INTELECT COMMUNICATIONS SYSTEMS LIMITED
INTELECT, INC.
OFFER TO PURCHASE THE FIVE YEAR SIX PERCENT (6%)
SUBORDINATED DEBENTURES OF INTELECT, INC.
FOR AN AGGREGATE OF 170,000 SHARES OF
COMMON STOCK, $.01 PAR VALUE, OF
INTELECT COMMUNICATIONS SYSTEMS LIMITED
AND THE PAYMENT OF CERTAIN AMOUNTS
IN LIEU OF ISSUING FRACTIONAL SHARES
September 6, 1996
TO: The Following Holders of Intelect, Inc. 5 Year Six Percent (6%)
Subordinated Debentures (the "Debenture Holders"):
Thomas R. Moore, Trustee Bharat Kinariwala
Lucille M. Moore, Trustee Rheinhold A. Sundeen, M.D., Inc.
Dole Food Company, Inc. Joe M. Chow and Marian K. Chow
Richard G. Grey Jeannette A. Bullis
National Securities and Investments, Inc. Eleanor Fleming
Franklin Tokioka Jeanne Scott
Philip J. Daunton and Nancy G. Daunton Carolyn Walters
Christopher J. Stevens Willis E. Hoff and Ahila D. Hoff
Dickey Company, Nominee for William H. Barkhurst and Karelyn B. Barkhurst
Richard F. Jobe, M.D., Trustee
Leo Luther Bass William H. Barkhurst
Charles J. Hartman Edwin Ducayet
John J. Jaquette, Trustee Thomas R. Howes
Edmund M. Keating Eric J. Robson
Macario Q. Laygui and Julita A. Laygui Shoeb Javed
Norma Jean Feaster Toni Willems
Kenneth G. Neifert and Ayako Neifert
Ladies and Gentlemen:
Intelect Communications Systems Limited ("ICSL") and Intelect, Inc.
("Intelect"), hereby offer to purchase, on or before 5:00 P.M., October 7, 1996,
all of those certain 5 Year Six Percent (6%) Subordinated Debentures of Intelect
dated June 29, 1995 (the "Debentures") issued pursuant to that certain Option
Agreement (the "Option Agreement") dated March 31, 1995, by and among the
Debenture Holders, ICSL (formerly known as Challenger International, Ltd.), and
Intelect, in
consideration of the issuance by ICSL of an aggregate of 170,000 Common Shares,
$.01 par value, of ICSL (the "Shares"), and the payment to the Debenture Holders
of certain amounts in lieu of issuing fractional shares (with the aggregate of
all such amounts totaling $156.19 (the "Fractional Share Payments")), such
Shares and Fractional Share Payments to be allocated to the Debenture Holders
pro rata in accordance with their percentage ownership of all of the Debentures
issued pursuant to the Option Agreement, all of which shall be subject to the
terms of this Offer (the "Offer").
This Offer is being made contingent upon all of the Debenture Holders
surrendering to Intelect (as instructed herein) all (100%) of the Debentures and
executing and delivering to Intelect (as instructed herein) the Release and the
Letter of Transmittal enclosed with this Offer (the "Required Amount"). In the
event less than the Required Amount is tendered, Intelect and ICSL reserve the
right to withdraw this Offer.
THE TERMS OF THIS OFFER HAVE NOT BEEN REVIEWED OR APPROVED IN ANY WAY
BY THE SECURITIES COMMISSIONER OF ANY STATE OR THE SECURITIES AND EXCHANGE
COMMISSION. THIS OFFER DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
EXPIRATION DATE
This Offer will expire (the "Expiration Date") at 5:00 P.M., Central
Daylight Savings Time on October 7, 1996, or at that hour on any later date to
which the Offer may be extended by Intelect and ICSL.
PROCEDURES FOR TENDERING DEBENTURES
Proper Tender of Debentures. For Debentures to be validly tendered
pursuant to the Offer you as a Debenture Holder must deliver the following
documents to the person and place set forth below to be held in trust until the
Required Amount is received:
1. The original Debenture issued in your name;
2. The enclosed Letter of Transmittal, duly executed by the
registered owner of the Debenture;
3. The enclosed Release in Consideration of Exchange of Property
(the "Release"), duly executed by the registered owner of the
Debenture. The enclosed Release states the amount of the
Shares to be received by you and the amount of cash to be paid
to you in lieu of issuing fractional
shares;
4. If required, the enclosed Substitute Form W-9 (see the
enclosed Instructions).
These documents must be delivered on or before the Expiration Date to:
Intelect, Inc.
c/o Ryan & Sudan, L.L.P.
