As filed with the Securities and Exchange Commission on February 11, 2000
Registration No. 333 - _____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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INTELECT COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 76-0471342
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NUMBER)
ORGANIZATION)
1100 EXECUTIVE DRIVE
RICHARDSON, TEXAS 75081
(972) 367-2100
(ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
HERMAN M. FRIETSCH
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
INTELECT COMMUNICATIONS, INC.
1100 EXECUTIVE DRIVE
RICHARDSON, TEXAS 75081
TELEPHONE: (972) 367-2100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH A COPY TO:
MICHAEL T. LARKIN
RYAN & SUDAN, L.L.P.
909 FANNIN, SUITE 3900
HOUSTON, TEXAS 77010
TELEPHONE: (713) 652-0501
TELECOPY: (713) 652-0503
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time to
time after the effective date of the registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
Calculation of Registration Fee (See following page)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO OFFERING AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PRICE OFFERING REGISTRATION
PER SHARE (2) PRICE FEE
Common Stock,
$.01 par value (1) 20,412,227 $4.61 $94,100,367 $24,843
================================================================================
(1) Represents shares to be sold by the Selling Stockholders listed under the
title "Selling Stockholders" in this Prospectus.
(2) Pursuant to Rule 457(c), the registration fee for the above shares is
calculated based upon the average of the high and low prices of Intelect
common stock as reported on the NASDAQ Small Cap Market on February 4,
2000.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC
BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE IN WHICH THE
OFFER, SOLICITATION OR SALE IS NOT PERMITTED.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED FEBRUARY __, 2000
INTELECT COMMUNICATIONS, INC.
20,412,227 Shares of Common Stock
The Selling Stockholders listed on pages 11 & 12 may offer and resell up
to 20,412,227 shares of Intelect Communications, Inc. ("Intelect" or the
"Company") common stock under this Prospectus, for each of their own accounts.
The number of shares the Selling Stockholders may sell includes shares of common
stock that currently are issued and outstanding and shares of common stock
issuable upon exercise of warrants.
We will not receive any proceeds from the sales covered by this
Prospectus.
Pursuant to an agreement dated as of December 17, 1999, we issued
5,000,000 shares of common stock to The Coastal Corporation Second Pension Trust
("Coastal") in repayment of debt owed by the Company to Coastal. We issued
additional common stock and warrants in several unrelated private placements to
accredited investors. For further information on the Selling Stockholders and
each of these transactions see "Selling Stockholders" in this Prospectus.
Our common stock is quoted on the Nasdaq Small Cap Market under the symbol
"ICOM." On February 10, 2000, the last sale price of our common stock was $5.97.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE
"RISK FACTORS" BEGINNING ON PAGE 2.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY
STATE SECURITIES COMMISSION, NOR HAVE THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS FEBRUARY __, 2000.
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ABOUT INTELECT
We design, develop, manufacture, market and sell products and services for
converging voice, data and video networks. We established our current operations
through a series of mergers in 1995 and 1996, at which time we defined four
communications product platforms to respond to the increasing demands of speed
and complexity in communications networks.
We strategically focus our product lines and services to take advantage of
the convergence of telecommunications and data communications. This convergence
arises from the explosive growth in communication services (such as high-speed
Internet, video and countless voice services), which is driving the demand for
expansion of network capacities. These industry trends require today's network
integrators and managers to manage multiple applications at multiple locations
within available bandwidth resources while balancing the need for network
reliability. We designed our product lines to meet these evolving markets and
applications.
We have developed and bring to market a new generation of intelligent
flexible and scalable communications platform to allow customers to combine
their current voice, data and video networks (telephone, computers,
surveillance, etc.) into a single communications network, which would also
upgrade their communications into the latest generation of high-speed
technologies under a single network management system. More information about
our products, markets and operations may be found in our Form 10-K annual
report, filed on April 2, 1999, and our Form 10-Q quarterly reports, filed on
May 17, August 16, and November 12, 1999.
Our executive offices are located at 1100 Executive Drive, Richardson,
Texas 75081; telephone (972) 367-2100.
RISK FACTORS
This prospectus and the documents it incorporates by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements accurately reflect our current view with respect to future events and
financial performance. The future events we describe in these risk factors
involve risks and uncertainties related to:
o general economic conditions in our product markets;
o our continuing development of our products;
o the market acceptance of our products;
o dependence on our suppliers;
o dependence on channels of distribution;
o competition;
o fluctuations in customer demand for our products;
o access to external sources of capital;
o execution of our margin improvement; and
o management of our corporate expansion.
In this prospectus, the words "anticipate ," "believe," "expect,"
"intend," "plan," "future," and similar expressions identify forward-looking
statements. Our actual results could differ materially from those that we
project in the forward-looking statements as a result of factors that we have
set forth throughout this document as well as factors of which we are currently
not aware.
Your investment in the shares offered by the Selling Stockholders in this
Prospectus involves a high degree of risk and should not be made by you if you
cannot afford the loss of your entire investment. In addition to the other
information in this prospectus, or incorporated in this prospectus by reference,
you should consider carefully the following risk factors before investing in the
common stock offered by the Prospectus:
OUR STOCK PRICE MAY DROP DUE TO MARKET FLUCTUATIONS AND SALES OF LARGE NUMBERS
OF OUR SHARES
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Intelect stock is quoted on the Nasdaq Small Cap Market. Based on
historical trends in the market for our stock and for other similar technology
company stocks, we anticipate that the trading price of our common stock may be
subject to wide fluctuations in response to:
o quarterly variations in operating results;
o changes in actual earnings or in earnings estimates by analysts;
o our announcements of technological developments;
o our competitors' announcements of technological developments;
o general market conditions;or
o other events largely outside our control.
In addition, extreme price and volume fluctuations in the stock market have
particularly affected the market prices of "high technology" stocks. These
fluctuations were often disproportionate to or unrelated to the operating
performance of these companies. These broad market fluctuations, general
economic conditions or other factors outside our control may adversely affect
the market price of our common stock.
Large numbers of the shares offered under this Prospectus could be sold at
the same time. Such sales, or the possibility of such sales, could significantly
depress the market price of the common stock.
WE ARE NOT PROFITABLE; ABILITY TO CONTINUE AS GOING CONCERN
We have incurred losses from continuing operations in 1998, 1997, and 1996
of $43,138,000, $20,241,000 and $43,039,000. Negative cash flows from operations
in the same periods were, respectively, $22,929,000, $24,852,000 and
$23,050,000. During the first nine months of 1999 we incurred losses from
continuing operations of $20,788,000 and negative cash flow from operations of
$13,703,000. We funded the negative cash flows by proceeds from borrowings under
credit facilities and sales of preferred stock and common stock in the first
nine months of 1999, and during 1998 and 1997 and by proceeds from issuance of
convertible debentures in 1996. It is uncertain when, if ever, the Company will
report operating income or positive cash flow from operations. If cash needs
exceed available resources, there also can be no assurance that additional
capital will be available through public or private equity or debt financing.
The reports of Grant Thornton LLP and KPMG on the consolidated financial
statements which are incorporated by reference into this Prospectus contain an
explanatory paragraph that states that we have suffered recurring losses from
continuing operations and are dependent upon the successful development and
commercialization of our products and our ability to secure adequate sources of
capital until we operate profitably. These matters raise substantial doubt about
our ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
OUR ABILITY TO BECOME PROFITABLE DEPENDS ON INCREASED SALES OF OUR PRODUCTS
Our ability to become profitable will depend, in part, on the sales volume
of our products. Increasing the sales volume will depend on our ability to:
o continue to develop our products;
o increase our sales and marketing activities;
o increase our manufacturing activities; and
o effectively compete against current and future competitors.
We cannot assure you that we will be able to successfully increase the
sales volumes of our products to achieve profitability. We also cannot assure
that profitability and positive cash flow will be achieved when expected. If our
sales plans are not achieved, operating losses and negative cash flows exceed
our estimates, or capital requirements in connection with the design,
development, and commercialization of our principal products are higher than
estimated, we will need to raise additional capital. See page 5 regarding
additional funding.
WE ARE NOT ABLE TO PREDICT SALES IN THE FUTURE AND A NUMBER OF FACTORS MAY CAUSE
OUR PERIODIC RESULTS TO FLUCTUATE
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We are not able to accurately predict our sales in future quarters. In any
quarter, a number of factors could affect our sales volumes and our ability to
fill orders. Our periodic results have varied in the past. In the future, we
expect our periodic operating results to vary significantly depending on, but
not limited to, a number of factors, including:
o the market acceptance of our current and new products;
o engineering and development requirements;
o the size, timing and recognition of revenue from significant orders;
o increased competition;
o new product introductions or enhancements by competitors;
o the proportion of revenues derived from distributors, value added
resellers and other sales channels;
o changes in our pricing policies or those of our competitors;
o the financial stability of major customers;
o delays in the introduction of our products or product enhancements;
o customer order deferrals in anticipation of upgrades and new
products;
o customer concerns about our financial condition;
o the costs and possible supply constraints of components we use to
build our products;
o changes in regulation of our product markets;
o the timing and nature of expenses; and
o general economic conditions.
