UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JULY 6, 1999
INTELECT COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-11630 76-0471342
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1100 EXECUTIVE DRIVE, RICHARDSON, TEXAS 75081
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 367-2100
(Former name or former address, if changed since last report.)
ITEM 5. OTHER EVENTS.
As previously disclosed, on April 26, 1999, Intelect Communications, Inc.
(the "Company") announced that it was discontinuing indefinitely conversions of
its outstanding shares of Series C Convertible Preferred Stock (the "Series C
Preferred Stock"), Series D Convertible Preferred Stock (the "Series D Preferred
Stock"), and Series E Convertible Preferred Stock (the "Series E Preferred
Stock") (the Series C Preferred Stock, the Series D Preferred Stock and the
Series E Preferred Stock are collectively referred to herein as the "Preferred
Stock"), for the reasons set forth in the Form 8-K of the Company dated April
26, 1999. The Company has now settled all claims and disputes with the holders
of the Preferred Stock. Pursuant to such settlement agreements, the Company will
issue shares of common stock of the Company (the "Common Stock") upon
conversion, exchange and surrender of all Preferred Stock outstanding as of
April 26, 1999 such that all such Preferred Stock is converted, exchanged and
surrendered at an effective blended price of approximately $1.08 per share of
Common Stock.
As previously disclosed, on June 27, 1999 the Company entered into a
Settlement Agreement and Mutual Release (the "Citadel Settlement Agreement")
with certain holders of Series C, D and E Preferred Stock managed by Citadel
Investment Group, L.L.C. ("Citadel" and collectively with the funds managed by
Citadel, the "Citadel Entities"). Pursuant to the Citadel Settlement Agreement,
the Company is issuing 7,452,628 shares of Common Stock to the Citadel Entities.
Immediately prior to closing of the Citadel Settlement Agreement, the Citadel
Entities' holdings of Preferred Stock represented approximately 69% of all
outstanding Preferred Stock.
On July 6, 1999, the Company entered into a Settlement Agreement and
Mutual Release (the "Promethean Settlement Agreement") with certain holders of
Preferred Stock managed by Promethean Investment Group, L.L.C. ("Promethean" and
collectively with the funds managed by Promethean and their affiliates, the
"Promethean Entities"). On July 8, 1999, the Company entered into a Settlement
Agreement and Mutual Release (the "Angelo Gordon Settlement Agreement") with
certain holders of Preferred Stock managed by Angelo, Gordon & Co., L.P.
("Angelo Gordon" and collectively with the funds managed by Angelo Gordon and
their affiliates, the "Angelo Gordon Entities") (the Promethean Settlement
Agreement and the Angelo Gordon Settlement Agreement are collectively referred
to herein as the "July Settlement Agreements").
As a result of the July Settlement Agreements, all remaining holders of
Preferred Stock will convert, pursuant to the applicable Certificate of
Designations, such number of shares of Preferred Stock as will result in the
issuance of an aggregate total of 5,916,049 shares of Common Stock to the
Promethean Entities and the Angelo Gordon Entities. The remainder of the
Preferred Shares held by the Promethean Entities and the Angelo Gordon Entities
will then be surrendered to the Company and canceled. The July Settlement
Agreements, along with the previously reported Citadel Settlement Agreement,
result in the elimination of all Preferred Stock holdings outstanding
immediately prior to closing of the Settlement Agreements.
The July Settlement Agreements resolve, settle and release, with respect
to the Company, the Promethean Entities and the Angelo Gordon Entities, all
disputes and claims relating to the Preferred Stock or Common Stock which arise
from any events that occurred prior to execution
of the July Settlement Agreements, including all claims and disputes relating to
the Company's April 26, 1999 announcement of an indefinite discontinuance of
conversions. Pursuant to the July Settlement Agreements, the Company will
dismiss with prejudice all of its claims in its lawsuit against the Promethean
Entities and the Angelo Gordon Entities in the United States District Court for
the Southern District of New York. Pursuant to the Promethean Settlement
Agreement, Promethean will dismiss with prejudice all claims in their lawsuit
against the Company in the Delaware Court of Chancery. Pursuant to the Angelo
Gordon Settlement Agreement, Angelo Gordon will dismiss with prejudice all
claims in their lawsuit against the Company in the Delaware Court of Chancery.
