1
Exhibit 10.5
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE
THEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD,
PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE
SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
WARRANT
to Purchase Common Stock of
INTELECT COMMUNICATIONS, INC.
Expiring on August 12, 2004
This Common Stock Purchase Warrant (the "Warrant"), certifies that for
value received, THE COASTAL CORPORATION SECOND PENSION TRUST (the "Holder") or
its assigns, is entitled to subscribe for and purchase from the Company (as
hereinafter defined), in whole or in part, ____________________________ shares
of duly authorized, validly issued, fully paid and nonassessable Common Stock
(as hereinafter defined) at an initial Exercise Price (as hereinafter defined)
per share of $________________, subject, however, to the provisions and upon
the terms and conditions hereinafter set forth. The number of Warrants (as
hereinafter defined), the number of shares of Common Stock purchasable
hereunder, and the Exercise Price therefor are subject to adjustment as
hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00 p.m., Houston, Texas time, _____________ from the date hereof, on
__________________.
As used herein, the following terms shall have the meanings set forth
below:
"Cashless Exercise" has the meaning given in Section 1.1.
"Company" shall mean Intelect Communications, Inc., a Delaware
corporation, and shall also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
"Common Stock" shall mean and include the Company's Common Stock, par
value $0.01 per share, authorized on the date of the original issue of this
Warrant and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets of the character referred to in Section 3.5 hereof,
the stock, securities provided for in such Section 3.5, and (ii) any other
shares of Common Stock of the Company into which such shares of Common Stock
may be converted.
"Convertible Securities" has the meaning given in Section 3.2 (b)(i).
"Exercise Date" has the meaning given in Section 1.1.
"Exercise Price" shall mean the initial purchase price of ONE AND
30/100 DOLLARS (US $1.30), per share of Common Stock payable upon exercise of
the Warrants, as adjusted from time to time pursuant to the provisions hereof.
"Holder" means The Coastal Corporation Second Pension Trust.
"Market Price" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (x) the last
reported sale price for the Common Stock on such day on the principal
securities exchange on which the Common Stock is listed or admitted to trading
or if no such sale takes place on such date, the average of the closing bid and
asked prices thereof as officially reported, or, if not so listed or admitted
to trading on any securities exchange, the last sale price for the Common Stock
on the National Association of Securities Dealers ("NASD") National Market on
such date, or, if there shall have been no trading on such date or if the
Common Stock shall not be listed on such system, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any NASD member
firm selected from time to time by the Company for such purpose, in each such
case, unless otherwise provided herein, averaged over a period of five (5)
consecutive Trading Days prior to the date as of which the determination is to
be made; or (y) if the Common Stock shall not be listed or admitted to trading
as provided in clause "(x)" above, the fair market value of the Common Stock as
determined in good faith by the Board of Directors of the Company.
"Note" shall mean the Note issued under the Amended and Restated Loan
Agreement For Receivables- And Inventory-backed Borrowing of the Company issued
to Holder in the principal amount of $_______________, of even date herewith.
2
"Outstanding" when used with reference to Common Stock, shall mean
(except as otherwise expressly provided herein) at any date as of which the
number of shares thereof is to be determined, all issued shares of Common
Stock, except shares then owned or held by or for the account of the Company.
"Registration Rights Agreement" means the Agreement between Company
and Holder.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Subscription Notice" has the meaning given in Section 1.1.
"Trading Days" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted
to trading is open for the exchange of securities.
"Warrant" shall mean the right upon exercise to purchase one Warrant
Share.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the Holder hereof upon the exercise of the Warrants.
