AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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)
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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)
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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
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PER SHARE(2) OFFERING PRICE REGISTRATION FEE
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Common Stock, $.01 par value.... (1) 5,131,895 $3.31 $16,986,572 $4,723
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(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 April 13, 2000.
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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<PAGE>
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.
SUBJECT TO COMPLETION, DATED APRIL 14, 2000
PROSPECTUS
INTELECT COMMUNICATIONS, INC.
5,131,895 SHARES OF COMMON STOCK
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The Selling Stockholders listed on pages 9 through 11 may offer and resell
up to 5,131,895 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.
The shares of common stock covered by this Prospectus were originally
issued 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 April 13, 2000, the last sale price of our common stock was $3.125.
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 APRIL 14, 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
for the fiscal year ended December 31, 1999, filed on March 30, 2000.
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
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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
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
We have incurred losses from continuing operations in 1999, 1998, 1997, and
1996 of $28,535,000, $42,735,000, $19,743,000 and $42,983,000. Negative cash
flows from operations in the same periods were, respectively, $19,145,000,
$22,929,000, $24,852,000 and $23,050,000. We funded the negative cash flows by
proceeds from borrowings under credit facilities, sales of preferred stock and
common stock during 1999, 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.
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 4 regarding
additional funding.
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WE ARE NOT ABLE TO PREDICT SALES IN THE FUTURE AND A NUMBER OF FACTORS MAY CAUSE
OUR PERIODIC RESULTS TO FLUCTUATE
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, 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.
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
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believe we could raise additional capital through public or private equity or
debt financing, if necessary, we cannot assure that such financing 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 in 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
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qualified employees could materially adversely affect our business, the results
of operations and new product development efforts.
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 code
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
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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
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.
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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, and certain former and present officers
and directors of the Company. 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.
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.
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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,
1999.
(2) Our Form 8-K's filed on February 8, and March 21, 2000.
(3) Our definitive Proxy Statement filed on April 30, 1999.
(4) 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.
(5) 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) - (4) 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 in the prior filings listed in numbers (1) - (4) above conflict
with statements in future filings referenced in number (5) above, this
Prospectus and the prior filings are modified by the future filings listed in
number (5) 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.
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<PAGE>
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 5,131,895 shares of Common Stock being registered:
(i) We issued shares of common stock, and warrants for the purchase of
shares of common stock, to certain accredited investors in a private
placement which closed on March 14, 2000. Such shares are
registerable under registration rights agreements dated March 14,
2000.
(ii) We issued warrants for the purchase of shares of common stock to
certain affiliates of Stonegate Securities, Inc. ("Stonegate") in a
private placement in connection with Stonegate's service as
placement agent in the March 14, 2000 private placement described in
(i) above. Such shares are registerable under registration rights
agreements dated March 14, 2000.
(iii) We issued warrants in a private placement transaction in 1996 to
Grayson & Associates in connection with its services as a placement
agent.
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 April 10, 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.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES SHARES OF
