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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) March 20, 2000
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INTELECT COMMUNICATIONS,INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-11630 76-0471342
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1100 Executive Drive, Richardson, Texas 75081
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 367-2100
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N/A
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
As previously announced, Intelect Communications, Inc. (the "Company") completed
a $27.6 million private placement of 4.6 million shares of common stock.
Proceeds to the Company, after costs and commissions, amounted to approximately
$25.9 million. In connection with the placement fee paid to Stonegate
Securities, Inc. ("Stonegate") for the transaction, certain affiliates of
Stonegate received warrants to purchase 460,166 shares of common stock.
Approximately $9.8 million of proceeds was used to repay all amounts due under
the Company's Revolving Credit Agreement with The Coastal Corporation Second
Pension Trust. Approximately $8.5 million of proceeds is being used to redeem
all of the Company's Series A Convertible Preferred Stock, which was convertible
into approximately 3.7 million shares of common stock. The balance of the
proceeds will be used to increase cash reserves.
The warrants issued to Stonegate for its placement agent services have a term of
three years and an exercise price of $6.00 per share. If the 20 day average
closing bid price for the Company's common stock as of the six month anniversary
of the closing is less than $6.00 per share, the exercise price will be reset to
that average price. As a part of the transactions Intelect has granted certain
registration rights to the investors and Stonegate, covering the resale of the
shares of common stock issued and also the resale of the shares of common stock
issuable upon exercise of the warrants.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business to Be Acquired: N/A
(b) Pro Forma Financial Information of the Business to Be Acquired: N/A
(c) Exhibits:
4.1 Form of Warrant issued to Stonegate affiliates to purchase common
stock of Intelect Communications, Inc. at $6.00 per share,
subject to adjustment.
4.2 Form of Registration Rights Agreement dated March 14, 2000
between Intelect Communications, Inc., the Investors named
therein, and Stonegate.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTELECT COMMUNICATIONS, INC.
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(Registrant)
Date: March 20, 2000 By: /s/ Herman Frietsch
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(Signature)
Herman M. Frietsch
Chairman of the Board and CEO
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
4.1 Form of Warrant issued to Stonegate affiliates to purchase common
stock of Intelect Communications, Inc. at $6.00 per share,
subject to adjustment.
4.2 Form of Registration Rights Agreement dated March 14, 2000
between Intelect Communications, Inc., the Investors named
therein, and Stonegate.
</TABLE>
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EXHIBIT 4.1
THIS WARRANT AND THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER SECURITIES LAWS, HAVE BEEN
TAKEN FOR INVESTMENT, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND OTHER APPLICABLE
SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE
OPINION OF COUNSEL (WHICH OPINION IS REASONABLY SATISFACTORY TO THE ISSUER OF
THESE SECURITIES), SUCH REGISTRATION UNDER SUCH ACT AND OTHER APPLICABLE
SECURITIES LAWS IS NOT REQUIRED.
<TABLE>
<S> <C>
Warrant Certificate Warrant to Purchase
**_________** **_________**
Number Shares
</TABLE>
INTELECT COMMUNICATIONS, INC.
(Incorporated under the laws of the State of Delaware)
PLACEMENT AGENT WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF
THE $.01 PAR VALUE COMMON STOCK OF INTELECT COMMUNICATIONS, INC.
Warrant Price: $6.00 per share subject to adjustment as provided below.
THIS IS TO CERTIFY that, for value received, **________** or its registered
assigns (either or both of whom are referred to herein as the "Holder"), is
entitled to purchase, subject to the terms and conditions hereinafter set forth,
up to **______** shares of the $.01 par value common stock ("Common Stock") of
Intelect Communications, Inc., a Delaware corporation (the "Company"), and to
receive certificate(s) for the Common Stock so purchased.
1. Exercise Period and Vesting. This Warrant is issued by the Company
pursuant to that certain Placement Agent Agreement between the Company and
Stonegate Securities, Inc. dated March ___, 2000 (the "Agreement"). The
"Exercise Period" is the period beginning on the date of this Warrant (the
"Issuance Date") and ending at 5:00 p.m., Dallas, Texas time, on March ___,
2003. This Warrant will terminate automatically and immediately upon the
expiration of the Exercise Period.
2. Exercise of Warrant; Cashless Exercise. This Warrant may be exercised,
in whole or in part, at any time and from time to time during the Exercise
Period. Such exercise shall be accomplished by tender to the Company of the
purchase price set forth above as the warrant price (the "Warrant Price"),
either (a) in cash or by certified check or bank cashier's check, payable to the
order of the Company, or (b) by surrendering such number of shares of Common
Stock received upon exercise of this Warrant with a current market price equal
to the Warrant Price (a "Cashless Exercise"), in cash or by certified check or
bank cashier's check, payable to the order of the Company, together with
presentation and surrender to the Company of this Warrant Certificate with an
executed subscription in substantially the form attached hereto as Exhibit A.
Upon receipt of the foregoing, the Company will deliver to the Holder, as
promptly as possible, a certificate or certificates representing the shares of
Common Stock so purchased, registered in the name of the Holder or its designee.