Our expense levels are based, in part, on our expectations of future
orders and sales, and we may be unable to adjust spending in a timely manner to
compensate for any sales shortfall. If sales are below expectations, operating
results are likely to be materially adversely affected. Net income may be
disproportionately affected by a reduction in sales because a significant
portion of our expenses do not vary with revenues. We may also choose to reduce
prices or increase spending in response to competition or to pursue new market
opportunities. If new competitors, technological advances by existing
competitors or other competitive factors require us to invest significantly
greater resources in engineering and development efforts, the spending could
materially adversely affect our operating results and financial condition.
Because our marketing strategy targets relatively large potential
customers, we anticipate that a small number of large orders may comprise a
significant portion of our future product sales. None of our significant
customers have entered into a long-term supply agreement requiring them to
purchase a minimum amount of our products. Historically, sales to a relatively
small number of customers have accounted for a significant portion of our total
revenues, particularly with respect to our SONETLYNX and OMNILYNX products. We
cannot assure that our principal customers will continue to purchase our
products at current levels, if at all. Also, we cannot assure that we will be
able to replace such purchases with sales to other customers. Any significant
deferral of purchases of our products or the reduction, delay or cancellation of
orders from one or more significant customers could materially and adversely
affect our business, results of operations, and financial condition.
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WE MAY NEED ADDITIONAL FUNDING IN THE FUTURE AND THESE FUNDS MAY NOT BE
AVAILABLE TO US
If our sales plans are not achieved, if operating losses and negative cash
flows exceed our estimates, or if capital requirements of the design,
development, and commercialization of our principal products are higher than
estimated, we will need to raise additional capital. Although we believe we
could raise additional capital through public or private equity or debt
financings, if necessary, we cannot assure that such financings will be
available, or available on acceptable terms. If such financing is needed but is
not available, we have determined that a reduction of engineering, development,
selling, and administrative costs would allow us to continue as a going concern.
After such time, we will need to increase revenues over current levels to
continue to operate in our current form.
OUR ABILITY TO GROW AND REMAIN COMPETITIVE DEPENDS ON OUR ABILITY TO FORESEE AND
RESPOND TO RAPID TECHNOLOGICAL CHANGE WITH NEW PRODUCTS AND KEY PRODUCT
ENHANCEMENTS
Rapid technological change, evolving industry standards and frequent new
product introductions and enhancements shape and can quickly change our current
and planned product markets. New technologies or the emergence of new industry
standards can render existing products or products under development obsolete or
unmarketable. Our ability to grow and remain competitive depends, in large part,
on our ability to anticipate changes in our product markets and to successfully
develop and introduce new products on a timely basis. New product development
often requires long-term forecasting of market trends, development and
implementation of new technologies and processes and a substantial capital
commitment. In particular, we recently invested substantial resources toward the
development of new products such as our OMNILYNX product. We have not yet
completed development of all planned enhancements to the OMNILYNX product line.
Development and customer acceptance of new products is inherently uncertain, and
we cannot assure that we will complete developments on a timely basis or that
products will be commercially successful. We compete or will be competing with
established companies with greater financial resources and more developed
channels of distribution. We cannot assure that customers will accept OMNILYNX
enhancement. Any failure to anticipate or respond on a cost-effective and timely
basis to technological developments, changes in industry standards or customer
requirements, or any significant delays in product development or introduction,
could materially adversely effect our business, operating results and financial
condition.
COMPETITION FROM LARGER, BETTER ESTABLISHED ENTITIES IS INTENSE
Competition in the converging voice and data communications industry is
intense, and we believe that competition will increase substantially with the
development of multimedia communications products, rapid technological changes,
industry consolidations, new industry entrants, and potential regulatory
changes. Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical and marketing resources,
greater name recognition, and a larger installed customer base than we have. In
addition, many of these competitors may be able to respond more quickly to new
or emerging technologies and changes in customer requirements, and to devote
greater resources to the development, promotion and sale of their products than
we can. Our current or potential competitors may develop products and services
comparable or superior to ours or adapt more quickly than we can to new
technologies, evolving industry trends, or changing customer requirements.
Increased competition as to any of our products or services could result in
price reductions, reduced margins, and loss our market share, which could
materially and adversely affect our business, results of operations, and
financial condition.
WE DEPEND ON KEY MEMBERS OF OUR MANAGEMENT AND ENGINEERING STAFF, AND WE MUST
RETAIN AND RECRUIT QUALIFIED INDIVIDUALS TO BE COMPETITIVE
Our success depends in large part on the continued service of key
creative, technical, marketing, sales and management personnel and our ability
to attract, motivate and retain highly qualified employees. Because of the
multifaceted nature of interactive media, key personnel often require a unique
combination of creative and technical talents. Such personnel are in short
supply, and the competition for their services is intense. Recruitment of such
personnel can be a lengthy process. We have at-will employment arrangements with
management and other personnel, meaning they may terminate their employment at
any time. The loss of key personnel or failure to attract additional qualified
employees could materially adversely affect our business, the results of
operations and new product development efforts.
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WE DEPEND ON THE SUPPLY OF PRODUCT COMPONENTS FROM OUTSIDE SUPPLIERS AND, IN
SOME CASES, SINGLE SOURCES OF SUPPLY. WE DEPEND ON A SINGLE MANUFACTURING
FACILITY
The majority of the components required to assemble our products come from
outside sources. The supply level of and the lead time in delivering certain key
components changes and is difficult to predict with any certainty. Occasional
unexpected shortages of or significant increases in the price of components
could materially and adversely affect our business, results of operations, and
financial condition.
We rely on a single source for certain key components and do not have
supply commitments for those components. If we lose the ability to obtain these
components from our current suppliers, we will have difficulty replacing this
supply of components in a short time frame. Many of our vendors extend us credit
for the components they supply. Poor credit terms would materially adversely
affect our business, results of operations, and financial condition.
We buy a fiber optic interface card for the OMNILYNX product from a small
company which is the sole source for this component. We also buy a video codec
card used in OMNILYNX video applications from another small company which is the
sole source. Delays in delivery of either component would restrict our ability
to increase sales. If either vendor fails to meet commitments, we intend to rely
on its in-house manufacturing capabilities. However, the conversion to in-house
backup supply would involve some interruption in our production and could
materially adversely affect our business, results of operations, and financial
condition.
We use fiber optic connectors made by a single vendor in the OMNILYNX
product. Equivalent components are available from other vendors, but their use
would require a redesign of the method of connecting to the fiber. This would
cause significant delays in delivery of the product and could materially
adversely effect our business, results of operations, and financial condition.
Our strategy is to forecast requirements and build inventories that comprehend
vendor lead times.
We have one manufacturing facility for OMNILYNX products, and our revenues
depend on its continued operation. While third-party manufacturers could be
utilized for a significant portion of the manufacturing process, operational
problems at the facility could materially adversely affect our business, results
of operations, and financial condition.
WE DEPEND ON THIRD PARTIES TO MARKET AND SERVICE OUR PRODUCTS
Although we expect to continue to market our products directly to certain
accounts, we intend to maintain a network of resellers, consisting primarily of
distributors, value-added resellers, and systems integrators with established
distribution channels for communications products, to market our products and
educate potential end-users and service providers about our products. Our future
prospects depend in large part on our development of relationships with third
parties and their marketing and product service efforts. We cannot assure that
we will be able, for financial or other reasons, to finalize third-party
distribution or marketing agreements or that such arrangements will result in
the successful commercialization of any of our products. Failure to develop
third party marketing and service arrangements or failure of third parties to
effectively market and service our products could materially adversely affect
our business or our financial condition.
WE RELY ON PATENTS AND OTHER PROPRIETARY INFORMATION. THE LOSS OF, OR A DISPUTE
REGARDING, PROPRIETARY INFORMATION OR INTELLECTUAL PROPERTY RIGHTS WOULD
NEGATIVELY AFFECT OUR BUSINESS
Our success depends, in part, on our ability to maintain trade secret
protection, obtain patents and operate without infringing the proprietary rights
of third parties or having third parties circumvent our intellectual property
rights. We have three issued U.S. patents. Fifteen additional patents are
pending. We cannot assure that the patents will provide us with any competitive
advantages or will not be challenged by any third parties. Likewise, the
intellectual property rights of others could impede our ability to do business.
Additionally, third parties may be able to circumvent our patents. Our patent
applications may be denied. Furthermore, it is possible that others could
independently develop similar products, duplicate our products, or design around
our patented products.
We have received notice that we may be infringing on certain intellectual
property rights of others. We have asked legal counsel to evaluate these claims.
We may have to obtain licenses from third parties to avoid infringing patents or
other proprietary rights. We cannot assure that any licenses required under any
such patents or proprietary rights would be made available, if at all, on
acceptable terms. Failure to obtain these licenses could delay product
introductions, or prohibit our development, manufacture or sale of products
requiring such licenses. In addition, we could incur substantial costs in
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defending or prosecuting lawsuits to protect our patents or other proprietary
rights. Intellectual property plaintiffs could obtain injunctive or other
equitable relief which could effectively block our ability to sell our products
in the United States and abroad, and could obtain an award of substantial
damages. Either result could materially adversely affect our business, results
of operations, and financial condition
Much of our know-how and technology may not be patentable. To protect our
rights, we require many employees, consultants, advisors and collaborators to
enter into confidentiality agreements. We cannot assure that these agreements
will provide meaningful protection of our trade secrets, know-how or other
proprietary information in the event of any unauthorized use or disclosure.