OF COMMON STOCK NUMBER OF COMMON STOCK
BENEFICIALLY OWNED SHARES OF BENEFICIALLY
AS OF APRIL 10, COMMON STOCK OWNED AFTER
NAME OF SELLING STOCKHOLDER 2000(1) OFFERED HEREBY OFFERING(5)
- ------------------------------------- ------------------- ---------------- ----------------
<S> <C> <C> <C>
LKCM Investment Partnership.......... 185,000 100,000 85,000
Gryphon Partners, L.P................ 333,333 333,333 0
Archer Fund, L.P..................... 26,667 26,667 0
Lighthouse Partners USA, LP.......... 417,500 261,000 156,500
Pharos Fund Limited.................. 1,082,600 676,600 406,000
Lighthouse Investment Fund, LP....... 194,066 104,066 90,000
Erinch R. Ozada IRA Rollover......... 500,000 500,000 0
Stanford C. Finney, Jr............... 75,000 75,000 0
Rainbow Trading Venture Partners
LP................................. 50,000 50,000 0
Rainbow Trading Corporation.......... 125,000 125,000 0
Duck Partners, LP.................... 105,000 65,000 40,000
Apogee Fund, LP...................... 160,000 100,000 60,000
William P. Esping Trust #2........... 30,000 30,000 0
Montrose Investments Ltd............. 300,000 300,000 0
Kingdom Family Partners.............. 30,000 30,000 0
Kingdon Associates................... 115,000 115,000 0
M. Kingdon Offshore, N.V............. 555,000 555,000 0
Graham Partners, LP.................. 140,000 120,000 20,000
(TABLE CONTINUED ON FOLLOWING PAGE)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES SHARES OF
OF COMMON STOCK NUMBER OF COMMON STOCK
BENEFICIALLY OWNED SHARES OF BENEFICIALLY
AS OF APRIL 10, COMMON STOCK OWNED AFTER
NAME OF SELLING STOCKHOLDER 2000(1) OFFERED HEREBY OFFERING
- ------------------------------------- ------------------- ---------------- ----------------
<S> <C> <C> <C>
Scout Capital Partners, LP........... 30,000 30,000 0
Asset Management Holding Co.......... 20,000 20,000 0
Kings Point Partners, LP............. 130,000 100,000 30,000
Kensington Partners II............... 884 884 0
Bald Eagle Fund...................... 3,628 3,628 0
Kensington Partners.................. 15,488 15,488 0
Lancaster Investment Partners, LP.... 50,000 50,000 0
Forest Fulcrum Fund, LP.............. 16,000 16,000 0
Forest Alternative Strategies Fund II
LP (2A5l).......................... 3,200 3,200 0
Forest Alternative Strategies Fund II
LP (2A5M).......................... 1,700 1,700 0
Forest Global Convertible Fund
Ltd................................ 75,000 75,000 0
LLT Ltd.............................. 4,100 4,100 0
Forest Convertible Fund, LP.......... 50,000 50,000 0
Forest Performance Fund, LP.......... 225,000 225,000 0
Zurich HFR MSTR Hedge Fund Index
Ltd................................ 25,000 25,000 0
Eurasian Capital Partners Fund LP.... 140,000 40,000 100,000
Endeavor Asset Management............ 100,000 100,000 0
North Olmsted Partners, L.P.......... 60,000 60,000 0
Robert A. Berlacher.................. 25,000 25,000 0
William B. Fretz, Jr. Irrev. Deed of
Trust DTD 6/26/98 FBO Christ....... 15,000 15,000 0
Edward O. Thorp...................... 175,000 175,000 0
Jesse Shelmire....................... 195,570 195,570 0
Scott R. Griffith.................... 195,570 195,570 0
Griffith Shelmire Partners, Inc...... 69,026 69,026 0
Grayson & Associates................. 70,063 70,063 0
</TABLE>
- ------------
(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 April 10,
2000 through the conversion or exercise of any security or other right.
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."
11
<PAGE>
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). 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
12
<PAGE>
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 578,450 shares of common stock. Mr. James W. Ryan, a partner
in Ryan & Sudan, L.L.P., beneficially owns 100,589 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 $256,766. 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%.
13
<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........................... 9
Use of Proceeds........................................................... 10
Selling Stockholders...................................................... 10
Plan of Distribution...................................................... 12
Legal Matters............................................................. 13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
NATURE OF EXPENSE
-----------------
SEC Registration Fee............................ $ 4,723
Legal (including Blue Sky), Printing,
and Accounting Fees and Expenses.............. $ 20,000
Miscellaneous................................... $ 2,000*
TOTAL...................................... $ 26,723
- ------------
* Estimated
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'
II-1
<PAGE>
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.
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-2
<PAGE>
(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 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 14th day of April, 2000.
INTELECT COMMUNICATIONS, INC.
By: /s/ HERMAN M. FRIESTCH
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 resubstitution,
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 and April 14, 2000
HERMAN M. FRIETSCH Director (Principal Executive
Officer)
/s/ ROBERT P. CAPPS Executive Vice President and April 14, 2000
ROBERT P. CAPPS Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
/s/ PHILIP P. SUDAN, JR. Director April 14, 2000
PHILIP P. SUDAN, JR.