With respect to any exercise of this Warrant, the Holder will for all purposes
be deemed to have become the holder of record of the number of shares of Common
Stock purchased hereunder on the date this Warrant and payment of the Warrant
Price is received by the Company (the "Exercise Date"), irrespective of the date
of delivery of the certificate evidencing such shares, except that, if the date
of such receipt is a date on which the stock transfer books of the Company are
closed, such person will be deemed to have become the holder of such shares at
the close of business on the next succeeding date on which the stock transfer
books are open. Fractional shares of Common Stock will not be issued upon the
exercise of this Warrant. In lieu of any fractional shares that would have been
issued but for the immediately preceding sentence, the Holder will be entitled
to receive cash equal to the
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current market price of such fraction of a share of Common Stock on the trading
day immediately preceding the Exercise Date. In the event this Warrant is
exercised in part, the Company shall issue a new Warrant Certificate to the
Holder covering the aggregate number of shares of Common Stock as to which this
Warrant remains exercisable.
If the Holder elects to conduct a Cashless Exercise, the Company shall
cause to be delivered to the Holder a certificate or certificates representing
the number of shares of Common Stock equal to (i) the total number of shares of
Common Stock to be purchased upon such Cashless Exercise, minus (ii) the number
of shares surrendered with a current market price on the trading day immediately
preceding the Exercise Date equal to the Warrant Price. For purposes of
determining the value of the underlying shares of Common Stock surrendered in a
Cashless Exercise, the "current market price" of each such shares shall mean for
the day in question: (i) if the principal trading market for such securities is
a national or regional securities exchange, the closing price on such exchange
on such day; or (ii) if sales prices for shares of Common Stock are reported by
the Nasdaq National Market System or Nasdaq Small Cap Market (or a similar
system then in use), the last reported sales price so reported on such day; or
(iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices
for shares of Common Stock are reported in the over-the-counter market by Nasdaq
(or, if not so reported, by the National Quotation Bureau), the average of the
high bid and low ask prices so reported on such day. Notwithstanding the
foregoing, if there is no reported closing price, last reported sales price, or
bid and ask prices, as the case may be, for the day in question, then the
current market price shall be determined as of the latest date prior to such day
for which such closing price, last reported sales price, or bid and ask prices,
as the case may be, are available, unless such securities have not been traded
on an exchange or in the over-the-counter market for 30 or more days immediately
prior to the day in question, in which case the current market price shall be
determined in good faith by, and reflected in a formal resolution of, the Board
of Directors of the Company. The Company acknowledges and agrees that this
Warrant was issued on the Issuance Date. Consequently, the Company acknowledges
and agrees that, if the Holder conducts a Cashless Exercise, the period during
which the Holder held this Warrant may, for purposes of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), be "tacked"
to the period during which the Holder holds the shares of Common Stock received
upon such Cashless Exercise.
3. Transferability and Exchange. (a) This Warrant and the Common Stock
issuable upon the exercise hereof are freely transferable by the holder to any
"affiliate" of the holder, provided that such transferee meets the requirements
of paragraph 5, Representations of Holder and may otherwise be transferred only
with the prior written consent of the Company, which consent shall not be
unreasonably withheld. As used herein "affiliate" shall mean any person who
directly, or indirectly through one or more intermediaries, is in control of, is
controlled by, or is under common control with, such specified person for
purposes of this definition, control of a person means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such person whether by contract, securities, ownership or otherwise; and the
terms "controlling" and "controlled" have the respective meanings correlative to
the foregoing. If this Warrant is transferred, in whole or in part as provided
above, upon surrender of this Warrant to the Company, the Company shall deliver
to each transferee a Warrant evidencing the rights of such transferee to
purchase the number of shares of Common Stock that such transferee is entitled
to purchase pursuant to such transfer. The Company may place a legend on this
Warrant or any replacement Warrant and on each certificate representing shares
issuable upon exercise of this Warrant as to which the Company has not been
provided evidence that the transfer of such security would not be in violation
of the Securities Act and any applicable state securities laws. Only a
registered Holder may enforce the provisions of this Warrant against the
Company. A transferee of the original registered Holder becomes a registered
Holder only upon delivery to the Company of the original Warrant and an original
Assignment, substantially in the form set forth in Exhibit B attached hereto.
(b) This Warrant is exchangeable upon its surrender by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as may be
designated by the Holder at the time of such surrender.
(c) The holder of this Warrant understands that this Warrant has not been
and is not expected to be, registered under the Securities Act or any state
securities laws, and, assuming the consent of the Company is obtained pursuant
to Section 3(1) hereof, may not be offered for sale, sold, assigned or
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transferred unless (a) subsequently registered thereunder, or (b) such holder
shall have delivered to the Company an opinion of counsel, from counsel and in
form reasonably acceptable to the Company, to the effect that the securities to
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration all shares purchasable upon excise of the
Warrant and to all resales or other transfers thereof pursuant to the Securities
Act.
4. Adjustments to Warrant Price. The Warrant Price and, to the extent
specifically provided, the number of shares of Common Stock purchasable upon the
exercise of this Warrant are subject to adjustment from time to time upon the
occurrence of any of the events specified in this Section 4. For the purpose of
this Section 4, the following terms shall have the following meanings:
(i) "Common Stock" shall mean the Company's common stock, par value
$0.01 per share, and any capital stock into which such Common Stock shall have
been changed or any capital stock resulting from a reclassification of such
Common Stock.
(ii) "Approved Stock Plan" shall mean any plan which has been approved
by the Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer, director, consultant or other
service provider for services provided to the Company.
