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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 21, 1999
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INTELECT COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-11630 76-0471342
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1100 Executive Drive, Richardson, Texas 75081
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 367-2100
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N/A
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
As previously announced, Intelect Communications, Inc. (the "Company")
closed the issuance of 5,000,000 investment units to The Coastal Corporation
Second Pension Trust ("Coastal") in exchange for a $5 million reduction in
Intelect's obligations under its $12 million Revolving Credit Agreement with
Coastal. Such amount will be available for borrowing by the Company subject to
the terms of the credit agreement. Each"investment unit" consists of one share
of restricted Intelect common stock and one restricted warrant. The warrants,
which are not immediately exercisable, have a term of three years, a strike
price of $0.75 per share and may not be exercised until at least six months
after issuance and after the common stock of the Company has a daily closing
price of $1.20 or more for five consecutive days. In addition, pursuant to the
transaction, the Company agreed that the exercise price of Coastal's currently
outstanding warrants to purchase 450,000 shares and 1,067,308 shares of common
stock of the Company would be re-set to $0.75 per share. Coastal has the right
to designate a person to fill the current vacancy on the Company's Board of
Directors on 14 days prior written notice to the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business to Be Acquired: N/A
(b) Pro Forma Financial Information of the Business to Be Acquired: N/A
(c) Exhibits:
4.1 Warrant to purchase 5,000,000 shares of common stock of
Intelect at $0.75 per share.
4.2 Warrant to purchase 450,000 shares of common stock of Intelect
at $0.75 per share.
4.3 Warrant to purchase 1,067,308 shares of common stock of
Intelect at $0.75 per share.
4.4 Registration Rights Agreement dated December 21, 1999 between
Intelect and Coastal.
10.1 Subscription Agreement for Common Stock Units dated December
17, 1999 between Intelect and Coastal.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTELECT COMMUNICATIONS, INC.
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(Registrant)
Date: December 21, 1999 By: /s/ HERMAN M. FRIETSCH
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(Signature)
Herman M. Frietsch
Chairman of the Board and CEO
3
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
4.1 Warrant to purchase 5,000,000 shares of common stock of
Intelect at $0.75 per share.
4.2 Warrant to purchase 450,000 shares of common stock of Intelect
at $0.75 per share.
4.3 Warrant to purchase 1,067,308 shares of common stock of
Intelect at $0.75 per share.
4.4 Registration Rights Agreement dated December 21, 1999 between
Intelect and Coastal.
10.1 Subscription Agreement for Common Stock Units dated December
17, 1999 between Intelect and Coastal.
</TABLE>
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EXHIBIT 4.1
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
WARRANT
to Purchase Common Stock of
INTELECT COMMUNICATIONS, INC.
Expiring on December 16, 2002
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, THE COASTAL CORPORATION SECOND PENSION TRUST (the "Holder") or
its assigns, is entitled to subscribe for and purchase from the Company (as
hereinafter defined), in whole or in part, Five Million (5,000,000) shares of
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock (as hereinafter defined) at an initial Exercise Price (as hereinafter
defined) per share of NO AND 75/100 DOLLARS ($0.75), subject, however, to the
provisions and upon the terms and conditions hereinafter set forth. The number
of Warrants (as hereinafter defined), the number of shares of Common Stock
purchasable hereunder, and the Exercise Price therefor are subject to adjustment
as hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00 p.m., Houston, Texas time, three years from the date hereof, on December
16, 2002. This is the "Unit Warrant" referred to in the Subscription Agreement.
This Warrant is subject to the following Restrictions on Exercise:
(1) This Warrant may not be exercised prior to June 15, 2000; and
(2) This Warrant may not be exercised prior to the first Trading Day
following the date on which the closing bid price for the Common Stock of
Intelect Communications, Inc. is One and 20/100 Dollars ($1.20) or more for five
(5) consecutive Trading Days; and
(3) This Warrant may not be exercised until the Company increases the
number of shares of Common Stock authorized as of the date hereof by at least
five million (5,000,000) in accordance with the Certificate of Incorporation and
By-Laws of the Company, provided that if no additional shares of Common Stock
have been authorized within one year of the date of this Agreement, this
condition shall lapse.
As used herein, the following terms shall have the meanings set forth
below:
"Cashless Exercise" has the meaning given in Section 1.1.
"Company" shall mean Intelect Communications, Inc., a Delaware
corporation, and shall also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
"Common Stock" shall mean and include the Company's Common Stock, par
value $0.01 per share, authorized on the date of the original issue of this
Warrant and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets of the character referred to in Section 3.5 hereof,
the stock, securities provided for in such Section 3.5, and (ii) any other
shares of Common Stock of the Company into which such shares of Common Stock may
be converted.
"Convertible Securities" has the meaning given in Section 3.2 (b)(i).
"Exercise Date" has the meaning given in Section 1.1.
"Exercise Price" shall mean the initial purchase price of NO and 75/100
DOLLARS ($0.75), per share of Common Stock payable upon exercise of the
Warrants, as adjusted from time to time pursuant to the provisions hereof.
"Holder" means The Coastal Corporation Second Pension Trust.
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"Market Price" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (x) the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers ("NASD") National Market on such
date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose, in each such case,
unless otherwise provided herein, averaged over a period of ten (10) consecutive
Trading Days prior to the date as of which the determination is to be made; or
(y) if the Common Stock shall not be listed or admitted to trading as provided
in clause "(x)" above, the fair market value of the Common Stock as determined
in good faith by the Board of Directors of the Company.
"Outstanding" when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the Company.
"Registration Rights Agreement" means the Agreement between Company
and Holder.
"Restrictions on Exercise" means conditions (1), (2) and (3) set forth
above.
"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.
"Subscription Agreement" shall mean the Subscription Agreement for
Common Stock Units between Holder and Company dated December 17, 1999.
"Subscription Notice" has the meaning given in Section 1.1.
"Trading Days" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
"Warrant" shall mean the right upon exercise to purchase one Warrant
Share.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the Holder hereof upon the exercise of the Warrants.
ARTICLE I
EXERCISE OF WARRANTS
Section I.1 Method of Exercise. The Warrants represented hereby may be
exercised by the Holder hereof, in whole or in part, at any time and from time
to time on or after June 15, 2000 until 5:00 p.m., Houston, Texas time, on
December 16, 2002 (the "Exercise Date").
(a) To exercise the Warrants, the Holder hereof shall
deliver to the Company, at the Warrant Office designated in Section 2.1 hereof:
(i) a written notice in the form of the
Subscription Notice attached as an exhibit hereto, stating therein the election
of such holder to exercise the Warrants in the manner provided in the
Subscription Notice;
(ii) payment in full of the Exercise Price (A) in
cash or immediately available funds for all Warrant Shares purchased hereunder,
or (B) if the Company and the Holder mutually elect, through a "cashless" or
"net-issue" exercise of each such Warrant ("Cashless Exercise"); the Holder
shall exchange each Warrant subject to a Cashless Exercise for that number of
Warrant Shares determined by multiplying the number of Warrant Shares issuable
hereunder by a fraction, the numerator of which shall be the difference between
(x) the Market Price and (y) the Exercise
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Price for each such Warrant, and the denominator of which shall be the Market
Price; the Subscription Notice shall set forth the calculation upon which the
Cashless Exercise is based, or (C) a combination of (A) and (B) above; and
(iii) this Warrant.
(b) The Warrants shall be deemed to be exercised on the
date of receipt by the Company of the Subscription Notice, accompanied by
payment for the Warrant Shares and surrender of this Warrant, as aforesaid, and
such date is referred to herein as the "Exercise Date". Upon such exercise, the
Company shall, as promptly as practicable and in any event within ten (10)
business days, issue and deliver to such holder a certificate or certificates
for the full number of the Warrant Shares purchased by such holder hereunder,
and shall, unless the Warrants have expired, deliver to the Holder hereof a new
Warrant representing the number of Warrants, if any, that shall not have been
exercised, in all other respects identical to this Warrant. As permitted by
applicable law, the person in whose name the certificates for Common Stock are
to be issued shall be deemed to have become a holder of record of such Common
Stock on the Exercise Date and shall be entitled to all of the benefits of such
holder on the Exercise Date, including without limitation the right to receive
dividends and other distributions for which the record date falls on or after
the Exercise Date and to exercise voting rights.
Section I.2 Reservation of Shares. The Company shall reserve at all
times so long as the Warrants remain outstanding, free from preemptive rights,
out of its treasury Common Stock or its authorized but unissued shares of Common
Stock, or both, solely for the purpose of effecting the exercise of the
Warrants, a sufficient number of shares of Common Stock to provide for the
exercise of the Warrants, provided that no shares of Common Stock shall be
required to be reserved for issuance upon exercise of this Warrant until the
Restrictions on Exercise have been met, provided further, that if insufficient
shares have been authorized at the time of Coastal's notice of timely exercise
of the Warrants following satisfaction of the Restrictions on Exercise, Coastal
shall be entitled to damages as follows: The amount of damages shall be
calculated as the average closing Market Price for the Common Stock for the ten
(10) Trading Days preceding the deemed date of exercise in accordance with
Section 1.1(b), less the Exercise Price of such Warrant, multiplied by the
number of Warrants sought to be exercised. The Company shall pay the damages
within ten (10) business days and shall, unless the Warrants have expired,
deliver to the Holder hereof a new Warrant representing the number of Warrants,
if any, that shall not have been exercised, in all other respects identical to
this Warrant. The Warrants for which damages are paid in accordance with this
Section shall be deemed exercised.
Section I.3 Expenses and Taxes. The Company shall pay all expenses, and
taxes (including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
Section I.4 Valid Issuance. All shares of Common Stock that may be
issued upon exercise of the Warrants will, upon issuance by the Company, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issuance thereof and, without limiting the
generality of the foregoing, the Company shall take no action or fail to take
any action which will cause a contrary result (including, without limitation,
any action that would cause the Exercise Price to be less than the par value, if
any, of the Common Stock).
Section I.5 Purchase Agreement. The Warrants represented hereby are
part of a duly authorized issuance and sale of Warrants to purchase Common Stock
issued and sold pursuant to the Subscription Agreement between Holder and
Company of even date herewith.
Section I.6 Acknowledgment of Rights. At the time of the exercise of
the Warrants in accordance with the terms hereof and upon the written request of
the Holder hereof, the Company will acknowledge in writing its continuing
obligation to afford to such holder any rights (including, without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant; provided, however, that if the Holder hereof shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
Section I.7 No Fractional Shares. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of this Warrant. If more
than one Warrant shall be presented for exercise at the same
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time by the same holder, the number of full shares of Common Stock which shall
be issuable upon such exercise shall be computed on the basis of the aggregate
number of whole shares of Common Stock purchasable on exercise of the Warrants
so presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 1.7, be issuable on the exercise of this Warrant, the
Company shall pay an amount in cash calculated by it to be equal to the Market
Price of one share of Common Stock at the time of such exercise multiplied by
such fraction computed to the nearest whole cent.
ARTICLE II
TRANSFER
Section II.1 Warrant Office. The Company shall maintain an office for
certain purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's offices at 1100 Executive Drive, Richardson, Texas
75081 and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to which
written notice has previously been given to the Holder hereof. The Company shall
maintain, at the Warrant Office, a register for the Warrants in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
Section II.2 Ownership of Warrants. The Company may deem and treat the
person in whose name the Warrants are registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if properly assigned in compliance with this Article II, may
be exercised by an assignee for the purchase of Warrant Shares without having a
new Warrant issued.
Section II.3 Restrictions on Transfer of Warrants.
(a) The Company agrees to maintain at the Warrant Office
books for the registration and transfer of the Warrants. Subject to the
restrictions on transfer of the Warrants in this Section 2.3, the Company, from
time to time, shall register the transfer of the Warrants in such books upon
surrender of this Warrant at the Warrant Office properly endorsed or accompanied
by appropriate instruments of transfer and written instructions for transfer
satisfactory to the Company. Upon any such transfer and upon payment by the
Holder or its transferee of any applicable transfer taxes, new Warrants shall be
issued to the transferee and the transferor (as their respective interests may
appear) and the surrendered Warrants shall be canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes or income
taxes) and all other expenses and charges payable in connection with the
transfer of the Warrants pursuant to this Section 2.3.
(b) The Holder of the Warrants agrees that it will
neither (i) transfer the Warrants prior to delivery to the Company of written
notice of such transfer, nor (ii) transfer such Warrant Shares prior to delivery
to the Company of written notice of such transfer, or until registration of such
Warrant Shares under the Securities Act and any applicable state securities or
Blue Sky laws has become effective.
Section II.4 Compliance with Securities Laws. Subject to the terms of
the Registration Rights Agreement between the Holder and the Company dated as of
the date hereof and notwithstanding any other provisions contained in this
Warrant, the Holder hereof understands and agrees that the following
restrictions and limitations shall be applicable to all Warrant Shares and to
all resales or other transfers thereof pursuant to the Securities Act:
(a) The Holder hereof agrees that the neither this
Warrant nor the Warrant Shares shall be sold or otherwise transferred unless
this Warrant and/or the Warrant Shares are registered under the Securities Act
and applicable state securities or Blue Sky laws or are exempt therefrom.
(b) A legend in substantially the following form will be
placed on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE
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"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT
AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS."
(c) Stop transfer instructions will be imposed with
respect to the Warrant Shares so as to restrict resale or other transfer
thereof, subject to this Section 2.4.
(d) The Holder understands that it must bear the economic
risk of the investment for an indefinite period of time because the Warrant
Shares have not been registered under the Securities Act and therefor cannot be
sold unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. The Holder acknowledges that the
Holder or the Holder's representative is familiar with the condition, financial
and otherwise, of the Company. The Holder or the Holder's representative has
such knowledge and experience in financial and business matters that the Holder
or the Holder's representative is able to weigh the information so received and
to evaluate the merits and risks of the Holder's investment in the Warrant
Shares.
ARTICLE III
ANTI-DILUTION
Section III.1 Anti-Dilution Provisions. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
Section III.2 Adjustment of Exercise Price Upon Issuance of Common
Stock.
(a) (i) If and whenever after the date hereof the
Company shall issue or sell any Common Stock for no consideration or
for a consideration per share less than the Exercise Price, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced
(but not increased, except as otherwise specifically provided in
Section 3.2 hereof), to the price (calculated to the nearest one-ten
thousandth of a cent) determined by dividing (x) an amount equal to the
sum of (i) the aggregate number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the consideration
received by the Company upon such issuance or sale on a per share basis
plus (ii) the consideration received by the Company upon such issue or
sale by (y) the aggregate number of shares of Common Stock Outstanding
immediately after such issue or sale.
