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 SYSTEMS LIMITED
Expiring on May 7, 2002
This Common Stock Purchase Warrant (the "Warrant") certifies that for value
received, THE COASTAL CORPORATION SECOND PENSION TRUST (the "Holder") or its
assigns, is entitled to subscribe for and purchase from the Company (as
hereinafter defined), in whole or in part, SEVEN HUNDRED FIFTY THOUSAND
(750,000) shares of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (as hereinafter defined) at an initial
Exercise Price (as hereinafter defined) per share of TWO DOLLARS (US $2.00),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of Warrants (as hereinafter defined), the
number of shares of Common Stock purchasable hereunder, and the Exercise Price
therefor are subject to adjustment as hereinafter set forth. This Warrant and
all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, on May 7,
2002.
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 Systems Limited, a Bermuda
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 TWO DOLLARS (US
$2.00) per share of Common Stock payable upon exercise of the Warrants, as
adjusted from time to time pursuant to the provisions hereof.
"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 National Market on such date, or, if
there shall have been no trading on such date or if the Common Stock shall not
be listed on such system, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any NASD member firm selected from time
to time by the Company for such purpose, in each such case, unless otherwise
provided herein, averaged over a period of ten (10) consecutive Trading Days
prior to the date as of which the determination is to be made; or (y) if the
Common Stock shall not be listed or admitted to trading as provided in clause
"(x)" above, the fair market value of the Common Stock as determined in good
faith by the Board of Directors of the Company.
"Note" shall mean the Promissory Note of the Company issued to Holder in
the principal amount of $5,000,000, of even date herewith.
"Outstanding," when used with reference to Common Stock, shall mean (except
as otherwise expressly provided herein) at any date as of which the number of
shares thereof is to be determined, all issued shares of Common Stock, except
shares then owned or held by or for the account of the Company.
"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 1.1 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 May
7, 2002 (the "Exercise Date"). To exercise the Warrants, the Holder hereof shall
deliver to the Company, at the Warrant Office designated in Section 2.1 hereof,
(i) a written notice in the form of the Subscription Notice attached as an
exhibit hereto, stating therein the election of such holder to exercise the
Warrants in the manner provided in the Subscription Notice; (ii) payment in full
of the Exercise Price (A) in cash or by bank check 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 1.2 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 1.3 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.
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Section 1.4 Valid Issuance. All shares of Common Stock that may be issued
upon exercise of the Warrants will, upon issuance by the Company, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof and, without limiting the
generality of the foregoing, the Company shall take no action or fail to take
any action which will cause a contrary result (including, without limitation,
any action that would cause the Exercise Price to be less than the par value, if
any, of the Common Stock).
Section 1.5 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 1.6 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 1.7 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 2.1 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 2.2 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 2.3 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.
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(b) Restrictions in General. The Holder of the Warrants agrees that it
will neither (i) transfer the Warrants prior to delivery to the Company of
written notice of such transfer, nor (ii) transfer such Warrant Shares prior to
delivery to the Company of written notice of such transfer, or until
registration of such Warrant Shares under the Securities Act and any applicable
state securities or Blue Sky laws has become effective.
Section 2.4 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 3.1 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 3.2 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
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upon such issuance or sale on a per share basis plus (ii) the
consideration received by the Company upon such issue or sale by (y) the
aggregate number of shares of Common Stock Outstanding immediately after
such issue or sale.
(ii) Notwithstanding the provisions of this Section 3.2, no adjustment
shall be made in the Exercise Price in the event that the Company issues,
in one or more transactions, (A) Common Stock or Convertible Securities
upon exercise of any options issued to officers, directors or employees of
the Company pursuant to a stock option plan or an employment, severance or
consulting agreement as now or hereafter in effect, in each case approved
by the Board of Directors (provided that the aggregate number of shares of
Common Stock which may be issuable, including options issued prior to the
date hereof, under all such employee plans and agreements shall at no time
exceed the number of such shares of Common Stock that are issuable under
currently effective employee plans and agreements); (B) Common Stock upon
exercise of the Warrants or any other Warrant issued pursuant to the terms
of the Agreement or otherwise issued to the Holder; (C) Common Stock upon
exercise of any stock purchase Warrant or option (other than the options
referred to in clause "(A)" above) or other convertible security
outstanding on the date hereof; (D) Common Stock upon conversion of the
Note; or (E) Common Stock issued as consideration in acquisitions. In
addition, for purposes of calculating any adjustment of the Exercise Price
as provided in this Section 3.2, all of the shares of Common Stock issuable
pursuant to any of the foregoing shall be assumed to be Outstanding prior
to the event causing such adjustment to be made.