ARTICLE I
EXERCISE OF WARRANTS
Section I.1 Method of Exercise. The Warrants represented hereby may be
exercised by the Holder hereof, in whole or in part, at any time and from time
to time on or after the date hereof until 5:00 p.m., Houston, Texas time, on
August 12, 2004 (the "Exercise Date"). To exercise the Warrants, the Holder
hereof shall deliver to the Company, at the Warrant Office designated in
Section 2.1 hereof, (i) a written notice in the form of the Subscription Notice
attached as an exhibit hereto, stating therein the election of such holder to
exercise the Warrants in the manner provided in the Subscription Notice; (ii)
payment in full of the Exercise Price (A) in cash or immediately available
funds for all Warrant Shares purchased hereunder, or (B) if the Company and the
Holder mutually elect, through a "cashless" or "net-issue" exercise of each
such Warrant ("Cashless Exercise"); the Holder shall exchange each Warrant
subject to a Cashless Exercise for that number of Warrant Shares determined by
multiplying the number of Warrant Shares issuable hereunder by a fraction, the
numerator of which shall be the difference between (x) the Market Price and (y)
the Exercise Price for each such Warrant, and the denominator of which shall be
the Market Price; the Subscription Notice shall set forth the calculation upon
which the Cashless Exercise is based, or (C) a combination of (A) and (B)
above; and (iii) this Warrant. The Warrants shall be deemed to be exercised on
the date of receipt by the Company of the Subscription Notice, accompanied by
payment for the Warrant Shares and surrender of this Warrant, as aforesaid, and
such date is referred to herein as the "Exercise Date". Upon such exercise, the
Company shall, as promptly as practicable and in any event within ten (10)
business days, issue and deliver to such holder a certificate or certificates
for the full number of the Warrant Shares purchased by such holder hereunder,
and shall, unless the Warrants have expired, deliver to the Holder hereof a new
Warrant representing the number of Warrants, if any, that shall not have been
exercised, in all other respects identical to this Warrant. As permitted by
applicable law, the person in whose name the certificates for Common Stock are
to be issued shall be deemed to have become a holder of record of such Common
Stock on the Exercise Date and shall be entitled to all of the benefits of such
holder on the Exercise Date, including without limitation the right to receive
dividends and other distributions for which the record date falls on or after
the Exercise Date and to exercise voting rights.
Section I.2 Expenses and Taxes. The Company shall pay all expenses,
and taxes (including, without limitation, all documentary, stamp, transfer or
other transactional taxes) other than income taxes attributable to the
preparation, issuance or delivery of the Warrants and of the shares of Common
Stock issuable upon exercise of the Warrants.
Section I.3 Reservation of Shares. The Company shall reserve at all
times so long as the Warrants remain outstanding, free from preemptive rights,
out of its treasury Common Stock or its authorized but unissued shares of
Common Stock, or both, solely for the purpose of effecting the exercise of the
Warrants, a sufficient number of shares of Common Stock to provide for the
exercise of the Warrants.
Section I.4 Valid Issuance. All shares of Common Stock that may be
issued upon exercise of the Warrants will, upon issuance by the Company, be
duly and validly issued, fully paid and nonassessable and free from all taxes,
liens
-2-
3
and charges with respect to the issuance thereof and, without limiting the
generality of the foregoing, the Company shall take no action or fail to take
any action which will cause a contrary result (including, without limitation,
any action that would cause the Exercise Price to be less than the par value,
if any, of the Common Stock).
Section I.5 Purchase Agreement. The Warrants represented hereby are
part of a duly authorized issuance and sale of Warrants to purchase Common
Stock issued and sold pursuant to the Loan Agreement between Holder and Company
of even date herewith.
Section I.6 Acknowledgment of Rights. At the time of the exercise of
the Warrants in accordance with the terms hereof and upon the written request
of the Holder hereof, the Company will acknowledge in writing its continuing
obligation to afford to such holder any rights (including, without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions
of this Warrant; provided, however, that if the Holder hereof shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
Section I.7 No Fractional Shares. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of this Warrant. If
more than one Warrant shall be presented for exercise at the same time by the
same holder, the number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
whole shares of Common Stock purchasable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 1.7, be issuable on the exercise of this Warrant,
the Company shall pay an amount in cash calculated by it to be equal to the
Market Price of one share of Common Stock at the time of such exercise
multiplied by such fraction computed to the nearest whole cent.