Furthermore, independent development by competitors of competing technologies
could materially adversely affect our business, results of operations and
financial condition, especially if we do not obtain patent protection or if our
patent protection is narrowly defined.
NUMEROUS GOVERNMENTAL REGULATIONS AFFECT OUR BUSINESS AND OUR PRODUCTS
While most of our operations are not directly regulated, some of our
customers are telecommunications service providers who are heavily regulated at
both the federal and state levels. Such regulation may limit the number of
potential customers for our services or impede our ability to offer competitive
services to the market, or otherwise materially adversely affect our business,
results of operations, and financial condition. At the same time, recent
deregulation of the telecommunications industry may facilitate the entrance of
new competitors or industry consolidation. This could subject us to additional
competitors, increased pricing pressures, decreased demand for our products or
services, increased cost of doing business or other factors that could
materially adversely affect our business, results of operations, and financial
condition.
WE MAY BE SUBJECT TO SIGNIFICANT CONTINGENT LIABILITIES
In connection with the sale of former operations in November 1995, our
subsidiary Intelect Communications Systems Limited agreed to indemnify Savage
Sports Corporation, the purchaser of Savage Arms, Inc. (a manufacturer of fire
arms) for potential losses associated with product liability, environmental
matters, employee matters and other similar items. Certain of these indemnity
obligations survive indefinitely. A finding of liability against Intelect
Communications Systems Limited could materially adversely affect our business,
results of operations, and financial condition. Furthermore, we could incur
substantial costs (including the diversion of the attention of management) in
defending lawsuits relating to these indemnity obligations.
One of the liabilities assumed in the 1995 sale involves a firearms
product liability lawsuit which one defendant, Western Auto Supply Co., settled
for $5 million and, in turn, has asserted a third-party claim against Savage
Arms, Inc. for indemnification in the amount of the settlement plus attorneys'
fees and related costs (the "Taylor litigation"). Savage Arms has asserted
defenses to the claims and we believe additional defenses may be available.
Based on the information available to date, it is impossible to predict the
outcome of this litigation or to assess the probability of any verdict.
Savage Sports Corporation also seeks indemnification for certain other
products liability claims. Intelect Communications Systems Limited has
undertaken the defense of a lawsuit filed against Savage Arms, Inc. by Emhart
Industries, Inc. in the United States District Court for the District of
Massachusetts, in which Emhart requests indemnification from Savage Arms (to
date, approximately $2.2 million). We have asserted additional defenses. The
parties are in discovery and we cannot at this time predict the outcome of the
litigation.
An adverse outcome in the Taylor or Emhart litigation would materially
adversely affect our financial condition and the results of operation.
A shareholders class action lawsuit was filed in the U.S. District Court
for the Northern District of Texas purported to have been filed on behalf of all
persons and entities who purchased Intelect common stock during the period
between February 24, 1998 and November 17, 1998. The named defendants include
Intelect Network Technologies Company, certain former and present officers and
directors of the Company, and Arthur Andersen, LLP. The complaint alleges that
the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934 and Rule 10b-5 promulgated thereunder by making false and misleading
statements concerning Intelect's reported financial results during the period,
primarily relating to revenue recognition, asset impairment and capitalization
issues. The plaintiffs seek monetary damages, interest, costs and expenses. The
Company intends to defend the suit vigorously in all aspects.
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OUR CHARTER, BYLAWS AND THE DELAWARE CORPORATE LAWS DISCOURAGE, DELAY OR PREVENT
A CHANGE IN CONTROL OF INTELECT
Certain provisions of our certificate of incorporation, by-laws and
Delaware law could discourage potential acquisition proposals, delay or prevent
a change in control of the company and limit the price that certain investors
might be willing to pay in the future for shares of common stock. These
provisions include:
o a classified Board of Directors;
o provisions that the Board of Directors have exclusive authority to
amend or change the By-laws;
o the ability of the Board of Directors to authorize the issuance,
without further stockholder approval, of preferred stock with rights
and privileges which could be senior to the common stock;
o eliminating the stockholders' ability to take any action without a
meeting;
o eliminating the ability of stockholders to call special meetings
without the required consent of the Board of Directors; and
o establishment of certain advance notice procedures for nomination of
candidates for election as directors and for stockholder proposals
to be considered at stockholders' meetings.
We are also subject to Section 203 of the Delaware General Corporation
Laws which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any "interested
stockholder" for a period of three years following the date that such
stockholder became an "interested stockholder."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
public reference facilities of the SEC in Washington, D.C., Chicago, Illinois
and New York, New York. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from the SEC's web site at http:\\www.sec.gov. Intelect common stock
is traded on the Nasdaq Stock Market.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we have
filed with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this Prospectus and any later information that we
file with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any additional documents
we file with the SEC until this offering of common stock is terminated. This
Prospectus is part of a registration statement on Form S-3 that we filed with
the SEC. The documents that we incorporate by reference are:
(1) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998.
(2) Our Form 10-Q's filed on May 17, August 16, and November 12, 1999.
(3) Our Form 8-K's filed on November 23, and December 22, 1999, and
February 8, 2000.
(4) Our definitive Proxy Statement filed on April 30, 1999.
(5) The description of our common stock contained in our Registration
Statement on Form S-4 declared effective on October 30, 1997 (File
No. 333-39063) and our Form 8-K filed on December 5, 1997.
(6) All documents we file with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of this Prospectus and
before the termination of the offering of the common stock
registered under this registration statement.
To the extent that prior filings listed in numbers (1) - (5) above
conflict with this Prospectus, those prior filings are modified by this
Prospectus and included herein only as modified. To the extent that statements
in this Prospectus or
8
<PAGE>
in the prior filings listed in numbers (1) - (5) above conflict with statements
in future filings referenced in number (8) above, this Prospectus and the prior
filings are modified by the future filings listed in number (6) above.
For information on the consolidated financial statements see "Experts" in
this Prospectus.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
ROBERT P. CAPPS
CHIEF FINANCIAL OFFICER
INTELECT COMMUNICATIONS, INC.
1100 EXECUTIVE DRIVE
RICHARDSON, TEXAS 75081
(972) 367-2100.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock offered in
this Prospectus.
SELLING STOCKHOLDERS
The Selling Stockholders were issued the common stock covered by this
Prospectus in a series of private placements as summarized below:
Of the 20,412,227 shares of Common Stock being registered:
(i) We issued 7,200,000 shares of common stock, and warrants for the
purchase of 3,600,000 shares of common stock, to certain accredited
investors in a private placement which closed on January 27, 2000.
Such shares are registerable under registration rights agreements
dated January 27, 2000.
(ii) We issued warrants for the purchase of 720,000 shares of common
stock to Stonegate Securities, Inc. ("Stonegate") in a private
placement in connection with Stonegate's service as placement agent
in the January 27, 2000 private placement described in (i) above. We
issued 250,000 shares of common stock to Stonegate in a private
placement for certain investment banking services performed by
Stonegate.
(iii) We issued 5,000,000 shares of common stock to The Coastal
Corporation Second Pension Trust ("Coastal") in exchange for a
reduction in Intelect's obligations under its credit facility with
Coastal. We issued 364,726 shares of common stock to The Coastal
Corporation Second Pension Trust ("Coastal") as dividends on the
Company's $2.0145, 10% Cumulative Convertible Preferred Stock,
Series A (the "Series A Preferred Stock") for the third quarter
(142,719 shares) and fourth quarter (222,007 shares) of 1999.
(iv) We issued 350,000 shares of common stock to Richard Dzanski pursuant
to a settlement agreement for the settlement and dismissal of
certain claims asserted by him against the Company.
(v) We issued warrants to purchase 225,000 shares of common stock to
Alpine Capital Partners, Inc. in connection with a private placement
of convertible debentures which occurred on October 15, 1996.
(vi) We are registering 450,500 shares for St. James Capital Partners,
L.P. ("SJCP") and 1,802,001 shares for SJMB, L.P. ("SJMB"), (SJCP
and SJMB collectively "St. James") which shares are included herein
as a result of an agreement dated September 14, 1998 between the
Company and the other parties thereto, as a result of anti-dilution
provisions in warrants issued April 2, 1998 by the Company to St.
James.
(vii) As of February 10, 2000, we issued in a private placement
transaction a warrant to purchase 115,000 shares of common stock at
an exercise price of $3.00 per share to Peter Ianace in connection
with a separation agreement with the Company.
(vii) As of February 10, 2000, we issued in a private placement
transaction 15,000 shares of common stock to Young Investment
Advisor, an entity controlled by Roger Young, in consideration for
certain advisory services rendered to the Company from 1995 to the
present.
9
<PAGE>
In each case, the issuance of Intelect common stock to each of the Selling
Stockholders was undertaken pursuant exemptions from registration under the
Securities Act.
Except as otherwise indicated, the table below sets forth the number of
shares of Intelect common stock beneficially owned by each of the Selling
Stockholders as of February 1, 2000, the number of shares of common stock to be
offered by each Selling Stockholder under this Prospectus, and the number of
shares of common stock to be beneficially owned by each Selling Stockholder if
all of the shares of common stock offered hereby are sold as described herein.