(b) For purposes of this Section 3.2, the following Sections 3.2(b)(i)
to 3.2(b)(v) inclusive, shall be applicable:
(i) Issuance of Rights or Options. In case at any time after the
date hereof the Company shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities"), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which shares of Common
Stock are issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (A) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of such rights or options, or plus, in the
case of such rights or options that relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise
of such rights or options) shall be less than the Exercise Price in effect
as of the date of granting such rights or options, then the total maximum
number of shares of Common Stock issuable upon the exercise of such rights
or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall be
deemed to be outstanding as of the date of the granting of such rights or
options and to have been issued for such price per share, with the effect
on the Exercise Price specified in Section 3.2(a) hereof. Except as
provided in Section 3.2(b) hereof, no further adjustment of the Exercise
Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(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,
-5-
additional consideration or conversion rate, as the case may be, at
the time initially granted, issued or sold. On the expiration of any such
option or right referred to in Section 3.2(b), or on the termination of any
such right to convert or exchange any such Convertible Securities referred
to in Section 3.2(b), the Exercise Price then in effect hereunder shall
forthwith be readjusted (increased or decreased, as the case may be) to the
Exercise Price that would have been in effect at the time of such
expiration or termination had such right, option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or
termination, never been granted, issued or sold, and the Common Stock
issuable thereunder shall no longer be deemed to be Outstanding. If the
purchase price provided for in Section 3.2(b) or the rate at which any
Convertible Securities referred to in Section 3.2(b) reduced at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the
exercise of any such right or option or upon conversion or exchange of any
such Convertible Securities, the Exercise Price then in effect hereunder
shall, if not already adjusted, forthwith be adjusted to such amount as
would have obtained had such right, option or Convertible Securities never
been issued as to such Common Stock and had adjustments been made upon the
issuance of the Common Stock delivered as aforesaid, but only if as a
result of such adjustment the Exercise Price then in effect hereunder is
thereby reduced.
(iii) Consideration for Stock. In case at any time Common Stock
or Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for cash,
the consideration therefor shall be deemed to be the amount received by the
Company therefor. In case at any time any Common Stock, Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for consideration other than
cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. In case at any time any Common Stock, Convertible Securities or
any rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of
consideration received therefor shall be deemed to be the fair value, as
determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be attributable to
such Common Stock, Convertible Securities, rights or options as the case
may be. In case at any time any rights or options to purchase any shares of
Common Stock or Convertible Securities shall be issued in connection with
the issuance and sale of other securities of the Company, together
consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options
shall be deemed to have been issued with consideration.
(iv) Record Date. In the case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock or
Convertible Securities, or (ii) to subscribe for or purchase Common Stock
or Convertible Securities, then such record date shall be deemed to be the
date of the issuance or sale of the Common Stock or Convertible Securities
deemed to have been issued or sold as a result of the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(v) Treasury Shares. The number of shares of Common Stock
Outstanding at any given time shall not include shares owned directly by
the Company in treasury, and the disposition of any such shares shall be
considered an issuance or sale of Common Stock for the purpose of this
Section 3.2.
Section 3.3 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 3.4 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
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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 3.5 Reorganizations and Asset Sales. If any capital reorganization
or reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another person shall be effected in such a way that a holder of Common Stock of
the Company shall be entitled to receive capital stock, securities or assets
with respect to or in exchange for their shares, then the following provisions
shall apply:
(a) As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in this Section 3.5), lawful and adequate
provisions shall be made whereby the holder of Warrants shall thereafter have
the right to purchase and receive upon the terms and conditions specified in
this Warrant and in lieu of the Warrant Shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares of
capital stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of Outstanding shares of such Common Stock equal to
the number of Warrant Shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision reasonably
satisfactory to such holder shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the exercise of Warrants.
(b) In the event of a merger, share exchange or consolidation of the
Company with or into another person as a result of which a number of shares of
Common Stock or its equivalent of the successor person greater or lesser than
the number of shares of Common Stock Outstanding immediately prior to such
merger, share exchange or consolidation are issuable to holders of Common Stock,
then the Exercise Price in effect immediately prior to such merger, share
exchange or consolidation shall be adjusted in the same manner as though there
were a subdivision or combination of the Outstanding shares of Common Stock.