ARTICLE II
TRANSFER
Section II.1 Warrant Office. The Company shall maintain an office for
certain purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to which
written notice has previously been given to the Holder hereof. The Company
shall maintain, at the Warrant Office, a register for the Warrants in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
Section II.2 Ownership of Warrants. The Company may deem and treat the
person in whose name the Warrants are registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of
transfer as provided in this Article II. Notwithstanding the foregoing, the
Warrants represented hereby, if properly assigned in compliance with this
Article II, may be exercised by an assignee for the purchase of Warrant Shares
without having a new Warrant issued.
Section II.3 Restrictions on Transfer of Warrants.
(a) The Company agrees to maintain at the Warrant Office
books for the registration and transfer of the Warrants. Subject to the
restrictions on transfer of the Warrants in this Section 2.3, the Company, from
time to time, shall register the transfer of the Warrants in such books upon
surrender of this Warrant at the Warrant Office properly endorsed or
accompanied by appropriate instruments of transfer and written instructions for
transfer satisfactory to the Company. Upon any such transfer and upon payment
by the Holder or its transferee of any applicable transfer taxes, new Warrants
shall be issued to the transferee and the transferor (as their respective
interests may appear) and the surrendered Warrants shall be canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes
or income taxes) and all other expenses and charges payable in connection with
the transfer of the Warrants pursuant to this Section 2.3.
(b) Restrictions in General. The Holder of the Warrants
agrees that it will neither (i) transfer the Warrants prior to delivery to the
Company of written notice of such transfer, nor (ii) transfer such Warrant
Shares prior to delivery to the Company of written notice of such transfer, or
until registration of such Warrant Shares under the Securities Act and any
applicable state securities or Blue Sky laws has become effective.
-3-
4
Section II.4 Compliance with Securities Laws. Subject to the terms of
the Registration Rights Agreement between the Holder and the Company dated as
of the date hereof and notwithstanding any other provisions contained in this
Warrant, the Holder hereof understands and agrees that the following
restrictions and limitations shall be applicable to all Warrant Shares and to
all resales or other transfers thereof pursuant to the Securities Act:
(a) The Holder hereof agrees that the Warrant Shares shall
not be sold or otherwise transferred unless the Warrant Shares are registered
under the Securities Act and applicable state securities or Blue Sky laws or
are exempt therefrom.
(b) A legend in substantially the following form will be
placed on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAW AND, ACCORDINGLY, THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS."
(c) Stop transfer instructions will be imposed with respect
to the Warrant Shares so as to restrict resale or other transfer thereof,
subject to this Section 2.4.
(d) The Holder understands that it must bear the economic
risk of the investment for an indefinite period of time because the Warrant
Shares have not been registered under the Securities Act and therefor cannot be
sold unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. The Holder acknowledges that the
Holder or the Holder's representative is familiar with the condition, financial
and otherwise, of the Company. The Holder or the Holder's representative has
such knowledge and experience in financial and business matters that the Holder
or the Holder's representative is able to weigh the information so received and
to evaluate the merits and risks of the Holder's investment in the Warrant
Shares.
ARTICLE III
ANTI-DILUTION
Section III.1 Anti-Dilution Provisions. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Holder of this Warrant shall thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of shares of Common Stock obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment.
Section III.2 Adjustment of Exercise Price Upon Issuance of Common
Stock.
(a) (i) If and whenever after the date hereof the
Company shall issue or sell any Common Stock for no consideration or
for a consideration per share less than the Exercise Price, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced
(but not increased, except as otherwise specifically provided in
Section 3.2 hereof), to the price (calculated to the nearest one-ten
thousandth of a cent) determined by dividing (x) an amount equal to
the sum of (i) the aggregate number of shares of Common Stock
Outstanding immediately prior to such issue or sale multiplied by the
consideration received by the Company upon such issuance or sale on a
per share basis plus (ii) the consideration received by the Company
upon such issue or sale by (y) the aggregate number of shares of
Common Stock Outstanding immediately after such issue or sale.