- -------------------------------------------------------------------------------
NUMBER OF
SHARES OF NUMBER OF
COMMON STOCK SHARES OF
BENEFICIALLY NUMBER OF COMMON STOCK
OWNED AS OF SHARES OF BENEFICIALLY
FEBRUARY 1, COMMON STOCK OWNED AFTER
NAME OF SELLING STOCKHOLDER 2000 (1) OFFERED HEREBY OFFERING (6)
- -------------------------------------------------------------------------------
The Coastal Corporation Second
Pension Trust .................. 14,263,508(2) 5,364,726 5,000,000
- -----------------------------------------------------------------------------
St. James Capital Partners, L.P. 860,000(3) 750,500 0
- -----------------------------------------------------------------------------
SJMB, L.P. ..................... 4,088,001(4) 1,802,001 0
- -----------------------------------------------------------------------------
Richard Dzanski ................ 350,000 350,000 0
- -----------------------------------------------------------------------------
Young Investment Advisor ....... 15,000 15,000 0
- -----------------------------------------------------------------------------
Peter Ianace.................... 115,000(5) 115,000 0
- -----------------------------------------------------------------------------
Stonegate Securities, Inc. ..... 990,000 990,000 0
- -----------------------------------------------------------------------------
Alpine Capital Partners, Inc. .. 337,500 225,000 0
- -----------------------------------------------------------------------------
Apogee Fund, LP ................ 180,000 180,000 0
- -----------------------------------------------------------------------------
Mary Kathryn Norman ............ 15,000 15,000 0
- -----------------------------------------------------------------------------
Lighthouse Partners USA LP ..... 870,000 870,000 0
- -----------------------------------------------------------------------------
Erinch R. Ozada ................ 600,000 600,000 0
- -----------------------------------------------------------------------------
Pharos Fund Limited ............ 2,262,000 2,262,000 0
- -----------------------------------------------------------------------------
Lighthouse Investment Fund, LP . 336,000 336,000 0
- -----------------------------------------------------------------------------
Eric Erdinch Ozada ............. 60,000 60,000 0
- -----------------------------------------------------------------------------
Balkir Zihnali ................. 30,000 30,000 0
- -----------------------------------------------------------------------------
Kenneth E. Higgins, Jr ......... 12,000 12,000 0
- -----------------------------------------------------------------------------
Joyce E. Heinzerling ........... 15,000 15,000 0
- -----------------------------------------------------------------------------
Bank Morgan Stanley AG ......... 600,000 600,000 0
- -----------------------------------------------------------------------------
Endeavor Asset Management ...... 60,000 60,000 0
- -----------------------------------------------------------------------------
JPW Fund, Ltd. ................. 60,000 60,000 0
- -----------------------------------------------------------------------------
Geronimo Partners, L.P. ........ 180,000 150,000 30,000
- -----------------------------------------------------------------------------
EOS Partners(Offshore), L.P. ... 3,000 3,000 0
- -----------------------------------------------------------------------------
10
<PAGE>
- -----------------------------------------------------------------------------
EOS Partners SBIC II, L.P. ..... 219,000 219,000 0
- -----------------------------------------------------------------------------
EOS Partners, L.P. ............. 18,000 18,000 0
- -----------------------------------------------------------------------------
Eurasian Capital Partners Fund,
L.P. ........................... 120,000 120,000 0
- -----------------------------------------------------------------------------
Forest Performance Fund ........ 37,500 37,500 0
- -----------------------------------------------------------------------------
Forest Convertible Fund, LP .... 17,250 17,250 0
- -----------------------------------------------------------------------------
Zurich HFR Master Hedge Fund,
Ltd. ........................... 5,250 5,250 0
- -----------------------------------------------------------------------------
Graham Partners, L.P ........... 60,000 60,000 0
- -----------------------------------------------------------------------------
Gryphon Partners, L.P. ......... 750,000 750,000 0
- -----------------------------------------------------------------------------
Archer Fund, L.P. .............. 60,000 60,000 0
- -----------------------------------------------------------------------------
Lyon Capital, LLC .............. 60,000 60,000 0
- -----------------------------------------------------------------------------
Jeff Coker ..................... 15,000 15,000 0
- -----------------------------------------------------------------------------
Warren W. Garden ............... 15,000 15,000 0
- -----------------------------------------------------------------------------
Hathaway Partners Inv. Ltd. ....
Partnership .................... 145,000 120,000 25,000
- -----------------------------------------------------------------------------
Montrose Investments Ltd. ...... 285,000 285,000 0
- -----------------------------------------------------------------------------
Duck Partners, L.P. ............ 120,000 120,000 0
- -----------------------------------------------------------------------------
Kingdon Partners ............... 180,000 180,000 0
- -----------------------------------------------------------------------------
Europa International, Inc. ..... 60,000 60,000 0
- -----------------------------------------------------------------------------
LKCM Investment Partnership .... 255,000 255,000 0
- -----------------------------------------------------------------------------
Bryan King & Mason King
Livestock Partnership .......... 15,000 15,000 0
- -----------------------------------------------------------------------------
Stanford C. Finney, Jr ......... 180,000 180,000 0
- -----------------------------------------------------------------------------
Rainbow Trading Corporation .... 255,000 255,000 0
- -----------------------------------------------------------------------------
Rainbow Trading Venture Partners 90,000 90,000 0
- -----------------------------------------------------------------------------
Ridgecrest Partners, Ltd. ...... 45,000 45,000 0
- -----------------------------------------------------------------------------
Ridgecrest Partners QP, Ltd. ... 165,000 165,000 0
- -----------------------------------------------------------------------------
Ridgecrest Partners, L.P. ...... 15,000 15,000 0
- -----------------------------------------------------------------------------
Sanford Prater ................. 30,000 30,000 0
- -----------------------------------------------------------------------------
Eugene McCaron ................. 15,000 15,000 0
- -----------------------------------------------------------------------------
David D. May ................... 30,000 30,000 0
- -----------------------------------------------------------------------------
Stuart Kensinger ............... 9,000 6,000 3,000
- -----------------------------------------------------------------------------
Doug Launius and Beth Launius .. 100,200 60,000 40,200
- -----------------------------------------------------------------------------
John N. Giannukos .............. 60,500 60,000 500
- -----------------------------------------------------------------------------
Michael J. Gaido, Jr ........... 30,000 30,000 0
- -----------------------------------------------------------------------------
11
<PAGE>
- -----------------------------------------------------------------------------
Emily Harris Todd & Christopher
Neal Todd ...................... 30,000 30,000 0
- -----------------------------------------------------------------------------
Paula L. Santoski .............. 30,000 30,000 0
- -----------------------------------------------------------------------------
Diane Goodwin .................. 22,000 12,000 10,000
- -----------------------------------------------------------------------------
Robert Garrison ................ 109,400 60,000 49,400
- -----------------------------------------------------------------------------
Nelson McCarter ................ 12,000 12,000 0
- -----------------------------------------------------------------------------
Don A. Sanders ................. 195,000 195,000 0
- -----------------------------------------------------------------------------
Christine M. Sanders ........... 15,000 15,000 0
- -----------------------------------------------------------------------------
Bret D. Sanders ................ 15,000 15,000 0
- -----------------------------------------------------------------------------
Brad D. Sanders ................ 15,000 15,000 0
- -----------------------------------------------------------------------------
Laura K. Sanders ............... 15,000 15,000 0
- -----------------------------------------------------------------------------
Susan Sanders Keller ........... 15,000 15,000 0
- -----------------------------------------------------------------------------
Katherine U. Sanders ........... 60,000 60,000 0
- -----------------------------------------------------------------------------
Ben T. Morris .................. 15,000 15,000 0
- -----------------------------------------------------------------------------
Donald U. Weir & Julie E. Weir . 60,000 60,000 0
- -----------------------------------------------------------------------------
Bruce R. McMaken ............... 15,000 15,000 0
- -----------------------------------------------------------------------------
George L. Ball ................. 15,000 15,000 0
- -----------------------------------------------------------------------------
Morton A. Cohn ................. 300,000 300,000 0
- -----------------------------------------------------------------------------
Robert Larry Kinney ............ 15,000 15,000 0
- -----------------------------------------------------------------------------
Sanders Opportunities Fund, LP . 120,000 120,000 0
- -----------------------------------------------------------------------------
Scout Capital Partners, L.P. ... 60,000 60,000 0
- -----------------------------------------------------------------------------
Halifax Fund LP ................ 150,000 150,000 0
- -----------------------------------------------------------------------------
Valor Capital Management LP .... 60,000 60,000 0
- -----------------------------------------------------------------------------
Carsam Capital II .............. 60,000 60,000 0
- -----------------------------------------------------------------------------
Thomas O. Meadows .............. 17,000 15,000 2,000
- -----------------------------------------------------------------------------
Jeffrey Thorp IRA Rollover Bear
Stearns Secs. Corp. Custodian .. 300,000 300,000 0
- -----------------------------------------------------------------------------
Jesse & Michelle Shelmire ...... 60,000 60,000 0
- -----------------------------------------------------------------------------
Mark & Cynthia Gulis ........... 15,000 15,000 0
- -----------------------------------------------------------------------------
Brent W. Clum .................. 30,000 30,000 0
- -----------------------------------------------------------------------------
Robert L. Swisher, Jr .......... 45,000 45,000 0
- -----------------------------------------------------------------------------
Charles C. Taylor .............. 15,000 15,000 0
- -----------------------------------------------------------------------------
Ray Nixon, Jr. & Denise A. Nixon 60,000 60,000 0
- -----------------------------------------------------------------------------
12
<PAGE>
- -----------------------------------------------------------------------------
Delaware Charter Trustee FBO
Scott R. Griffith SEP-IRA ...... 18,000 18,000 0
- -----------------------------------------------------------------------------
Scott Griffith ................. 42,000 42,000 0
- -----------------------------------------------------------------------------
SGR & Associates 401K Profit
Sharing Plan FBO Tim Stobaugh .. 9,000 9,000 0
- -----------------------------------------------------------------------------
Tim Stobaugh ................... 6,000 6,000 0
- -----------------------------------------------------------------------------
Anne K Dahlson ................. 40,000 30,000 10,000
- -----------------------------------------------------------------------------
Richard A. Englander ........... 30,000 30,000 0
- -----------------------------------------------------------------------------
Bray Family Trust .............. 60,000 60,000 0
- -----------------------------------------------------------------------------
John S. Lemak .................. 60,000 60,000 0
- -----------------------------------------------------------------------------
Allan Peterson ................. 15,000 15,000 2,000
- -----------------------------------------------------------------------------
(1) Beneficial ownership is determined under SEC rules and generally
includes voting or investment power with respect to securities and
includes any securities the person has the right to acquire within
60 days of August 18, 1999 through the conversion or exercise of any
security or other right.