(ii) Notwithstanding the provisions of this
Section 3.2, no adjustment shall be made in the Exercise Price in the
event that the Company issues, in one or more transactions, (A) Common
Stock or Convertible Securities upon exercise of any options issued to
officers, directors or employees of the Company pursuant to a stock
option plan or an employment, severance or consulting agreement as now
or hereafter in effect, in each case approved by the Board of Directors
(provided that the aggregate number of shares of Common Stock which may
be issuable, including options issued prior to the date hereof, under
all such employee plans and agreements shall at no time exceed the
number of such shares of Common Stock that are issuable under currently
effective employee plans and agreements); (B) Common Stock upon
exercise of the Warrants or any other Warrant issued pursuant to the
terms of the Agreement or otherwise issued to the Holder; (C) Common
Stock upon exercise of any stock purchase Warrant or option (other than
the options referred to in clause "(A)" above) or other convertible
security outstanding on the date hereof; (D) Common Stock upon
conversion of the Note; or (E) Common Stock issued as consideration in
acquisitions. In addition, for purposes of calculating any adjustment
of the Exercise Price as provided in this Section 3.2, all of the
shares of Common Stock issuable pursuant to any of the foregoing shall
be assumed to be Outstanding prior to the event causing such adjustment
to be made.
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(b) For purposes of this Section 3.2, the following Sections
3.2(b)(i) to 3.2(b)(v) inclusive, shall be applicable:
(i) Issuance of Rights or Options. In case at any time
after the date hereof the Company shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock
or securities being herein called "Convertible Securities"), whether or
not such rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (A) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, or plus, in the case of such rights
or options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights or options) shall be less than the Exercise
Price in effect as of the date of granting such rights or options, then
the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon conversion or exchange of
all such Convertible Securities issuable upon the exercise of such
rights or options shall be deemed to be outstanding as of the date of
the granting of such rights or options and to have been issued for such
price per share, with the effect on the Exercise Price specified in
Section 3.2(a) hereof. Except as provided in Section 3.2(b) hereof, no
further adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon
exercise of such rights or options or upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible
Securities.
(ii) Change in Option Price or Conversion Rate.
Upon the happening of any of the following events, namely, if the
purchase price provided for in any right or option referred to in
Section 3.2(b), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
Section 3.2(b), or the rate at which any Convertible Securities
referred to in Section 3.2(b), are convertible into or exchangeable for
Common Stock shall change (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price then in
effect hereunder shall forthwith be readjusted (increased or decreased,
as the case may be) to the Exercise Price that would have been in
effect at such time had such rights, options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of any such option
or right referred to in Section 3.2(b), or on the termination of any
such right to convert or exchange any such Convertible Securities
referred to in Section 3.2(b), the Exercise Price then in effect
hereunder shall forthwith be readjusted (increased or decreased, as the
case may be) to the Exercise Price that would have been in effect at
the time of such expiration or termination had such right, option or
Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been granted, issued or sold, and
the Common Stock issuable thereunder shall no longer be deemed to be
Outstanding. If the purchase price provided for in Section 3.2(b) or
the rate at which any Convertible Securities referred to in Section
3.2(b) reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of
the delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall, if not
already adjusted, forthwith be adjusted to such amount as would have
obtained had such right, option or Convertible Securities never been
issued as to such Common Stock and had adjustments been made upon the
issuance of the Common Stock delivered as aforesaid, but only if as a
result of such adjustment the Exercise Price then in effect hereunder
is thereby reduced.
(iii) Consideration for Stock. In case at any time
Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for cash, the consideration therefor shall be deemed to
be the amount received by the Company therefor. In
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case at any time any Common Stock, Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities
shall be issued or sold for consideration other than cash, the amount
of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration, as determined
reasonably and in good faith by the Board of Directors of the Company.
In case at any time any Common Stock, Convertible Securities or any
rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration received therefor shall be deemed to be the
fair value, as determined reasonably and in good faith by the Board of
Directors of the Company, of such portion of the assets and business of
the nonsurviving corporation as such Board of Directors may determine
to be attributable to such Common Stock, Convertible Securities, rights
or options as the case may be. In case at any time any rights or
options to purchase any shares of Common Stock or Convertible
Securities shall be issued in connection with the issuance and sale of
other securities of the Company, together consisting of one integral
transaction in which no consideration is allocated to such rights or
options by the parties, such rights or options shall be deemed to have
been issued with consideration.
(iv) Record Date. In the case the Company shall
take a record of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in Common Stock or Convertible Securities, or (ii) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a
result of the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription
or purchase, as the case may be.
(v) Treasury Shares. The number of shares of
Common Stock Outstanding at any given time shall not include shares
owned directly by the Company in treasury, and the disposition of any
such shares shall be considered an issuance or sale of Common Stock for
the purpose of this Section 3.2.
Section III.3 Stock Dividends. In case the Company shall declare a
dividend or make any other distribution upon any shares of the Company, payable
in Common Stock or Convertible Securities, any Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
Section III.4 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its Outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in the event
that the Outstanding shares of Common Stock shall at any time be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced. Except as provided in this Section
3.4, no adjustment in the Exercise Price and no change in the number of Warrant
Shares purchasable shall be made under this Article III as a result of or by
reason of any such subdivision or combination.
Section III.5 Reorganizations and Asset Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another person shall be effected in such a way that a holder of Common
Stock of the Company shall be entitled to receive capital stock, securities or
assets with respect to or in exchange for their shares, then the following
provisions shall apply:
(a) As a condition of such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer or other
disposition (except as otherwise provided below in this Section 3.5), lawful and
adequate provisions shall be made whereby the holder of Warrants shall
thereafter have the right to purchase and receive upon the terms and conditions
specified in this Warrant and in lieu of the Warrant Shares immediately
theretofore receivable upon the exercise of the rights represented hereby, such
shares of capital stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of Outstanding shares of such Common
Stock equal to the number of Warrant Shares immediately theretofore so
receivable had such reorganization, reclassification,
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<PAGE> 8
consolidation, merger, share exchange or sale not taken place, and in any such
case appropriate provision reasonably satisfactory to such holder shall be made
with respect to the rights and interests of such holder to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Exercise Price and of the number of Warrant Shares receivable upon the
exercise) shall thereafter be applicable, as nearly as possible, in relation to
any shares of capital stock, securities or assets thereafter deliverable upon
the exercise of Warrants.
(b) In the event of a merger, share exchange or
consolidation of the Company with or into another person as a result of which a
number of shares of Common Stock or its equivalent of the successor person
greater or lesser than the number of shares of Common Stock Outstanding
immediately prior to such merger, share exchange or consolidation are issuable
to holders of Common Stock, then the Exercise Price in effect immediately prior
to such merger, share exchange or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the Outstanding
shares of Common Stock.
(c) The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Holder hereof at the
last address of such holder appearing on the books of the Company the obligation
to deliver to such holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the Holder hereof, such successor person will issue a
new Warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section 3.5.
(d) If a purchase, tender or exchange offer is made to
and accepted by the holders of 50% or more of the Outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the person having made such offer or with any affiliate of such
person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the Holder hereof shall have been
given a reasonable opportunity to then elect to receive upon the exercise of the
Warrants either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
Section III.6 Adjustment for Asset Distribution. If the Company
declares a dividend or other distribution payable to all holders of shares of
Common Stock in evidences of indebtedness of the Company or other assets of the
Company (including, cash (other than regular cash dividends declared by the
Board of Directors), capital stock (other than Common Stock, Convertible
Securities or options or rights thereto) or other property), the Exercise Price
in effect immediately prior to such declaration of such dividend or other
distribution shall be reduced by an amount equal to the amount of such dividend
or distribution payable per share of Common Stock, in the case of a cash
dividend or distribution, or by the fair value of such dividend or distribution
per share of Common Stock (as reasonably determined in good faith by the Board
of Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
Section III.7 De Minimis Adjustments. No adjustment in the number of
shares of Common Stock purchasable hereunder shall be required unless such
adjustment would require an increase or decrease of at least one share of Common
Stock purchasable upon an exercise of each Warrant and no adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least $0.01 in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 3.7 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest full share or nearest
one-hundredth of a dollar, as applicable.
Section III.8 Notice of Adjustment. Whenever the Exercise Price or the
number of Warrant Shares issuable upon the exercise of the Warrants shall be
adjusted as herein provided, or the rights of the Holder hereof shall change by
reason of other events specified herein, the Company shall compute the adjusted
Exercise Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate
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<PAGE> 9
setting forth the adjusted Exercise Price and the adjusted number of Warrant
Shares issuable upon the exercise of the Warrants or specifying the other shares
of stock, securities or assets receivable as a result of such change in rights,
and showing in reasonable detail the facts and calculations upon which such
adjustments or other changes are based. The Company shall cause to be mailed to
the Holder hereof copies of such Officer's Certificate together with a notice
stating that the Exercise Price and the number of Warrant Shares purchasable
upon exercise of the Warrants have been adjusted and setting forth the adjusted
Exercise Price and the adjusted number of Warrant Shares purchasable upon the
exercise of the Warrants.
Section III.9 Notifications to Holders. In case at any time the Company
proposes:
(a) to declare any dividend upon its Common Stock payable
in capital stock or make any special dividend or other distribution (other than
cash dividends) to the holders of its Common Stock;
(b) to offer for subscription pro rata to all of the
holders of its Common Stock any additional shares of capital stock of any class
or other rights;
(c) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation, merger
or share exchange of the Company with another person, or sale, transfer or other
disposition of all or substantially all of its assets; or
(d) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of such
cases, the Company shall give the Holder hereof (a) at least ten (10) days' (but
not more than ninety (90) days') prior written notice of the date of which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of such issuance, reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
and (b) in the case of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, at least ten (10) days' (but not more than ninety
(90) days') prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause "(a)" shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause "(b)" shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock, as
the case may be, for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, as the case may
be.
Section III.10 Company to Prevent Dilution. If any event or condition
occurs as to which other provisions of this Article III are not strictly
applicable or if strictly applicable would not fairly protect the exercise or
purchase rights of the Warrants evidenced hereby in accordance with the
essential intent and principles of such provisions, or that might materially and
adversely affect the exercise or purchase rights of the Holder hereof under any
provisions of this Warrant, then the Company shall make such adjustments in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such exercise and purchase rights as aforesaid, and
any adjustments necessary with respect to the Exercise Price and the number of
Warrant Shares purchasable hereunder so as to preserve the rights of the Holder
hereunder. In no event shall any such adjustment have the effect of increasing
the Exercise Price as otherwise determined pursuant to this Article III except
in the event of a combination of shares of the type contemplated in Section 3.4
hereof, and then in no event to an amount greater than the Exercise Price as
adjusted pursuant to Section 3.4 hereof.
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<PAGE> 10
ARTICLE IV
MISCELLANEOUS
Section IV.1 Negative Covenants. Without the consent of Coastal, the
Company will not:
(a) Enter into any merger or consolidation unless the
surviving entity assumes all obligations of the Company under this Warrant,
provided that nothing herein shall prohibit the merger of one or more
Subsidiaries into the Company or any other Material Subsidiary.
(b) Amend the By-Laws in any way, or take such other
corporate action, which would by its terms restrict the exercise of any Warrants
issued to Coastal, as such Warrants may have been amended by agreement from time
to time.
Section IV.2 Entire Agreement. This Warrant, together with the
Agreement, contain the entire agreement between the Holder hereof and the
Company with respect to the Warrant Shares purchasable upon exercise hereof and
the related transactions and supersedes all prior arrangements or understandings
with respect thereto.
Section IV.3 Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section IV.4 Waiver and Amendment. Any term or provision of this
Warrant may be waived at any time by the party which is entitled to the benefits
thereof and any term or provision of this Warrant may be amended or supplemented
at any time by agreement of the Holder hereof and the Company, except that any
waiver of any term or condition, or any amendment or supplementation, of this
Warrant shall be in writing. A waiver of any breach or failure to enforce any of
the terms or conditions of this Warrant shall not in any way effect, limit or
waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of this Warrant.
Section IV.5 Illegality. In the event that any one or more of the
provisions contained in this Warrant shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
Section IV.6 Copy of Warrant. A copy of this Warrant shall be filed
among the records of the Company.
Section IV.7 Notice. All notices, requests, demands or other
communications to or upon the respective parties hereto shall be deemed to have
been duly given or made when delivered to the party to which such notice,
request, demand or other communication is required or permitted to be given or
made under this Warrant addressed to such party at its address set forth below
or at such other address as either of the parties hereto may hereafter notify
the other in writing.
To COMPANY: INTELECT COMMUNICATIONS, INC.
1100 Executive Drive
Richardson, Texas 75081
Telephone: 972-367-2100
Telecopy: 972-367-2271
Attention: Herman Frietsch, President and CEO
with a copy to: RYAN & SUDAN, L.L.P.
909 Fannin, 39th Floor
Houston, Texas 77010
Telephone: 713-652-0501
Telecopy: 713-652-0503
Attention: Philip P. Sudan, Jr., Esq.
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<PAGE> 11
To HOLDER: THE COASTAL CORPORATION SECOND PENSION TRUST
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-6825
Telecopy: 713-877-7071
Attention: Donald H. Gullquist, Trustee
with a copy to: THE COASTAL CORPORATION
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-6920
Telecopy: 713-877-7132
Attention: Director, Financial Administration
Section IV.8 Limitation of Liability; Not Stockholders. No provision of
this Warrant shall be construed as conferring upon the Holder hereof the right
to vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Section IV.9 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt
of evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in such
form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the
Company will make and deliver a new Warrant of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 4.8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or in lieu of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company. This Warrant shall be
promptly canceled by the Company upon the surrender hereof in connection with
any exchange or replacement. The Company shall pay all taxes (other than
securities transfer taxes or income taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to this Section 4.8.
Section IV.10 Registration Rights. The Warrant Shares shall be entitled
to such registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
Section IV.11 Headings. The Article and Section and other headings
herein are for convenience only and are not a part of this Warrant and shall not
affect the interpretation thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be issued as
of December 17, 1999.
INTELECT COMMUNICATIONS, INC.
By:
-------------------------------
Herman M. Frietsch
Chairman & CEO
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<PAGE> 12
SUBSCRIPTION NOTICE
The undersigned, the Holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for and to purchase thereunder,
_________________________________ (____________) shares of the Common Stock
covered by such Warrant, and herewith makes payment in full for such shares
pursuant to Section 1.1 of such Warrant, and requests (a) that certificates for
such shares (and any other securities or other property issuable upon such
exercise) be issued in the name of, and delivered to THE COASTAL CORPORATION
SECOND PENSION TRUST and (b), if such shares shall not include all of the shares
issuable as provided in such Warrant, that a new Warrant of like tenor and date
for the balance of the shares issuable thereunder be delivered to the
undersigned.
THE COASTAL CORPORATION SECOND PENSION TRUST
By:
-----------------------------------------
Date:
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<PAGE> 13
ASSIGNMENT
For value received, _______________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer such Warrant on the books
of the Company, with full power of substitution.
-------------------------
Date:
----------------
<PAGE> 1
EXHIBIT 4.2
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
WARRANT
to Purchase Common Stock of
INTELECT COMMUNICATIONS, INC.