(iii) "Other Securities" means (i) those rights, warrants, options or
convertible securities of the Company issued prior to, and outstanding on, the
date of issuance of this Warrant, or Common Stock issued or issuable upon the
exercise or conversion of such rights, warrants, options or convertible
securities, (ii) the Common Stock issued pursuant to the Agreement or the
Warrant or other warrants issued pursuant to the Agreement or shares issuable
upon exercise of the Warrant or such other warrants and any shares issued or
issuable (or deemed issued or issuable) by virtue of the operation of the
antidilution provisions or Reset Price of the Warrant or other warrants issued
pursuant to the Agreement, (iii) securities issued or issuable pursuant to
transactions arranged by or pursuant to which Stonegate Securities or its
affiliates acted as placement agent, finder, intermediary, underwriter, or
broker, or (iv) securities issued or issuable to The Coastal Corporation Second
Pension Trust.
(a) In the event that on the 180th day following the Issuance Date (the
"Reset Date") the average closing bid price for the Common Stock during the
twenty consecutive trading day period immediately prior to the Reset Date (the
"Reset Price") is less than the Warrant Price, then the Warrant Price shall then
be adjusted to equal the Reset Price.
(b) In case the Company shall (i) pay a dividend or make a distribution in
shares of Common Stock or other securities, (ii) subdivide its outstanding
shares of Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Common Stock other securities of the
Company, then the Warrant Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, or the number and kind of securities issuable on such date,
shall be proportionately adjusted so that the Holder of any Warrant thereafter
exercised shall be entitled to receive the aggregate number and kind of shares
of Common Stock (or such other securities other than Common Stock) of the
Company that, if such Warrant had been exercised immediately prior to such date,
the Holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(c) In case the Company shall issue or sell any shares of Common Stock to
all of its existing stockholders for a consideration per share less than the
current market price per share of Common Stock on the date of such issue or
sale, except for securities issued or issuable (or deemed issued or issuable) in
connection with an Approved Stock Plan or for Other Securities, then in each
such case the Warrant Price shall forthwith be adjusted to equal the then
current Warrant Price times the quotient obtained by dividing (i) the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale, plus (y) the consideration, if any, received by the Company upon such
issue or sale, divided by the current market price per share of Common Stock on
the date of such issue or sale, by (ii) the number of shares of Common Stock
outstanding immediately after such issue or sale.
In any determination of an adjusted Warrant Price, (i) the number of shares
of Common Stock outstanding at any given time shall exclude shares in the
treasury of the Company and shall include shares
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issuable in respect of script certificates issued in lieu of fractions of shares
of Common Stock, (ii) in the case of the issue of shares of Common Stock for
cash, the consideration received by the Company therefor shall be deemed to be
the amount of cash received by the Company for such shares, without deduction of
the costs, expenses, fees and commissions incidental to the issue and sale
thereof, and (iii) in the case of the issue of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration received by
the Company therefor shall be deemed to be the fair value to the Company of such
consideration as determined in good faith by, and reflected in a formal
resolution of, the Board of Directors of the Company.
In case of the issuance by the Company of any security that is convertible
into shares of Common Stock at a price less than the current market price per
share of Common Stock on the date of such issuance, or of any rights, warrants
or options to purchase shares of Common Stock at a price less than the current
market price per share of Common Stock on the date of such issuance, (i) the
Company shall be deemed to have issued the maximum number of shares of Common
Stock deliverable upon the exercise of such conversion privileges or rights,
warrants or options, and (ii) the consideration therefor shall be deemed to be
(A) the consideration actually received by the Company for the issuance of such
convertible securities, rights, warrants or options, as the case may be, without
deduction of the costs, expenses, fees and commissions incidental to the issue
and sale thereof, plus (B) the additional minimum consideration, if any, to be
received by the Company in connection with such conversion or upon the exercise
of such rights, warrants or options. No further adjustment of the Warrant Price
shall be made as a result of the actual issuance of the shares of Common Stock
referred to in this paragraph. Upon the expiration of such rights, warrants or
options, or the termination of such privilege to convert, the Warrant Price and
the number of shares of Common Stock purchasable upon exercise of this Warrant
shall be readjusted to such Warrant Price and such number of shares of Common
Stock as would have pertained had the adjustments made upon the issuance of such
rights, warrants, options or convertible securities been made upon the basis of
the issuance of only the number of shares of Common Stock actually delivered
upon the exercise of such rights, warrants or options or upon the conversion of
such securities.
(d) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
surviving corporation) of cash, evidences of indebtedness or assets, or
subscription rights or warrants (excluding those referred to in subsection (b)
above), the Warrant Price to be in effect after such record date shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price per share of Common Stock on such record date, less the amount of cash so
to be distributed (or the fair market value (as determined in good faith by, and
reflected in a formal resolution of, the Board of Directors of the Company) of
the portion of the assets or evidences of indebtedness so to be distributed, or
of such subscription rights or warrants, applicable to one share of Common
Stock, and the denominator of which shall be such current market price per share
of Common Stock. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Warrant Price shall again be adjusted to be the Warrant Price which would
then be in effect if such record date had not been fixed.