(ii) Notwithstanding the provisions of this Section
3.2, no adjustment shall be made in the Exercise Price in the event
that the Company issues, in one or more transactions, (A) Common Stock
or Convertible Securities upon exercise of any options issued to
officers, directors or employees of the Company
-4-
5
pursuant to a stock option plan or an employment, severance or
consulting agreement as now or hereafter in effect, in each case
approved by the Board of Directors (provided that the aggregate number
of shares of Common Stock which may be issuable, including options
issued prior to the date hereof, under all such employee plans and
agreements shall at no time exceed the number of such shares of Common
Stock that are issuable under currently effective employee plans and
agreements); (B) Common Stock upon exercise of the Warrants or any
other Warrant issued pursuant to the terms of the Agreement or
otherwise issued to the Holder; (C) Common Stock upon exercise of any
stock purchase Warrant or option (other than the options referred to
in clause "(A)" above) or other convertible security outstanding on
the date hereof; (D) Common Stock upon conversion or redemption of the
Note; or (E) Common Stock issued as consideration in acquisitions. In
addition, for purposes of calculating any adjustment of the Exercise
Price as provided in this Section 3.2, all of the shares of Common
Stock issuable pursuant to any of the foregoing shall be assumed to be
Outstanding prior to the event causing such adjustment to be made.
(b) For purposes of this Section 3.2, the following Sections
3.2(b)(i) to 3.2(b)(v) inclusive, shall be applicable:
(i) Issuance of Rights or Options. In case at any
time after the date hereof the Company shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or securities convertible into
or exchangeable for Common Stock (such convertible or exchangeable
stock or securities being herein called "Convertible Securities"),
whether or not such rights or options or the right to convert or
exchange any such Convertible Securities are immediately exercisable,
and the price per share for which shares of Common Stock are issuable
upon the exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined by dividing (A)
the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the
minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of such rights or options, or plus,
in the case of such rights or options that relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Exercise Price in effect as of the
date of granting such rights or options, then the total maximum number
of shares of Common Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall
be deemed to be outstanding as of the date of the granting of such
rights or options and to have been issued for such price per share,
with the effect on the Exercise Price specified in Section 3.2(a)
hereof. Except as provided in Section 3.2(b) hereof, no further
adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon
exercise of such rights or options or upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible
Securities.
(ii) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase
price provided for in any right or option referred to in Section
3.2(b), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
Section 3.2(b), or the rate at which any Convertible Securities
referred to in Section 3.2(b), are convertible into or exchangeable
for Common Stock shall change (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price
then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Exercise Price that would have
been in effect at such time had such rights, options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at
the time initially granted, issued or sold. On the expiration of any
such option or right referred to in Section 3.2(b), or on the
termination of any such right to convert or exchange any such
Convertible Securities referred to in Section 3.2(b), the Exercise
Price then in effect hereunder shall forthwith be readjusted
(increased or decreased, as the case may be) to the Exercise Price
that would have been in effect at the time of such expiration or
termination had such right, option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or
termination, never been granted, issued or sold, and the Common Stock
issuable thereunder shall no longer be deemed to be Outstanding. If
the purchase price provided for in Section 3.2(b) or the rate at which
any Convertible Securities referred to in Section 3.2(b) reduced at
any time under or by reason of provisions with respect thereto
designed to protect against dilution, then in case of the
-5-
6
delivery of Common Stock upon the exercise of any such right or option
or upon conversion or exchange of any such Convertible Securities, the
Exercise Price then in effect hereunder shall, if not already
adjusted, forthwith be adjusted to such amount as would have obtained
had such right, option or Convertible Securities never been issued as
to such Common Stock and had adjustments been made upon the issuance
of the Common Stock delivered as aforesaid, but only if as a result of
such adjustment the Exercise Price then in effect hereunder is thereby
reduced.
(iii) Consideration for Stock. In case at any time
Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for cash, the consideration therefor shall be deemed to
be the amount received by the Company therefor. In case at any time
any Common Stock, Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed
to be the fair value of such consideration, as determined reasonably
and in good faith by the Board of Directors of the Company. In case at
any time any Common Stock, Convertible Securities or any rights or
options to purchase any Common Stock or Convertible Securities shall
be issued in connection with any merger or consolidation in which the
Company is the surviving corporation, the amount of consideration
received therefor shall be deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the Company,
of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be
attributable to such Common Stock, Convertible Securities, rights or
options as the case may be. In case at any time any rights or options
to purchase any shares of Common Stock or Convertible Securities shall
be issued in connection with the issuance and sale of other securities
of the Company, together consisting of one integral transaction in
which no consideration is allocated to such rights or options by the
parties, such rights or options shall be deemed to have been issued
with consideration.
