AGREEMENT OF PURCHASE AND SALE
This Agreement of Purchase and Sale (the "Agreement"), is made and entered
into as of February ___, 1998, by and between INTELECT COMMUNICATIONS, INC., a
Delaware corporation (the "Seller"), and ST. JAMES CAPITAL PARTNERS, L.P., a
Delaware limited partnership (the "Purchaser"), and sets forth the terms and
conditions of the sale and purchase of a $15,000,000 Promissory Note,
substantially in the form attached hereto as EXHIBIT "A"(the "Note").
WHEREAS, the Seller desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase and accept from the Seller, the Note in the form
of EXHIBIT "A", on the terms and subject to the conditions set forth herein, the
obligations of which of the Seller are secured by the Seller Pledge Agreement
dated as of the date hereof and attached as EXHIBIT "D" (the "Pledge
Agreement").
WHEREAS, the Seller and the Purchaser desire to make certain
representations, warranties and agreements in connection with the purchase and
sale of the Note contemplated hereby.
WHEREAS, the Seller desires to sell to the Purchaser warrants (the
"Warrants"), to purchase shares of Seller's common stock, par value $.01 per
share (the "Common Stock"), which Warrants shall have the terms and be subject
to the conditions set forth in the Form of Warrants attached hereto as EXHIBIT
"B"(the "Warrants").
WHEREAS, the Seller desires to grant to the Purchaser certain registration
rights in respect to the shares of Seller's Common Stock that may be acquired on
the exercise of the Warrants, which registration rights shall have the terms and
be subject to the conditions set forth in the Registration Rights Agreement
attached hereto as EXHIBIT "C"(the "Registration Rights Agreement"; this
Agreement, the Note, the Pledge Agreement, the Warrants and the Registration
Rights Agreement are collectively referred to as the "Transaction Documents").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE OF THE NOTE. Subject to the terms of this Agreement,
the Seller agrees to and does hereby issue, sell and deliver the Note to the
Purchaser at the Closing (as defined herein), and Purchaser agrees to and does
hereby purchase and accept the Note from the Seller.
1.2 CONSIDERATION FOR PURCHASE OF THE NOTE. Subject to the terms of this
Agreement, the Purchaser hereby agrees to pay to the Seller at Closing, by check
or wire transfer to the account of the Seller, $3,000,000 (the "Initial
Advance"), and agrees to make further advances of up to $12,000,000 pursuant to
the terms hereof, all as the consideration for the purchase of the Note (the
"Note Consideration").
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1.3 PURCHASE AND SALE OF THE WARRANTS; ADDITIONAL WARRANTS.
(a) Subject to the terms of this Agreement, the Seller agrees to and
does hereby issue, sell and deliver the Warrants to the Purchaser at the
Closing (as defined herein), and Purchaser agrees to and does hereby
purchase and accept the Warrants from the Seller. The Seller further
agrees to issue additional warrants, substantially in the form of EXHIBIT
"B" hereto to the Purchaser in connection with subsequent advances
hereunder up to an aggregate amount of $10,000,000 for a number of shares
equal to 15,000 shares for each additional $100,000 advanced by Purchaser
hereunder after the Initial Advance.
(b) The Seller further agrees to issue additional Warrants,
substantially in the form of EXHIBIT "B" hereto (subject to subsection (d)
of this Section 1.3), to the Purchaser in connection with advances
hereunder after an aggregate amount of $10,000,000 has been advanced, for
a number of shares equal to 15,000 shares for each additional $100,000
advanced by Purchaser hereunder after the Initial Advance.
(c) In the event the Seller elects to extend the maturity date of
the Note, the Seller will issue additional Warrants, substantially in the
form of EXHIBIT "B" hereto (subject to subsection (d) of this Section
1.3), to the Purchaser hereunder for a number of shares equal to 5,000
shares for each $100,000 then outstanding under the Note.
(d) The exercise price per share for the Warrants referenced in
Section 1.3(a) shall be $7.50 per share. The exercise price per share for
the Warrants referenced in Sections 1.3(b) and (c) above shall be equal to
$1.50 over the volume weighted average closing price of the Common Stock
for the ten (10) day period prior to date of the pertinent subsequent
advance or date of the Seller's election to extend the maturity date of
the Note, respectively.
1.4 CONSIDERATION FOR PURCHASE OF THE WARRANTS. Subject to the terms of
this Agreement, the Purchaser hereby agrees to pay to the Seller at Closing, by
check or wire transfer to the account of the Seller, $4,500, or $.01 per Warrant
at Closing for the Warrants issued in respect of the Initial Advance, and, upon
the issuance thereof, an amount equal to $.01 per Warrant for the Warrants
referenced in Section 1.3(b) hereof, as the consideration for the purchase of
the Warrants (the "Warrants Consideration"; the Note Consideration and the
Warrants Consideration are collectively referred to as the "Consideration"). The
Seller acknowledges that the Seller's Option to extend the Note for an
additional twelve (12) months pursuant to the terms thereof shall constitute the
Warrants Consideration for the Warrants referenced in Section 1.3(c) hereof.
1.5 FUTURE ADVANCES. The Purchaser shall make additional advances of the
Note Consideration and Warrant Consideration on the following terms and
conditions:
(a) The Seller shall provide to the Purchaser the following items
prior to any such advance:
(i) a written request for such advance at the address for the
Purchaser in Section 7.2 hereof, setting forth (1) the amount
requested, (2) the account to which such advance is to be
funded, (3) the date for which such advance is requested and
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(4) the proposed use of the proceeds of such advance as set
forth in this Agreement or other Transaction Document;
(ii) a certificate of an officer of Seller certifying that, as
of the date the advance is requested, no Default hereunder has
occurred, that Seller is in compliance with all covenants
herein and that all of the representations and warranties set
forth herein are true and correct as of such date;
(iii) per subsection 1.3(b) above, a Warrant in favor of
Purchaser, executed by Seller, for a number of shares of
Common Stock equal to 15,000 shares for each $100,000 advanced
by Purchaser;
(iv) such security documents or instruments respecting the
Pledged Securities as may be reasonably requested by Purchaser
and consistent with Purchaser's rights under the Pari Passu
Agreement executed of even date herewith by and among
Purchaser, Coastal and St. James Capital Corp.;
(v) such other documents, certificates, agreements or
instruments as may be reasonably requested by Purchaser in
connection with any or all of the foregoing;
(vi) payment by Seller of an origination fee equal to fifteen
hundredths of one percent (0.15%) of the principal amount of
such Advance which origination fee shall be deducted from the
amount of such Advance; and
(vii) payment by Seller of any and all expenses or other
amount due and owing to Purchaser.