Expiring on August 26, 2002
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, THE COASTAL CORPORATION SECOND PENSION TRUST (the "Holder") or
its assigns, is entitled to subscribe for and purchase from the Company (as
hereinafter defined), in whole or in part, FOUR HUNDRED FIFTY THOUSAND (450,000)
shares of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (as hereinafter defined) at an initial Exercise Price (as
hereinafter defined) per share of NO AND 75/100 DOLLARS ($0.75), subject,
however, to the provisions and upon the terms and conditions hereinafter set
forth. The number of Warrants (as hereinafter defined), the number of shares of
Common Stock purchasable hereunder, and the Exercise Price therefor are subject
to adjustment as hereinafter set forth. This Warrant and all rights hereunder
shall expire at 5:00 p.m., Houston, Texas time, on August 26, 2002. The Company
caused this Warrant to be issued as of December 4, 1997, as repriced and
restated on August, 13, 1999, and as repriced and restated on December 17, 1999.
As used herein, the following terms shall have the meanings set forth
below:
"Cashless Exercise" has the meaning given in Section 1.1.
"Company" shall mean Intelect Communications, Inc., a Delaware
corporation, and shall also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
"Common Stock" shall mean and include the Company's Common Stock, par
value $0.01 per share, authorized on the date of the original issue of this
Warrant and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets of the character referred to in Section 3.5 hereof,
the stock, securities provided for in such Section 3.5, and (ii) any other
shares of Common Stock of the Company into which such shares of Common Stock may
be converted.
"Convertible Securities" has the meaning given in Section 3.2 (b)(i).
"Exercise Date" has the meaning given in Section 1.1.
"Exercise Price" shall mean the initial purchase price of NO AND 75/100
DOLLARS ($0.75), per share of Common Stock payable upon exercise of the
Warrants, as adjusted from time to time pursuant to the provisions hereof.
"Holder" means The Coastal Corporation Second Pension Trust.
"Market Price" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (x) the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers ("NASD") National Market on such
date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose, in each such case,
unless otherwise provided herein, averaged over a period of ten (10) consecutive
Trading Days prior to the date as of which the determination is to be made; or
(y) if the Common Stock shall not be listed or admitted to trading as provided
in clause "(x)" above, the fair market value of the Common Stock as determined
in good faith by the Board of Directors of the Company.
<PAGE> 2
"Note" shall mean the Amended and Restated Promissory Note of the
Company issued to Holder in the principal amount of $12,000,000, of even date
herewith.
"Outstanding" when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the Company.
"Registration Rights Agreement" means the Agreement between Company and
Holder.
"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.
"Subscription Notice" has the meaning given in Section 1.1.
"Trading Days" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
"Warrant" shall mean the right upon exercise to purchase one Warrant
Share.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the Holder hereof upon the exercise of the Warrants.
ARTICLE I
EXERCISE OF WARRANTS
Section I.1 Method of Exercise. The Warrants represented hereby may be
exercised by the Holder hereof, in whole or in part, at any time and from time
to time on or after the date hereof until 5:00 p.m., Houston, Texas time, on
August 26, 2002 (the "Exercise Date"). To exercise the Warrants, the Holder
hereof shall deliver to the Company, at the Warrant Office designated in Section
2.1 hereof, (i) a written notice in the form of the Subscription Notice attached
as an exhibit hereto, stating therein the election of such holder to exercise
the Warrants in the manner provided in the Subscription Notice; (ii) payment in
full of the Exercise Price (A) in cash or immediately available funds for all
Warrant Shares purchased hereunder, or (B) if the Company and the Holder
mutually elect, through a "cashless" or "net-issue" exercise of each such
Warrant ("Cashless Exercise"); the Holder shall exchange each Warrant subject to
a Cashless Exercise for that number of Warrant Shares determined by multiplying
the number of Warrant Shares issuable hereunder by a fraction, the numerator of
which shall be the difference between (x) the Market Price and (y) the Exercise
Price for each such Warrant, and the denominator of which shall be the Market
Price; the Subscription Notice shall set forth the calculation upon which the
Cashless Exercise is based, or (C) a combination of (A) and (B) above; and (iii)
this Warrant. The Warrants shall be deemed to be exercised on the date of
receipt by the Company of the Subscription Notice, accompanied by payment for
the Warrant Shares and surrender of this Warrant, as aforesaid, and such date is
referred to herein as the "Exercise Date". Upon such exercise, the Company
shall, as promptly as practicable and in any event within ten (10) business
days, issue and deliver to such holder a certificate or certificates for the
full number of the Warrant Shares purchased by such holder hereunder, and shall,
unless the Warrants have expired, deliver to the Holder hereof a new Warrant
representing the number of Warrants, if any, that shall not have been exercised,
in all other respects identical to this Warrant. As permitted by applicable law,
the person in whose name the certificates for Common Stock are to be issued
shall be deemed to have become a holder of record of such Common Stock on the
Exercise Date and shall be entitled to all of the benefits of such holder on the
Exercise Date, including without limitation the right to receive dividends and
other distributions for which the record date falls on or after the Exercise
Date and to exercise voting rights.
Section I.2 Expenses and Taxes. The Company shall pay all expenses, and
taxes (including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
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<PAGE> 3
Section I.3 Reservation of Shares. The Company shall reserve at all
times so long as the Warrants remain outstanding, free from preemptive rights,
out of its treasury Common Stock or its authorized but unissued shares of Common
Stock, or both, solely for the purpose of effecting the exercise of the
Warrants, a sufficient number of shares of Common Stock to provide for the
exercise of the Warrants.
Section I.4 Valid Issuance. All shares of Common Stock that may be
issued upon exercise of the Warrants will, upon issuance by the Company, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issuance thereof and, without limiting the
generality of the foregoing, the Company shall take no action or fail to take
any action which will cause a contrary result (including, without limitation,
any action that would cause the Exercise Price to be less than the par value, if
any, of the Common Stock).
Section I.5 Purchase Agreement. The Warrants represented hereby are
part of a duly authorized issuance and sale of Warrants to purchase Common Stock
issued and sold pursuant to the Loan Agreement between Holder and Company of
even date herewith.
Section I.6 Acknowledgment of Rights. At the time of the exercise of
the Warrants in accordance with the terms hereof and upon the written request of
the Holder hereof, the Company will acknowledge in writing its continuing
obligation to afford to such holder any rights (including, without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant; provided, however, that if the Holder hereof shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
Section I.7 No Fractional Shares. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of this Warrant. If more
than one Warrant shall be presented for exercise at the same time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of whole
shares of Common Stock purchasable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section 1.7, be issuable on the exercise of this Warrant, the Company shall pay
an amount in cash calculated by it to be equal to the Market Price of one share
of Common Stock at the time of such exercise multiplied by such fraction
computed to the nearest whole cent.
ARTICLE II
TRANSFER
Section II.1 Warrant Office. The Company shall maintain an office for
certain purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's offices at 1100 Executive Drive, Richardson, Texas
75081 and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to which
written notice has previously been given to the Holder hereof. The Company shall
maintain, at the Warrant Office, a register for the Warrants in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
Section II.2 Ownership of Warrants. The Company may deem and treat the
person in whose name the Warrants are registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if properly assigned in compliance with this Article II, may
be exercised by an assignee for the purchase of Warrant Shares without having a
new Warrant issued.
Section II.3 Restrictions on Transfer of Warrants.
(a) The Company agrees to maintain at the Warrant Office books
for the registration and transfer of the Warrants. Subject to the restrictions
on transfer of the Warrants in this Section 2.3, the Company, from time to time,
shall register the transfer of the Warrants in such books upon surrender of this
Warrant at the Warrant Office properly endorsed or accompanied by appropriate
instruments of transfer and written instructions for transfer satisfactory to
the
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<PAGE> 4
Company. Upon any such transfer and upon payment by the Holder or its transferee
of any applicable transfer taxes, new Warrants shall be issued to the transferee
and the transferor (as their respective interests may appear) and the
surrendered Warrants shall be canceled by the Company. The Company shall pay all
taxes (other than securities transfer taxes or income taxes) and all other
expenses and charges payable in connection with the transfer of the Warrants
pursuant to this Section 2.3.
(b) Restrictions in General. The Holder of the Warrants agrees
that it will neither (i) transfer the Warrants prior to delivery to the Company
of written notice of such transfer, nor (ii) transfer such Warrant Shares prior
to delivery to the Company of written notice of such transfer, or until
registration of such Warrant Shares under the Securities Act and any applicable
state securities or Blue Sky laws has become effective.
Section II.4 Compliance with Securities Laws. Subject to the terms of
the Registration Rights Agreement between the Holder and the Company dated as of
the date hereof and notwithstanding any other provisions contained in this
Warrant, the Holder hereof understands and agrees that the following
restrictions and limitations shall be applicable to all Warrant Shares and to
all resales or other transfers thereof pursuant to the Securities Act:
(a) The Holder hereof agrees that the Warrant Shares shall not
be sold or otherwise transferred unless the Warrant Shares are registered under
the Securities Act and applicable state securities or Blue Sky laws or are
exempt therefrom.
(b) A legend in substantially the following form will be
placed on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAW AND, ACCORDINGLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS."
(c) Stop transfer instructions will be imposed with respect to
the Warrant Shares so as to restrict resale or other transfer thereof, subject
to this Section 2.4.
(d) The Holder understands that it must bear the economic risk
of the investment for an indefinite period of time because the Warrant Shares
have not been registered under the Securities Act and therefor cannot be sold
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. The Holder acknowledges that the Holder or
the Holder's representative is familiar with the condition, financial and
otherwise, of the Company. The Holder or the Holder's representative has such
knowledge and experience in financial and business matters that the Holder or
the Holder's representative is able to weigh the information so received and to
evaluate the merits and risks of the Holder's investment in the Warrant Shares.
ARTICLE III
ANTI-DILUTION
Section III.1 Anti-Dilution Provisions. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
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<PAGE> 5
Section III.2 Adjustment of Exercise Price Upon Issuance of Common
Stock.
(a) (i) If and whenever after the date hereof the Company
shall issue or sell any Common Stock for no consideration or for a
consideration per share less than the Exercise Price, then, forthwith
upon such issue or sale, the Exercise Price shall be reduced (but not
increased, except as otherwise specifically provided in Section 3.2
hereof), to the price (calculated to the nearest one-ten thousandth of
a cent) determined by dividing (x) an amount equal to the sum of (i)
the aggregate number of shares of Common Stock Outstanding immediately
prior to such issue or sale multiplied by the consideration received by
the Company upon such issuance or sale on a per share basis plus (ii)
the consideration received by the Company upon such issue or sale by
(y) the aggregate number of shares of Common Stock Outstanding
immediately after such issue or sale.
(ii) Notwithstanding the provisions of this Section 3.2,
no adjustment shall be made in the Exercise Price in the event that the
Company issues, in one or more transactions, (A) Common Stock or
Convertible Securities upon exercise of any options issued to officers,
directors or employees of the Company pursuant to a stock option plan
or an employment, severance or consulting agreement as now or hereafter
in effect, in each case approved by the Board of Directors (provided
that the aggregate number of shares of Common Stock which may be
issuable, including options issued prior to the date hereof, under all
such employee plans and agreements shall at no time exceed the number
of such shares of Common Stock that are issuable under currently
effective employee plans and agreements); (B) Common Stock upon
exercise of the Warrants or any other Warrant issued pursuant to the
terms of the Agreement or otherwise issued to the Holder; (C) Common
Stock upon exercise of any stock purchase Warrant or option (other than
the options referred to in clause "(A)" above) or other convertible
security outstanding on the date hereof; (D) Common Stock upon
conversion of the Note; or (E) Common Stock issued as consideration in
acquisitions. In addition, for purposes of calculating any adjustment
of the Exercise Price as provided in this Section 3.2, all of the
shares of Common Stock issuable pursuant to any of the foregoing shall
be assumed to be Outstanding prior to the event causing such adjustment
to be made.
(b) For purposes of this Section 3.2, the following Sections
3.2(b)(i) to 3.2(b)(v) inclusive, shall be applicable:
(i) Issuance of Rights or Options. In case at any
time after the date hereof the Company shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any rights
to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock
or securities being herein called "Convertible Securities"), whether or
not such rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (A) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, or plus, in the case of such rights
or options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights or options) shall be less than the Exercise
Price in effect as of the date of granting such rights or options, then
the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon conversion or exchange of
all such Convertible Securities issuable upon the exercise of such
rights or options shall be deemed to be outstanding as of the date of
the granting of such rights or options and to have been issued for such
price per share, with the effect on the Exercise Price specified in
Section 3.2(a) hereof. Except as provided in Section 3.2(b) hereof, no
further adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon
exercise of such rights or options or upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible
Securities.
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<PAGE> 6
(ii) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase
price provided for in any right or option referred to in Section
3.2(b), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
Section 3.2(b), or the rate at which any Convertible Securities
referred to in Section 3.2(b), are convertible into or exchangeable for
Common Stock shall change (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price then in
effect hereunder shall forthwith be readjusted (increased or decreased,
as the case may be) to the Exercise Price that would have been in
effect at such time had such rights, options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of any such option
or right referred to in Section 3.2(b), or on the termination of any
such right to convert or exchange any such Convertible Securities
referred to in Section 3.2(b), the Exercise Price then in effect
hereunder shall forthwith be readjusted (increased or decreased, as the
case may be) to the Exercise Price that would have been in effect at
the time of such expiration or termination had such right, option or
Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been granted, issued or sold, and
the Common Stock issuable thereunder shall no longer be deemed to be
Outstanding. If the purchase price provided for in Section 3.2(b) or
the rate at which any Convertible Securities referred to in Section
3.2(b) reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of
the delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall, if not
already adjusted, forthwith be adjusted to such amount as would have
obtained had such right, option or Convertible Securities never been
issued as to such Common Stock and had adjustments been made upon the
issuance of the Common Stock delivered as aforesaid, but only if as a
result of such adjustment the Exercise Price then in effect hereunder
is thereby reduced.
(iii) Consideration for Stock. In case at any time
Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for cash, the consideration therefor shall be deemed to
be the amount received by the Company therefor. In case at any time any
Common Stock, Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed
to be the fair value of such consideration, as determined reasonably
and in good faith by the Board of Directors of the Company. In case at
any time any Common Stock, Convertible Securities or any rights or
options to purchase any Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the
Company is the surviving corporation, the amount of consideration
received therefor shall be deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the Company,
of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be attributable
to such Common Stock, Convertible Securities, rights or options as the
case may be. In case at any time any rights or options to purchase any
shares of Common Stock or Convertible Securities shall be issued in
connection with the issuance and sale of other securities of the
Company, together consisting of one integral transaction in which no
consideration is allocated to such rights or options by the parties,
such rights or options shall be deemed to have been issued with
consideration.
(iv) Record Date. In the case the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in Common Stock or Convertible Securities, or (ii) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a
result of the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription
or purchase, as the case may be.
(v) Treasury Shares. The number of shares of Common
Stock Outstanding at any given time shall not include shares owned
directly by the Company in treasury, and the disposition of any such
shares shall be considered an issuance or sale of Common Stock for the
purpose of this Section 3.2.
Section III.3 Stock Dividends. In case the Company shall declare a
dividend or make any other distribution upon any shares of the Company, payable
in Common Stock or Convertible Securities, any Common Stock
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<PAGE> 7
or Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.