(iv) Record Date. In the case the Company shall take
a record of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in Common Stock or Convertible Securities, or (ii) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as
a result of the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(v) Treasury Shares. The number of shares of Common
Stock Outstanding at any given time shall not include shares owned
directly by the Company in treasury, and the disposition of any such
shares shall be considered an issuance or sale of Common Stock for the
purpose of this Section 3.2.
Section III.3 Stock Dividends. In case the Company shall declare a
dividend or make any other distribution upon any shares of the Company, payable
in Common Stock or Convertible Securities, any Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
Section III.4 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its Outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in the event
that the Outstanding shares of Common Stock shall at any time be combined into
a smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of Warrant
Shares purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced. Except as provided in this
Section 3.4, no adjustment in the Exercise Price and no change in the number of
Warrant Shares purchasable shall be made under this Article III as a result of
or by reason of any such subdivision or combination.
Section III.5 Reorganizations and Asset Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another person shall be effected in such a way that a holder of
Common Stock of the Company shall be entitled to receive capital stock,
securities or assets with respect to or in exchange for their shares, then the
following provisions shall apply:
-6-
7
(a) As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in this Section 3.5), lawful and adequate
provisions shall be made whereby the holder of Warrants shall thereafter have
the right to purchase and receive upon the terms and conditions specified in
this Warrant and in lieu of the Warrant Shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares of
capital stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of Outstanding shares of such Common Stock equal to
the number of Warrant Shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision reasonably
satisfactory to such holder shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the exercise of Warrants.
(b) In the event of a merger, share exchange or consolidation
of the Company with or into another person as a result of which a number of
shares of Common Stock or its equivalent of the successor person greater or
lesser than the number of shares of Common Stock Outstanding immediately prior
to such merger, share exchange or consolidation are issuable to holders of
Common Stock, then the Exercise Price in effect immediately prior to such
merger, share exchange or consolidation shall be adjusted in the same manner as
though there were a subdivision or combination of the Outstanding shares of
Common Stock.
(c) The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor person (if other
than the Company) resulting from such consolidation, share exchange or merger
or the person purchasing or otherwise acquiring such assets shall have assumed
by written instrument executed and mailed or delivered to the Holder hereof at
the last address of such holder appearing on the books of the Company the
obligation to deliver to such holder such shares of capital stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive, and all other liabilities and obligations of the Company
hereunder. Upon written request by the Holder hereof, such successor person
will issue a new Warrant revised to reflect the modifications in this Warrant
effected pursuant to this Section 3.5.
(d) If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the Outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange
or sale, transfer or other disposition of all or substantially all of the
Company's assets with the person having made such offer or with any affiliate
of such person, unless prior to the consummation of such consolidation, merger,
share exchange, sale, transfer or other disposition the Holder hereof shall
have been given a reasonable opportunity to then elect to receive upon the
exercise of the Warrants either the capital stock, securities or assets then
issuable with respect to the Common Stock or the capital stock, securities or
assets, or the equivalent, issued to previous holders of the Common Stock in
accordance with such offer.
Section III.6 Adjustment for Asset Distribution. If the Company
declares a dividend or other distribution payable to all holders of shares of
Common Stock in evidences of indebtedness of the Company or other assets of the
Company (including, cash (other than regular cash dividends declared by the
Board of Directors), capital stock (other than Common Stock, Convertible
Securities or options or rights thereto) or other property), the Exercise Price
in effect immediately prior to such declaration of such dividend or other
distribution shall be reduced by an amount equal to the amount of such dividend
or distribution payable per share of Common Stock, in the case of a cash
dividend or distribution, or by the fair value of such dividend or distribution
per share of Common Stock (as reasonably determined in good faith by the Board
of Directors of the Company), in the case of any other dividend or
distribution. Such reduction shall be made whenever any such dividend or
distribution is made and shall be effective as of the date as of which a record
is taken for purpose of such dividend or distribution or, if a record is not
taken, the date as of which holders of record of Common Stock entitled to such
dividend or distribution are determined.