Two Houston Center, Suite 3900
909 Fannin
Houston, Texas 77010
Attention: Robert C. Beasley
These documents may be delivered via the enclosed addressed envelope.
These documents will be held in trust by Ryan & Sudan, L.L.P. until
receipt of all (100%) of the Debentures and the executed Releases and Letters of
Transmittal signed by all of the Debenture Holders. In the event the Required
Amount is not received by the Expiration Date (unless the Company and ICSL
otherwise direct Ryan & Sudan, L.L.P. that they elect to proceed with the Offer
in the absence of receiving the tender of 100% of the Debentures, Releases, and
Letters of Transmittal) Ryan & Sudan, L.L.P. will immediately return to you the
Debenture you surrendered, the Letter of Transmittal executed by you, and the
Release executed by you.
ISSUANCE AND REGISTRATION OF SHARES
Upon the terms and subject to the conditions of this Offer, including
receipt of the Required Amount pursuant to the terms of this Offer, ICSL will:
(1) issue to each Debenture Holder the amount of shares of its Common Stock as
is set forth in the Release executed by such Debenture Holder and deliver a
certificate to such Debenture Holder representing such shares; (2) commence
registration of such shares with the Securities and Exchange Commission pursuant
to a Form S-3 Registration Statement; and (3) pay to each Debenture Holder by
check that amount of Fractional Share Payment as is set forth in the Release
executed by such Debenture Holder.
ICSL will pay the expenses incurred by ICSL in connection with the
registration of the Shares, including all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements of ICSL's
counsel and independent certified public accountant, and the expense of
qualifying such Shares under state blue sky laws, if any. However, all
underwriting expenses incurred by the Debenture Holders (if any), including
discounts and commissions, shall be borne by such Debenture Holders. The
Debenture Holders may be required to provide information concerning the
Debenture Holders necessary to complete the Registration Statement,
and accordingly, as set forth in the Letter of Transmittal, the Debenture
Holders agree to complete and return any documents (including questionnaires)
necessary to enable ICSL to complete the Registration Statement.
ICSL will pay all stock transfer taxes, if any, payable on the issuance
of the Shares pursuant to the Offer; provided, however, that if issuance of the
Shares is to be made to any person other than the Debenture Holder, the
Debenture Holder will be responsible for such taxes.
FEDERAL INCOME TAX BACKUP WITHHOLDING. To prevent federal income tax
backup withholding equal to 31% of the gross cash payments in lieu of fractional
shares made pursuant to the Offer, each Debenture Holder who does not otherwise
establish an exemption from such withholding must notify ICSL of such
shareholder's correct taxpayer identification number (which in the case of an
individual is their social security number), or certify that such taxpayer is
awaiting a taxpayer identification number, and provide certain other information
by completing the enclosed Substitute Form W-9 (see the enclosed Instruction
Letter).
ICSL MAY BE REQUIRED TO WITHHOLD AND REMIT TO THE INTERNAL REVENUE
SERVICE (THE "IRS"), 31% OF THE GROSS PROCEEDS PAID TO ANY TENDERING DEBENTURE
HOLDER WHO FAILS TO COMPLETE FULLY AND SIGN THE SUBSTITUTE FORM W-9 INCLUDED
WITH THIS LETTER.
CONDITIONS OF THE OFFER
NO PARTIAL PURCHASES. Intelect and ICSL will not accept a tender of a
portion of a Debenture. Therefore, if a Debenture Holder tenders his or her
Debenture, they must tender all of their Debenture in order for there to be a
valid tender and in order for them to receive the Shares.
WITHDRAWAL OF OFFER. The Offer is contingent on Intelect and ICSL
receiving all of the Debentures, together with the Letters of Transmittal and
Releases executed by the Debenture Holders (the "Required Amount"). Intelect and
ICSL reserve the right to withdraw this Offer if less than the Required Amount
is tendered, or if, in Intelect's or ICSL's sole discretion, it would be
inadvisable to proceed with the Offer (including, without limitation, if the
filing of the Registration Statement would materially and adversely affect the
business or prospects of ICSL or Intelect in view of the disclosures that may be
required). In such case, the Debentures, the Letters of Transmittal, and the
Releases will be immediately returned to the respective Debenture Holders.
INTELECT, INC.
/s/ Herman M. Frietsch
-----------------------------------------
Herman M. Frietsch, Chairman of the Board
INTELECT COMMUNICATIONS SYSTEMS
LIMITED
/s/ Herman M. Frietsch
-----------------------------------------
Herman M. Frietsch, Chairman of the Board