(e) For the purpose of any computation under any subsection of this Section
4, the "current market price" per share of Common Stock on any date shall be the
per share price of the Common Stock on the trading day immediately prior to the
event requiring an adjustment hereunder and shall be: (i) if the principal
trading market for such securities is a national or regional securities
exchange, the closing price on such exchange on such day; or (ii) if sales
prices for shares of Common Stock are reported by the Nasdaq National Market
System or Nasdaq Small Cap Market (or a similar system then in use), the last
reported sales price so reported on such day; or (iii) if neither (i) nor (ii)
above are applicable, and if bid and ask prices for shares of Common Stock are
reported in the over-the-counter market by Nasdaq (or, if not so reported, by
the National Quotation Bureau), the average of the high bid and low ask prices
so reported on such day. Notwithstanding the foregoing, if there is no reported
closing price, last reported sales price, or bid and ask prices, as the case may
be, for the day in question, then the current market price shall be determined
as of the latest date prior to such day for which such closing price, last
reported sales price, or bid and ask prices, as the case may be, are available,
unless such securities have not been traded on an exchange or in the
over-the-counter market for 30 or more days immediately prior to the day in
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question, in which case the current market price shall be determined in good
faith by, and reflected in a formal resolution of, the Board of Directors of the
Company.
(f) Notwithstanding any provision herein to the contrary, no adjustment in
the Warrant Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Warrant Price; provided, however,
that any adjustments which by reason of this subsection (e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4 shall be made to the nearest
cent or the nearest one-hundredth of a share, as the case may be.
(g) In the event that at any time, as a result of an adjustment made
pursuant to Section 4(b), the Holder of any Warrant thereafter exercised shall
become entitled to receive any shares of capital stock of the Company other than
shares of Common Stock, thereafter the number of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in this Section 4, and the other
provisions of this Warrant shall apply on like terms to any such other shares.
(h) If the Company merges or consolidates into or with another corporation
or entity, or if another corporation or entity merges into or with the Company
(excluding such a merger in which the Company is the surviving or continuing
corporation and which does not result in any reclassification, conversion,
exchange, or cancellation of the outstanding shares of Common Stock), or if all
or substantially all of the assets or business of the Company are sold or
transferred to another corporation, entity, or person, then, as a condition to
such consolidation, merger, or sale (a "Transaction"), lawful and adequate
provision shall be made whereby the Holder shall have the right from and after
the Transaction to receive, upon exercise of this Warrant and upon the terms and
conditions specified herein and in lieu of the shares of the Common Stock that
would have been issuable if this Warrant had been exercised immediately before
the Transaction, such shares of stock, securities, or assets as the Holder would
have owned immediately after the Transaction if the Holder had exercised this
Warrant immediately before the effective date of the Transaction. The Company
shall not effect any Transaction unless prior to or simultaneously with the
consummation thereof the successor corporation, entity, or person (if other than
the Company) resulting from the Transaction or purchasing assets or the business
of the Company in the Transaction shall assume by written instrument the
obligation to deliver to the Holder such shares of stock, securities, or assets
as, in accordance with the foregoing provisions, the Holder may be entitled to
receive.
(i) In case any event shall occur as to which the other provisions of this
Section 4 are not strictly applicable but the failure to make any adjustment
would not fairly protect the purchase rights represented by this Warrant in
accordance with the essential intent and principles hereof, then, in each such
case, the Company shall effect such adjustment, on a basis consistent with the
essential intent and principles established in this Section 4, as may be
necessary to preserve, without dilution, the purchase rights represented by this
Warrant.
5. Representations of Holder. The holder of this Warrant, by the acceptance
hereof, represents that it is acquiring this Warrant and the shares issuable
upon exercise of this Warrant for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution of this Warrant or the shares issuable upon exercise of this
Warrant, except pursuant to sales registered or exempted under the Securities
Act. The holder of this Warrant further represents, by acceptance hereof, that,
as of this date, such holder is an "accredited investor" as such term is defined
in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "Accredited Investor"). Upon exercise of
this Warrant, the holder shall confirm in writing, in a form satisfactory to the
Company, that the shares issuable upon exercise of the Warrant are being
acquired solely for the holder's own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale and
that such holder is an Accredited Investor. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of this Warrant that the Company receive
such other representations as the Company considers reasonably necessary to
assure the Company that the issuance of its securities upon exercise of this
Warrant shall not violate any United States or state securities laws.
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6. Registration Rights. The Holder shall be entitled to the benefits of the
registration rights set forth in that certain Registration Rights Agreement by
and among the Company and the Holders of the Warrants dated March __ 2000.
7. Reservation of Shares. The Company agrees at all times to reserve and
hold available out of the aggregate of its authorized but unissued Common Stock
the number of shares of its Common Stock issuable upon the full exercise of this
Warrant. The Company further covenants and agrees that all shares of Common
Stock that may be delivered upon the exercise of this Warrant will, upon
delivery, be fully paid and nonassessable and free from all taxes, liens and
charges with respect to the purchase thereof hereunder.
8. Notices to Holder. Upon any adjustment of the Warrant Price (or number
of shares of Common Stock purchasable upon the exercise of this Warrant)
pursuant to Section 4, the Company shall promptly thereafter cause to be given
to the Holder written notice of such adjustment. Such notice shall include the
Warrant Price (and/or the number of shares of Common Stock purchasable upon the
exercise of this Warrant) after such adjustment, and shall set forth in
reasonable detail the Company's method of calculation and the facts upon which
such calculations were based. Where appropriate, such notice shall be given in
advance and included as a part of any notice required to be given under the
other provisions of this Section 8.