/s/ ANTON LIECHTENSTEIN Director April 14, 2000
ANTON LIECHTENSTEIN
/s/ ROBERT E. GARRISON II Director April 14, 2000
ROBERT E. GARRISON II
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
3.1 -- Amended and Restated Certificate of
Incorporation of Intelect
Communications, Inc.(1)
3.2 -- Certificate of Amendment of Amended and
Restated Certificate of Incorporation of
Intelect Communications, Inc.(2)
3.3 -- Amended and Restated By-Laws of Intelect
Communications, Inc.(1)
3.4 -- Certificate of Designations of the
Series A Preferred Stock dated December
2, 1997(1)
4.5 -- Form of Registration Rights Agreement
dated March 14, 2000 between Intelect
Communications, Inc., the Investors
named therein, and Stonegate Securities,
Inc.(3)
4.6 -- Form of Warrant issued to Stonegate to
purchase common stock of Intelect Commu-
nications, Inc. at $6.00 per share,
subject to adjustment.(3)
4.7 -- Warrant issued Grayson & Associates to
purchase 70,063 shares of common stock
of Intelect Communications, Inc. at
$8.56375 per share
5.1 -- Opinion of Ryan & Sudan, L.L.P.,
Houston, Texas
23.1 -- Consent of Grant Thornton, LLP
23.2 -- 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 March 21, 2000
II-5
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. 4 Number of Shares: 70,063
(subject to adjustment)
Date of Issuance: August 8, 1996
INTELECT COMMUNICATIONS SYSTEMS LIMITED
COMMON SHARES PURCHASE WARRANT
(Void after August 7, 2001)
Intelect Communications Systems Limited, a Bermuda company (the "Company"),
for value received, hereby certifies that Grayson & Associates, 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 August 7,
2001, at not later than 5:00 p.m. (Boston, Massachusetts time), 70,063
common shares, $.01 par value per share (the "Common Shares"), of the
Company. 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 I 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 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 $8.56375 per share.
(b) The Registered Holder may, at its option, elect to pay some or
all of the Purchase Price payable upon an exercise of this Warrant by canceling
a portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing ti) the total Purchase Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (ii) the excess
of the Fair Market Value per share of Common Stock as of the effective date of
exercise, as determined pursuant to Subsection l(c) below (the "Exercise Date")
over the Purchase Price per share. The Fair Market Value per share of Common
Stock shall be determined as follows:
<PAGE>
(i) If the Common Stock is 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 Stock shall be deemed to be the last reported sale
price per share of Common Stock thereon on the Exercise Date; or, if no such
price is reported on such date, such price on the next preceding business day
(provided that if no such price is reported on the next preceding business day,
the Fair Market Value per share of Common Stock shall be determined pursuant to
clause (ii)).
(ii) If the Common Stock is 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 Common Stock 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 Stock including without limitation a determination
for purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company); and upon request of the Registered
Holder, the Board of Directors (or a representative thereof) shall promptly
notify the Registered Holder of the Fair Market Value per share of Common Stock.
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 Stock shall be the amount next
determined by the Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common Stock under an
employee benefit plan of the Company), (B) the Board of Directors shall make
such a determination within 15 days of a request by the Registered Holder that
it do so, and (C) the exercise of this Warrant pursuant to Subsection l(b) shall
be delayed until such determination is made.
(c) 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 subsections
l(a) and lib) above. At such time, the person or persons in whose name or names
any certificates for Warrant Shares shall be issuable upon such exercise as
provided in subsection l(d) below shall be deemed to have become the holder or
holders of record of the Warrant Shares represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant in
full or in part, and in any event within 10 days thereafter, 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:
(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
<PAGE>
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 property thereafter deliverable upon the exercise of this Warrant.
(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 forth 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.
<PAGE>
3. FRACTIONAL SHARES. The Company shall not be required upon the exercise
of this Warrant to issue any fractional 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 to be the last reported
sale price per share of the Common Shares thereon on the Exercise Date; or, if
no such price is reported on such date, such price on the next preceding
business day (provided that if no such price is 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) shall
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 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.
(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:
<PAGE>
"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. REGISTRATION UPON CLOSING.