(c) The Company shall not effect any such consolidation, merger, share
exchange, sale, transfer or other disposition unless prior to or simultaneously
with the consummation thereof the successor person (if other than the Company)
resulting from such consolidation, share exchange or merger or the person
purchasing or otherwise acquiring such assets shall have assumed by written
instrument executed and mailed or delivered to the Holder hereof at the last
address of such holder appearing on the books of the Company the obligation to
deliver to such holder such shares of capital stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the Holder hereof, such successor person will issue a
new Warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section 3.5.
(d) If a purchase, tender or exchange offer is made to and accepted by
the holders of 50% or more of the Outstanding shares of Common Stock, the
Company shall not effect any consolidation, merger, share exchange or sale,
transfer or other disposition of all or substantially all of the Company's
assets with the person having made such offer or with any affiliate of such
person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the Holder hereof shall have been
given a reasonable opportunity to 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 3.6 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
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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 3.7 De Minimis Adjustments. No adjustment in the number of shares
of Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments which by reason of this Section 3.7 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
Section 3.8 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 3.9 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 10 days' (but not more than 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 10 days' (but not more than 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.
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Section 3.10 Company to Prevent Dilution. If any event or condition occurs
as to which other provisions of this Article III are not strictly applicable or
if strictly applicable would not fairly protect the exercise or purchase rights
of the Warrants evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the Holder hereof under any provisions of this
Warrant, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Exercise Price and the number of Warrant Shares
purchasable hereunder so as to preserve the rights of the Holder hereunder. In
no event shall any such adjustment have the effect of increasing the Exercise
Price as otherwise determined pursuant to this Article III except in the event
of a combination of shares of the type contemplated in Section 3.4 hereof, and
then in no event to an amount greater than the Exercise Price as adjusted
pursuant to Section 3.4 hereof.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Entire Agreement. This Warrant, together with the Agreement,
contain the entire agreement between the Holder hereof and the Company with
respect to the Warrant Shares purchasable upon exercise hereof and the related
transactions and supersedes all prior arrangements or understandings with
respect thereto.
Section 4.2 Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 4.3 Waiver and Amendment. Any term or provision of this Warrant may
be waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the Holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant shall be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
Section 4.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
Section 4.5 Copy of Warrant. A copy of this Warrant shall be filed among
the records of the Company.
Section 4.6 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 COMMUNICATION SYSTEMS LIMITED
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman and CEO
with a copy to: ▇▇▇▇▇▇ ▇. Sudan, Jr.,
▇▇▇▇ & SUDAN, L.L.P.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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Secured Party: THE COASTAL CORPORATION SECOND PENSION TRUST
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attn: Corporate Secretary
with a copy to: THE COASTAL CORPORATION
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attn: Director, Financial Administration
For wire transfers of funds to Lender under all Transaction Documents:
Texas Commerce Bank
Houston, Texas
ABA #▇▇▇▇▇▇▇▇▇
Trust Wires Clearing Account
DDA #00101606276
Cusip #
Description: Dividend Income
Intelect Communication
OBI# Attn: Trust Receipts
FFC: 5502001-1867300
The Coastal Corporation Second Trust
Attn: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Section 4.7 Limitation of Liability; Not Stockholders. No provision of this
Warrant shall be construed as conferring upon the Holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Section 4.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in such
form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the
Company will make and deliver a new Warrant of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 4.8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or in lieu of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company. This Warrant shall be
promptly canceled by the Company upon the surrender hereof in connection with
any exchange or replacement. The Company shall pay all taxes (other than
securities transfer taxes or income taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to this Section 4.8.
Section 4.9 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 4.10 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.
-10-
IN WITNESS WHEREOF, the Company has caused this Warrant to be issued as of
the date above.
INTELECT COMMUNICATIONS SYSTEMS LIMITED
By: ___________________________________
Name: _________________________________
Title: ________________________________
-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 _____________________________________ and (b), if such shares shall
not include all of the shares issuable as provided in such Warrant, that a new
Warrant of like tenor and date for the balance of the shares issuable thereunder
be delivered to the undersigned.
__________________________________
Date:________________________
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: _______________________