(2) Based solely on information supplied to the Company as of February
2, 2000 by Coastal. Includes 3,719,409 shares of common stock
issuable upon conversion of the Company's Series A Preferred Stock
and 1,517,308 shares of common stock issuable upon exercise of
currently exercisable warrants. Includes 5,000,000 shares of common
stock issuable upon exercise of a warrant which is not presently
exercisable pursuant of the terms of such warrant.
(3) Includes (i) 750,500 shares of common stock issuable upon exercise
of warrants, which represents 300,000 shares of common stock
issuable upon exercise of warrants issued on April 2, 1998 and an
additional 450,500 shares issuable pursuant to an agreement relating
to anti-dilution provisions in such warrants as of September 14,
1998, and (ii) 110,000 shares issuable upon exercise of that certain
warrant dated January 13, 1999. Assumes the sale of all shares of
common stock previously issued to St. James Capital Partners, L.P.
upon conversion of indebtedness. Except as set forth herein, does
not include any additional shares which may be acquired pursuant to
anti-dilution provisions in the warrants.
(4) Includes (i) 661,000 shares of common stock issuable upon conversion
of convertible debt as of February 9, 2000 at a repayment price of
$3.33 per share (which price represents 66 2/3% of the "Market
Price" (as defined) of the Company's common stock on such date of
determination), (ii) 3,002,001 shares of common stock issuable upon
exercise of warrants, which represents 1,200,000 shares of common
stock issuable upon exercise of warrants issued on April 2, 1998 and
an additional 1,802,001 shares pursuant to an agreement relating to
anti-dilution provisions in such warrants as of September 14, 1998,
and (ii) 425,000 shares issuable upon exercise of that certain
warrant dated January 13, 1999. Assumes the sale of all shares of
common stock previously issued to SJMB, L.P. upon conversion of
indebtedness. Except as set forth herein, does not include any
additional shares which may be acquired pursuant to anti-dilution
provisions in the warrants.
(5) Beneficial ownership as of February 10, 2000.
(6) Assumes the sale of all shares of common stock covered by this
Prospectus by the Selling Stockholders. With respect to Coastal,
assumes the sale of all of the shares of common stock issuable upon
conversion of the Company's Series A Preferred Stock and shares of
common stock issuable or issued upon exercise of warrants held by
Coastal, or issued to Coastal as dividends on the Company's Series A
Preferred Stock and covered in previous registration statements of
the Company on Form S-3 filed on December 30, 1997, May 22, 1998,
April 2, and August 27, 1999 (File Nos. 333-35851, 333-53451,
333-75651 and
13
<PAGE>
333-86095). With respect to St. James Capital Partners, L.P.,
assumes the sale of (i) 300,000 shares of common stock issuable upon
the exercise of the warrants covered by the registration statement
filed on May 22, 1998, (ii) 110,000 shares of common stock issuable
upon exercise of warrants covered by the registration statement
filed on April 2, 1999, and (iii) all remaining shares of common
stock issuable upon conversion of certain indebtedness covered by
the registration statement filed on August 27, 1999. With respect to
SJMB, L.P., assumes the sale of (i) 1,200,000 shares of common stock
issuable upon the exercise of the warrants covered by the
registration statement filed on May 22, 1998, (ii) 425,000 shares of
common stock issuable upon exercise of warrants covered by the
registration statement filed on April 2, 1999, and (iii) all
remaining shares of common stock issuable upon conversion of certain
indebtedness covered by the registration statement filed on August
27, 1999. Upon completion of the offering, and after giving effect
the sale of all of the shares of common stock referred to herein,
each Selling Stockholder will own less than 1% of the common stock
of the Company except for Coastal which will own 5%.
Since the date on which they provided the information regarding their
common stock, the Selling Stockholders identified above may have sold,
transferred or otherwise disposed of all or a portion of their common stock in
transactions exempt from the registration requirements of the Securities Act.
Additional information concerning the above listed Selling Stockholders may be
set forth from time to time in Prospectus supplements to this Prospectus. See
"Plan of Distribution."
PLAN OF DISTRIBUTION
The common stock is offered on behalf of the Selling Stockholders. The
common stock may be sold or distributed from time to time by the Selling
Stockholders, or by donees or transferees of, or other successors in interest
to, the Selling Stockholders, directly to one or more purchasers or through
brokers, dealers or underwriters who may act solely as agents or may acquire
common stock as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices, or at
fixed prices, which may be changed. The sale of Intelect common stock may occur
in one or more of the following methods:
(i) ordinary brokers' transactions;
(ii) transactions involving cross or block trades or otherwise on the
Nasdaq Small Cap Market;
(iii) purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to this
Prospectus;
(iv) "at the market" to or through market makers or into an existing
market for the Common Stock;
(v) in other ways not involving market makers or established trading
markets, including direct sales to purchases or sales effected
through agents;
(vi) through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise);
(vii) in privately negotiated transactions; or
(viii) any combination of the foregoing.
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of their conversion
shares, and the pledges, secured parties or persons to whom such securities have
been hypothecated shall, upon foreclosure in the event of default, be deemed to
be Selling Stockholders hereunder.
From time to time one or more of the Selling Stockholders may transfer,
pledge, donate or assign such Selling Stockholders' conversion shares to lenders
or others and each of such persons will be deemed to be a Selling Stockholder
for purposes of this Prospectus. The number of Selling Stockholders' conversion
shares beneficially owned by those Selling Stockholders who so transfer, pledge,
donate or assign Selling Stockholders' conversion shares will decrease as and
when they take such actions. The plan of distribution for Selling Stockholders'
conversion shares sold hereunder will otherwise remain unchanged, except that
the transferees, pledges, donees or other successors will be Selling
Stockholders hereunder.
Brokers, dealers, underwriters or agents participating in the distribution
of the common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Stockholders and/or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation as to a
particular broker-dealer may be less than or in excess of customary
commissions).
14
<PAGE>
The Selling Stockholders and any broker-dealers who act in connection with the
sale of common stock covered by this Prospectus may be deemed to be
"Underwriters" within the meaning of the Securities Act, and any commissions
they receive and proceeds of any sale of common stock may be deemed to be
underwriting discounts and commissions under the Securities Act. Neither
Intelect nor any Selling Stockholders can presently estimate the amount of such
compensation. We know of no existing arrangements between any Selling
Stockholders, any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of the common stock.
We will pay substantially all of the expenses incident to the
registration, offering and sale of the common stock to the public other than
commissions or discounts of underwriters, broker-dealers or agents. We have also
agreed to indemnify certain of the Selling Stockholders and certain related
persons against certain liabilities, including liabilities under the Securities
Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Intelect,
Intelect has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
We have advised the Selling Stockholders that during such time as they may
be engaged in a distribution of the common stock included herein they are
required to comply with Regulation M promulgated under the Exchange Act. With
certain exceptions, Regulation M precludes any Selling Stockholder, any
affiliated purchasers, and any broker-dealer or other person who participates in
such distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing may affect the marketability of the common stock.
Because it is possible that a significant number of shares of the common
stock could be sold at the same time hereunder, such sales, or the possibility
thereof, may have a significant depressive effect on the market price of
Intelect common stock.
This offering will terminate on the earlier of (a) the date on which the
shares are eligible for resale without restriction pursuant to Rule 144(k) under
the Securities Act or (b) the date on which all shares offered hereby have been
sold by the Selling Stockholders.
LEGAL MATTERS
The validity of the common stock offered by the Selling Stockholders
hereby will be passed upon by Ryan & Sudan, L.L.P., Houston, Texas. Philip P.