(b) In addition, the Seller shall provide evidence to the Purchaser
of the repayment or payment of Seller's indebtedness that is PARI PASSU to
the indebtedness under the Note in connection with subsequent advances, as
may be required by Purchaser hereunder.
(c) For subsequent advances aggregating up to a principal amount of
$10,000,000, it shall be a further condition precedent to such advance
that the Purchaser shall be reasonably satisfied in its sole discretion
that (i) no Default has occurred and is continuing, and (ii) no Material
Effect has occurred.
(d) For subsequent advances in excess of an aggregate of $10,000,000
and aggregating up to a principal amount of $15,000,000, it shall be a
further condition precedent to such advance that the Purchaser shall be
reasonably satisfied in its sole discretion that (i) no Default has
occurred and is continuing, (ii) no Material Effect has occurred, and
(iii) Seller has provided Purchaser with reasonable access since the
Initial Advance to the financial and business records of the Seller and
that Purchaser is reasonably satisfied with the results of such due
diligence review.
(e) In no event shall the Purchaser be required to make any advances
hereunder after July 31, 1998.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of the Seller, as to itself and its Subsidiaries, hereby warrants and
represents to the Purchaser that:
2.1 ORGANIZATION, STANDING AND QUALIFICATION. Each of the Seller and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. Each of the Seller
and its Subsidiaries is licensed and qualified to do business as a foreign
corporation in each jurisdiction in which the character of Seller's or any
Subsidiary's properties, owned or leased, or the nature of its activities makes
such qualification or license necessary, except where failure to be so licensed
and qualified would not have a material adverse effect on the business or
financial condition of the Seller and its Subsidiaries taken as a whole.
2.2 AUTHORITY; NO DEFAULTS. The Seller has all requisite corporate power
and authority to enter into the Transaction Documents to which it is a party and
to consummate the transactions contemplated thereby. The execution and delivery
of the Transaction Documents to which the Seller is a party and the consummation
of the transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Seller. Each of the Transaction
Documents to which the Seller is a party has been duly executed and delivered by
the Seller and constitutes the valid and binding obligation of the Seller,
enforceable in accordance with its terms, except as enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws relating to creditors' rights generally and by
general principles of equity which may limit the right to obtain equitable
remedies (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Except for those transaction documents
evidencing loans from Coastal and St. James Capital Corp. the execution and
delivery by the Seller of the Transaction Documents to which the Seller is a
party do not, and the consummation of the transactions contemplated hereby and
thereby will not, conflict with or result in a breach of or the acceleration of
any obligation under, or constitute a default or event of default (or event
which, with notice or lapse of time or both, would constitute a default) under,
any provision of any charter, bylaw, indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, decree, ordinance or
regulation, or any restriction to which any property of the Seller or any of its
Subsidiaries is subject or by which the Seller or any of its Subsidiaries is
bound, and which would have a Material Effect on the Seller or its Subsidiaries.
Neither the Seller nor any of its Subsidiaries is in material violation or
default of any applicable law, statute, order, rule or regulation promulgated or
judgment entered by any court, administrative agency or commission or other
governmental agency or instrumentality, domestic or foreign (a "Governmental
Entity"), relating to or affecting the operation, conduct or ownership of the
property or business of the Seller or any of its Subsidiaries which would have a
Material Effect on the Seller and its Subsidiaries.
2.3 APPROVALS. (a) There is no legal impediment to (x) the valid
execution, delivery and performance by the Seller of this Agreement or any other
Transaction Document to which the Seller is a party or (y) the valid offer,
issue, sale and delivery of the Note or the Warrants pursuant to this Agreement.
No consent, approval or authorization of, or declaration or filing or
registration with, any Governmental Entity (including, without limitation, the
SEC or the Texas State Securities Board), stockholders or any other third party
is necessary or required for (x) the valid execution, delivery, or performance
by the Seller
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of this Agreement or any other Transaction Document to which the Seller is a
party or (y) the valid offer, issue, sale and delivery of the Note and the
Warrants pursuant to this Agreement.
2.4 SEC DOCUMENTS. The Seller has made all filings with the SEC that it
has been required to make under the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") since December 31, 1996. The Seller has provided to the
Purchaser a true, complete and correct copy of Seller's annual report on Form
10-K for the fiscal year ended December 31, 1996, together with all amendments
thereto, and any and all filings with the SEC made by Seller (including all
requested exhibits to such filings) since the filing of said Form 10-K (all such
documents that have been filed with the SEC, as amended, are referred to as the
"Seller SEC Documents"). As of their respective dates, and except as amended,
the Seller SEC Documents complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and none of the
Seller SEC Documents contained any untrue statement of an material fact or
omitted to state a material fact required to be stated herein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Seller and
its Subsidiaries included in the Seller SEC Documents comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q) and fairly present (subject, in
the case of the unaudited statements, to normal recurring audit adjustments) the
consolidated financial position of the Seller and its Subsidiaries as of the
dates thereof and the consolidated results of its operations and cash flows for
the periods then ended. Except as set forth in the Seller SEC Documents, since
December 31, 1996, (i) there have been no material adverse changes in the
business, operations or financial condition of each of the Seller and each of
its Subsidiaries and (ii) the operations of each of the Seller and each of its
Subsidiaries have been conducted in the ordinary course of business except as
previously disclosed in writing to the Purchaser.
2.5 LITIGATION. Except as set forth in the Seller SEC Documents, as of the
date of this Agreement, there is no suit, action, proceeding or investigation
pending or, to the best knowledge of the Seller, threatened against or affecting
the Seller or any of its Subsidiaries (or any of their respective officers or
directors in connection with the business of the Seller or any of such
Subsidiaries), nor any outstanding judgment, order, writ, injunction or decree
against the Seller or any of its Subsidiaries, which would have a material
adverse effect on the Seller and its Subsidiaries taken as a whole. Neither the
Seller nor any Subsidiary is subject to any court order, writ, injunction,
decree, settlement agreement or judgment that contains or orders any on-going
obligations, whether prohibitory or mandatory in nature, the performance of
which would have a material adverse effect on the Seller and its Subsidiaries
taken as a whole.
2.6 CAPITALIZATION. The Seller has authorized capital stock of 50,000,000
shares of Common Stock of which there are 23,997,524 shares issued and
outstanding as of February 9, 1998. All of the issued and outstanding shares of
Common Stock were duly and validly issued and are fully paid and non-assessable.