(a) Subject to the terms and conditions hereof, within fifteen (15) days
after the closing of the transactions contemplated by the Convertible Securities
Subscription Agreements between the Company and the Buyers named therein of even
date herewith (the "Closing Date"), the Company shall, at the Company's cost and
expense (other than the fees and disbursements of counsel for the Registered
Holder and the underwriting discounts and brokerage commissions, if any, payable
in respect of the Warrant shares sold by the Registered Holder) prepare and file
with the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3 (if the same is available),with respect to all of the
Warrant Shares and will use all reasonable efforts to cause such registration
statement to become effective promptly. If Form S-3 is not available to the
Company for such registration statement, the Company shall use its best efforts
to promptly file the registration statement on an appropriate alternative form.
(b) Except as set forth below, the Company shall keep effective the
registration statement contemplated by this Section 5 and shall from time to
time amend or supplement such registration statement, for a period of not less
than two (2) years, as extended by any period of time during which the
registration statement is not effective pursuant to Section 5(c) below, unless
all of the Warrant Shares set forth in such registration statement have
theretofore been sold.
(c) The Company may terminate or suspend the effectiveness of any
registration statement to be filed pursuant to Section 5(a) one time for a
period of not more than 30 days if the Company shall deliver to the Registered
Holder a certificate signed by the President or Chief Financial Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company it would (i) be seriously detrimental to the Company for such
registration statement to be effected or remain effective at such time, (ii)
interfere with any proposed or pending material corporate transaction involving
the Company or any of its subsidiaries or (iii) result in any premature
disclosure thereof.
6. FUTURE DEMAND REGISTRATION.
(a) If, at any one time following thirty (30) days after the
termination of the effectiveness of the registration statement prepared and
filed in accordance with Section 5, the Company receives a written request from
the Registered Holder, the Company shall, at the
<PAGE>
Company's sole cost and expense (other than the fees and disbursements of
counsel for such Registered Holder and the underwriting discounts and
commissions, if any, payable in respect of the Warrant Shares sold by such
Registered Holder), prepare and file with the Commission an additional
registration statement sufficient to permit the public offering and sale of the
number of Warrant Shares set forth in such request. The Company shall file such
registration statement on Form S-3 (if the same is available to the Company for
such registration) within thirty (30) days of the receipt of the request. If
Form S-3 is not available to the Company for such registration statement, the
Company shall use its best efforts to promptly file the registration statement
on an appropriate alternative form. The Company will use all reasonable efforts
to cause such registration statement to become effective promptly.
Notwithstanding anything to the contrary set forth above, the Company shall not
be obligated to effect any such registration, qualification or compliance,
pursuant to this Section 6(a): (1) if the Company shall furnish to the
Registered Holder a certificate signed by the President or the Chief Financial
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration to be effected at such time, in which
event the Company shall have the right to defer the filing of the registration
statement for a period of not more than 30 days after receipt of the request of
the Registered Holder; or (2) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(b) The Company shall keep effective the registration statement
contemplated by this Section 2 and shall from time to time amend or supplement
such registration statement, for a period of not less than three years.
(c) The Company shall not be obligated to file more than two (2)
registration statements under this Agreement.
(d) The Company shall furnish to the Registered Holder such numbers
of copies of a prospectus in conformity with the requirements of the Securities
Act, and such other documents as may reasonably be requested in order to
facilitate the disposition of the Warrant Shares owned by the Registered Holder.
7. THE COMPANY COVENANTS.
(a) The Company's obligations pursuant to Sections 1 and 2 hereof
shall continue for five years after the Closing Date or until all Warrant Shares
have been sold, whichever event occurs first.
(b) In the event of a registration pursuant to the provisions of
Sections 5 and 6, the Company shall use all reasonable efforts to cause the
Warrant Shares so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Registered Holder may
reasonably request; provided, however, that the Company shall not be required to
qualify to do business in any state by reason of this Section 7(b) in which it
is not otherwise required to qualify to do business.
<PAGE>
(c) The Company shall notify the Registered Holder promptly when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed.
(d) The Company shall advise the Registered Holder, promptly after
it shall receive notice or obtain knowledge of the issuance of any stop order by
the Commission suspending the effectiveness of such registration statement, or
the initiation or threatening of any proceeding for that purpose, and promptly
use all reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued.
(e) The Company shall promptly notify the Registered Holder, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event of which it has knowledge as a
result of which the prospectus included in such registration statement, as then
in effect, would include an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the reasonable request of each Investor prepare and furnish to
them such number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers of such
Warrant Shares or securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made.