Section III.4 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its Outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in the event
that the Outstanding shares of Common Stock shall at any time be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced. Except as provided in this Section
3.4, no adjustment in the Exercise Price and no change in the number of Warrant
Shares purchasable shall be made under this Article III as a result of or by
reason of any such subdivision or combination.
Section III.5 Reorganizations and Asset Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another person shall be effected in such a way that a holder of Common
Stock of the Company shall be entitled to receive capital stock, securities or
assets with respect to or in exchange for their shares, then the following
provisions shall apply:
(a) As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in this Section 3.5), lawful and adequate
provisions shall be made whereby the holder of Warrants shall thereafter have
the right to purchase and receive upon the terms and conditions specified in
this Warrant and in lieu of the Warrant Shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares of
capital stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of Outstanding shares of such Common Stock equal to
the number of Warrant Shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision reasonably
satisfactory to such holder shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the exercise of Warrants.
(b) In the event of a merger, share exchange or consolidation
of the Company with or into another person as a result of which a number of
shares of Common Stock or its equivalent of the successor person greater or
lesser than the number of shares of Common Stock Outstanding immediately prior
to such merger, share exchange or consolidation are issuable to holders of
Common Stock, then the Exercise Price in effect immediately prior to such
merger, share exchange or consolidation shall be adjusted in the same manner as
though there were a subdivision or combination of the Outstanding shares of
Common Stock.
(c) The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Holder hereof at the
last address of such holder appearing on the books of the Company the obligation
to deliver to such holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the Holder hereof, such successor person will issue a
new Warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section 3.5.
(d) If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the Outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the person having made such offer or with any affiliate of such
person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the Holder hereof shall have been
given a reasonable opportunity to
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<PAGE> 8
then elect to receive upon the exercise of the Warrants either the capital
stock, securities or assets then issuable with respect to the Common Stock or
the capital stock, securities or assets, or the equivalent, issued to previous
holders of the Common Stock in accordance with such offer.
Section III.6 Adjustment for Asset Distribution. If the Company
declares a dividend or other distribution payable to all holders of shares of
Common Stock in evidences of indebtedness of the Company or other assets of the
Company (including, cash (other than regular cash dividends declared by the
Board of Directors), capital stock (other than Common Stock, Convertible
Securities or options or rights thereto) or other property), the Exercise Price
in effect immediately prior to such declaration of such dividend or other
distribution shall be reduced by an amount equal to the amount of such dividend
or distribution payable per share of Common Stock, in the case of a cash
dividend or distribution, or by the fair value of such dividend or distribution
per share of Common Stock (as reasonably determined in good faith by the Board
of Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
Section III.7 De Minimis Adjustments. No adjustment in the number of
shares of Common Stock purchasable hereunder shall be required unless such
adjustment would require an increase or decrease of at least one share of Common
Stock purchasable upon an exercise of each Warrant and no adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least $0.01 in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 3.7 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest full share or nearest
one-hundredth of a dollar, as applicable.
Section III.8 Notice of Adjustment. Whenever the Exercise Price or the
number of Warrant Shares issuable upon the exercise of the Warrants shall be
adjusted as herein provided, or the rights of the Holder hereof shall change by
reason of other events specified herein, the Company shall compute the adjusted
Exercise Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock, securities
or assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based. The Company shall cause to be mailed to the Holder
hereof copies of such Officer's Certificate together with a notice stating that
the Exercise Price and the number of Warrant Shares purchasable upon exercise of
the Warrants have been adjusted and setting forth the adjusted Exercise Price
and the adjusted number of Warrant Shares purchasable upon the exercise of the
Warrants.
Section III.9 Notifications to Holders. In case at any time the
Company proposes:
(a) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution (other than
cash dividends) to the holders of its Common Stock;
(b) to offer for subscription pro rata to all of the holders
of its Common Stock any additional shares of capital stock of any class or other
rights;
(c) to effect any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation, merger or share exchange
of the Company with another person, or sale, transfer or other disposition of
all or substantially all of its assets; or
(d) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of such
cases, the Company shall give the Holder hereof (a) at least ten (10) days' (but
not more than ninety (90) days') prior written notice of the date of which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of such issuance, reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
and (b) in the case of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, at least ten (10) days' (but not
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<PAGE> 9
more than ninety (90) days') prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause "(a)"
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause "(b)"
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock, as the case may be, for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, as the case may be.
Section III.10 Company to Prevent Dilution. If any event or condition
occurs as to which other provisions of this Article III are not strictly
applicable or if strictly applicable would not fairly protect the exercise or
purchase rights of the Warrants evidenced hereby in accordance with the
essential intent and principles of such provisions, or that might materially and
adversely affect the exercise or purchase rights of the Holder hereof under any
provisions of this Warrant, then the Company shall make such adjustments in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such exercise and purchase rights as aforesaid, and
any adjustments necessary with respect to the Exercise Price and the number of
Warrant Shares purchasable hereunder so as to preserve the rights of the Holder
hereunder. In no event shall any such adjustment have the effect of increasing
the Exercise Price as otherwise determined pursuant to this Article III except
in the event of a combination of shares of the type contemplated in Section 3.4
hereof, and then in no event to an amount greater than the Exercise Price as
adjusted pursuant to Section 3.4 hereof.
ARTICLE IV
MISCELLANEOUS
Section IV.1 Entire Agreement. This Warrant, together with the
Agreement, contain the entire agreement between the Holder hereof and the
Company with respect to the Warrant Shares purchasable upon exercise hereof and
the related transactions and supersedes all prior arrangements or understandings
with respect thereto.
Section IV.2 Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section IV.3 Waiver and Amendment. Any term or provision of this
Warrant may be waived at any time by the party which is entitled to the benefits
thereof and any term or provision of this Warrant may be amended or supplemented
at any time by agreement of the Holder hereof and the Company, except that any
waiver of any term or condition, or any amendment or supplementation, of this
Warrant shall be in writing. A waiver of any breach or failure to enforce any of
the terms or conditions of this Warrant shall not in any way effect, limit or
waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of this Warrant.
Section IV.4 Illegality. In the event that any one or more of the
provisions contained in this Warrant shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
Section IV.5 Copy of Warrant. A copy of this Warrant shall be filed
among the records of the Company.
Section IV.6 Notice. All notices, requests, demands or other
communications to or upon the respective parties hereto shall be deemed to have
been duly given or made when delivered to the party to which such notice,
request, demand or other communication is required or permitted to be given or
made under this Warrant addressed to such party at its address set forth below
or at such other address as either of the parties hereto may hereafter notify
the other in writing.
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<PAGE> 10
To COMPANY: INTELECT COMMUNICATIONS, INC.
1100 Executive Drive
Richardson, Texas 75081
Telephone: 972-367-2100
Telecopy: 972-367-2271
Attention: Herman Frietsch, President and CEO
with a copy to: RYAN & SUDAN, L.L.P.
909 Fannin, 39th Floor
Houston, Texas 77010
Telephone: 713-652-0501
Telecopy: 713-652-0503
Attention: Philip P. Sudan, Jr., Esq.
To HOLDER: THE COASTAL CORPORATION SECOND PENSION TRUST
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-6825
Telecopy: 713-877-7071
Attention: Donald H. Gullquist, Trustee
with a copy to: THE COASTAL CORPORATION
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-6920
Telecopy: 713-877-7132
Attention: Director, Financial Administration
Section IV.7 Limitation of Liability; Not Stockholders. No provision of
this Warrant shall be construed as conferring upon the Holder hereof the right
to vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Section IV.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt
of evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in such
form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the
Company will make and deliver a new Warrant of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 4.8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or in lieu of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company. This Warrant shall be
promptly canceled by the Company upon the surrender hereof in connection with
any exchange or replacement. The Company shall pay all taxes (other than
securities transfer taxes or income taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to this Section 4.8.
Section IV.9 Registration Rights. The Warrant Shares shall be entitled
to such registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
Section IV.10 Headings. The Article and Section and other headings
herein are for convenience only and are not a part of this Warrant and shall not
affect the interpretation thereof.
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<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be issued as
of December 4, 1997, as repriced and restated on August, 13, 1999, and as
repriced and restated on December 17, 1999.
INTELECT COMMUNICATIONS, INC.
By:
-----------------------------
Herman M. Frietsch
Chairman & CEO
SIGNATURE PAGE TO WARRANT
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<PAGE> 12
SUBSCRIPTION NOTICE
The undersigned, the Holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for and to purchase thereunder,
FOUR HUNDRED FIFTY THOUSAND (450,000) shares of the Common Stock covered by such
Warrant, and herewith makes payment in full for such shares pursuant to Section
1.1 of such Warrant, and requests (a) that certificates for such shares (and any
other securities or other property issuable upon such exercise) be issued in the
name of, and delivered to THE COASTAL CORPORATION SECOND PENSION TRUST and (b),
if such shares shall not include all of the shares issuable as provided in such
Warrant, that a new Warrant of like tenor and date for the balance of the shares
issuable thereunder be delivered to the undersigned.
THE COASTAL CORPORATION SECOND PENSION TRUST
By:
-----------------------------------------
Date:
-----------------------
<PAGE> 13
ASSIGNMENT
For value received, _______________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer such Warrant on the books
of the Company, with full power of substitution.
_________________________
Date:_______________________
<PAGE> 1
EXHIBIT 4.3
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
WARRANT
to Purchase Common Stock of
INTELECT COMMUNICATIONS, INC.
Expiring on August 12, 2004
This Common Stock Purchase Warrant (the "Warrant"), certifies that for
value received, THE COASTAL CORPORATION SECOND PENSION TRUST (the "Holder") or
its assigns, is entitled to subscribe for and purchase from the Company (as
hereinafter defined), in whole or in part, ONE MILLION SIXTY-SEVEN THOUSAND
THREE HUNDRED EIGHT (1,067,308) shares of duly authorized, validly issued, fully
paid and nonassessable Common Stock (as hereinafter defined) at an initial
Exercise Price (as hereinafter defined) per share of NO AND 75/100 DOLLARS
($0.75), subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of Warrants (as hereinafter defined), the
number of shares of Common Stock purchasable hereunder, and the Exercise Price
therefor are subject to adjustment as hereinafter set forth. This Warrant and
all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, five (5)
years from the date hereof, on August 12, 2004. The Company caused this Warrant
to be issued as of August 13, 1999, as repriced and restated on December 17,
1999.
As used herein, the following terms shall have the meanings set forth
below:
"Cashless Exercise" has the meaning given in Section 1.1.
"Company" shall mean Intelect Communications, Inc., a Delaware
corporation, and shall also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
"Common Stock" shall mean and include the Company's Common Stock, par
value $0.01 per share, authorized on the date of the original issue of this
Warrant and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets of the character referred to in Section 3.5 hereof,
the stock, securities provided for in such Section 3.5, and (ii) any other
shares of Common Stock of the Company into which such shares of Common Stock may
be converted.
"Convertible Securities" has the meaning given in Section 3.2 (b)(i).
"Exercise Date" has the meaning given in Section 1.1.
"Exercise Price" shall mean the initial purchase price of NO AND 75/100
DOLLARS ($0.75), per share of Common Stock payable upon exercise of the
Warrants, as adjusted from time to time pursuant to the provisions hereof.
"Holder" means The Coastal Corporation Second Pension Trust.
"Market Price" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (x) the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers ("NASD") National Market on such
date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose, in each such case,
unless otherwise provided herein, averaged over a period of five (5) consecutive
Trading Days prior to the date as of which the determination is to be made; or
(y) if the Common Stock shall not be listed or admitted to trading as provided
in clause "(x)" above, the fair market value of the Common Stock as determined
in good faith by the Board of Directors of the Company.
<PAGE> 2
"Note" shall mean the Note issued under the Amended and Restated Loan
Agreement For Receivables- And Inventory-backed Borrowing of the Company issued
to Holder in the principal amount of $12,000,000, of even date herewith.
"Outstanding" when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the Company.
"Registration Rights Agreement" means the Agreement between Company and
Holder.
"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.
"Subscription Notice" has the meaning given in Section 1.1.
"Trading Days" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
"Warrant" shall mean the right upon exercise to purchase one Warrant
Share.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the Holder hereof upon the exercise of the Warrants.
ARTICLE I
EXERCISE OF WARRANTS
Section I.1 Method of Exercise. The Warrants represented hereby may be
exercised by the Holder hereof, in whole or in part, at any time and from time
to time on or after the date hereof until 5:00 p.m., Houston, Texas time, on
August 12, 2004 (the "Exercise Date"). To exercise the Warrants, the Holder
hereof shall deliver to the Company, at the Warrant Office designated in Section
2.1 hereof, (i) a written notice in the form of the Subscription Notice attached
as an exhibit hereto, stating therein the election of such holder to exercise
the Warrants in the manner provided in the Subscription Notice; (ii) payment in
full of the Exercise Price (A) in cash or immediately available funds for all
Warrant Shares purchased hereunder, or (B) if the Company and the Holder
mutually elect, through a "cashless" or "net-issue" exercise of each such
Warrant ("Cashless Exercise"); the Holder shall exchange each Warrant subject to
a Cashless Exercise for that number of Warrant Shares determined by multiplying
the number of Warrant Shares issuable hereunder by a fraction, the numerator of
which shall be the difference between (x) the Market Price and (y) the Exercise
Price for each such Warrant, and the denominator of which shall be the Market
Price; the Subscription Notice shall set forth the calculation upon which the
Cashless Exercise is based, or (C) a combination of (A) and (B) above; and (iii)
this Warrant. The Warrants shall be deemed to be exercised on the date of
receipt by the Company of the Subscription Notice, accompanied by payment for
the Warrant Shares and surrender of this Warrant, as aforesaid, and such date is
referred to herein as the "Exercise Date". Upon such exercise, the Company
shall, as promptly as practicable and in any event within ten (10) business
days, issue and deliver to such holder a certificate or certificates for the
full number of the Warrant Shares purchased by such holder hereunder, and shall,
unless the Warrants have expired, deliver to the Holder hereof a new Warrant
representing the number of Warrants, if any, that shall not have been exercised,
in all other respects identical to this Warrant. As permitted by applicable law,
the person in whose name the certificates for Common Stock are to be issued
shall be deemed to have become a holder of record of such Common Stock on the
Exercise Date and shall be entitled to all of the benefits of such holder on the
Exercise Date, including without limitation the right to receive dividends and
other distributions for which the record date falls on or after the Exercise
Date and to exercise voting rights.
Section I.2 Expenses and Taxes. The Company shall pay all expenses, and
taxes (including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
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Section I.3 Reservation of Shares. The Company shall reserve at all
times so long as the Warrants remain outstanding, free from preemptive rights,
out of its treasury Common Stock or its authorized but unissued shares of Common
Stock, or both, solely for the purpose of effecting the exercise of the
Warrants, a sufficient number of shares of Common Stock to provide for the
exercise of the Warrants.
Section I.4 Valid Issuance. All shares of Common Stock that may be
issued upon exercise of the Warrants will, upon issuance by the Company, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issuance thereof and, without limiting the
generality of the foregoing, the Company shall take no action or fail to take
any action which will cause a contrary result (including, without limitation,
any action that would cause the Exercise Price to be less than the par value, if
any, of the Common Stock).