None of the outstanding shares of Common Stock have been issued in violation of
any preemptive rights of the current or past shareholders of the Seller. Except
as set forth on SCHEDULE 2.7, and except for shares that may be issued in
connection with completed or pending acquisitions and financings, there are no
outstanding options, warrants or rights to subscribe for, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of the Seller or contracts,
commitments, understandings or arrangements by which the Seller is or may be
obligated to issue additional shares of its capital stock or options, warrants,
or rights to
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purchase or acquire any additional shares of its capital stock. All of the
Common Stock issued on the exercise of the Warrants will be fully paid,
non-assessable and free and clear of any preemptive rights and Encumbrances. As
used in this Agreement, the term "Encumbrance" means and includes (i) any
security interest, mortgage, deed of trust, lien, charge, pledge, proxy, adverse
claim, equity, power of attorney, or restriction of any kind, including but not
limited to, any restriction or servitude on the use, transfer, receipt of
income, or other exercise of any attributes of ownership, and (ii) any notice of
pledge registered with any financial intermediary or broker, any Uniform
Commercial Code financing statement or other public filing, notice or record
that by its terms purports to evidence or notify interested parties of any of
the matters referred to in clause (i) that has not been terminated or released
by another proper filing, notice or record.
2.7 SUBSIDIARIES. SCHEDULE 2.7 sets forth a true, complete and correct
list of each Subsidiary of the Seller, including state or country of
organization. Each Subsidiary of the Seller is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite corporate power and authority to own, to lease
or to operate its properties and to carry on its business as it is now being
conducted and is duly qualified or licensed to do business in each jurisdiction
in which the character of its properties, owned or leased, or the nature of its
activities makes such qualification or license necessary, unless the failure to
be so licensed or qualified would not have a Material Effect on such Subsidiary
or the Seller and its Subsidiaries taken as a whole. Except as set forth in
SCHEDULE 2.7, all outstanding shares of capital stock of each Subsidiary of the
Seller were duly and validly issued and are fully paid, nonassessable and owned
by the Seller or a Subsidiary of the Seller, free and clear of all Encumbrances.
There are no options, warrants or other rights, agreements or commitments
(including preemptive rights) obligating the Seller or any of its Subsidiaries
to issue, to sell or to transfer any shares of capital stock or other securities
of any Subsidiary of the Seller.
2.8 LIABILITIES. Except as set forth in SCHEDULE 2.8, the Seller has no
knowledge of any liability that it reasonably believes would result in a
Material Effect on the value or business of Seller or any Subsidiary, other than
those (a) reflected or reserved against in the unaudited consolidated balance
sheet of the Seller and its consolidated Subsidiaries at December 31, 1997, or
disclosed in other Seller SEC Documents or (b) incurred in the ordinary course
of business since December 31, 1997.
2.9 LICENSES, PERMITS, AUTHORIZATIONS, ETC. The Seller and each of the
Subsidiaries holds all approvals, authorizations, consents, licenses, orders,
franchises, rights, registrations and permits of any type required to operate
its business as presently conducted, the failure of which to hold would have a
Material Effect on the Seller or its Subsidiaries. The execution, delivery and
performance by the Seller of this Agreement and the other Transaction Documents
will not result in any revocation, cancellation, suspension or modification of
any such approval, authorization, consent, license, order, franchise, right,
registration or permit.
2.10 TITLE TO ASSETS; ENCUMBRANCES.
2.10.1 Each of the Seller and its Subsidiaries has good and
indefeasible title to its assets, whether real, personal or intangible,
free and clear of all Encumbrances except (i) as reflected in the Seller
SEC Documents, (ii) liens for current taxes and assessments not yet due or
being contested in good faith by appropriate proceedings, (iii) mechanic's
liens arising under the operation of law for actions contested in good
faith or for which payment arrangements have been made, (iv) liens granted
or incurred by such Person in the ordinary course of its business or
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financing of equipment, office space, furniture and computers in the
ordinary course of its business, (v) easements, rights of way,
encroachments or other reductions or matters affecting title which do not
prevent the assets from being used for the purpose for which they are
currently being used and (vi) encumbrances on the Pledged Shares set forth
on SCHEDULE 2.6;
2.10.2 There are no parties in possession of any of the assets of
the Seller or its Subsidiaries other than (i) personal property held by
third parties in the reasonable and ordinary course of business and (ii)
the possession of the Pledged Shares by Coastal pursuant to the terms of
the Pari Passu Agreement between Coastal and SJ Corp., replaced on the
date hereof by that Pari Passu Agreement referenced in Paragraph 4.3.10
hereof. Each of the Seller and its Subsidiaries enjoys full, free and
exclusive use and quiet enjoyment of its assets and its rights pertaining
thereto. Each of the Seller and its Subsidiaries enjoys peaceful and
undisturbed possession under all leases under which it is a lessee, and
all such leases are legal, valid and binding obligations of such Person,
enforceable against such Person in accordance with its terms.
2.11 TAXES AND RETURNS. Seller has filed, and has caused each of its
Subsidiaries to file, all required tax returns and reports, except for where the
failure to file or pay would not have a Material Effect on Seller or its
Subsidiaries. Seller has paid, and has caused its Subsidiaries to pay, all
taxes, assessments and governmental charges and penalties which it or such
Subsidiary has incurred, except such as are being or may be contested in good
faith by appropriate proceedings except for where the failure to file or pay
would not have a Material Effect on Seller or its Subsidiaries. Neither the
Seller nor any Subsidiary is delinquent in the payment of any tax, assessment or
governmental charge. No deficiencies for any taxes have been proposed, asserted,
or assessed against either the Seller or any Subsidiary, and no requests for
waivers of the time to assess any such tax are pending. For the purposes of this
Agreement, the term "tax" (including, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts.
2.12 INSURANCE. Each policy of property, fire and casualty, product
liability, worker's compensation, professional liability and title insurance and
other forms of insurance (except group, health and life policies) and each bond
issued or posted by any person with respect to any operations or other
activities of either the Seller or any Subsidiary of the Seller is and, to
Seller's knowledge the legal, valid and binding obligation of the insurer or
bond issuer, enforceable in accordance with its terms.