(f) If requested by the underwriter for any underwritten offering of
Warrant Shares on behalf of the Registered Holder pursuant to a registration
requested under Sections 5 and 6, the Company and the Registered Holder will
enter into an underwriting agreement with such underwriter for such offering,
which shall be reasonably satisfactory in substance and form to the Company and
the Company's counsel, the Registered Holder, and the underwriter, and such
agreement shall contain such representations and warranties by the Company and
each Investor and such other terms and provisions as are customarily contained
in an underwriting agreement with respect to secondary distributions solely by
selling stockholders, including, without limitation, indemnities substantially
to the effect and to the extent provided in Section 8.
8. INDEMNIFICATION: MISCELLANEOUS OPERATIVE PROVISIONS.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Registered Holder, its respective officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who controls any such person within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") from and against any and all loss, liability, charge, claim,
damage, and expense whatsoever (which shall include, for all purposes of this
Section 8, but not be limited to, reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), arising out of, based upon, or in connection with any untrue
statement or alleged untrue statement of a material fact contained (A) in any
registration statement,
<PAGE>
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented) or any amendment or supplement thereto, relating to the sale of
any of the Warrant Shares or (B) in any application or other document or
communication (in this Section 8 collectively called an "application") executed
by or on behalf of the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to register or
qualify any of the Warrant Shares under the securities or blue sky laws thereof
or filed with the Commission or any securities exchange; or any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading, unless (x) such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Registered Holder
for inclusion in any registration statement, preliminary prospectus, or final
prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or (y) such loss, liability, charge, claim, damage or expense
arises out of the Registered Holder's failure to comply with the terms and
provisions of this Agreement. The foregoing agreement to indemnify shall be in
addition to any liability the Company may otherwise have, including liabilities
arising under this Agreement.
If any action is brought against the Registered Holder or any of their
respective officers, directors, partners, employees, agents, or counsel, or any
controlling persons of such person (an "indemnified party") in respect of which
indemnity may be sought against the Company pursuant to the foregoing paragraph,
such indemnified party or parties shall promptly notify the Company in writing
of the institution of such action (but the failure so to notify shall not
relieve the Company from any liability other than pursuant to this Section 8(a)
unless, the failure to so notify shall prejudice any rights or defenses with
respect to such claim) and the Company shall promptly assume the defense of such
action, including the employment of counsel (reasonably satisfactory to such
indemnified party or parties) provided that the indemnified party shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless:
(i) the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action; or
(ii) such indemnified party or parties shall have reasonably
concluded, based on an opinion of counsel reasonably satisfactory to the
Company, that there may be one or more legal defenses available to it or them or
to other indemnified parties which are different from or additional to those
available to the Company, in any material respect, and that as a result thereof
a conflict of interest would arise absent separate representation of the
parties.
In the event of clauses (i) or (ii) above, such fees and expenses shall be borne
by the Company and the Company shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties. Anything in this
Section 8 to the contrary notwithstanding, the Company shall not be liable for
any settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld. The Company shall not, without the
prior written consent of each indemnified party that is not released as
described in this sentence, settle or compromise any action, or permit a default
or consent to the entry of judgment in
<PAGE>
or otherwise seek to terminate any pending or threatened action, in respect of
which indemnity may be sought hereunder (whether or not any indemnified party is
a party thereto) unless such settlement, compromise, consent, or termination
includes an unconditional release of each indemnified party from all liability
in respect of such action. The Company agrees promptly to notify the Investor of
the commencement of any litigation or proceedings against the Company or any of
its officers or directors in connection with the sale of any Warrant Shares or
any preliminary prospectus, prospectus, registration statement, or amendment or
supplement thereto, or any application relating to any sale of any Warrant
Shares.