In the event of (a) any fixing by the Company of a record date with respect
to the holders of any class of securities of the Company for the purpose of
determining which of such holders are entitled to dividends or other
distributions, or any rights to subscribe for, purchase or otherwise acquire any
shares of capital stock of any class or any other securities or property, or to
receive any other right, or (b) any capital reorganization of the Company, or
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets or business of the Company
to, or consolidation or merger of the Company with or into, any other entity or
person, or (c) any voluntary or involuntary dissolution or winding up of the
Company, then and in each such event the Company will give the Holder a written
notice specifying, as the case may be, (i) the record date for the purpose of
such dividend, distribution, or right, and stating the amount and character of
such dividend, distribution, or right; or (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, conveyance, 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
Stock (or such capital stock or securities receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock securities) for securities or other property deliverable upon such
event. Any such notice shall be given at least 20 days prior to the earliest
date therein specified.
9. No Rights as a Stockholder. This Warrant does not entitle the Holder to
any voting rights or other rights as a stockholder of the Company, nor to any
other rights whatsoever except the rights herein set forth.
10. Additional Covenants of the Company. At such time as the Common Stock
is listed for trading on any regional or national securities exchange or Nasdaq,
the Company shall, upon issuance of any shares for which this Warrant is
exercisable, at its expense, promptly obtain and maintain the listing of such
shares.
The Company shall comply with the reporting requirements of Sections 13 and
15(d) of the Exchange Act for so long as and to the extent that such
requirements apply to the Company.
The Company shall not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant. Without limiting the generality of the foregoing, the Company (a) will
at all times reserve and keep available, solely for issuance and delivery upon
exercise of this Warrant, shares of Common Stock issuable from time to time upon
exercise of this Warrant, (b) will not increase the par value of any shares of
capital stock receivable upon exercise of this Warrant above the amount payable
therefor upon such exercise, and (c) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable stock.
11. Specific Performance. The Company stipulates that remedies at law, in
money damages, available to the Holder or to a holder of Common Stock issued
pursuant to the exercise of this Warrant, in
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the event of any default or threatened default by the Company in the performance
of or compliance with any of the terms of this Warrant, are not and will not be
adequate. Therefore, the Company agrees that the terms of this Warrant may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
12. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Company, the Holder and their respective successors and
permitted assigns.
13. Notices. The Company agrees to maintain a ledger of the ownership of
the Warrants (the "Warrant Ledger). Any notice hereunder shall be given by
registered or certified mail if to the Company, at its principal executive
office and, if to the Holder, to its address shown in the Warrant Ledger of the
Company, provided that the Holder may at any time on three (3) days' written
notice to the Company designate or substitute another address where notice is to
be given. Notice shall be deemed given and received after a certified or
registered letter, properly addressed with postage prepaid, is deposited in the
U.S. mail.
14. Severability. Every provision of this Warrant is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the remainder of this
Warrant.
15. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to the
principles of choice of laws thereof. Venue for any dispute arising hereunder
shall lie in the state or federal courts of Dallas County, Texas.
16. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Warrant, the Holder, if successful, shall be entitled to
recover reasonable attorneys' fees in addition to its costs and expenses and any
other available remedy.
17. Entire Agreement. This Warrant (including the exhibits attached hereto)
constitutes the entire understanding between the Company and the Holder with
respect to the subject matter hereof, and supersedes all prior negotiations,
discussions, agreements and understandings relating to such subject matter.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer, and its corporate seal hereunto affixed.
DATED:
-------------------------
INTELECT COMMUNICATIONS, INC.
By:
--------------------------------------
Its:
--------------------------------------
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Exhibit A
SUBSCRIPTION FORM
(To be Executed by the Holder to Exercise the Rights To Purchase Common
Stock Evidenced by the Within Warrant)
The undersigned hereby irrevocably subscribes for ___________ shares (the
"Stock") of the Common Stock of Intelect Communications, Inc., ("Company")
pursuant to and in accordance with the terms and conditions of the attached
Warrant, and hereby makes payment of $______________ therefor by tendering cash
or delivering a certified check or bank cashier's check, payable to the order of
the Company. The undersigned requests that a certificate for such shares be
issued in the name of the undersigned and be delivered to the undersigned at the
address stated below. If such number of shares is not all of the shares
purchasable pursuant to the attached Warrant, the undersigned requests that a
new Warrant of like tenor for the balance of the remaining shares purchasable
thereunder be delivered to the undersigned at the address stated below.
In connection with the issuance of the Stock, I hereby represent to the
Company that I am acquiring the Stock for my own account for investment and not
with a view to, or for resale in connection with, a distribution of the shares
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
I understand that because the Stock has not been registered under the
Securities Act, I must hold such Stock indefinitely unless such Stock is
subsequently registered and qualified under the Securities Act or is exempt from
such registration and qualification. I shall make no transfer or disposition of
the Stock unless (a) such transfer or disposition can be made without
registration under the Securities Act by reason of a specific exemption from
such registration and such qualification, or (b) a registration statement has
been filed pursuant to the Securities Act and has been declared effective with
respect to such disposition.