Section III.7 De Minimis Adjustments. No adjustment in the number of
shares of Common Stock purchasable hereunder shall be required unless such
adjustment would require an increase or decrease of at least one share of
Common Stock purchasable upon an exercise of each Warrant and no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least $0.01 in the Exercise Price; provided,
however, that any adjustments which by reason of this Section 3.7 are not
required to be made shall be carried forward and taken into account
-7-
8
in any subsequent adjustment. All calculations shall be made to the nearest
full share or nearest one-hundredth of a dollar, as applicable.
Section III.8 Notice of Adjustment. Whenever the Exercise Price or the
number of Warrant Shares issuable upon the exercise of the Warrants shall be
adjusted as herein provided, or the rights of the Holder hereof shall change by
reason of other events specified herein, the Company shall compute the adjusted
Exercise Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock,
securities or assets receivable as a result of such change in rights, and
showing in reasonable detail the facts and calculations upon which such
adjustments or other changes are based. The Company shall cause to be mailed to
the Holder hereof copies of such Officer's Certificate together with a notice
stating that the Exercise Price and the number of Warrant Shares purchasable
upon exercise of the Warrants have been adjusted and setting forth the adjusted
Exercise Price and the adjusted number of Warrant Shares purchasable upon the
exercise of the Warrants.
Section III.9 Notifications to Holders. In case at any time the
Company proposes:
(a) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution (other than
cash dividends) to the holders of its Common Stock;
(b) to offer for subscription pro rata to all of the holders
of its Common Stock any additional shares of capital stock of any class or
other rights;
(c) to effect any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation, merger or share exchange
of the Company with another person, or sale, transfer or other disposition of
all or substantially all of its assets; or
(d) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of such
cases, the Company shall give the Holder hereof (a) at least ten (10) days'
(but not more than ninety (90) days') prior written notice of the date of which
the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of such issuance, reorganization, reclassification, consolidation,
merger, share exchange, sale, transfer, disposition, dissolution, liquidation
or winding up, and (b) in the case of any such issuance, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, at least ten (10) days'
(but not more than ninety (90) days') prior written notice of the date when the
same shall take place. Such notice in accordance with the foregoing clause
"(a)" shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause "(b)"
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock, as the case may be, for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition,
dissolution, liquidation or winding up, as the case may be.
Section III.10 Company to Prevent Dilution. If any event or condition
occurs as to which other provisions of this Article III are not strictly
applicable or if strictly applicable would not fairly protect the exercise or
purchase rights of the Warrants evidenced hereby in accordance with the
essential intent and principles of such provisions, or that might materially
and adversely affect the exercise or purchase rights of the Holder hereof under
any provisions of this Warrant, then the Company shall make such adjustments in
the application of such provisions, in accordance with such essential intent
and principles, so as to protect such exercise and purchase rights as
aforesaid, and any adjustments necessary with respect to the Exercise Price and
the number of Warrant Shares purchasable hereunder so as to preserve the rights
of the Holder hereunder. In no event shall any such adjustment have the effect
of increasing the Exercise Price as otherwise determined pursuant to this
Article III except in the event of a combination of shares of the type
contemplated in Section 3.4 hereof, and then in no event to an amount greater
than the Exercise Price as adjusted pursuant to Section 3.4 hereof.
-8-
9
ARTICLE IV
MISCELLANEOUS
Section IV.1 Entire Agreement. This Warrant, together with the
Agreement, contain the entire agreement between the Holder hereof and the
Company with respect to the Warrant Shares purchasable upon exercise hereof and
the related transactions and supersedes all prior arrangements or
understandings with respect thereto.