Sudan, Jr. is a partner of Ryan & Sudan, L.L.P and a director of Intelect. Mr.
Sudan beneficially owns 473,273 shares of common stock. Mr. James W. Ryan, a
partner in Ryan & Sudan, L.L.P., beneficially owns 98,000 shares of common
stock. In addition, Messrs. Ryan and Sudan are holders of certain amended and
restated promissory notes (the "Promissory Notes") issued by the Company which
have an aggregate principal balance of $200,000. The Promissory Notes are
payable on demand in cash or in Common Stock. If a holder elects to convert his
Promissory Note into Common Stock, the number of shares to which the holder
would be entitled is equal to the aggregate principal and interest outstanding
under the Promissory Note divided by $1.00. The Promissory Notes were originally
issued on December 5, 1997 and bear interest at the prime rate plus 3%.
15
<PAGE>
PROSPECTUS
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY INTELECT COMMUNICATIONS, INC. (THE "COMPANY") OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT
RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
About Intelect ....................................................... 2
Risk Factors ......................................................... 2
Where You Can Find More Information About Intelect ................... 8
Incorporation of Certain Documents by Reference ...................... 8
Use of Proceeds ...................................................... 9
Selling Stockholders ................................................. 9
Plan of Distribution ................................................. 14
Legal Matters ........................................................ 15
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Nature of Expense
SEC Registration Fee ................................................. $24,843
Legal (including Blue Sky), Printing, and Accounting Fees and Expenses $20,000
Miscellaneous ........................................................ $ 2,000*
*Estimated
TOTAL ................................................................ $46,843
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VII of the Registrant's Certificate of Incorporation provides that
if Delaware law is amended hereafter to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by Delaware law as so amended. Any amendment, repeal or
modification of Article VII of the Registrant's Certificate of Incorporation
shall not adversely affect any right or protection of a director of the
Corporation existing hereunder with respect to any act or omission occurring
prior to such amendment, repeal or modification.
Article XI of the Registrant's By-Laws provides that the Registrant (i)
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Registrant) by reason of the fact that he or she is or
was a director or an officer of the Registrant, or is or was serving at the
request of the Registrant as a director or an officer of another corporation,
partnership, joint venture, trust or other enterprise, to the full extent
authorized or permitted by law, as now or hereafter in effect, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful, and (ii) may
indemnify, if the Board of Directors determines such indemnification is
appropriate, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Registrant) by reason of the fact that he or she is or
was an employee or agent of the Registrant, or is or was serving at the request
of the Registrant as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, to the full extent authorized or
permitted by law, as now or hereafter in effect, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Registrant, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Registrant, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful. To the extent that (i) a director
or an officer of the Registrant or (ii) any other employee or agent of the
Registrant who the Board of Directors has authorized the Registrant to
indemnify, has been successful on the merits or otherwise in defense of any
action, suit or proceeding or in defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
Notwithstanding the foregoing, except for proceedings to enforce rights to
indemnification, the Registrant shall not be obligated to indemnify any person
in connection with a proceeding (or part thereof) initiated by such person
unless such proceeding (or part thereof) was authorized in advance, or
unanimously consented to, by the Board of Directors.
II-1
<PAGE>
Article XI of the Registrant's By-Laws also provides that any
indemnification provided therein (unless ordered by a court) shall be made by
the Registrant only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in sections 1 and 2 of Article XI of the Registrant's By-Laws. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the Stockholders.
Expenses (including attorneys fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding shall be paid by the Registrant in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that such person is not entitled to be indemnified by the
Registrant or as otherwise authorized by law. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
Article XI of the Registrant's By-Laws further provides that the
indemnification and advancement of expenses shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any by-law, agreement, vote of Stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative, by reason
of the fact that he or she is or was a director, officer, employee or agent of
the corporation or is or was serving at its request in such capacity in another
corporation or business association against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interest of the corporation and, with respect to any
criminal action or proceeding, if he or she had no reasonable cause to believe
his conduct was unlawful; provided that, in the case of actions brought by or in
the right of the corporation, no indemnification will be made with respect to
any matter as to which such person will have been adjudged to be liable to the
corporation unless and only to the extent that the adjudicating court determines
that such indemnification is proper under the circumstances.
ITEM 16. EXHIBITS.
See Exhibit Index included immediately preceding the Exhibits to this
Registration Statement, which is incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (1)(i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant
to
II-2
<PAGE>
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are incorporated by reference in this
Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable,
each filing of any employer benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the indemnification provisions described herein, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceedings) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing this Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Richardson, Texas on the 11th day of February, 2000.
INTELECT COMMUNICATIONS, INC.
BY: /s/ HERMAN M. FRIETSCH
HERMAN M. FRIETSCH
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Herman M. Frietsch, his true and lawful
attorney-in-fact and agent with full power of substitution and re-substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/HERMAN M. FRIETSCH Chief Executive Officer February 11, 2000
HERMAN M. FRIETSCH and Director (Principal
Executive Officer)
/s/ROBERT P. CAPPS Executive Vice President February 11, 2000
ROBERT P. CAPPS and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
/s/PHILIP P. SUDAN, JR. Director February 11, 2000
PHILIP P. SUDAN, JR.
/s/ANTON LIECHTENSTEIN Director February 11, 2000
ANTON LIECHTENSTEIN
/s/ROBERT E. GARRISON II Director February 11, 2000
ROBERT E. GARRISON II
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT
4.1 Amended and Restated Certificate of Incorporation of Intelect
Communications, Inc. (1)
4.2 Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Intelect Communications, Inc. (2)
4.3 Amended and Restated By-Laws of Intelect Communications, Inc.
(1)
4.4 Certificate of Designations of the Series A Preferred Stock
dated December 2, 1997 (1)
4.5 Form of Registration Rights Agreement dated January 27, 2000
between Intelect Communications, Inc., the Investors named
therein, and Stonegate Securities, Inc. (3)
4.6 Registration Rights Agreement dated December 13, 1999 between
Intelect Communications, Inc. and The Coastal Corporation Second
Pension Trust (4)
4.7 Form of Warrant issued to Stonegate and the Investors to
purchase common stock of Intelect Communications, Inc. at $2.50
per share, subject to adjustment. (3)
4.8 Warrant issued to Stonegate to purchase 250,000 shares of common
stock of Intelect Communications, Inc. at $1.00 per share. (3)
4.9 Warrant issued to Alpine Capital Partners, Inc. to purchase
250,000 shares of common stock of Intelect Communications, Inc.
at $7.50 per share.
4.10 Warrant issued to St. James Capital Partners, L.P. by Intelect
Communications, Inc. dated April 2, 1998 exercisable as to
300,000 shares of Common Stock (5)
4.11 Warrant issued to SJMB, L.P. by Intelect Communications, Inc.
dated April 2, 1998 exerciseable as to 1,200,000 shares of
Common Stock (5)
4.12 Warrant issued to Peter Ianace by Intelect Communications, Inc.
dated February 10, 2000 exerciseable as to 115,000 shares of
Common Stock
5.1 Opinion of Ryan & Sudan, L.L.P., Houston, Texas
10.1 Settlement Agreement and Mutual Release dated February 2, 2000
between Intelect Communications, Inc., Intelect Network
Technologies Company and Intelect Communications, Inc. (3)
10.2 Subscription Agreement for Common Stock Units dated December 17,
1999 between Intelect Communications, Inc. and The Coastal
Corporation Second Pension Trust. (4)
10.3 Letter Agreement dated September 14, 1998 among Intelect
Communications, Inc., St. James and Falcon Seaboard (6)
23.1 Consent of Grant Thornton LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG
23.4 Consent of Ryan & Sudan, L.L.P. (included in Exhibit 5.1)
--------------------
(1) Incorporated herein by reference to Form S-4 of Intelect
Communications, Inc. filed October 30, 1997 (File No. 333-39063)
(2) Incorporated herein by reference to Form 8-K of Intelect
Communications, Inc. filed March 8, 1999
(3) Incorporated herein by reference to Form 8-K of Intelect
Communications, Inc. filed February 8, 2000
(4) Incorporated herein by reference to Form 8-K of Intelect
Communications, Inc. filed December 22, 1999
(5) Incorporated herein by reference to Form 10-Q of Intelect
Communications, Inc. for the quarter ended March 31, 1998
(6) Incorporated herein by reference to Form 8-K of Intelect
Communications, Inc. filed September 16, 1998
II-5
EXHIBIT 4.9
THIS WARRANT AND THE SHARES OF COMMON SHARES ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN
SECTION 4 OF THIS WARRANT
Warrant No. 10 Number of Shares: 225,000
(subject to adjustment)
Date of Issuance: October 15, 1996
INTELECT COMMUNICATIONS SYSTEMS LIMITED
COMMON SHARES PURCHASE WARRANT
(Void after October 15, 2001)
Intelect Communications Systems Limited, a Bermuda Company (the "Company), for
value received, hereby certifies that Alpine Capital Partners, Inc., or its
registered assigns (the "Registered Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company, at any time or from time to time
on or after the date of issuance and on or before October 15, 2001 at not later
than 5:00 p.m. (Boston, Massachusetts time) 225,000 shares of Commons Shares,
$.01 par value per share, of the Company, at an issue price of $7.50 per share.