The July Settlement Agreements also terminated all rights that the
Promethean Entities and Angelo Gordon Entities may have under the Series C, D
and E Certificates of Designations, Preferences and Rights and Series C, D and E
Securities Purchase Agreements, except as specifically set forth in the terms of
the Settlement Agreement.
Also under the July Settlement Agreements, the Promethean Entities and the
Angelo Gordon Entities each agreed to certain restrictions on their transfer and
sale of Common Stock, including (i) a prohibition on directly or indirectly
engaging in short sales, purchase of puts, sell calls, equity swaps or any other
means or mechanism by which they would benefit from a decrease in the market
price of the Common Stock; (ii) a prohibition on sale or transfer, in any single
day, by the Promethean Entities of an aggregate number of shares of Common Stock
in excess of 7% of the trading volume for the Common Stock (exclusive of
purchases or sales of Common Stock by the Promethean Entities) on such day; and
(iii) a prohibition on sale or transfer, in any single day, by the Angelo Gordon
Entities of an aggregate number of shares of Common Stock in excess of 7% of the
trading volume for the Common Stock (exclusive of purchases or sales of Common
Stock by the Angelo Gordon Entities) on such day.
In the July Settlement Agreements, the Promethean Entities and the Angelo
Gordon Entities granted to the Company an irrevocable proxy to vote the shares
of Common Stock issued in connection with the July Settlement Agreements on all
matters that may come before the stockholders of the Company, so long as such
shares are owned by the Promethean Entities or the Angelo Gordon Entities,
respectively. The Company also has the right to repurchase, within 120 days of
the dates of the respective July Settlement Agreements, the shares issued at the
greater of the current closing sale price for the Common Stock or $1.25 per
share.
In order to comply with federal securities laws and to track compliance
with the terms of the July Settlement Agreements, the July Settlement Agreements
provide that all shares issued to the Promethean Entities and the Angelo Gordon
Entities in connection with the July Settlement Agreements shall be certificated
and bear a restrictive legend, and may be transferred only upon submission by
the respective shareholder of a certificate signed by two officers verifying
compliance with their contractual representations under the July Settlement
Agreements as of the date of such transfer.
Pursuant to the Promethean Settlement Agreement, (i) the Company has
issued 2,290,415 shares of the Company's Common Stock (the "Converted Shares")
to the Promethean Entities
pursuant to conversion notices submitted by the Promethean Entities between
April 26, 1999 and July 6, 1999; (ii) beginning on September 2, 1999 the
Promethean Entities will be entitled to submit conversion notices for a number
of Preferred Shares to be converted into an aggregate of 906,210 shares of
Common Stock; and (iii) immediately after receipt of such Common Stock, the
Promethean Entities will submit all of their remaining Preferred Stock to the
Company to be canceled.
Pursuant to the Angelo Gordon Settlement Agreement, (i) the Company has
issued 2,315,711 shares of the Company's Common Stock (the "Converted Shares")
to the Angelo Gordon Entities pursuant to conversion notices submitted by the
Angelo Gordon Entities between April 26, 1999 and July 8, 1999; (ii) beginning
on September 3, 1999, the Angelo Gordon Entities will be entitled to submit
conversion notices for a number of Preferred Shares to be converted into an
aggregate of 403,713 shares of Common Stock; and (iii) immediately after receipt
of such Common Stock, the Angelo Gordon Entities will submit all of their
remaining Preferred Stock to the Company to be canceled.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business to Be Acquired: N/A
(b) Pro Forma Financial Information of the Business to Be Acquired: N/A
(c) Exhibits:
EXHIBIT DESCRIPTION OF EXHIBIT
10.1 Settlement Agreement and Mutual Release among the
Company and the Promethean Entities, dated July 6, 1999.
10.2 Settlement Agreement and Mutual Release among the
Company and the Angelo Gordon Entities, dated July 8,
1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTELECT COMMUNICATIONS, INC.
(Registrant)
Date: July 8, 1999 By: /s/ HERMAN M. FRIETSCH
(Signature)
Herman M. Frietsch
Chairman of the Board