Section I.5 Purchase Agreement. The Warrants represented hereby are
part of a duly authorized issuance and sale of Warrants to purchase Common Stock
issued and sold pursuant to the Loan Agreement between Holder and Company of
even date herewith.
Section I.6 Acknowledgment of Rights. At the time of the exercise of
the Warrants in accordance with the terms hereof and upon the written request of
the Holder hereof, the Company will acknowledge in writing its continuing
obligation to afford to such holder any rights (including, without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant; provided, however, that if the Holder hereof shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
Section I.7 No Fractional Shares. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of this Warrant. If more
than one Warrant shall be presented for exercise at the same time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of whole
shares of Common Stock purchasable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section 1.7, be issuable on the exercise of this Warrant, the Company shall pay
an amount in cash calculated by it to be equal to the Market Price of one share
of Common Stock at the time of such exercise multiplied by such fraction
computed to the nearest whole cent.
ARTICLE II
TRANSFER
Section II.1 Warrant Office. The Company shall maintain an office for
certain purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's offices at 1100 Executive Drive, Richardson, Texas
75081 and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to which
written notice has previously been given to the Holder hereof. The Company shall
maintain, at the Warrant Office, a register for the Warrants in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
Section II.2 Ownership of Warrants. The Company may deem and treat the
person in whose name the Warrants are registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if properly assigned in compliance with this Article II, may
be exercised by an assignee for the purchase of Warrant Shares without having a
new Warrant issued.
Section II.3 Restrictions on Transfer of Warrants.
(a) The Company agrees to maintain at the Warrant Office books
for the registration and transfer of the Warrants. Subject to the restrictions
on transfer of the Warrants in this Section 2.3, the Company, from time to time,
shall register the transfer of the Warrants in such books upon surrender of this
Warrant at the Warrant Office properly endorsed or accompanied by appropriate
instruments of transfer and written instructions for transfer satisfactory to
the
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<PAGE> 4
Company. Upon any such transfer and upon payment by the Holder or its transferee
of any applicable transfer taxes, new Warrants shall be issued to the transferee
and the transferor (as their respective interests may appear) and the
surrendered Warrants shall be canceled by the Company. The Company shall pay all
taxes (other than securities transfer taxes or income taxes) and all other
expenses and charges payable in connection with the transfer of the Warrants
pursuant to this Section 2.3.
(b) Restrictions in General. The Holder of the Warrants agrees
that it will neither (i) transfer the Warrants prior to delivery to the Company
of written notice of such transfer, nor (ii) transfer such Warrant Shares prior
to delivery to the Company of written notice of such transfer, or until
registration of such Warrant Shares under the Securities Act and any applicable
state securities or Blue Sky laws has become effective.
Section II.4 Compliance with Securities Laws. Subject to the terms of
the Registration Rights Agreement between the Holder and the Company dated as of
the date hereof and notwithstanding any other provisions contained in this
Warrant, the Holder hereof understands and agrees that the following
restrictions and limitations shall be applicable to all Warrant Shares and to
all resales or other transfers thereof pursuant to the Securities Act:
(a) The Holder hereof agrees that the Warrant Shares shall not
be sold or otherwise transferred unless the Warrant Shares are registered under
the Securities Act and applicable state securities or Blue Sky laws or are
exempt therefrom.
(b) A legend in substantially the following form will be
placed on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAW AND, ACCORDINGLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS."
(c) Stop transfer instructions will be imposed with respect to
the Warrant Shares so as to restrict resale or other transfer thereof, subject
to this Section 2.4.
(d) The Holder understands that it must bear the economic risk
of the investment for an indefinite period of time because the Warrant Shares
have not been registered under the Securities Act and therefor cannot be sold
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. The Holder acknowledges that the Holder or
the Holder's representative is familiar with the condition, financial and
otherwise, of the Company. The Holder or the Holder's representative has such
knowledge and experience in financial and business matters that the Holder or
the Holder's representative is able to weigh the information so received and to
evaluate the merits and risks of the Holder's investment in the Warrant Shares.
ARTICLE III
ANTI-DILUTION
Section III.1 Anti-Dilution Provisions. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
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<PAGE> 5
Section III.2 Adjustment of Exercise Price Upon Issuance of Common
Stock.
(a) (i) If and whenever after the date hereof the Company
shall issue or sell any Common Stock for no consideration or for a
consideration per share less than the Exercise Price, then, forthwith
upon such issue or sale, the Exercise Price shall be reduced (but not
increased, except as otherwise specifically provided in Section 3.2
hereof), to the price (calculated to the nearest one-ten thousandth of
a cent) determined by dividing (x) an amount equal to the sum of (i)
the aggregate number of shares of Common Stock Outstanding immediately
prior to such issue or sale multiplied by the consideration received by
the Company upon such issuance or sale on a per share basis plus (ii)
the consideration received by the Company upon such issue or sale by
(y) the aggregate number of shares of Common Stock Outstanding
immediately after such issue or sale.
(ii) Notwithstanding the provisions of this Section
3.2, no adjustment shall be made in the Exercise Price in the event
that the Company issues, in one or more transactions, (A) Common Stock
or Convertible Securities upon exercise of any options issued to
officers, directors or employees of the Company pursuant to a stock
option plan or an employment, severance or consulting agreement as now
or hereafter in effect, in each case approved by the Board of Directors
(provided that the aggregate number of shares of Common Stock which may
be issuable, including options issued prior to the date hereof, under
all such employee plans and agreements shall at no time exceed the
number of such shares of Common Stock that are issuable under currently
effective employee plans and agreements); (B) Common Stock upon
exercise of the Warrants or any other Warrant issued pursuant to the
terms of the Agreement or otherwise issued to the Holder; (C) Common
Stock upon exercise of any stock purchase Warrant or option (other than
the options referred to in clause "(A)" above) or other convertible
security outstanding on the date hereof; (D) Common Stock upon
conversion or redemption of the Note; or (E) Common Stock issued as
consideration in acquisitions. In addition, for purposes of calculating
any adjustment of the Exercise Price as provided in this Section 3.2,
all of the shares of Common Stock issuable pursuant to any of the
foregoing shall be assumed to be Outstanding prior to the event causing
such adjustment to be made.
(b) For purposes of this Section 3.2, the following Sections
3.2(b)(i) to 3.2(b)(v) inclusive, shall be applicable:
(i) Issuance of Rights or Options. In case at any
time after the date hereof the Company shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any rights
to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock
or securities being herein called "Convertible Securities"), whether or
not such rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (A) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, or plus, in the case of such rights
or options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights or options) shall be less than the Exercise
Price in effect as of the date of granting such rights or options, then
the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon conversion or exchange of
all such Convertible Securities issuable upon the exercise of such
rights or options shall be deemed to be outstanding as of the date of
the granting of such rights or options and to have been issued for such
price per share, with the effect on the Exercise Price specified in
Section 3.2(a) hereof. Except as provided in Section 3.2(b) hereof, no
further adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon
exercise of such rights or options or upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible
Securities.
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<PAGE> 6
(ii) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase
price provided for in any right or option referred to in Section
3.2(b), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
Section 3.2(b), or the rate at which any Convertible Securities
referred to in Section 3.2(b), are convertible into or exchangeable for
Common Stock shall change (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price then in
effect hereunder shall forthwith be readjusted (increased or decreased,
as the case may be) to the Exercise Price that would have been in
effect at such time had such rights, options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of any such option
or right referred to in Section 3.2(b), or on the termination of any
such right to convert or exchange any such Convertible Securities
referred to in Section 3.2(b), the Exercise Price then in effect
hereunder shall forthwith be readjusted (increased or decreased, as the
case may be) to the Exercise Price that would have been in effect at
the time of such expiration or termination had such right, option or
Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been granted, issued or sold, and
the Common Stock issuable thereunder shall no longer be deemed to be
Outstanding. If the purchase price provided for in Section 3.2(b) or
the rate at which any Convertible Securities referred to in Section
3.2(b) reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of
the delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall, if not
already adjusted, forthwith be adjusted to such amount as would have
obtained had such right, option or Convertible Securities never been
issued as to such Common Stock and had adjustments been made upon the
issuance of the Common Stock delivered as aforesaid, but only if as a
result of such adjustment the Exercise Price then in effect hereunder
is thereby reduced.
(iii) Consideration for Stock. In case at any time
Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for cash, the consideration therefor shall be deemed to
be the amount received by the Company therefor. In case at any time any
Common Stock, Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed
to be the fair value of such consideration, as determined reasonably
and in good faith by the Board of Directors of the Company. In case at
any time any Common Stock, Convertible Securities or any rights or
options to purchase any Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the
Company is the surviving corporation, the amount of consideration
received therefor shall be deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the Company,
of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be attributable
to such Common Stock, Convertible Securities, rights or options as the
case may be. In case at any time any rights or options to purchase any
shares of Common Stock or Convertible Securities shall be issued in
connection with the issuance and sale of other securities of the
Company, together consisting of one integral transaction in which no
consideration is allocated to such rights or options by the parties,
such rights or options shall be deemed to have been issued with
consideration.
(iv) Record Date. In the case the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in Common Stock or Convertible Securities, or (ii) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a
result of the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription
or purchase, as the case may be.
(v) Treasury Shares. The number of shares of Common
Stock Outstanding at any given time shall not include shares owned
directly by the Company in treasury, and the disposition of any such
shares shall be considered an issuance or sale of Common Stock for the
purpose of this Section 3.2.
Section III.3 Stock Dividends. In case the Company shall declare a
dividend or make any other distribution upon any shares of the Company, payable
in Common Stock or Convertible Securities, any Common Stock
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<PAGE> 7
or Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.
Section III.4 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its Outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in the event
that the Outstanding shares of Common Stock shall at any time be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced. Except as provided in this Section
3.4, no adjustment in the Exercise Price and no change in the number of Warrant
Shares purchasable shall be made under this Article III as a result of or by
reason of any such subdivision or combination.
Section III.5 Reorganizations and Asset Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another person shall be effected in such a way that a holder of Common
Stock of the Company shall be entitled to receive capital stock, securities or
assets with respect to or in exchange for their shares, then the following
provisions shall apply:
(a) As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in this Section 3.5), lawful and adequate
provisions shall be made whereby the holder of Warrants shall thereafter have
the right to purchase and receive upon the terms and conditions specified in
this Warrant and in lieu of the Warrant Shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares of
capital stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of Outstanding shares of such Common Stock equal to
the number of Warrant Shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision reasonably
satisfactory to such holder shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the exercise of Warrants.
(b) In the event of a merger, share exchange or consolidation
of the Company with or into another person as a result of which a number of
shares of Common Stock or its equivalent of the successor person greater or
lesser than the number of shares of Common Stock Outstanding immediately prior
to such merger, share exchange or consolidation are issuable to holders of
Common Stock, then the Exercise Price in effect immediately prior to such
merger, share exchange or consolidation shall be adjusted in the same manner as
though there were a subdivision or combination of the Outstanding shares of
Common Stock.
(c) The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Holder hereof at the
last address of such holder appearing on the books of the Company the obligation
to deliver to such holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the Holder hereof, such successor person will issue a
new Warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section 3.5.
(d) If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the Outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the person having made such offer or with any affiliate of such
person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the Holder hereof shall have been
given a reasonable opportunity to
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<PAGE> 8
then elect to receive upon the exercise of the Warrants either the capital
stock, securities or assets then issuable with respect to the Common Stock or
the capital stock, securities or assets, or the equivalent, issued to previous
holders of the Common Stock in accordance with such offer.
Section III.6 Adjustment for Asset Distribution. If the Company
declares a dividend or other distribution payable to all holders of shares of
Common Stock in evidences of indebtedness of the Company or other assets of the
Company (including, cash (other than regular cash dividends declared by the
Board of Directors), capital stock (other than Common Stock, Convertible
Securities or options or rights thereto) or other property), the Exercise Price
in effect immediately prior to such declaration of such dividend or other
distribution shall be reduced by an amount equal to the amount of such dividend
or distribution payable per share of Common Stock, in the case of a cash
dividend or distribution, or by the fair value of such dividend or distribution
per share of Common Stock (as reasonably determined in good faith by the Board
of Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
Section III.7 De Minimis Adjustments. No adjustment in the number of
shares of Common Stock purchasable hereunder shall be required unless such
adjustment would require an increase or decrease of at least one share of Common
Stock purchasable upon an exercise of each Warrant and no adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least $0.01 in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 3.7 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest full share or nearest
one-hundredth of a dollar, as applicable.
Section III.8 Notice of Adjustment. Whenever the Exercise Price or the
number of Warrant Shares issuable upon the exercise of the Warrants shall be
adjusted as herein provided, or the rights of the Holder hereof shall change by
reason of other events specified herein, the Company shall compute the adjusted
Exercise Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock, securities
or assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based. The Company shall cause to be mailed to the Holder
hereof copies of such Officer's Certificate together with a notice stating that
the Exercise Price and the number of Warrant Shares purchasable upon exercise of
the Warrants have been adjusted and setting forth the adjusted Exercise Price
and the adjusted number of Warrant Shares purchasable upon the exercise of the
Warrants.
Section III.9 Notifications to Holders. In case at any time the Company
proposes:
(a) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution (other than
cash dividends) to the holders of its Common Stock;
(b) to offer for subscription pro rata to all of the holders
of its Common Stock any additional shares of capital stock of any class or other
rights;
(c) to effect any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation, merger or share exchange
of the Company with another person, or sale, transfer or other disposition of
all or substantially all of its assets; or
(d) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of such
cases, the Company shall give the Holder hereof (a) at least ten (10) days' (but
not more than ninety (90) days') prior written notice of the date of which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of such issuance, reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
and (b) in the case of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, at least ten (10) days' (but not
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<PAGE> 9
more than ninety (90) days') prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause "(a)"
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause "(b)"
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock, as the case may be, for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, as the case may be.
Section III.10 Company to Prevent Dilution. If any event or condition
occurs as to which other provisions of this Article III are not strictly
applicable or if strictly applicable would not fairly protect the exercise or
purchase rights of the Warrants evidenced hereby in accordance with the
essential intent and principles of such provisions, or that might materially and
adversely affect the exercise or purchase rights of the Holder hereof under any
provisions of this Warrant, then the Company shall make such adjustments in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such exercise and purchase rights as aforesaid, and
any adjustments necessary with respect to the Exercise Price and the number of
Warrant Shares purchasable hereunder so as to preserve the rights of the Holder
hereunder. In no event shall any such adjustment have the effect of increasing
the Exercise Price as otherwise determined pursuant to this Article III except
in the event of a combination of shares of the type contemplated in Section 3.4
hereof, and then in no event to an amount greater than the Exercise Price as
adjusted pursuant to Section 3.4 hereof.
ARTICLE IV
MISCELLANEOUS
Section IV.1 Entire Agreement. This Warrant, together with the
Agreement, contain the entire agreement between the Holder hereof and the
Company with respect to the Warrant Shares purchasable upon exercise hereof and
the related transactions and supersedes all prior arrangements or understandings
with respect thereto.