Section IV.2 Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section IV.3 Waiver and Amendment. Any term or provision of this
Warrant may be waived at any time by the party which is entitled to the
benefits thereof and any term or provision of this Warrant may be amended or
supplemented at any time by agreement of the Holder hereof and the Company,
except that any waiver of any term or condition, or any amendment or
supplementation, of this Warrant shall be in writing. A waiver of any breach or
failure to enforce any of the terms or conditions of this Warrant shall not in
any way effect, limit or waive a party's rights hereunder at any time to
enforce strict compliance thereafter with every term or condition of this
Warrant.
Section IV.4 Illegality. In the event that any one or more of the
provisions contained in this Warrant shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
Section IV.5 Copy of Warrant. A copy of this Warrant shall be filed
among the records of the Company.
Section IV.6 Notice. All notices, requests, demands or other
communications to or upon the respective parties hereto shall be deemed to have
been duly given or made when delivered to the party to which such notice,
request, demand or other communication is required or permitted to be given or
made under this Warrant addressed to such party at its address set forth below
or at such other address as either of the parties hereto may hereafter notify
the other in writing.
To Pledgor: INTELECT COMMUNICATIONS, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman and CEO
with a copy to: ▇▇▇▇ & SUDAN, L.L.P.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Sudan, Jr., Esq.
Secured Party: THE COASTAL CORPORATION SECOND PENSION TRUST
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee
with a copy to: THE COASTAL CORPORATION
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Director, Financial Administration
-9-
10
For wire transfers of funds to Lender under all Transaction Documents:
Chase Bank of Texas - Houston, Texas
ABA #▇▇▇▇▇▇▇▇▇
Trust Wires Clearing Account DDA #00101606276
Description: Intelect Communications Receipts
OBI# Att: Trust Receipts FFC: 5502001-1867300
The Coastal Corporation Second Pension Trust
Att: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - (▇▇▇) ▇▇▇-▇▇▇▇
Section IV.7 Limitation of Liability; Not Stockholders. No provision
of this Warrant shall be construed as conferring upon the Holder hereof the
right to vote, consent, receive dividends or receive notices (other than as
herein expressly provided) in respect of meetings of stockholders for the
election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such holder for the purchase price of any shares of
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
Section IV.8 Exchange, Loss, Destruction, etc. of Warrant. Upon
receipt of evidence satisfactory to the Company of the loss, theft, mutilation
or destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in such
form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the
Company will make and deliver a new Warrant of like tenor, in lieu of such
lost, stolen, destroyed or mutilated Warrant. Any Warrant issued under the
provisions of this Section 4.8 in lieu of any Warrant alleged to be lost,
destroyed or stolen, or in lieu of any mutilated Warrant, shall constitute an
original contractual obligation on the part of the Company. This Warrant shall
be promptly canceled by the Company upon the surrender hereof in connection
with any exchange or replacement. The Company shall pay all taxes (other than
securities transfer taxes or income taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to this Section 4.8.
Section IV.9 Registration Rights. The Warrant Shares shall be entitled
to such registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
Section IV.10 Headings. The Article and Section and other headings
herein are for convenience only and are not a part of this Warrant and shall
not affect the interpretation thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be issued
as August 13, 1999
INTELECT COMMUNICATIONS, INC.
By:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman & CEO
-10-
11
SUBSCRIPTION NOTICE
The undersigned, the Holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for and to purchase thereunder,
shares of the Common Stock covered by such Warrant, and herewith makes payment
in full for such shares pursuant to Section 1.1 of such Warrant, and requests
(a) that certificates for such shares (and any other securities or other
property issuable upon such exercise) be issued in the name of, and delivered
to THE COASTAL CORPORATION SECOND PENSION TRUST and (b), if such shares shall
not include all of the shares issuable as provided in such Warrant, that a new
Warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
THE COASTAL CORPORATION SECOND PENSION TRUST
By:
-----------------------------------------
Date:
--------------
12
ASSIGNMENT
For value received, _______________________, hereby sells, assigns,
and transfers unto _________________________ the within Warrant, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint ________________________ attorney, to transfer such Warrant on the
books of the Company, with full power of substitution.
---------------------------
Date:
--------------------------