2.13 HAZARDOUS WASTES AND SUBSTANCES. Except as set forth in the Seller
SEC Documents, to the best of Seller's knowledge neither the operations of
either the Seller or of any Subsidiary of the Seller, nor the use of such
Person's assets violates any applicable federal, state or local law, statute,
ordinance, rule, regulation, memorandum of understanding, order or notice
requirement pertaining to the collection, transportation, storage, treatment,
discharge, release or disposal of hazardous or non-hazardous waste or
substances, including without limitation (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. ss.ss. 9601 ET
SEQ.), as amended from time to time on or before the Closing Date ("CERCLA")
(including, without limitation, as amended pursuant to the Superfund Amendments
and Reauthorization Act of 1986), and such regulations promulgated under CERCLA
on or before the Closing Date, (ii) the Resources Conservation and Recovery Act
of 1976 (42 U.S.C. ss.ss. 6901 ET SEQ.), as amended from time to time ("RCRA")
on or before the Closing Date, and such regulations promulgated under RCRA,
(iii) any applicable federal, state or local laws or regulations relating to the
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environment in effect on the Closing Date (collectively, the "Applicable
Environmental Laws"), which violation would have a Material Effect on the Seller
or its Subsidiaries. Except as set forth in the Seller SEC Documents or
otherwise disclosed in the Seller's Form 10-K for the periods ending 1992
through 1996 to the best of the Seller's knowledge, none of the operations of
the Seller or any Subsidiary has ever been conducted nor have any of such
Person's assets been used in such a manner as to constitute a violation of any
of the Applicable Environmental Laws, which violation would have a Material
Effect on the Seller or its Subsidiaries. Except as set forth in the Seller SEC
Documents, to the best of Seller's Knowledge, no notice has been served on the
Seller or any Subsidiary by any person or Governmental Entity regarding any
existing, pending or threatened investigation or inquiry related to violations
under any Applicable Environmental Law, which violation or claims could have a
Material Effect on the Seller or its Subsidiaries, or regarding any claims for
corrective action, remedial obligations or contribution for removal costs or
damages under any Applicable Environmental Law or regarding the designation of
the Seller or any of its Subsidiaries as a potentially responsible party for any
facility under the Applicable Environmental Laws which violations or claims
could have a Material Effect on the Seller or its Subsidiaries, nor, does any
fact or circumstance exist which, if disclosed publicly, would be reasonably
likely to result in the service on either the Seller or any Subsidiary of any
such notice. Except as set forth on the Seller SEC Documents, to the best of
Seller's knowledge there has been no action taken, or omitted to be taken by the
Seller or its Subsidiaries which has caused, or would be reasonably likely to
cause, a "release" of any "hazardous substance" at any "facility", without
limitation, within the meaning of such terms as defined in the Applicable
Environmental Laws.
2.14 USE OF PROCEEDS. The Seller shall use the consideration for purposes
of retiring certain short term debt and for the Seller's working capital needs
in connection with Seller's expansion of production, all as consented to by
Purchaser, which consent shall not be unreasonably withheld or delayed; provided
however, that Seller shall use advances after the Initial Advance for purposes
of repaying or prepaying indebtedness that is PARI PASSU to the indebtedness
under the Note (to the extent that such indebtedness has not already been repaid
or refinanced at the time of such advance) such that at any time, the
outstanding principal amount under the Note, when aggregated with such PARI
PASSU indebtedness, does not exceed $15,000,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Seller, as follows:
3.1 INVESTMENT INTENT. The Note and the Warrants are being acquired for
Purchaser's own account and not with a view to public distribution and Purchaser
acknowledges that the purchase and sale of the Note and the Warrants is intended
to be exempt from registration under the Securities Act by virtue of Section
4(2) of the Securities Act.
3.2 ACCREDITED INVESTOR. The Purchaser is an accredited investor within
the meaning of Rule 501 under the Securities Act.
3.3 RESTRICTED SECURITIES. The Purchaser acknowledges that the Note and
the Warrants have not been registered under the Act and therefore cannot be sold
or transferred unless either they are subsequently registered under the Act (as
well as under any applicable state securities laws) or an
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exemption from such registration is available. The Note and the Warrants will be
"restricted securities" under Rule 144 promulgated under the Act, and unless and
until registered under the Act, the Note and the Warrants may be subject to
limitations on resale set forth in Rule 144 or in administrative interpretations
of the Securities Act by the SEC or in other rules and regulations in effect at
the time of the proposed sale or other disposition of the Note or the Warrants.
ARTICLE IV
THE CLOSING
4.1 TIME AND PLACE. The closing of the purchase and sale of the Note and
the Warrants (the "Closing") will take place on a date agreed to by the parties
(the "Closing Date"), at the offices of Gardere Wynne Sewell & Riggs, L.L.P.,
unless another time and place are agreed to by the parties.
4.2 CONDITIONS TO THE OBLIGATION OF THE SELLER. The obligation of the
Seller to effect the Closing is subject to the Purchaser delivering, or causing
to be delivered, to the Seller at the Closing the Consideration.
4.3 CONDITIONS TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser
to effect the Closing is subject to the delivery by the Seller to Purchaser at
the Closing the following:
4.3.1 copies, certified by the Secretary of State of the State of
Delaware, of the Certificate of Incorporation of the Seller and all
amendments thereto;
4.3.2 copies, certified by the Secretary of the Seller as of the
Closing Date, of the bylaws of the Seller and all amendments thereto;
4.3.3 copies, certified by a certificate of the Secretary of the
Seller as of the Closing Date, of resolutions duly adopted by the board of
directors of the Seller, authorizing the execution and delivery by the
Seller of the Transaction Documents to which the Seller is a party and all
other agreements or other documents contemplated thereby, the completion
of the sale of the Note and the taking of all such other corporate action
as shall have been required as a condition to, or in connection with, the
sale of the Note and the Warrants;
4.3.4 the Note;
4.3.5 the Warrants;
4.3.6 the Pledge Agreement;
4.3.7 the Registration Rights Agreement;
4.3.8 an opinion of Ryan & Sudan, L.L.P. in substantially the form
attached hereto as EXHIBIT "F";
4.3.9 an origination fee equal to $4,500, permitted by Seller as an
offset against funds advanced by Purchaser; and
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4.3.10 the In Pari Passu Agreement among the Purchaser, SJ Corp. and
Coastal dated as of the date hereof.
ARTICLE V
COVENANTS
The Seller covenants and agrees with the Purchaser, so long as the Note is
outstanding or any fee, expense, compensation or any other amount payable by the
Seller shall remain unpaid or outstanding, as follows:
5.1 DEBT. The Seller shall not, nor shall the Seller permit any of its
Subsidiaries to, create, incur, assume or otherwise become or remain liable with
respect to, any Debt, except for:
5.1.1 Permitted Debt; and
5.1.2 Debt outstanding on the date hereof and described in filings
made with the Securities and Exchange Commission.
5.2 RESTRICTIONS ON DISTRIBUTIONS. The Seller shall not, nor shall the
Seller permit any of its Subsidiaries to, declare, make or pay any Distribution,
except that (i) any Subsidiary of Seller may make Distributions to the Seller,
(ii) Seller may make Distributions to holders of the Seller's preferred stock,
and (iii) Seller may make Distributions pursuant to a shareholder rights plan
duly adopted by Seller's Board of Directors and disclosed in Seller's filings
with the SEC.