The shares purchasable upon exercise of this Warrant, and the Purchase Price per
share (defined below), each as adjusted from time to time pursuant to the
provisions of this Warrant, are hereinafter referred to as the "Warrant Shares"
and the "Purchase Price," respectively.
1. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in whole or in
part, by surrendering this Warrant, with the purchase form appended hereto as
EXHIBIT 1 duly executed by such Registered Holder or by such Registered Holder's
duly authorized attorney, at the principal office of the Company, or at such
other office or agency by as the Company may designate, accompanied by payment
in full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise. For
purposes hereof, the Purchase Price shall be equal to $7.50 per share.
(b) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection l(a) above.
At such time, the person or persons whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in subsection
(c) below shall be deemed to have become the holder or holders of record of the
Warrant Shares represented by such certificates.
(c) As soon as practicable after the exercise of this Warrant in full or
in part, and in any event within 10 days hereafter, the Company, at its expense,
will cause to be issued in the name of, and delivered to, the Registered Holder,
or as such Holder (upon payment by such Holder of any applicable transfer taxes)
may direct:
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<PAGE>
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the number of such shares purchased by the Registered
Holder upon such exercise.
2. ADJUSTMENTS.
(a) If outstanding shares of the Company's Common Shares shall be
subdivided into a greater number of shares or a dividend in Common Shares shall
be paid in respect of Common Shares, the Purchase Price in effect immediately
prior to such subdivision or at the record date of such dividend shall
simultaneously with the effectiveness of such subdivision or immediately after
the record date of such dividend be proportionately reduced. If outstanding
shares of Common Shares shall be combined into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the Purchase Price, the
number of Warrant Shares purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the number
of shares issuable upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or reclassification of
the Company's Common Shares (other than a change in par value or a subdivision
or combination as provided for in subsection 2(a) above), or any consolidation
or merger of the Company with or into another corporation, or a transfer of all
or substantially all of the assets of the Company, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Shares which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or proper thereafter
deliverable upon the exercise of this Warrant.
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<PAGE>
(c) When any adjustment is required to be made in the Purchase Price, the
Company shall promptly mail to the Registered Holder a certificate setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Such certificate shall also set for the
kind and amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
subsection 2(a) or (b) above.
3. FRACTIONAL SHARES. The Company shall not be required upon the exercise of
this Warrant to issue any frachona1 shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value (defined below) per share
of Common Shares. For purposes hereof, Fair Market Value shall be determined as
follows:
(i) If the Common Shares are listed on a national securities
exchange, the Nasdaq National Market, the NASDAQ system, or another nationally
recognized exchange or trading system as of the Exercise Date, the Fair Market
Value per share of the Common Shares shall be deemed be the last reported sale
price per share of the Common Shares thereon on the Exercise Date; or, if no
such price s reported on such date, such price on the next preceding business
day (provided that if no such puce reported on the next preceding business day,
the Fair Market Value per share of Common Shares shall be determined pursuant to
clause (ii)).
(ii) If the Common Shares are not listed on a national securities
exchange, the Nasdaq National Market the NASDAQ system or another nationally
recognized exchange or trading system as of the Exercise Date, the Fair Market
Value per share of the Common Shares shall be deemed to be the amount most
recently determined by the Board of Directors to represent the fair market value
per share of the Common Shares (including without limitation a determination for
purposes of granting Common Shares options or issuing Common Shares under an
employee benefit plan of the Company); and, upon request of the Registered
Holder, the Board of Directors (or a representative thereof) shal1 promptly
notify the Registered Holder of the Fair Market Value per share of Common
Shares. Notwithstanding the foregoing, if the Board of Directors has not made
such a determination within the three-month period prior to the Exercise Date,
then (A) the Fair Market Value per share of Common Shares shall be the amount
next determined by the Board of Directors to represent the fair market value per
share of the Common Shares (including without limitation a determination for
purposes of granting Common Shares options or issuing Common Shares under an
employee benefit plan of the Company), and (B) the Board of Directors shall make
such a determination within 15 days of a request by the Registered Holder that
it do so.
4. REQUIREMENTS FOR TRANSFER.
(a) This Warrant and the Warrant Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities Act
of 1933, as amended (the "Act"), or (ii) the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
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<PAGE>
(b) Notwithstanding the foregoing, no registration or opinion of counsel
shall be required for (i) a transfer by a Registered Holder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 4, or (ii) a transfer made in accordance with Rule 144
under the Act.
(c) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been :registered
under the Securities Act of 1933, as amended, and may not be offered, sold
or otherwise transferred, pledged or hypothecated unless and until such
securities are registered under such Act or an opinion of counsel
satisfactory to the Company is obtained to the effect that such
registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
5. NO IMPAIRMENT. The Company will not, by amendment of this charter or the
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
6. NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the holders of its Common Shares
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, Or to receive any right to subscribe for or purchase any
shares of stock of another class or any other securities, or to receive any
other right; or
(b) of any capital reorganization of the Company, any reclassification of
the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company, then, and in each such case, the Company will mail or cause to
be mailed to the Registered Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such
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<PAGE>
divided distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Shares (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Shares (or such other stock or
securities) for securities or other property deliverable upon which
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
7. RESERVATION OF SHARES. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of any
Warrant or Warrants, properly endorsed, to the Company at the principal office
of the Company, the Company will, subject to the provisions of Section 4 hereof,
issue and deliver to or upon the order of such Holder, at the Company's expense,
a new Warrant or Warrants of like tenor, in the name of such Registered Holder
or such Registered Holder (upon payment by such Registered Holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Shares called for on the face
or faces of the Warrant or Warrants so surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (w surety if reasonably required) an amount reasonably satisfactory to
the Company, or (in the case of mutilation) upon surrender and cancellation of
this Warrant, the Company will issue, in lieu thereof, a new Warrant of like
tenor.
10. TRANSFERS, ETC.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by writ notice to the
Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of
Warrant with a properly executed assignment (in the form of EXHIBIT II hereto)
at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register,
the Company may treat the registered Holder of Warrant as the absolute owner
hereof for all purposes; PROVIDED, HOWEVER, that if and when this Warrant is
properly assigned in blank, the Company may (but shall not
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<PAGE>
be obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
11. MAILING OF NOTICES, ETC. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered,
postage prepaid, to the Company at its principal office set forth below. If the
Company should at any time change the location of its principal office to a
place other than as set forth below, it shall give prompt written notice to the
Registered Holder of this Warrant and thereafter all references in this Warrant
to the location of its principal office at the particular time shall be as so
specified in such notice.
11. NO RIGHTS AS SHARESHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived only
by an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
14. HEADINGS. The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant.
15. GOVERNING LAW. This Warrant will be governed by and construed in
accordance w the laws of Bermuda.
INTELECT COMMUNICATIONS
SYSTEMS LIMITED
By: /S/
-------------------------------
Title: Chief Financial Officer
ATTEST:
/S/
- -------------------------------
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<PAGE>
EXHIBIT I
PURCHASE FORM
To: __________________________ Dated: ________________________
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No. _____), hereby irrevocably elects to purchase ________ Common Shares
covered by such Warrant. The undersigned herewith makes payment of $__________
representing the full purchase price for such shares at the price per share
provided for in such Warrant. Such payment takes the form of $______in lawful
money of the United States.
Signature: ________________________
Address: ________________________
________________________
________________________
<PAGE>
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________ hereby sells, assigns
and transfers all of the rights of the undersigned under the attached Warrant
(No. _____) with respect to the number of shares of Common Shares covered hereby
set forth below, unto:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
- ---------------- ------- -------------
Dated: ________________________ Signature: ________________________
Dated: ________________________ Witness: ________________________
EXHIBIT 4.12
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 AND THE COMMON STOCK ISSUABLE THEREBY 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 31, 2000
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, Peter Ianace (the "Holder") is entitled to subscribe for and
purchase from the Company (as hereinafter defined), in whole or in part, 115,000
shares of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (as hereinafter defined) at the Exercise Price (as hereinafter
defined), subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00 p.m., Houston, Texas time, on December 31, 2000.
As used herein, the following terms shall have the meanings set forth
below:
"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.
"EXERCISE PRICE" shall mean $3.00 per share of Common Stock payable upon
exercise of the Warrant, as adjusted pursuant to the provisions hereof.
"WARRANT SHARES" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrant.
ARTICLE I
EXERCISE OF WARRANT
1.1 METHOD OF EXERCISE. The Warrant 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 December 31,
2000. To exercise the Warrant, the Holder hereof shall deliver to the Company
(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
Warrant in the manner provided in the Subscription Notice; and
<PAGE>
(ii) payment in full of the Exercise Price in cash or by bank check for all
Warrant Shares purchased hereunder. The Warrant 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 Warrant has expired or has been redeemed, deliver to the
Holder hereof a new Warrant representing the portion, 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.
1.2 RESERVATION OF SHARES. Beginning at such time as this Warrant is
exercisable, the Company shall reserve at all times so long as the Warrant
remains 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 Warrant, a sufficient number of
shares of Common Stock to provide for the exercise of the Warrant.
1.3 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.