I agree that each certificate representing the Stock delivered to me shall
bear substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AVAILABLE
EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT THE SELLER
DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL
RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
I further agree that the Company may place stop orders on the certificates
evidencing the Stock with the transfer agent, if any, to the same effect as the
above legend. The legend and stop transfer notice referred to above shall be
removed only upon my furnishing to the Company an opinion of counsel (reasonably
satisfactory to the Company) to the effect that such legend may be removed.
Date: Signed:
----------------------------- --------------------------
Address:
--------------------------
- ----------------------------------
- ----------------------------------
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Exhibit B
ASSIGNMENT
(To be Executed by the Holder to Effect Transfer of the Within Warrant)
For Value Received __________________________ hereby sells, assigns and
transfers to _____________________________ this Warrant and the rights
represented hereby to purchase _________ shares of Common Stock in accordance
with the terms and conditions hereof, and does hereby irrevocably constitute and
appoint _____________________________ as attorney to transfer this Warrant on
the books of the Company with full power of substitution.
Date: Signed:
---------------------- ---------------------------
Please print or typewrite name and address Please insert Social Security or
of assignee: other Tax Identification Number
of Assignee:
- --------------------------- -----------------------------------
- ---------------------------
- ---------------------------
9
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March __, 2000 (this
"Agreement"), is entered into by and among INTELECT COMMUNICATIONS, INC., a
Delaware corporation, with principal executive offices located at 1100
Executive Drive, Richardson, Texas 75081 (the "Company"), and each of the
entities or individuals identified on Schedule 10(c) hereto (collectively, the
"Investors" and individually an "Investor").
WHEREAS, upon the terms and subject to the conditions of the
respective Subscription Agreements entered into by and between each Investor
and the Company (collectively, the "Subscription Agreements" and individually a
"Subscription Agreement"), the Company has agreed to issue and sell to the
Investors an aggregate of __________ shares of the Company's common stock, par
value $.01 per share (the "Common Stock"); and
WHEREAS, to induce the Investors to execute and deliver the
Subscription Agreements, the Company has agreed to provide with respect to the
Registrable Securities (as defined below) certain registration rights under the
Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "Affiliate," of any specified Person means any other
Person who directly, or indirectly through one or more intermediaries,
is in control of, is controlled by, or is under common control with,
such specified Person. For purposes of this definition, control of a
Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by
contract, securities, ownership or otherwise; and the terms
"controlling" and "controlled" have the respective meanings correlative
to the foregoing.
(ii) "Commission" means the Securities and Exchange
Commission.
(iii) "Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(iv) "Final Closing Date" means the date and time of the final
issuance and sale of the Common Stock pursuant to the Subscription
Agreements.
(v) "Investors" means the Investors and any permitted
transferee or assignee of Registrable Securities who agrees to become
bound by all of the terms and provisions of this Agreement and the
Subscription Agreements.
(vi) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
(vii) "Prospectus" means the prospectus (excluding any
preliminary prospectus but including, without limitation, any final
prospectus filed pursuant to Rule 424(b) under the Securities Act and
any prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance
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on Rule 430A under the Securities Act) included in the Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement and by all other
amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed
after the date of such prospectus by the Company under the Exchange Act
and incorporated by reference therein.
(viii) "Public Offering" means an offer registered with the
Commission and the appropriate state securities commissions by the
Company of its Common Stock and made pursuant to the Securities Act.
(ix) "Registrable Securities" means the shares of Common Stock
purchased pursuant to the Subscription Agreements; provided, however, a
share of Common Stock shall cease to be a Registrable Security for
purposes of this Agreement when it no longer is a Restricted Security.
(x) "Registration Statement" means a registration statement of
the Company filed on an appropriate form under the Securities Act
providing for the registration of, and the sale on a continuous or
delayed basis by the holders of, all of the Registrable Securities
pursuant to Rule 415 under the Securities Act, including the Prospectus
contained therein and forming a part thereof, any amendments to such
registration statement and supplements to such Prospectus, and all
exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(xi) "Restricted Security" means any share of Common Stock
sold pursuant to the Subscription Agreement except any of those that
(i) have been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by
the prospectus included in such registration statement, (ii) have been
transferred in compliance with the resale provisions of Rule 144 under
the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the Securities
Act (or any successor provision thereto), or (iii) otherwise has been
transferred and a new share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on
behalf of the Company.
(xii) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Subscription Agreements.
2. Registration.
(a) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission not later than 30 days after the
Final Closing Date, a Registration Statement relating to the offer and sale of
the Registrable Securities and shall use its best efforts to cause the
Commission to declare such Registration Statement effective under the Securities
Act as promptly as practicable but not later than 70 days after the Final
Closing Date. The shares of Common Stock underlying warrants issued to Stonegate
Securities, Inc. may be included in the Registration Statement at the option of
the Company. The Company shall notify the Investors by written notice that such
Registration Statement has been declared effective by the Commission within
three (3) business days of such declaration by the Commission.