5.3 NEGATIVE PLEDGE. The Seller shall not, nor shall the Seller permit any
of its Subsidiaries to, create, incur, assume or suffer to exist, any
Encumbrance on any asset of such Person other than Permitted Liens. The Seller
will not enter into or become subject to, nor will it permit any of its
Subsidiaries to enter into or become subject to, any agreement (other than this
Agreement) that prohibits or otherwise restricts the right of the Seller or its
Subsidiaries to create, incur, assume or suffer to exist any Lien in favor of
the Purchaser on any of the Seller's or any of its Subsidiaries' assets.
5.4 CONSOLIDATION, MERGERS AND ACQUISITIONS; FUNDAMENTAL CHANGES. Without
Purchaser's prior written consent, the Seller shall not, nor shall the Seller
permit any of its operating Subsidiaries to, merge or consolidate with or
acquire substantially all of the outstanding capital stock or assets of any
other Person unless the Seller or operating Subsidiary is the surviving
corporation in such transaction or liquidate, wind up or dissolve (or suffer any
liquidation or dissolution), or convey, lease, sell, transfer or otherwise
dispose of, in one transaction or series of transactions, all or any substantial
part of its business, property or assets, whether now or hereafter acquired
provided that nothing herein shall prohibit the sale or transfer of fixed assets
from a Subsidiary to the Seller or to another Subsidiary, provided that the
shares of such transferee Subsidiary are pledged to the Purchaser pursuant to
the Pledge Agreement. The Seller shall not, nor shall the Seller permit any of
its operating Subsidiaries to, purchase, redeem, retire or otherwise acquire for
value any of its capital stock now or hereafter outstanding, except for the
redemption of the Seller's preferred stock.
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5.5 INVESTMENTS. The Seller shall not, nor shall the Seller permit any of
its Subsidiaries to, make, directly or indirectly, any Investments, except:
5.5.1 Investments existing on the date hereof and disclosed on
SCHEDULE 5.5;
5.5.2 Investments consisting of Cash Equivalents;
5.5.3 Accounts receivable from customers in the ordinary course of
business; and
5.5.4 Investments by the Seller in wholly owned Subsidiaries.
5.6 TRANSACTIONS WITH AFFILIATES. The Seller shall not, nor shall the
Seller permit any of its Subsidiaries to, enter into, or be a party to any
transaction with any Affiliate, except for (i) the transactions provided for in
the Transactions Documents, (ii) transactions currently disclosed or disclosed
in the future in accordance with applicable securities laws in the Seller SEC
Documents, (iii) transactions referenced as Permitted Debt, (iv) customary
employment arrangements and benefit programs on reasonable terms, (v) any
agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than an Affiliate, or (vi) an agreement, transaction, commitment or
arrangement which is approved by a majority of the disinterested directors of
Seller.
5.7 SALES OF ASSETS. Except for sales of assets by a Subsidiary to Seller
or to another Subsidiary, the Seller shall not, nor shall the Seller permit any
of its Subsidiaries to, sell, assign, transfer, lease, convey or otherwise
dispose of any of its assets or properties, whether now owned or hereafter
acquired, or any income or profits therefrom, or enter into any agreement to do
so, except:
5.7.1 sales of inventory in the ordinary course of business;
5.7.2 the sale, discount or transfer of delinquent accounts
receivable in the ordinary course of business for purposes of collection;
5.7.3 occasional sales, leases or other dispositions of immaterial
assets for consideration not less than fair market value;
5.7.4 sales, leases or other dispositions of assets that are
obsolete or have negligible fair market value; and
5.7.5 sales of equipment for a fair and adequate consideration (but
if replacement equipment is necessary for the proper operation of the
business of the seller, the seller must promptly replace the sold
equipment).
5.8 SALES AND LEASEBACKS. The Seller shall not, nor shall the Seller
permit any of its Subsidiaries to, become liable, directly or by way of a
guaranty or accommodation obligation, with respect to any lease or any property
(whether real or personal or mixed) whether now owned or hereafter acquired, (i)
which the Seller or such Subsidiary has sold or transferred or is to sell or
transfer to any other Person or (ii) which the Seller or such Subsidiary intends
to use for substantially the same purposes as any other
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property which has been or is to be sold or transferred by the Seller or such
Subsidiary to any other Person in connection with such lease.
5.9 MARGIN REGULATION. The Seller shall not use or permit any other Person
to use any portion of the proceeds of the Note in any manner which might cause
the extension of credit or the application of such proceeds to violate the
Securities Act or the Exchange Act or to violate Regulation G, Regulation U, or
Regulation X, or any other regulation of the Federal Reserve Board.
5.10 AMENDMENT TO ORGANIZATIONAL DOCUMENTS. The Seller will not enter into
or permit any modification or amendment of, or waive any material right or
obligation of, the Purchaser or the rights of holders of Common Stock of the
Seller, under its certificate or articles of incorporation, bylaws or other
charter documents other than such modifications, amendments or waivers which
would not, singly or in the aggregate, result in a Material Effect.
5.11 FISCAL YEAR. The Seller shall not change its fiscal year.
5.12 COMPLIANCE WITH LAWS. The Seller shall, and shall cause each of its
Subsidiaries to, conduct its business and affairs and maintain its Properties in
all material respects in compliance with all applicable laws, rules,
regulations, judgments, orders, and decrees (including, without limitation, all
Applicable Environmental Laws, where non-compliance therewith would have a
Material Effect).
5.13 INSURANCE. The Seller shall, and shall cause each of its Subsidiaries
to, maintain insurance in full force and effect either with Seller's existing
insurance carriers in the current amounts of coverage or replacement insurance
with insurance companies of recognized standing on all of its Properties of an
insurable nature in such manner and amounts and against such casualties and
contingencies as are customarily insured by businesses of established reputation
which own similar assets. The Seller shall, and shall cause each of its
Subsidiaries to, also maintain in full force and effect either with Seller's
existing insurance carriers in the current amounts of coverage or replacement
insurance with insurance companies of recognized standing general liability and
worker's compensation. The Seller shall, and shall cause each of its
Subsidiaries to, at any time and from time to time, furnish evidence of all
insurance required by this SECTION 5.13 to the Purchaser promptly upon the
request of Purchaser.
5.14 PAYMENT AND PERFORMANCE. The Seller will pay all amounts due under
each Transaction Document to which it is a party in accordance with the terms
thereof and will observe, perform and comply with every covenant, term and
condition expressed or implied therein.