Section IV.2 Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section IV.3 Waiver and Amendment. Any term or provision of this
Warrant may be waived at any time by the party which is entitled to the benefits
thereof and any term or provision of this Warrant may be amended or supplemented
at any time by agreement of the Holder hereof and the Company, except that any
waiver of any term or condition, or any amendment or supplementation, of this
Warrant shall be in writing. A waiver of any breach or failure to enforce any of
the terms or conditions of this Warrant shall not in any way effect, limit or
waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of this Warrant.
Section IV.4 Illegality. In the event that any one or more of the
provisions contained in this Warrant shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
Section IV.5 Copy of Warrant. A copy of this Warrant shall be filed
among the records of the Company.
Section IV.6 Notice. All notices, requests, demands or other
communications to or upon the respective parties hereto shall be deemed to have
been duly given or made when delivered to the party to which such notice,
request, demand or other communication is required or permitted to be given or
made under this Warrant addressed to such party at its address set forth below
or at such other address as either of the parties hereto may hereafter notify
the other in writing.
To COMPANY: INTELECT COMMUNICATIONS, INC.
1100 Executive Drive
Richardson, Texas 75081
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<PAGE> 10
Telephone: 972-367-2100
Telecopy: 972-367-2271
Attention: Herman Frietsch, President and CEO
with a copy to: RYAN & SUDAN, L.L.P.
909 Fannin, 39th Floor
Houston, Texas 77010
Telephone: 713-652-0501
Telecopy: 713-652-0503
Attention: Philip P. Sudan, Jr., Esq.
To HOLDER: THE COASTAL CORPORATION SECOND PENSION TRUST
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-6825
Telecopy: 713-877-7071
Attention: Donald H. Gullquist, Trustee
with a copy to: THE COASTAL CORPORATION
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-6920
Telecopy: 713-877-7132
Attention: Director, Financial Administration
Section IV.7 Limitation of Liability; Not Stockholders. No provision of
this Warrant shall be construed as conferring upon the Holder hereof the right
to vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Section IV.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt
of evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in such
form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the
Company will make and deliver a new Warrant of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 4.8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or in lieu of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company. This Warrant shall be
promptly canceled by the Company upon the surrender hereof in connection with
any exchange or replacement. The Company shall pay all taxes (other than
securities transfer taxes or income taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to this Section 4.8.
Section IV.9 Registration Rights. The Warrant Shares shall be entitled
to such registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
Section IV.10 Headings. The Article and Section and other headings
herein are for convenience only and are not a part of this Warrant and shall not
affect the interpretation thereof.
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<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be issued as
August 13, 1999, as repriced and restated on December 17, 1999.
INTELECT COMMUNICATIONS, INC.
By:
-----------------------------
Herman M. Frietsch
Chairman & CEO
SIGNATURE PAGE TO WARRANT
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<PAGE> 12
SUBSCRIPTION NOTICE
The undersigned, the Holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for and to purchase thereunder,
_________ shares of the Common Stock covered by such Warrant, and herewith
makes payment in full for such shares pursuant to Section 1.1 of such Warrant,
and requests (a) that certificates for such shares (and any other securities or
other property issuable upon such exercise) be issued in the name of, and
delivered to THE COASTAL CORPORATION SECOND PENSION TRUST and (b), if such
shares shall not include all of the shares issuable as provided in such Warrant,
that a new Warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
THE COASTAL CORPORATION SECOND PENSION TRUST
By:
-----------------------------------------
Date:
----------------------
<PAGE> 13
ASSIGNMENT
For value received, _______________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer such Warrant on the books
of the Company, with full power of substitution.
------------------------------
Date:
--------------------
<PAGE> 1
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
December 17, 1999, by and between INTELECT COMMUNICATIONS, INC., a Delaware
corporation ("ICI" or the "Company"), and THE COASTAL CORPORATION SECOND PENSION
TRUST ("Purchaser").
W I T N E S S :
WHEREAS, on the date hereof, Purchaser received from the Company
Warrants to purchase shares of the Company's common stock, $.01 par value (the
"Common Stock") which may be exercised to acquire a certain number of shares of
Common Stock, subject to adjustment (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.
"Common Stock" shall have the meaning given in the second recital.
"Company" shall have the meaning given in the Preamble.
"Exchange Act" means the Securities Exchange Act of 1934.
"Indemnified Party" shall have the meaning given in Section 2.5.3.
"Indemnifying Party" shall have the meaning given in Section 2.5.3.
"Purchaser" shall have the meaning given in the Preamble.
"Subscription Agreement" shall mean that certain Subscription Agreement
for Common Stock Units of even date herewith between ICI and Purchaser.
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.
"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 stock split, stock dividend, recapitalization or other similar
event involving the Company.
"Registration Expenses" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Agreement, including, without 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).
<PAGE> 2
"Registration Statement" shall have the meaning given in Section 2.1.1.
"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.
"Selling Security Holder" shall have the meaning given in Section
2.5.4.
"Shares" shall mean Common Stock acquired by Purchaser through exercise
of the Warrants.
"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.
"Warrants" means a Warrant to purchase shares of ICI's Common Stock,
par value $.01 per share, dated as of the date hereof, executed by ICI in favor
of Holder, as hereafter amended, modified, substituted, supplemented or
replaced.
ARTICLE II
REGISTRATION RIGHTS
2.1 Demand Registration.
2.1.1 Subject to the Subscription Agreement and the rules and
regulations of the Commission, at any time and from time to time, Purchaser may
make a one-time written demand upon the Company to file, within sixty (60) days
after such written demand is made, a registration statement covering the resale
of all of the Registrable Securities on Form S-1, S-2 or S-3 as appropriate with
the Commission (the "Demand Registration Statement"). The Company shall use its
reasonable best efforts to cause such Registration Statement to become effective
as soon after filing 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 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 if the Registrable Securities extend for more than ninety (90)
days.
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<PAGE> 3
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 has then engaged a reputable and
nationally or regionally recognized securities or
investment banking firm for a registered public
offering of Shares of Common Stock, then the Company
shall give notice of such negotiations to all holders
of Registrable Securities within fifteen (15) days of
the date upon which the Company received such
holder's request and the Company shall not, for sixty
(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 sixty
(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 twenty (20) days after the expiration of such
sixty (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 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 not less than 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 twenty (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 distributed pursuant to a registration or until
the Shares are transferable pursuant to Rule 144 under the Securities Act.
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
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<PAGE> 4
Registrable Securities as compared to the number of Shares proposed to be sold
by all shareholders. 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 one hundred twenty (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 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this 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:
2.4.1 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;
2.4.2 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 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
2.4.3 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.
2.5 Indemnification.
2.5.1 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
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<PAGE> 5
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 arising 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 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.
2.5.2 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) by such holder 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
such 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 2.5.2 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.
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<PAGE> 6
2.5.3 Notwithstanding Sections 2.5.1 and 2.5.2, 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 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.
2.5.4 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 be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
2.6 Certain Information.
2.6.1 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.
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2.6.2 The failure of the holder of Registrable Securities to
furnish the information requested pursuant to Section 2.6.1 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.
2.7 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:
2.7.1 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");
2.7.2 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
2.7.3 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.
2.8 Transferability. The rights conferred by this Agreement shall
be freely transferable to a recipient of Registrable Securities.
2.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS BY THE LAWS OF THE STATE OF TEXAS.
2.10 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.
2.11 Notices, etc. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made when delivered to
the party to which such notice, request, demand or other communication is
required or permitted to be given or made under this Agreement or the Note,
addressed to such party at its address set forth below or at such other address
as either of the parties hereto may hereafter notify the other in writing:
To Company: INTELECT COMMUNICATIONS, INC.
1100 Executive Drive
Richardson, Texas 75081
Telephone: 972-367-2100
Telecopy: 972-367-2271
Attention: Herman Frietsch, President and CEO
with a copy to: RYAN & SUDAN, L.L.P.
909 Fannin, 39th Floor
Houston, Texas 77010
Telephone: 713-652-0501
Telecopy: 713-652-0503
Attention: Philip P. Sudan, Jr., Esq.
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To Purchaser: THE COASTAL CORPORATION SECOND PENSION TRUST
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-7640
Telecopy: 713-297-1734
Attention: Donald H. Gullquist, Trustee
with a copy to: THE COASTAL CORPORATION
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-6920
Telecopy: 713-877-7132
Attn: Director, Financial Administration
2.12 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.
2.13 Counterparts. This Agreement may be executed in counterparts,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
2.14 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.
2.15 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.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth above.
THE COASTAL CORPORATION INTELECT COMMUNICATIONS, INC.
SECOND PENSION TRUST
By: By:
---------------------------------- ---------------------------------
Donald H. Gullquist Herman M. Frietsch
Senior Vice President Chairman & CEO
The Coastal Corporation
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<PAGE> 1
EXHIBIT 10.1
INTELECT COMMUNICATIONS INC.
SUBSCRIPTION AGREEMENT
FOR
COMMON STOCK UNITS
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made and entered into as
of this 17th day of December 1999, by and between INTELECT COMMUNICATIONS, INC.,
a company incorporated under the laws of Delaware ("ICI" or the "Company") and
THE COASTAL CORPORATION SECOND PENSION TRUST ("Coastal") (the "Parties"):
W I T N E S S:
WHEREAS, the Company has authorized share capital consisting of (a)
100,000,000 shares $.01 per share par value common stock ("Common Stock"), and
(b) 50,000,000 shares $.01 per share par value preferred stock ("Preferred
Stock"); and
WHEREAS, ICI and Coastal entered into an AMENDED AND RESTATED LOAN
AGREEMENT FOR RECEIVABLES- AND INVENTORY-BACKED BORROWING ("Loan Agreement")
dated August 13, 1999 in the amount of Twelve Million Dollars ($12,000,000) as a
continuation to Coastal's debt and equity funding of the operations of ICI and
its Subsidiaries; and
WHEREAS, ICI is in need of additional working capital funding in order
to acquire parts and components to construct its products, and to continue
operations leading to additional sales, and is willing to provide incentives to
Coastal to purchase Common Stock of the Company by combining the sale of Common
Stock with Warrants which are subject to conditions on exercise (the "Common
Stock Units" or "Units") and to adjust the price and/or conversion ratios of
warrants previously issued to Coastal; and
WHEREAS, Coastal and ICI have agreed to the sale and purchase of the
Common Stock Units for the consideration and on the terms and conditions set
forth herein, including advances on November 22, and December 3, 1999; and
WHEREAS, ICI believes it is in the best interests of the Company to
acquire Coastal's additional equity investment on the terms and conditions
herein; and
WHEREAS, the Parties desire to memorialize their agreement for the
issuance and acquisition of the Common Stock Units of ICI;
NOW, THEREFORE, for and in consideration of the premises, and the
mutual covenants and agreements herein contained, the Company and Coastal agree
as follows:
ARTICLE 1
GENERAL TERMS
Section 1.01 Definitions. As used in this Agreement, the following
terms shall have the following meanings, unless the context otherwise requires:
"Act" shall mean the Securities Act of 1933, as amended.
"Agreement" shall mean this Agreement, as the same may from time to
time be amended, modified or supplemented.
"Business Day" shall mean a day (other than a Saturday, Sunday or legal
holiday) for commercial lenders pursuant to the laws of the State under which
Coastal is governed.
"Capital Stock" shall mean all common and preferred stock of the
Company, but shall not include preferred stock subject to mandatory redemption
requirements.
<PAGE> 2
"CERCLA" shall have the meaning given in Section 6.01(k).
"Closing" shall have the meaning given in Section 2.01(b).
"Coastal" shall mean The Coastal Corporation Second Pension Trust.
"Common Stock" means the common shares of ICI, par value $.01 per
share.
"Company" shall mean ICI, including all successors thereto, and whether
merged, consolidated, reincorporated or as its name, domicile or jurisdiction
may change from time to time.
"Company and its Consolidated Subsidiaries" shall mean the Company and
its Subsidiaries which are taken on a consolidated basis for financial reporting
purposes. The Consolidated Subsidiaries of the Company are: Intelect Network
Technologies Company (formerly Intelect, Inc.) ("INT"); DNA Enterprises, Inc.
("DNA"); Intelect Visual Communications Corp. ("IVC"); and Intelect
Communications Systems, Ltd. ("ICSL").
"Default" shall mean the occurrence of any of the events specified in
Article 9 hereof, whether or not any requirement for notice or lapse of time or
other condition precedent has been satisfied.
"Dollar", "Dollars" and "$" shall mean the lawful currency of the
United States of America.
"Effective Date" shall have the meaning given in Section 2.01(b).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and all current rules and regulations promulgated thereunder.
"Event of Default" shall mean the occurrence of any of the events
specified in Article 9 hereof, provided that any requirement for notice or lapse
of time or any other condition precedent has been satisfied.
"Financial Statements" shall mean the financial statements of the
Company described in Section 7.01 hereof.
"GAAP" shall mean generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board.
"Indebtedness" shall mean all principal, interest and commitment fees
owing by the Company to Coastal.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"Loan Agreement" shall have the meaning given in the Recitals.
"Material Adverse Effect" shall mean a material and adverse effect on
the operations or financial condition of the Company or its Subsidiaries.
"Material Subsidiaries" shall mean INT, DNA and IVC.
"NASDAQ" means the National Association of Securities Dealers Automated
Quote System.
"Parties" shall have the meaning given in the Preamble.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
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<PAGE> 3
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other form of
entity.
"Plan" shall mean any multi-employer plan or single employer plan, as
defined in Section 4001 and subject to Title IV of ERISA, which is maintained,
or at any time during the five (5) calendar years preceding the date of this
Agreement was maintained, for employees of the Company or a Subsidiary.
"Preferred Stock" shall have the meaning given in the Recitals.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Public Documents" shall mean ICI's filings with the Securities
Exchange Commission.
"Registration Rights Agreement" means the Registration Rights Agreement
the form of which is attached hereto to Exhibit B, as originally executed or as
it may from time to time be supplemented, modified or amended.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Security Act of 1933, as amended.
"Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the issued and outstanding securities having ordinary voting
power for the election of directors is owned or controlled, directly or
indirectly, by the Company and/or one or more of its Subsidiaries.
"Trading Days" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
"Transaction Documents" means this Agreement, the Registration Rights
Agreement and all Exhibits, Certificates and Opinions pertaining thereto.
"Units" shall mean the Common Stock Units.
"Unit Warrants"shall mean the Unit Warrants in the form attached hereto
as Exhibit A.
"Warrants"shall have the meaning given in Article 3.
"Warrant Shares" shall have the meaning given in Section 3.05.
ARTICLE 2
TERMS OF SUBSCRIPTIONS
Section 2.01 Issuance and Purchase of Common Stock Units.
(a) On the terms and subject to the conditions of this
Agreement, the Company agrees to issue, and Coastal agrees to purchase,
5,000,000 Common Stock Units for a purchase price of One and no/100 Dollars
($1.00) per Unit, for an aggregate purchase price of Five Million Dollars
($5,000,000). The 5,000,000 Common Stock Units shall consist of 5,000,000 shares
of Commons Stock and 5,000,000 Unit Warrants.