(b) Registration Default. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) is not (i) filed with the Commission
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<PAGE> 3
within 30 days after the Closing Date or (ii) declared effective by the
Commission within 90 days after the Closing Date (either of which, without
duplication, an "Initial Date"), then the Company shall make the payments to the
Investors as provided in the next sentence as liquidated damages and not as a
penalty. The amount to be paid by the Company to the Investors shall be
determined as of each Computation Date (as defined below), and such amount shall
be equal to 2.5% (the "Liquidated Damage Rate") of the Purchase Price (as
defined in the Subscription Agreements) from the Initial Date to the first
Computation Date and for each Computation Date thereafter, calculated on a pro
rata basis to the date on which the Registration Statement is filed with (in the
event of an Initial Date pursuant to clause (i) above) or declared effective by
(in the event of an Initial Date pursuant to clause (ii) above) the Commission
(the "Periodic Amount") provided, however, that in no event shall the liquidated
damages be less than $25,000. The full Periodic Amount shall be paid by the
Company to the Investors, pro rata, by wire transfer of immediately available
funds within three days after each Computation Date.
As used in this Section 2(b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not filed with the Commission by the 30th day after the Closing
Date, the Company shall be in default of this Registration Rights Agreement, and
the Investors shall be entitled to liquidated damages as set forth above.
(c) (i) If the Company proposes to register any of its warrants, Common
Stock or any other shares of common stock of the Company under the Securities
Act (other than a registration (A) on Form S-8 or S-4 or any successor or
similar forms, (B) relating to Common Stock or any other shares of common stock
of the Company issuable upon exercise of employee share options or in connection
with any employee benefit or similar plan of the Company or (C) in connection
with a direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision) under
the Securities Act applies), whether or not for sale for its own account, it
will each such time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to such
registration to the Investors, which notice shall set forth such Investors'
rights under this Section 2(c) and shall offer the Investors the opportunity to
include in such registration statement such number of Registrable Securities as
the Investors may request. Upon the written request of an Investor made within
10 days after the receipt of notice from the Company (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Investors), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities that the Company has been
so requested to register by the Investors, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided,
however, that (A) if such registration involves a Public Offering, the Investors
must sell their Registrable Securities to the underwriters selected as provided
in Section 3(b) hereof on the same terms and conditions as apply to the Company
and (B) if, at any time after giving written notice of its intention to register
any Registrable Securities pursuant to this Section 2(c) and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
Registrable Securities, the Company shall give written notice to the Investors
and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(c) shall terminate on the date that the registration statement to
be filed in accordance with Section 2(a) is declared effective by the
Commission. (ii) If a registration pursuant to this Section 2(c) involves a
Public Offering and the managing underwriter thereof advises the Company that,
in its view, the number of shares of Common Stock, if any, or other shares of
Common Stock that the Company and the Investors intend to include in such
registration exceeds the largest number of shares of Common Stock (including any
other shares of Common Stock or warrants of the Company) that can be sold
without having an adverse effect on such Public Offering (the "Maximum Offering
Size"), the Company will include in such registration only that number of shares
of Common Stock which does not exceed the Maximum Offering Size, in the
following order of priorities: (1) first, all securities the Company proposes to
sell for its own account (the "Company Shares"), (2) second, up to the full
number of securities proposed to be registered for the
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<PAGE> 4
account of the holders of securities entitled to inclusion of their securities
in the Registration Statement by reason of demand registration rights ("Demand
Shares"), and (3) third, the securities requested to be registered by other
holders of securities entitled to participate in the registration, drawn from
them pro-rata based on the number of shares each has requested to be included in
such registration ("Third Party Shares") and the Investors pursuant to this
Agreement.
If as a result of the proration provisions of this Section 2(c)(ii),
the Investors are not entitled to include all such Registrable Securities in
such registration, such Investors may elect to withdraw their request to include
any Registrable Securities in such registration.
3. Obligations of the Company. In connection with the registration of
the Registrable Securities, the Company shall use its reasonable best efforts
to:
(a) Subject to the provisions of Section 3(r) hereof, promptly (i)
prepare and file with the Commission such amendments (including post-effective
amendments) to the Registration Statement and supplements to the Prospectus as
may be necessary to keep the Registration Statement continuously effective and
in compliance with the provisions of the Securities Act applicable thereto so as
to permit the Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a period of two (2)
years from the date on which the Registration Statement is first declared
effective by the Commission (the "Effective Time") or such shorter period that
will terminate when all the Registrable Securities covered by the Registration
Statement have been sold pursuant thereto in accordance with the plan of
distribution provided in the Prospectus, transferred pursuant to Rule 144 under
the Securities Act or otherwise transferred in a manner that results in the
delivery of new securities not subject to transfer restrictions under the
Securities Act (the "Registration Period") and (ii) take all lawful action such
that each of (A) the Registration Statement and any amendment thereto does not,
when it becomes effective, contain 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 and (B) the Prospectus forming part of
the Registration Statement, and any amendment or supplement thereto, does not at
any time during the Registration Period 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, in light of the circumstances under
which they were made, not misleading;
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
(including a copy of the accountant's consent letter to be included in the
filing) to Stonegate Securities, Inc. and reflect in such documents all such
comments as Stonegate reasonably may propose ("Stonegate"); provided, however,
in the event of a good faith disagreement as to the reasonableness of the
comments or objections of Stonegate, the deadline for filing the Registration
Statement or any amendments or supplements thereto shall be extended for the
period of such bona-fide disagreement, and (ii) furnish to Stonegate for
delivery to each Investor whose Registrable Securities are included in the
Registration Statement, (A) promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, one copy of
the Registration Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
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<PAGE> 5
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Investors of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus
which are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post- effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the
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managers reasonably agree should be included therein and to which the Company
does not reasonably object and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after it is
notified of the matters to be included or incorporated in such Prospectus
supplement or post-effective amendment;
(m) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(n) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post- effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(o) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(p) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(q) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker- dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
(r) Notwithstanding anything to the contrary in Section 3, at any time
after the Registration Statement has been declared effective, the Company may
delay the disclosure of material non-public information concerning the Company
the disclosure of which at the time is not, in the good faith opinion of the
Company and its counsel, in the best interest of the Company (a "Grace Period");
provided, that the Company shall promptly (i) notify the Investors in writing of
the existence of material non-public
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information giving rise to a Grace Period and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which the
Grace Period ends; and, provided further, that during any consecutive 365 day
period, there shall be only two Grace Periods, such Grace Periods not to exceed
30 days (an "Allowable Grace Period"). For purposes of determining the length of
a Grace Period above, the Grace Period shall begin on and include the date the
holders receive the notice referred to in clause (i) and shall end on and
include the date the holders receive the notice referred to in clause (ii).