5.15 BOOKS, FINANCIAL STATEMENTS AND REPORTS. The Seller will at all times
maintain, and will cause its Subsidiaries to at all times maintain, full and
accurate books of account and records. The Seller will furnish, or cause to be
furnished, the following statements and reports to the Purchaser:
5.15.1 As soon as available, and in any event within ninety (90)
days after the end of each fiscal year, consolidated financial statements
of the Seller and its Subsidiaries together with all notes thereto,
prepared in accordance with GAAP, together with an opinion, based on an
audit using generally accepted auditing standards, by independent
certified public accountants selected by the Seller, stating that such
consolidated financial statements have been so prepared. These financial
statements shall contain a consolidated balance sheet as of the end of
such fiscal year and consolidated statements of earnings, of cash flows,
and of changes in owners' equity for such fiscal
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year, each setting forth in comparative form the corresponding figures for
the preceding fiscal year.
5.15.2 The Seller will maintain its Edgar filing status with the SEC
and will deliver to the Purchaser within 20 days after completing filings
with the SEC, copies of all information, documents, and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules
and regulations prescribe) which the Seller is required to file with the
SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. The Seller will timely comply in all material respects with its
reporting and filing obligations under the applicable federal securities
laws.
5.15.3 The Seller will promptly notify the Purchaser in writing of
the occurrence of (i) any Event of Default and (ii) any event of default
(or if any event of default would result upon any payment with respect to
the Note) with respect to any Debt as such event of default is defined
therein or in the instrument under which it is outstanding, permitting
holders to accelerate the maturity of such Debt.
5.15.4 Promptly upon request, any information which the Purchaser
may from time to time reasonably request concerning any covenant,
provision or condition of the Transaction Documents or any matter in
connection with such Persons' businesses and operations, including without
limitation business plans, environmental compliance matters, budgets,
forecasts and sales reports. The Seller will permit representatives
appointed by the Purchaser to visit during normal business hours and
inspect any of such Person's Property, including its books of account,
other books and records, and any facilities or other business assets, and
to make extra copies therefrom and photocopies and photographs thereof,
and to write down and record any information such representatives obtain,
and the Seller shall permit the Purchaser or its representatives to
investigate and verify the accuracy of the information furnished to the
Purchaser in connection with the Transaction Documents and to discuss all
such matters with its officers, employees and representatives and
Purchaser agrees to keep any and all of such information in strictest
confidence and not to disclose such information to any outside party
except as may be required by law or compelled by judicial order.
5.16 MAINTENANCE OF EXISTENCE, QUALIFICATIONS AND ASSETS. The Seller
shall, and shall cause its Subsidiaries to, (i) maintain its corporate existence
and good standing and its authority to transact business in all states where
necessary; (ii) maintain all licenses, permits and franchises necessary for its
business; and (iii) keep all of its assets that are useful in and necessary to
its business in good working order and condition (ordinary wear and tear
excepted) and make all necessary repairs and replacements.
5.17 PAYMENT OF TRADE DEBT, TAXES, ETC. The Seller will, and will cause
each of its Subsidiaries to, (i) timely file all required tax returns; (ii)
timely pay all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income, profits or Property; (iii) within ninety
(90) days after the same becomes due pay all Debt owed by it on ordinary trade
terms to vendors, suppliers and other Persons providing goods and services used
by it in the ordinary course of its business; (iv) pay and discharge when due
all other Debt now or hereafter owed by it; and (v) maintain appropriate
accruals and reserves for all of the foregoing Debt in accordance with GAAP. The
Seller shall not be required to pay or discharge any such Debt prior to
institution of foreclosure proceedings if the validity thereof shall
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concurrently be contested in good faith by appropriate proceedings and if the
Seller shall have established reserves deemed by the Seller adequate therefor.
5.18 PAYMENT OF EXPENSES. Whether or not the transactions contemplated by
this Agreement are consummated, the Seller will promptly (and in any event,
within thirty (30) calendar days after any invoice or other statement or notice)
pay (i) all reasonable costs and expenses incurred by or on behalf of the
Purchaser (including reasonable attorneys' fees and out-of-pocket expenses) in
connection with the negotiation, preparation, execution, and delivery of the
Transaction Documents (up to a $25,000 maximum aggregate amount), and any and
all consents, waivers or other documents or instruments relating thereto, and
any filing, recording, refiling and re-recording of any Transaction Documents
and any other documents or instruments or further assurances required to be
filed or recorded or refiled or re-recorded by the terms of any Transaction
Document.
5.19 ENVIRONMENTAL MATTERS.
5.19.1 The Seller will comply in all material respects with all
Environmental Laws now or hereafter applicable to the Seller and shall
obtain, at or prior to the time required by applicable Environmental Laws,
all environmental, health and safety permits, licenses and other
authorizations necessary for its operations and will maintain such
authorizations in full force and effect so as to avoid any action or
omission having a Material Effect.
5.19.2 The Seller will promptly furnish to the Agent all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any the Seller, or of
which it has notice, pending or threatened against any the Seller, by any
Governmental Entity with respect to any alleged violation of or
non-compliance with any Applicable Environmental Laws or any permits,
licenses or authorizations in connection with its ownership or use of its
Properties or the operation of its business.
ARTICLE VI
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated:
"AFFILIATE" of a Person means any other individual or entity who directly
or indirectly controls, is controlled by, or is under common control with, that
Person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
"CASH EQUIVALENTS" means, when used in connection with the Seller or any
Subsidiary of such Person's Investments in:
(a) government securities due within 180 days from the date of
acquisition thereof;
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(b) Readily marketable direct obligations of any State of the United
States or any political subdivision of any such State given on the date of
such investment a credit rating of at least A2 by Moody's Investors
Service, Inc. or A by Standard & Poor's Corporation, in each case due
within 180 days from the date of acquisition thereof;
(c) Certificates of deposit issued by, money market deposit accounts
with, eurodollar deposits through, bankers' acceptances of, and repurchase
and reverse repurchase agreements covering government securities executed
by any bank doing business in and incorporated under the laws of the
United States or any state thereof whose deposits are insured through the
FDIC, or any successor thereto, and having (either itself or its holding
company) on the date of such Investment combined capital, surplus and
undivided profits of at least $250,000,000, or any offshore branch of such
bank, in each case maturing within 180 days from the date of acquisition
thereof;
(d) "Money-market mutual funds" investing solely in instruments of
the types described in subparagraphs (a) through (c) above.
"COASTAL" means The Coastal Corporation Second Pension Trust.