(b) The sale and purchase of the Common Stock Units shall take
place at 10:00 AM, December 17th, 1999, (the "Effective Date") at the offices of
Coastal at Nine Greenway Plaza, Houston, Texas and thereafter until completed
(the "Closing"). At the Closing, the Company shall deliver to Coastal
certificates evidencing the shares of Common Stock, registered in the name of
Coastal, and the Unit Warrants against payment as specified herein. Payment
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<PAGE> 4
shall be in the form of a credit to the balance of the Indebtedness outstanding
under the Loan Agreement. The Closing shall be subject to the conditions set
forth in Article 5.
Section 2.02 Restrictive Legend. Each certificate representing shares
of the Common Stock shall be inscribed with the following restrictive legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. NO SALE, OFFER TO
SELL, TRANSFER OR OTHER DISPOSITION OF THE SHARES REPRESENTED
BY THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION
STATEMENT UNDER THE ACT, WITH RESPECT TO SUCH SHARES IS THEN
IN EFFECT OR UNLESS THE HOLDER OBTAINS AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY
THAT SUCH DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE
ACT OR ANY APPLICABLE STATE BLUE SKY LAW."
Section 2.03 Costs. The Company shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or delivery
of shares of Common Stock of the Company or other securities or property;
provided, however, that the Company shall not be required to pay any taxes which
may be payable in respect of any transfer involved in the issuance or delivery
of any certificate for such shares or securities in the name other than that of
the holder of the Common Shares in respect of which such shares are being
issued.
Section 2.04 Registration Rights. ICI further agrees to register the
resale of the shares of Common Stock identified in this Article 2. A
registration statement shall be filed with the SEC not later than January 31,
2000, and ICI shall seek to make the registration effective within sixty (60)
days of filing.
Section 2.05 Right of First Refusal. Nothing contained herein may be
read or construed to limit, amend or terminate the rights of first refusal to
participate in any offering of an equity interest, including common stock,
preferred stock, warrants or convertible debentures, to be offered by Company or
brought to Company, previously granted to Coastal.
ARTICLE 3
WARRANTS
Section 3.01 Warrants. As an inducement to enter this Agreement to
purchase Common Stock Units and invest capital in the Company, but for which
Coastal would not do, ICI agrees to issue to Coastal Warrants to purchase shares
of Common Stock subject to the conditions below.
Section 3.02 Unit Warrants. ICI agrees to issue to Coastal Warrants
("Unit Warrants") to purchase shares of Common Stock at a price per share
("Exercise Price") of 75/100 DOLLARS ($0.75), provided that the Warrants shall
not be exercisable before six (6) months following the date of issuance, and
provided further that the Warrants shall not be exercisable before the share
price of the Common Stock shall close trading at ONE and 20/100 DOLLARS ($1.20)
or more for five (5) consecutive Trading Days. ICI agrees to issue the Unit
Warrants in the form attached as Exhibit A.
Section 3.03 Other Restrictions and Conditions.
(a) The Warrants may not be exercised until ICI increases the
number of authorized shares of Common Stock by at least five million (5,000,000)
in accordance with the Articles of Incorporation and By-Laws of the Company,
provided that if no such additional shares have been authorized within one year
of the date of this Agreement, this condition shall lapse and be of no effect.
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<PAGE> 5
(b) No shares of Common Stock shall be required to be reserved
for issuance upon exercise of the Warrants until the conditions in Section
3.03(a) have been met, provided that if insufficient shares have been authorized
at the time of Coastal's notice of exercise of the warrants following
satisfaction of the other restrictions and conditions herein, Coastal shall be
entitled to damages in the amount calculated as set forth in the Warrant.
Section 3.04 Reissued Warrants. As a further inducement, ICI agrees to
reissue to Coastal the Warrants originally issued on August 27, 1997, at an
exercise price per share of Six Dollars ($6.00), and reissued on August 13, 1999
at an exercise price of $1.30, and the Warrants issued on August 13, 1999 at an
exercise price per share of One and 30/100 Dollars ($1.30). The exercise price
shall be the same as for the Warrants issued under Section 3.02. The form of
each of the Amended and Restated Warrants is attached hereto as Exhibit C and D.
Section 3.05 Registration Rights. The Company agrees to grant to
Coastal certain registration rights under a Registration Rights Agreement, the
form of which is attached as Exhibit B, to be executed at Closing, covering
registration rights in respect to the Common Stock to be issued on exercise of
the Warrants issued hereunder ("Warrant Shares").
ARTICLE 4
BOARD OF DIRECTORS
Section 4.01 Appointment. For so long as Coastal holds ten percent
(10%) or more of the voting shares of Common Stock after purchase of Units, ICI
agrees to cause a person selected by Coastal to be appointed to fill the vacant
seat on the Board of Directors of the Company. Coastal shall provide 14 days
written notice of its exercise of this right of appointment. Such representative
shall serve at Coastal's discretion until the earlier of the election at least
two years from the date hereof, or until Coastal holds less than ten percent
(10%) of the voting shares of Common Stock.
Section 4.02 Election. In the event of an appointment under Section
4.01, for so long as Coastal holds ten percent (10%) or more of the voting
shares of Common Stock, ICI further agrees to cause Coastal's representative to
be elected to the Board of Directors at each subsequent election of Directors of
the Company to serve at Coastal's discretion.
Section 4.03 Duration. Nothing contained herein shall be read or
construed to require ICI to cause the Coastal representative to remain on the
Board of Directors of the Company beyond such time as Coastal maintains
sufficient voting stock to elect a member to the Board of Directors consistent
with the Certificate of Incorporation and By-laws of the Company, nor shall
anything herein be read or construed to limit Coastal to elect or vote with
regard to only one Director.
ARTICLE 5
CONDITIONS
The obligation of Coastal to purchase the Units is subject to the
satisfaction of the following conditions:
Section 5.01 Secretary's Certificates. Coastal shall have received
certificates of the Secretary or an Assistant Secretary of the Company setting
forth (i) resolutions of its Board of Directors in form and substance
satisfactory to Coastal with respect to the authorization of this Agreement and
the officers of the Company authorized to sign such instruments, and (ii)
specimen signatures of the officers so authorized.
Section 5.02 Good Standing. Company shall deliver certificate of good
standing for Company and its Material Subsidiaries.
Section 5.03 No Default. Coastal shall have received certificates of an
officer of the Company stating no Default shall have occurred and be continuing
which in any respect could have a Material Adverse Effect on the Company or any
Subsidiary and there shall not have occurred and be continuing any condition,
event or act which constitutes an Event of Default under the Loan Agreement.
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Section 5.04 Regulatory Requirements. The Parties to this Agreement
have determined that all regulatory requirements which are conditions precedent
to the execution of this Agreement has been met, or the time for such approvals
shall have lapsed and no further regulatory action be required.
Section 5.05 Representations and Warranties. The representations and
warranties made by the Company herein and in every other written document
delivered pursuant hereto shall then be true in all material respects; and the
Company shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with by them at or before the Closing.
Section 5.06 Opinion of Counsel.
(a) Coastal shall have received from counsel for the Company
an opinion addressed to Coastal substantially to the effect that:
(i) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of Delaware, and
has the corporate power to conduct its business, to enter into and to
perform its obligations under this Agreement, and to issue the Common
Stock, the Unit Warrants and the Amended and Restated Warrants.
(ii) The authorized capital stock of the Company
consists of (x) 100,000,000 shares of Common Stock, US $.01 par value,
and (y) 50,000,000 shares of Preferred Stock, US $.01 par value.
(iii) Upon the payment of the consideration described
in this Agreement, the Common Stock will be duly authorized, validly
issued, fully paid, and nonassessable.;
(iv) The Company has the corporate power to execute,
deliver and carry out the terms and provisions of the Agreement and the
Transaction Documents and has taken all necessary corporate action to
authorize the execution, delivery and performance thereof. This
Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its terms except to the extent that
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights
generally and by equitable principles (regardless of whether
enforcement is sought in equity or at law).
(v) Neither the execution, delivery or performance by
the Company of the Transaction Documents nor the consummation of the
transactions therein contemplated, nor compliance with the terms and
provisions thereof, (i) will contravene any applicable provision of any
law, statute, rule or regulation, or of any order, writ, injunction or
decree of any court, governmental instrumentality or stock exchange
known to such counsel or (ii) will conflict, or be inconsistent with,
or result in any breach of, or constitute a default under, or result in
the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of the Company pursuant to
the terms of any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is a party or by which it or any of its
property or assets is bound or to which it may be subject, or (iii)
will violate any provision of the Certificate of Incorporation or
By-Laws of the Company.
(vi) Except as disclosed in the Financial Statements,
the Public Documents or this Agreement, there are no actions, suits or
proceedings pending or threatened against or affecting the Company
before any court or before any governmental or administrative body or
agency the outcome of which is likely to materially and adversely
affect the operations, business, property or assets or the financial
condition of the Company.
(vii) No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or
any subdivision thereof, or any stock exchange, is required to
authorize, or is required in connection with (i) the execution,
delivery and performance of the Agreement or the Transaction Documents,
or (ii) the legality, validity, binding effect or enforceability of the
Agreement or the Transaction Documents.
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(b) The opinion required by this Section may, as to matters of
fact, be given in reliance upon certificates of officers of the Company and
public officials and may contain other normal and customary qualifications found
in opinions of this nature.
Section 5.07 NASDAQ Requirements. Nothing in the Transaction Documents
shall, or shall be read or construed to, violate the rules of the SEC or any
market in which shares of ICI are traded, and including the maintenance criteria
of the NASDAQ Rule 4460(i)(1)(D)(iii), (as applied to all shares of ICI's Common
and Preferred Stock deemed to be aggregated under said Rule).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Section 6.01 By The Company. The Company represents and warrants to
Coastal that:
(a) Organization. ICI is a corporation duly existing and in
good standing under the laws of Delaware. Each of Company and its Material
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has all requisite
corporate power and authority to own its Property and to carry on its business
as now conducted, and is in good standing and authorized to do business in each
jurisdiction in which the Company or such Material Subsidiary owns real Property
or conducts such business, where the failure to maintain such good standing or
authorization is reasonably expected to have a Material Adverse Effect.
(b) Authorization; No Conflict. The execution and delivery of
this Agreement, and the performance by the Company of its obligations under this
Agreement are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, have received all necessary governmental
approvals (if any shall be required) and do not and will not contravene or
conflict with any rule, regulation, decree or order or provision of law or of
the charter or the By-Laws of the Company or of any agreement binding upon the
Company or any of its properties, except to the extent any such consent or
approval has been obtained or waived, and delivered to Coastal. In addition, and
not in limitation of the foregoing, the Company's Board of Directors has
approved (i) the Transaction Documents, and (ii) the consummation of the
transactions contemplated by the Transaction Documents.
(c) Capitalization. At the date of this Agreement, the
authorized Capital Stock of the Company consists of 100,000,000 shares of Common
Stock, US $.01 of which 60,936,573 are issued and outstanding as of December 1,
1999, and 50,000,000 shares of Preferred Stock, US $.01, of which 3,719,409
shares are issued and outstanding as of December 1, 1999.
(d) Valid Issuance of Securities. Upon receipt of the
consideration from Coastal as described herein, the Stock will be duly
authorized, validly issued, fully paid, and nonassessable.
(e) Binding Obligations. This Agreement constitutes the
binding obligation of the Company, enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally or under general principles of equity.
(f) Financial Condition. The audited annual consolidated
Financial Statements of the Company and its Consolidated Subsidiaries for its
most recently ended fiscal year ended December 31, 1998 (the "1998 Financial
Statements"), and the unaudited consolidated interim Financial Statements of the
Company and its Consolidated Subsidiaries for its most recently ended fiscal
quarter (for which such annual or quarterly Financial Statements are available),
which have been delivered to Coastal, are complete and correct in all material
respects, have been prepared in accordance with GAAP, consistently applied, and
present fairly the consolidated financial condition and results of the
operations of the Company and its Consolidated Subsidiaries as at the date or
dates and for the period or periods stated (subject only to normal year-end
audit adjustments with respect to such unaudited interim statements). No
material adverse change has since occurred in the consolidated financial
condition or operations of the Company and its Consolidated Subsidiaries, except
as otherwise disclosed to Coastal.
(g) Defaults. Except as disclosed to Coastal, neither the
Company nor any Subsidiary is in Default (in any respect which materially and
adversely affects the consolidated business, Property, operations or
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financial condition of the Company and its Consolidated Subsidiaries) under any
instrument evidencing borrowed money to which the Company or a Subsidiary is a
party or by which it is bound.
(h) Tax Returns and Payments. The Company has (i) filed all
tax returns which it is required to file, where the failure to file such returns
would have a Material Adverse Effect on the consolidated financial condition or
operations of the Company and its Consolidated Subsidiaries, and (ii) paid, or
has provided adequate reserves for the payment of all material federal and state
income taxes applicable for all prior fiscal years and for the current fiscal
year down to the date hereof.
(i) Litigation Representation. Except as disclosed to Coastal
or in the Public Documents, there is no litigation (including without
limitation, derivative actions), arbitration proceedings or governmental
proceedings pending or, to the knowledge of the Company, threatened against it
or any Subsidiary which involves the reasonable probability of a judgment not
covered by insurance or which would have a Material Adverse Effect on the
Company and its Consolidated Subsidiaries.
(j) Compliance with ERISA. The Company and each of its
Subsidiaries are in compliance in all material respects with ERISA. Neither the
Company nor any of its Subsidiaries has any material liability under any type of
Plan. No reportable event, as set forth in Section 4043(b) of ERISA, has
occurred and is continuing with respect to any Plan which results in any
material liability to the PBGC.
(k) Environmental Matters. Neither the Company nor any
Subsidiary (i) has received written notice, nor has any officer of the Company
otherwise learned, of any claim, demand, action, event, condition, report or
investigation indicating or concerning any potential or actual liability which
individually or in the aggregate would have a Material Adverse Effect, arising
in connection with: (x) any noncompliance with or violation of the requirements
of any applicable federal, state or local environmental health and safety
statutes and regulations or (y) the release or threatened release of any toxic
or hazardous waste, substance or constituent, or other substance into the
environment, (ii) to the best of Company's knowledge, has any liability in
connection with the release or threatened release of any toxic or hazardous
waste, substance or constituent, or other substance into the environment which
in the aggregate would have a Material Adverse Effect, (iii) has received notice
of any federal or state investigation evaluating whether any remedial action is
needed to respond to a release or threatened release of any toxic or hazardous
waste, substance or constituent or other substance into the environment for
which the Company or any Material Subsidiary is or may be liable where the
taking or the failure to take such remedial action would have a Material Adverse
Effect, or (iv) has received notice that the Company or any Material Subsidiary
is or may be liable to any Person under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq. ("CERCLA"), or any analogous state law, the failure to comply with
which would have a Material Adverse Effect. To the best of the Company's
knowledge, the Company and each Material Subsidiary is in compliance in all
material respects with the financial responsibility requirements of federal and
state environmental laws to the extent applicable, including, without
limitation, those contained in 40 C.F.R., parts 264 and 265, subpart H, and any
analogous state law, the failure to comply with which would have a Material
Adverse Effect.