(b) Each Registered Holder agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who shall
have signed any registration statement covering Warrant Shares by the Registered
Holder, each other person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and
its or their respective counsel, to the same extent as the foregoing indemnity
from the Company to the Registered Holder in Section 8(a) but only with respect
to statements or omissions, if any, made in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented) or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information furnished to the
Company with respect to the Registered Holder by or on behalf of the Registered
Holder, for inclusion in any such registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be. If any action shall be brought against the
Company or any other person so indemnified based on any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, and in respect of which indemnity may
be sought against the Registered Holder pursuant to this Section 8(b) the
Registered Holder shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 8(a) or 8(b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act or otherwise, then
the Company (including for this purpose any contribution made by or on behalf of
any director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company as one entity, and
the Registered Holder, included in such registration in the aggregate (including
for this purpose any contribution by or on behalf of an indemnified party), as a
second entity, shall contribute to the losses, liabilities, claims, damages, and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
the Registered Holder in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission, or alleged
omission shall be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by the Registered Holder, and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement, alleged statement,
<PAGE>
omission, or alleged omission. The Company and the Registered Holder agree that
it would be unjust and inequitable if the respective obligations of the Company
and the Registered Holder for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Registered Holder and the other indemnified parties were
treated as one entity for such purpose) or by any other method of allocation
that does not reflect the equitable considerations referred to in this Section
8(c). In no case shall the Registered Holder be responsible for a portion of the
contribution obligation imposed on the Registered Holder in excess of such
Registered Holder's pro rata share based on the number of Common Shares owned by
each Registered Holder and included in such registration as compared to the
total number of Common Shares included in such registration. No person guilty of
a fraudulent misrepresentation (within the meaning of Section ll(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 8(c)
each person, if any, who controls any Registered Holder within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee, agent, and counsel of any Registered
Holder or control person shall have the same rights to contribution as the
Registered Holder or control person and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, each officer of the Company who shall have signed any such
registration statement, each director of the Company, and its or their
respective counsel shall have the same rights to contribution as the Company,
subject to each case to the provisions of this Section 8(c). Anything in this
Section 8(c) to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8(c) is intended to supersede any
right to contribution under the Securities Act, the Exchange Act or otherwise.
(d) Remedies. In the event of a breach by any party of its obligations
under this Agreement, the other party, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement.
(e) Agreements and Waivers. The provisions of this Warrant, including the
provisions of this sentence, may not be amended, modified or supplemented,
unless such amendment, modification or supplement is in writing and signed by
the parties hereto.
(f) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, or telecopied, initially to the address set forth
below, and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 8(f).
(i) if to the Company:
Intelect Communications Systems Limited
<PAGE>
Reid House, 31 Church Street
Hamilton, Bermuda
Attn: Peter G. Leighton
Fax: 441/292-5560
(ii) if to the Registered Holder at the address specified from
time to time to the
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; two business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.
(g) Reasonable Cooperation of the Registered Holder. The Registered
Holder shall cooperate in all reasonable respects with the filing of the
registration statement contemplated hereby. Without limiting the foregoing, the
Registered Holder shall furnish to the Company (or any regulatory authority)
such written information and representations that the Company may reasonably
request in order to facilitate any registration of the Warrant Shares hereunder.
9. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through 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.
10. 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 any 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 dividend, 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 such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or
<PAGE>
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.
11. 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.
12. 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 as 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.
13. 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 (with surety if reasonably required) in 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.
14. 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 written 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
this 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 this 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 be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
<PAGE>
15. 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
mail, 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.
16. NO RIGHTS AS SHAREHOLDER. 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.
17. 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.
18. 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.
<PAGE>
19. GOVERNING LAW. This Warrant will be governed by and construed in
accordance with the laws of Bermuda.
Intelect Communications Systems
Limited
By: /s/ PETER G. LEIGHTON
Peter G. Leighton
[Corporate Seal] Title: President
ATTEST:
____________________
<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
thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
- ---------------- ------- -------------
Dated:____________ Signature:____________________________
Dated:____________ Witness:______________________________
EXHIBIT 5.1
[RYAN & SUDAN, L.L.P. LETTERHEAD]
April 14, 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 5,131,895 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
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 CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Intelect Communications, Inc.
We have issued our report dated March 17, 2000 accompanying the consolidated
financial statements of Intelect Communications, Inc. and subsidiaries appearing
in the 1999 Annual Report of the Company on Form 10-K for the year ended
December 31, 1999 which is incorporated by reference in this Registration
Statement. We consent to the incorporation by reference in the Registration
Statement of the aforementioned report.
GRANT THORNTON LLP
Dallas, Texas
April 14, 2000