"DEBT" means, for any Person, (a) all obligations required by GAAP to be
classified upon a balance sheet as liabilities, (b) liabilities secured by any
Lien existing on property owned or acquired by that Person, (c) obligations that
have been (or under GAAP should be) capitalized for financial reporting
purposes, (d) all guaranties, endorsements and other contingent obligations with
respect to Debt of others, and (e) for all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (a) through (c) above.
"DEFAULT" means an "EVENT OF DEFAULT" as defined in the Note.
"DISTRIBUTION" means, with respect to any shares of any capital stock or
other equity securities or other interests issued by a Person, (a) the
retirement, redemption, purchase or other acquisition for value of those
securities by such Person, (b) the declaration or payment of any dividend on or
with respect to those securities by such Person, (c) any loan or advance by that
Person to, or other investment by that Person in, the holder of any of those
securities, and (d) any other payment by that Person with respect to those
securities.
"GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board.
"INVESTMENT" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of stock, partnership interest or
other equity interest, or of a beneficial interest therein, of any other Person,
and any direct or indirect loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, advances to
employees and similar items made or incurred in the ordinary course of
business), or capital contribution by such Person to any other Person, including
all Debt and accounts owed by that other Person which are not current assets or
did not arise from sales of goods or services to such Person in the ordinary
course of business. The amount of any Investment shall be determined in
conformity with GAAP.
15
"MATERIAL EFFECT" means (a) a material adverse effect on the business,
Properties, operations or condition (financial or otherwise) of the Seller and
its Subsidiaries taken as a whole, (b) material impairment of the ability of the
Seller to perform its obligations under any Transaction Document, or (c) a
material adverse effect on the validity or enforceability of this Agreement, the
Note, the Warrants or any of the other Transaction Documents or a material
impairment of the rights or remedies of the Purchaser hereunder or under any of
the other Transaction Documents.
"OBLIGATIONS" means all obligations, liabilities and indebtedness of every
nature of the Seller or any of its Subsidiaries from time to time owing to the
Purchaser under any Transaction Document to which such Person is a party,
including, without limitation, the due and punctual payment of the principal of
and interest on the Note, when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, including, to the extent
permitted by applicable law, interest that accrues after the commencement of any
proceeding by or against any of the Seller or its Subsidiaries under the
Bankruptcy Code and all other applicable Debtor Relief Laws, and all other
monetary obligations of the Seller or any of its Subsidiaries to the Purchaser
under this Agreement and each of the other Transaction Documents to which such
Person is a party, including any and all fees, costs, expenses and indemnities.
"PERMITTED DEBT" means (a) the Obligations; (b) debt arising from
endorsing negotiable instruments for collection in the ordinary course of
business; (c) purchase money debt incurred to finance equipment in the ordinary
course of business; (d) trade payables that are for goods furnished or services
rendered in the ordinary course of business and that are payable in accordance
with customary trade terms; (e) indebtedness for borrowed money to Coastal of up
to $3,500,000; (f) indebtedness for borrowed money to SJ Corp. of up to
$6,500,000;(g) indebtedness for borrowed money to certain affiliated persons in
the aggregate principal amount of $710,000 and (h) indebtedness representing
Seller's payments in cancellation of redemption rights present in two
outstanding warrants in the aggregate principal amount of $1,750,000.
"PERMITTED LIENS" means (a) Encumbrances now or hereafter securing the
Obligations; (b) pledges or deposits made to secure payment of workers'
compensation, unemployment insurance, or other forms of governmental insurance
or benefits or to participate in any fund in connection with workers'
compensation, unemployment insurance, pensions, or other social security
programs; (c) good-faith pledges or deposits made to secure performance of bids,
tenders, contracts (other than for the repayment of borrowed money), or leases,
or to secure statutory obligations, surety or bonds, or indemnity, performance,
or other similar bonds in the ordinary course of business; (d) liens for taxes
and liens imposed by operation of law (including liens of mechanics,
materialmen, warehousemen, carriers and landlords), if (i) no amounts are due
and payable and no lien has been filed (or agreed to), or (ii) the validity or
amount secured thereof is being contested in good faith by lawful proceedings
diligently conducted, reserves required by GAAP have been made, and levy and
execution thereon have been (and continue to be) stayed or payment thereof is
covered in full (subject to the customary deductible) by insurance; (e) liens
currently in existence; (f) liens covering purchase money debt incurred to
finance equipment or inventory in the ordinary course of business;(g) liens
securing indebtedness for borrowed money to Coastal of up to $3,500,000, and (h)
liens securing indebtedness for borrowed money from SJ Corp. of up to
$6,500,000.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
16
"PLEDGED SHARES" means all shares of capital stock or other evidences of
ownership now or hereafter issued to the Seller by DNA Enterprises, Inc., a
Texas corporation, Intelect Network Technologies Company, a Nevada corporation,
and Intelect Visual Communications Corp., a Delaware corporation, each a wholly
owned Subsidiary of the Seller and the Certificate(s) representing the Pledged
Shares and all dividends, cash, instruments and other property from time-to-time
received, receivable or otherwise distributed in respect of or in exchange of
any Pledged Shares.
"PROPERTY" means any asset, whether real, personal or mixed, or tangible
or intangible, or any interest therein.
"SJ CORP." means St. James Capital Corp., a Delaware corporation.
"SEC" means the U.S. Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act of 1933, as amended.
"SUBSIDIARY" means, with respect to any Person, any entity of which more
than 50% (in number of votes) of the stock (or equivalent interests) is owned of
record or beneficially, directly or indirectly, by such Person, excepting that,
for purposes thereof, "Subsidiary" shall not be taken to include Intelect
Network Systems Limited (U.K.), Intelect Finance Limited (Bermuda), Intelect
Communications Systems Limited (Bermuda), Intelect Defense Technologies, Inc.
(Delaware) or The Customer Premises Equipment Corporation (Delaware).
"UCC" means the Uniform Commercial Code, as adopted in Texas, PROVIDED,
HOWEVER, to the extent the perfection or the effect of perfection (or
non-perfection) of any Encumbrance in any collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than Texas, "UCC" means,
with respect to the provisions relating to perfection or the effect of
perfection (or non-perfection), the Uniform Commercial Code in effect in such
jurisdiction.
ARTICLE VII
GENERAL PROVISIONS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All of the
Seller's various representations, warranties, covenants and agreements in the
Transaction Documents shall survive the execution and delivery of this Agreement
and the other Transaction Documents and the performance hereof and thereof,
including the issuance and delivery of the Note, the Warrants and the other
Transaction Documents, and shall further survive until the Note is paid in full.