(l) Compliance with Applicable Laws. Neither the Company nor
any Material Subsidiary is in default with respect to any judgment, order, writ,
injunction, decree or decision of any governmental authority, which default
would have a Material Adverse Effect. To the best of the Company's knowledge,
the Company and each Subsidiary is in compliance with all applicable statutes,
rules and regulations, including ERISA, of all governmental authorities, and
(except as disclosed to Coastal) of every exchange on which the Capital Stock of
the Company is listed, a violation of which would have a Material Adverse
Effect. In addition and not in limitation of the foregoing, the transactions
contemplated by this Agreement will not (i) violate any NASDAQ rules applicable
to the Company or, singly or together with other events, cause the Common Stock
to cease to be authorized for quotation on NASDAQ; (ii) constitute a "change of
control" for purposes of NASDAQ Stock Market Rule 4310(c)(25); or (iii) violate
NASDAQ Stock Market Rule 4310(c)(21) regarding voting rights. In addition and
not in limitation of the foregoing, the acquisition of the Common Stock Units
will not require shareholder approval under the laws, rules and regulations of
the SEC, NASDAQ or any provision of the Certificate of Incorporation or By-Laws
of the Company; and the acquisition of the Common Stock Units will not require
the review of the Federal Trade Commission or the Antitrust Division of the U.S.
Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
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(m) Patents, Licenses, Etc. Except as disclosed to Coastal,
the Company warrants that it has all right and title to, and has maintained and
caused each Subsidiary to maintain in full force and effect, all material
licenses, copyrights, patents, permits, applications, reports, authorizations,
easements and other rights as are necessary for the conduct of the business of
Company and its Consolidated Subsidiaries, where the termination of such rights
would have a Material Adverse Effect.
(n) Disclosure. Each of Company's representations in the
Transaction Documents are true, complete and accurate in all material respects.
Company has disclosed all material facts of which it has knowledge and regarding
the transaction contemplated by this Agreement. Company has not failed to
disclose to Coastal any material fact necessary in order to make any statement
made, in light of the circumstances under which made, not misleading.
Section 6.02 By Coastal. Coastal represents and warrants to the Company
that:
(a) Organizational Status; Authority; Enforceability; No
conflicts; etc. Coastal is a trust, duly formed under the laws of the State of
Texas, and has all requisite power and authority to enter into and perform its
obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions hereunder have been duly authorized by
all required action. This Agreement has been duly executed and delivered on
behalf of Coastal and is a legal, valid and binding obligation, enforceable in
accordance with its terms, subject to applicable bankruptcy and insolvency laws
and general principles of equity. This Agreement does not conflict with any of
Coastal's organizational documents or any other contract or agreement to which
it is a party, or any law, rule or regulation binding on or applicable to
Coastal.
(b) Investment Purpose. The securities to be issued to Coastal
under or as contemplated in this Agreement are being acquired, or will be
acquired, for investment for its own account, and not with a view to, or for
resale in connection with, any distribution of securities within the meaning of
the Securities Act. No securities may be sold, transferred, or otherwise
disposed of without registration under the Securities Act and any applicable
state securities laws, except under any exemption from those laws.
(c) Accredited Investor Status. Coastal is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
(d) No Litigation. There are no claims, actions, suits,
proceedings or investigations pending, or, to the knowledge of Coastal
threatened against it, which, if adversely resolved, would materially impair its
ability to perform its obligations under this Agreement or which challenge the
legality of, or seek to enjoin, restrain or prohibit the consummation of the
transactions contemplated by this Agreement.
(e) Reliance on Exemptions. Coastal understands that the
Common Stock Units, including the Common Stock, the Warrants and the Warrant
Shares, are being issued to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and
Coastal's compliance with, the representations and warranties of Coastal in
order to determine the availability of such exemptions and the eligibility of
Coastal to acquire the Common Stock Units, including the Common Stock, the
Warrants and the Warrant Shares.
(f) Information. Coastal and its advisors, if any, have been
afforded the opportunity to ask questions of the Company, including its
management. Coastal has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Common Stock Units, including the Common Stock, the Warrants
and the Warrant Shares. Coastal acknowledges that:
(i) it has access to copies of (and acknowledges that
the Company has offered to provide, upon request, copies of)
the Company's filings with the Securities Exchange Commission
(collectively, the "Public Documents");
(ii) it understands that the acquisition of Common
Stock Units entails various risks including, but not limited
to, those outlined in the Public Documents and in this
Agreement, and has determined that the Common Stock Units are
a suitable investment and that at this time it could bear a
complete loss of its investment; and
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<PAGE> 10
(iii) any information which Coastal has heretofore
represented or furnished to the Company with respect to its
financial sophistication is correct and complete as of the
date of this Agreement.
(g) No Governmental Review. Coastal understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Common Stock
Units, including the Common Stock, the Warrants and the Warrant Shares, or the
fairness or suitability of the investment in the Common Stock Units, including
the Common Stock, the Warrants and the Warrant Shares, nor have such authorities
passed upon or endorsed the merits of the offering.
(h) Transfer or Resale. Coastal understands that except as
provided herein: (i) the Common Stock Units, including the Common Stock, the
Warrants and the Warrant Shares, have not been registered under the Securities
Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered, (B) Coastal shall
have delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that the Common Stock Units, including the Common Stock, the
Warrants and the Warrant Shares, to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) Coastal provides the Company with reasonable assurance that such Common
Stock Units, including the Common Stock, the Warrants and the Warrant Shares,
can be sold, assigned or transferred pursuant to Rule 144 promulgated under the
Securities Act, as amended (or a successor rule thereto)("Rule 144"); and (ii)
any sale of the Common Stock Units, including the Common Stock, the Warrants and
the Warrant Shares, made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Common Stock Units, including the Common Stock, the Warrants and
the Warrant Shares, under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the Securities Act) may require compliance with some other
exemption under the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder; and (iii) except as expressly
provided in this Agreement or the Registration Rights Agreement, neither the
Company nor any other person is under any obligation to register such shares
under the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
ARTICLE 7
AFFIRMATIVE COVENANTS
Section 7.01 Financial Statements and Reports. The Company will
promptly furnish to Coastal:
(a) Annual Reports. As soon as available and in any event
within one hundred and twenty (120) days after the close of each fiscal year of
the Company, the audited balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such year, the audited statement of income of the
Company and its Consolidated Subsidiaries for such year, and the audited
statement of reconciliation of capital accounts of the Company and its
Consolidated Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
accompanied by the opinion of independent public accountants of national
standing.
(b) Quarterly Reports. As soon as available and in any event
within sixty (60) days after the end of each of the first three quarterly
periods in each fiscal year of the Company, a copy of the Company's Form 10-Q as
filed with the Securities and Exchange Commission.
(c) Other Information. Such other information regarding the
financial condition and operations of the Company and its Consolidated
Subsidiaries as Coastal may reasonably request. All such balance sheets and
other Financial Statements referred to in Sections 7.01(a) and (b) above shall
conform to GAAP except for such changes in accounting principles or practice
with which the independent public accountants concur, and subject to normal
year-end audit adjustments with respect to the unaudited quarterly statements
described in Section 7.01(b) hereof.
(d) Actions. Notice of all actions, suits, claims, proceeding,
investigation and inquiries that could reasonably be expected to have a Material
Adverse Effect.
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(e) Defaults. Promptly, and in any event within three (3)
Business Days, after any officer of the Company obtains knowledge of the
existence of any Default under this Agreement or a default under any other
contract to which the Company is a party and which could reasonably be expected
to have a Material Adverse Effect.
Section 7.02 Legal Existence. The Company will, and will cause each
Material Subsidiary to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its legal existence, rights and franchises.
The Company will use, and will cause each Material Subsidiary to use, its best
efforts to comply with all applicable statutes, regulations and orders of, and
all applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
Property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls).
Section 7.03 Insurance. The Company shall maintain, and cause each
Subsidiary to maintain, insurance on its Property against such risks and in
substantially the same amounts as are currently maintained, including, without
limitation, general liability and workers' compensation insurance.
Section 7.04 Maintenance of Property. The Company shall cause all
material Property owned by or leased to the Company or any Material Subsidiary
and used or useful in the conduct of the Company's business or the business of
any Material Subsidiary to be maintained and kept in normal condition, repair
and working order and supplied with all necessary equipment and cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company or such Material Subsidiary may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company or any Material Subsidiary
from discontinuing the use, operation or maintenance of any such Property, or
disposing of any such Property, if such discontinuance or disposal is, in the
judgment of the Board of Directors or the board of directors, board of trustees
or managing partners of the Material Subsidiary concerned, or of any officer (or
other agent employed by the Company or any of its Material Subsidiaries) of the
Company or such Material Subsidiary having managerial responsibility for any
such Property, desirable in the conduct of the business of the Company or any
Material Subsidiary, and if such discontinuance or disposal is not
disadvantageous in any material respect to Coastal.
Section 7.05 Inspection of Property; Books and Records; Discussions.
Upon reasonable request by Coastal, the Company shall permit representatives of
Coastal, upon at least two (2) Business Days' prior written notice to a
financial officer of the Company and subject to assertions of attorney-client
privilege and to confidentiality obligations reasonably necessary to protect
proprietary information, to visit the offices of the Company and its
Subsidiaries, to inspect, under guidance of officers of the Company, any of its
Property and examine and make copies or abstracts from any of its books and
records at any reasonable time and as often as may reasonably be desired, and to
discuss the business, operations, prospects, licenses, Property and financial
condition of the Company and its Subsidiaries with the officers thereof.
Section 7.06 Patents, Licenses, Etc. Except as disclosed to Coastal,
the Company shall maintain and cause each Material Subsidiary to maintain, in
full force and effect, all material licenses, copyrights, patents, permits,
applications, reports, authorizations, easements and other rights as are
necessary for the conduct of its business, the termination of which would have a
Material Adverse Effect. Company shall pay all royalties, annuities and license
fees as they become due and shall not forfeit or allow to lapse any rights under
any patent, copyright or license.
Section 7.07 Further Assurances. The Company will promptly cure any
defects in the creation and execution of the Transaction Documents. The Company,
at its expense, will promptly execute and deliver to Coastal all such further
documents, agreements and instruments as may reasonably be requested by Coastal
in order to effect any obligation of the Company under this Agreement.
Section 7.08 Reimbursement of Expenses. The Company will, upon request,
promptly reimburse Coastal for all amounts expended, advanced or incurred by
Coastal (including reasonable attorneys' fees and disbursements) to satisfy any
obligations of the Company under this Agreement or to enforce the rights of
Coastal under this Agreement, including all fees and disbursements (including,
without limitation, all investment banking, legal and other fees and
disbursements) of Coastal in connection with the transactions contemplated by
this Agreement, or any other Transaction Documents.
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Section 7.09 Hart-Scott-Rodino. The Company agrees to file such notices
of exemption or applications for approval or authority as it, in consultation
with legal counsel, deems necessary or advisable with the Federal Trade
Commission and the Antitrust Division of the U.S. Department of Justice as
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (15 U.S.C.
Section 18a) as amended and the rules and regulations promulgated thereunder by
the Federal Trade Commission. Coastal will assist in preparation of the filing
and any response required by either entity.
ARTICLE 8
MISCELLANEOUS
Section 8.01 Notices. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
Parties hereto shall be deemed to have been duly given or made when delivered to
the party to which such notice, request, demand or other communication is
required or permitted to be given or made under this Agreement, addressed to
such party at its address set forth below or at such other address as either of
the Parties hereto may hereafter notify the other in writing.
To Company: INTELECT COMMUNICATIONS, INC.
1100 Executive Drive
Richardson, Texas 75081
Telephone: 972-367-2100
Telecopy: 972-367-2271
Attention: Herman Frietsch, Chairman and CEO
with a copy to: RYAN & SUDAN, L.L.P.
909 Fannin, 39th Floor
Houston, Texas 77010
Telephone: 713-652-0501
Telecopy: 713-652-0503
Attention: Philip P. Sudan, Jr.
To Coastal: THE COASTAL CORPORATION SECOND PENSION TRUST
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-7640
Telecopy: 713-297-1734
Attention: Donald H. Gullquist, Trustee
with a copy to: THE COASTAL CORPORATION
Nine Greenway Plaza
Houston, Texas 77046-0995
Telephone: 713-877-6920
Telecopy: 713-877-7132
Attention: Director, Financial Administration
Section 8.02 Benefit of Agreement. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the Parties hereto; provided, however, the Company may not assign or
transfer any of its interest hereunder without the prior written consent of
Coastal and provided further that Coastal may not assign its interest hereunder
without the prior written consent of the Company, which consent of either party
shall not be withheld unreasonably.
Section 8.03 Survival of Agreements. All representations and warranties
of the Company herein shall survive the effective date of this Agreement.
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Section 8.04 Invalidity. In the event that any one or more of the
provisions contained in this Agreement shall, for any reason, be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of the this Agreement.
Section 8.05 Amendment or Waiver. This Agreement may not be amended,
changed, waived, discharged or terminated without the written consent of the
Company and Coastal.
Section 8.06 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Company or Coastal in exercising any right, power or privilege
hereunder and no course of dealing between the Company and Coastal shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Company or Coastal would otherwise have.
Section 8.07 Headings. The descriptive headings of this Agreement are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
Section 8.08 Counterparts. This Agreement may be executed in any number
of counterparts and by the different Parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Company and Coastal.
Section 8.09 Governing Law. THIS AGREEMENT, AND THE APPLICATION OR
INTERPRETATION THEREOF, SHALL BE GOVERNED EXCLUSIVELY BY ITS TERMS AND BY THE
LOCAL, INTERNAL LAW OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THE CONFLICTS OF
LAWS RULES OF THE STATE OF TEXAS WOULD REQUIRE THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION IN WHICH CASE THE LAWS OF THE STATE OF TEXAS SHALL
NONETHELESS APPLY. THE PARTIES CONSENT TO JURISDICTION IN THE STATE AND FEDERAL
COURTS LOCATED IN HARRIS COUNTY, TEXAS.
Section 8.10 Exhibits. The following exhibits are attached hereto and
incorporated herein by reference thereto for all relevant purposes of this
Agreement:
Exhibit A - Warrants
Exhibit B - Registration Rights Agreement
Exhibit C -Amended and Restated Warrants
Exhibit D - Amended and Restated Warrants
Section 8.11 Entire Agreement. This Agreement, including the Exhibits
attached hereto and the documents delivered pursuant hereto, constitutes the
entire agreement between the Parties with respect to the subject matter of this
Agreement and supersedes all previous communications, representations,
understandings, and agreements, either oral or written, between the Parties with
respect to the subject matter.
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IN WITNESS WHEREOF, the Parties hereto have caused this instrument to
be duly executed as of the date first above written.
INTELECT COMMUNICATIONS, INC. THE COASTAL CORPORATION SECOND
PENSION TRUST
By: By:
------------------------------- ---------------------------
Herman M. Frietsch Donald H. Gullquist
Chairman & CEO Senior Vice President
The Coastal Corporation
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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