1.4 NO FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of this Warrant. If any
fraction of a share of Common Stock would 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
2.1 OWNERSHIP OF WARRANT. The Company may deem and treat the person in
whose name the Warrant is 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 unless agreed to in writing by the Company.
2.2 RESTRICTIONS ON TRANSFER OF WARRANTS. The Holder of the Warrant agrees
that the Warrant is not transferrable without the prior written consent of the
Company and any such transfer without such consent shall be void and without
effect. Subject to the restrictions on transfer of the Warrant in this Section
2.2, the Company, from time to time, shall register the transfer of the Warrant
in such books upon surrender of this Warrant at the Company's principal 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, a new Warrant shall be issued to the transferee and the
transferor (as their respective interests may appear) and the surrendered
Warrant shall be
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canceled by the Company. The Holder shall pay all taxes and all other expenses
and charges payable in connection with the transfer of the Warrant pursuant to
this Section 2.2.
2.3 COMPLIANCE WITH SECURITIES LAWS. 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,
and that as a condition to the exercise of such warrant that the following are
and will be true and correct:
(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 2.3.
(D) The Holder is an "accredited investor" within the meaning of
Rule 501 of Regulation D as promulgated under the Securities Act of 1933,
and will be so as a condition of purchasing any of the Warrant Shares. The
Holder will acquire the Warrant Shares for its own account for investment
purposes and not with a view towards distribution. The Holder 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 therefore cannot be sold unless they are subsequently registered
under the Securities Act or an exemption from such registration is
available. The Holder has received and carefully reviewed copies of all
documents filed by the Company as of the time of each exercise with the
Securities and Exchange Commission. No representations or warranties have
been made to the Holder by the Company, the officers or directors of the
Company, or any agent, employee or affiliate of any of them. The Holder is
aware that the purchase of the Warrant Shares involves a high degree of
risk and that it may sustain, and has the financial ability to sustain,
the loss of its entire investment. The Holder has had the opportunity to
ask questions of, and receive answers, satisfactory to it from the
Company's management regarding the Company. The Holder understands that no
Federal or State governmental authority has made any finding or
determination relating to the fairness of an investment in the Warrant
Shares and that no Federal or State governmental authority has recommended
or endorsed, or will recommend or endorse, the investment herein. The
Holder, in making the decision to purchase the Warrant Shares subscribed
for, has relied upon independent investigations made by it and has not
relied on any information or representations made by third parties. The
Holder has significant assets, and upon consummation of the purchase of
the Warrant
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Shares, will continue to have significant assets exclusive of the Warrant
Shares. The Holder understands that the Warrant Shares are being offered
and sold to it in reliance on specific provisions of Federal and State
securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments
and understandings of the Holder set forth herein in order to determine
the applicability of such provisions. The Holder, in making the decision
to purchase the Warrant Shares subscribed for, has relied upon independent
investigations made by it and has not relied on any information or
representations made by third parties.
ARTICLE III
ANTI-DILUTION
3.1 ANTI-DILUTION PROVISIONS. If the outstanding shares of the Company's
Common Stock shall be subdivided into a greater number of shares or a dividend
in Common Stock shall be paid in respect of Common Stock, the Exercise Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Exercise Price, the number of Warrant Shares purchasable upon the exercise of
this Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Exercise Price in effect
immediately in effect prior to such adjustment, by (ii) the Exercise Price in
effect immediately after such adjustment.
3.2 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 as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Holder of this Warrant shall have
the right thereafter to receive upon exercise hereof the kind and amount of
share of stock or other securities or property which such holder would have been
entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger or sale, as the case may be, such holder
had held the number of shares of Common Stock which were the purchasable upon
the exercise of this Warrant. In any such case, appropriate adjustment (as
reasonably determined in good faith by the Board of Directors of the Company)
shall be made in the application of the provisions set forth herein with respect
to the rights and interests thereafter of the Holder of this Warrant, such that
the provisions set forth herein (including provisions with respect to adjustment
of the Exercise Price) shall thereafter be applicable, as nearly as is
reasonably practicable, in relation to any shares of stock or other securities
or property thereafter deliverable upon the exercise of this Warrant.
3.3 NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number of
Warrant Shares issuable upon the exercise of the Warrant 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 a notice setting forth the adjusted Exercise
Price and the adjusted number of Warrant Shares issuable upon the exercise of
the Warrant or specifying the other shares of stock, securities or assets
receivable as a
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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 notice stating that
the Exercise Price and the number of Warrant Shares purchasable upon exercise of
the Warrant have been adjusted and setting forth the adjusted Exercise Price and
the adjusted number of Warrant Shares purchasable upon the exercise of the
Warrant.
ARTICLE IV
MISCELLANEOUS
4.1 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.
4.2 GOVERNING LAW; VENUE. This warrant shall be governed by and construed
in accordance with the laws of the State of Texas. Venue for any dispute arising
under this Warrant shall lie in the state or federal courts of Dallas County,
Texas.
4.3 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.
4.4 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.
4.5 COPY OF WARRANT. A copy of this Warrant shall be filed among the
records of the Company.
4.6 NOTICE. Any notice or other document required or permitted to be given
or delivered to the Holder or the Company hereof shall be in writing and will
deemed to have been delivered: (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile (provided a confirmation of transmission is
mechanically generated and kept on file by the sending party); or (iii) one (1)
day after deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be: any notice or other document
required or permitted to be given or delivered to the Company shall be sent to
the offices of the Company at 1100 Executive Drive, Richardson, Texas 75081,
Attn: Chief Executive Officer, Telecopy No. (972) 367-2271 or such other address
as shall have been furnished in writing by the Company to the Holder of this
Warrant. Any notice sent or required to be sent hereunder to the Holder shall be
sent to the address of the Holder as contained in the corporate records of the
Company or such other address as shall have been furnished in writing by the
Holder to the Company.
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4.7 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.
4.8 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.
4.9 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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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: February 10, 2000
INTELECT COMMUNICATIONS, INC.
By: /S/ HERMAN M. FRIETSCH
Name: Herman M. Frietsch
Title: Chairman and Chief Executive Officer
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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 _____________________________________ 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.
_______________________________________
Date:___________________________
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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:___________________________
9
EXHIBIT 5.1
[RYAN & SUDAN, L.L.P. LETTERHEAD]
February 11, 2000
Intelect Communications, Inc.
1100 Executive Drive
Richardson, Texas 75081
Re: Registration Statement on Form S-3 of Intelect Communications, Inc.
(the "Company")
Ladies and Gentlemen:
We have acted as counsel to Intelect Communications, Inc., a Delaware
corporation (the "Company"), with respect to the offering by certain selling
shareholders of up to 20,412,227 shares (the "Shares") of the Common Stock of
the Company, par value $.01 per share (the "Common Stock") under the
Registration Statement, filed by the Company under the Securities Act of 1933,
as amended.
As such counsel, we have examined such corporate records, certificates and
other documents and have made such other factual and legal investigations as we
have deemed relevant and necessary as the basis for the opinions hereinafter
expressed. In such examinations, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity to original documents of all documents submitted to us as
conformed or photostatic copies. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to them in the Registration Statement.
Based on the foregoing, we are of the opinion that the shares of Common
Stock covered by this Registration Statement have been duly authorized, are (or
with respect to shares of Common Stock underlying the warrants covered by this
Registration Statement, upon the exercise of such warrants and payment of the
exercise price in accordance with their terms, will be) fully paid and
non-assessable by the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
RYAN & SUDAN, L.L.P.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Intelect Communications, Inc.
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 (Registration No.
333-______) of our report dated March 31, 1999, included in Intelect
Communications, Inc.'s Form 10-K for the year ended December 31, 1998, and to
all references to our firm included in this registration statement.
GRANT THORNTON LLP
Dallas, Texas
February 11, 2000
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Intelect Communications, Inc.
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 (Registration No.
333-______) of our report dated March 27, 1998, included in Intelect
Communications, Inc.'s Form 10-K for the year ended December 31, 1997, and to
all references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Dallas, Texas
February 11, 2000
EXHIBIT 23.3
CONSENT OF KPMG
The Board of Directors
Intelect Communications, Inc.
We consent to the incorporation by reference in the registration statement on
Form S-3 dated February 11, 2000 of our report dated April 9, 1997, relating to
the consolidated statements of operations, stockholder's equity and cash flows
of Intelect Communications Systems Limited and subsidiaries for the year ended
December 31, 1996, and the related schedule, which report appears in the
December 31, 1998 annual report on Form 10-K of Intelect Communications, Inc.
Our report dated April 9, 1997, contains an explanatory paragraph that states
that Intelect Communications Systems Limited has suffered recurring losses from
continuing operations and is dependent upon the successful development and
commercialization of its products and its ability to secure adequate sources of
capital until the Company is operating profitably. These matters raise
substantial doubt about the company's ability to continue as a going concern.
Management's plans with regard to these matters are described in note 1 to the
consolidated financial statements. The consolidated financial statements and
financial statement schedule do not include any adjustments that might result
from the outcome of this uncertainty.
We consent to all references to our firm under the heading "Risk Factors" in the
prospectus.
KPMG
Chartered Accountants
Hamilton, Bermuda
February 11, 2000