7.2 NOTICES. All notices or other communications which are required or may
be given under this Agreement shall be in writing and shall be deemed to have
been duly given when delivered in person, transmitted by telecopier (with
receipt confirmed) or mailed by registered or certified first class mail,
postage prepaid, return receipt requested to the parties hereto at the address
set forth below (as the same may be changed from time to time by notice
similarly given) or the last known business or residence address of such other
person as may be designated by either party hereto in writing.
17
(a) If to the Seller: Intelect Communications, Inc.
1100 Executive Drive
Richardson, Texas 75081
Attn: Herman M. Frietsch
(b) If to Purchaser: St. James Capital Partners, L.P.
1980 Post Oak Boulevard, Suite 2030
Houston, Texas 77056
Attn: John L. Thompson
7.3 MISCELLANEOUS. This Agreement (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
(ii) shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns and is not intended to confer upon any
other person any rights or remedies hereunder, (iii) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Texas and (iv) may be executed in two or more counterparts which
together shall constitute a single agreement.
7.4 PUBLICITY. Each of the Seller and Purchaser promptly shall advise and
cooperate with the other prior to issuing, or permitting any of its directors,
officers, employees or agents to issue, any press release with respect to this
Agreement or the explicit transactions contemplated hereby. Notwithstanding the
foregoing, without the prior consent of the Purchaser, neither the Seller nor
any of its directors, officers, employees or agents shall issue any press
release which includes the name of the Purchaser or any of the Purchaser's
Affiliates.
7.5 SCHEDULES. All statements contained in any exhibit, schedule,
appendix, certificate or other instrument delivered by or on behalf of the
parties hereto, or in connection with the transactions contemplated hereby, are
an integral part of this Agreement and shall be deemed representations and
warranties hereunder.
7.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which constitutes an original execution and, in the
aggregate, constitute a single document.
7.7 ASSIGNMENT.
(a) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by Seller (whether by operation of
law or otherwise) without the prior written consent of the Purchaser.
(b) Purchaser may assign all or any part of its rights and
obligations hereunder, under the Note, the Warrants or any other
Transaction Document, to any other entity that is an Affiliate of either
Purchaser or the general partner of Purchaser, subject to the terms hereof
and upon prior written notice to Seller. Each such assignee (an
"Assignee") shall execute an Assignment and Acceptance substantially in
the form of EXHIBIT E. Upon the execution of such Assignment and
Acceptance by such Assignee, (i) the Assignee shall be a "Purchaser"
hereunder and, to the extent provided in the Assignment and Acceptance,
shall have the rights and obligations of a Purchaser hereunder, and (ii)
the assigning Purchaser (an "Assignor") shall, to the extent provided in
the
18
Assignment and Acceptance and consistent with this subparagraph, be
released from its obligations hereunder.
(c) An Assignor hereunder shall, if requested by the Assignee,
deliver the Note and Warrants in favor of such Assignor to the Seller, and
the Seller shall issue replacement Notes and Warrants in favor of the
Assignor and the Assignee in the amounts and for such shares as are
indicated in the Assignment and Acceptance. The replacement Warrants shall
be issued for an exercise price per share equal to the exercise price set
forth in the Warrants to be delivered to Seller under this Section 7.7(c).
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SELLER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Seller has signed this Agreement as of the date
first written above.
INTELECT COMMUNICATIONS, INC.
By:
Name:
Title:
20
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date
first written above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its General Partner
By:
Name:
Title:
21
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
Dated _______________, 1998
Reference is made to the Agreement for Purchase and Sale dated as of
___________, 1998 (as the same may be amended or modified from time-to-time, the
"Agreement") among INTELECT COMMUNICATIONS, INC., a Delaware corporation
("Borrower") and ST. JAMES CAPITAL PARTNERS, L.P. ("Assignor"). Capitalized
terms not otherwise defined in this Assignment and Acceptance shall have the
meanings assigned to them in the Agreement.
Pursuant to the terms of the Agreement, St. James Capital Partners, L.P.
wishes to assign and delegate ___% of its rights and obligations under the
Agreement. Therefore, St. James Capital Partners,
L.P. ("Assignor") and ________________ ("Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, without recourse to the
Assignor and without representation or warranty except for the representations
and warranties specifically set forth in clauses (i) and (ii) of Section 2, a
___ interest in and to all of the Assignor's rights and obligations under the
Agreement and the Transaction Documents as of the Effective Date (as defined
below), including, without limitation, such percentage interest in the
Assignor's obligation to make Advances, the Advances owing to the Assignor, the
Note held by the Assignor, the Warrants held by the Assignor, the Assignor's
interest in the Collateral, and the Assignor's registration rights in respect of
Common Stock.
2. The Assignor (i) represents and warrants that, prior to executing
this Assignment and Acceptance, its obligation to make further Advances under
the Agreement is $__________, and the aggregate outstanding principal amount of
Advances owed to it by the Borrower is $__________; (ii) represents and warrants
that it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; (iii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties, or representations made in or in connection with
the Agreement or any other Transaction Document or the execution, legality,
validity, enforceability, genuineness, sufficiency, or value of the Agreement or
any other Transaction Document or any other instrument or document furnished
pursuant thereto; (iv) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
Subsidiary or the performance or observance by the Borrower of any of its
obligations under the Agreement or any other Transaction Document or any other
instrument or document furnished pursuant thereto;(v) agrees to deliver the Note
to the Borrower to exchange such Note for a new Note dated _________ __, 19__,
in the principal amount of $___________ payable to the order of the Assignee;
(vi) and agrees to deliver the Warrants issued by Borrower to the Assignor to
exchange such Warrants for replacement Warrants in favor of the Assignee in
respect of ______ shares of Common Stock.
3. The Assignee (i) confirms that it has received a copy of the
Agreement and the other Transaction Documents, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance and (ii) agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of the Agreement or any other Transaction Document are required to be
performed by it as a Purchaser.
4. The effective date for this Assignment and Acceptance shall be
_______________ (the "Effective Date").
5. As of the Effective Date, (i) the Assignee shall be a Purchaser under
the Agreement for all purposes, and, to the extent provided in this Assignment
and Acceptance, have the rights and obligations of a Purchaser thereunder and
(ii) the Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Agreement.
6. From and after the Effective Date, the Borrower shall make all
payments under the Agreement and the Note in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest, and
commitment fees) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Agreement and the Note for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
and enforced in accordance with, the laws of the State of Texas.
The parties hereto have caused this Assignment and Acceptance to be duly
executed as of the date first above written.
ASSIGNOR
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its
General Partner
By:
Name:
Title:
ASSIGNEE
By:
Name:
Title:
ACKNOWLEDGED
THIS ____ DAY OF ____________, 1998.
INTELECT COMMUNICATIONS, INC.
By:
Name:
Title:
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