4. Obligations of the Investors. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. As least four (4) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor elects to
have any of its Registrable Securities included in the Registration Statement.
If at least two business days prior to the anticipated filing date the Company
has not received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor and have no
further registration obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) As promptly as practicable after becoming aware of such event,
notify the Company of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company, and
the reasonable fees, not to exceed $5,000.00, of one firm of counsel to the
holders of a majority in interest of the Registrable Securities shall be borne
by the Company.
6. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Investor and
each underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective
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officers and directors and each person who controls such Investor or underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such person being sometimes hereinafter referred to as an
"Indemnified Person") from and against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or an omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, not misleading, or arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus or an omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
the Company hereby agrees to reimburse such Indemnified Person for all
reasonable legal and other expenses incurred by them in connection with
investigating or defending any such action or claim as and when such expenses
are incurred; provided, however, that the Company shall not be liable to any
such Indemnified Person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon (i) an untrue
statement or alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Person expressly for use therein or (ii) in the case of the occurrence of an
event of the type specified in Section 3(e), the use by the Indemnified Person
of an outdated or defective Prospectus after the Company has provided to such
Indemnified Person written notice that such Prospectus is outdated or defective.
(b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers and each person,
if any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement or Prospectus or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
light of the circumstances under which they were made, in the case of the
Prospectus), not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such holder or underwriter expressly for use
therein; provided, however, that no Investor or underwriter shall be liable
under this Section 6(b) for any amount in excess of the gross proceeds paid to
such Investor or underwriter in respect of shares sold by it, and (ii) reimburse
the Company for any legal or other expenses incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such
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separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, costs and expenses, (y)
the Indemnified Party and the Indemnifying Party shall reasonably have concluded
that representation of the Indemnified Party by the Indemnifying Party by the
same legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of such Claim, or
if there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party, or (z)
the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnified Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the gross
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
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7. Rule 144. With a view to making available to the Investors the
benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement may be assigned or transferred only with
the prior written consent of the Company, and any such assignment or transfer
without such consent shall be void and of no effect. In the event of any such
permitted assignment or transfer by the Investors to any permitted transferee of
all or any portion of such Registrable Securities such transfer will be allowed
only if: (a) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (i) the name and address of such transferee or assignee and (ii) the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment, the
securities so transferred or assigned to the transferee or assignee constitute
Restricted Securities, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein.
9. Amendment and Waiver. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority- in-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. Miscellaneous.
(a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) If after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company grants to any Person any registration rights with
respect to any Company securities which are more favorable to such other Person
than those provided in this Agreement, then the Company forthwith shall grant
(by means of an amendment to this Agreement or otherwise) identical registration
rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
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if to the Company, to:
Intelect Communications, Inc.
1100 Executive Drive
Richardson, Texas 75081
Phone: (972) 367-2100
Attention: Chief Executive Officer
with a copy to:
Ryan & Sudan, L. L. P.
909 Fannin, Suite 3900
Houston, Texas 77010
Attention: Michael T. Larkin
if to the Investors, to:
Each individual or entity identified on Schedule
10(c) attached hereto
With a copy to:
Stonegate Securities, Inc.
500 Crescent Court, Suite 270
Dallas, Texas 75201
Phone: (214) 871-6939
Fax: (214) 871-6940
Attention: Jesse Shelmire
If to any other Investor, at such address as such Investor shall have
provided in writing to the Company.
The Company or any Investor may change the foregoing address by notice
given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Texas. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Dallas or the state courts of the State of Texas sitting in the City of
Dallas in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by
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a court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(g) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are pari pasu to the prior rights of the holders of Registrable
Securities set forth herein, and are not otherwise in conflict or inconsistent
with the provisions of this Agreement. The restrictions on the Company's rights
to grant registration rights under this paragraph shall terminate on the date
the Registration Statement to be filed pursuant to Section 2(a) is declared
effective by the Commission.
(h) This Agreement and the Subscription Agreements constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein. This Agreement and the Subscription
Agreements supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3, or any delay in such performance could result
in direct damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company may be liable for all direct damages caused by such failure or
delay.
(m) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
INTELECT COMMUNICATIONS, INC.
By:_________________________________________________
Name:_______________________________________________
Title:______________________________________________
INVESTORS: [See attached signature page]
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INVESTOR SIGNATURE PAGE
Investor Name:________________________________________________________
By:________________________
Its:_______________________
