CAPITAL LIMITED
By:____________________________________
Name:__________________________________
Title:_________________________________
REGISTRATION RIGHTS AGREEMENT - PAGE 10