INTELECT COMMUNICATIONS SYSTEMS LIMITED
SUBSCRIPTION AGREEMENT
FOR
SERIES A CUMULATIVE PREFERRED STOCK
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made and entered into as of
this 30th day of May 1997, by and between INTELECT COMMUNICATIONS SYSTEMS
LIMITED, a company incorporated in Bermuda with limited liability ("ICSL" or the
"Company") and THE COASTAL CORPORATION SECOND PENSION TRUST ("Coastal") (the
"Parties"):
W I T N E S S:
WHEREAS, the Company has authorized share capital consisting of (a)
80,000,000 shares $.01 per share par value common stock ("Common Stock") and (b)
15,000,000 shares $.01 per share par value preferred stock;
WHEREAS, the Company has authorized the issuance of 10,000,000 shares $.01
per share par value, ten percent dividend, cumulative, convertible preferred
stock, Series A, priced at $2.0145 ("Preferred Stock");
WHEREAS, Coastal wishes to purchase the Preferred Stock for the
consideration and on the terms and conditions set forth herein;
WHEREAS, the Parties desire to memorialize their agreement for the issuance
and acquisition of the Preferred Stock of ICSL;
NOW, THEREFORE, for and in consideration of the premises, and the mutual
covenants and agreements herein contained, the Company and Coastal agree as
follows:
ARTICLE 1
GENERAL TERMS
Section 1.01 Definitions. As used in this Agreement, the following terms
shall have the following meanings, unless the context otherwise requires:
"Act" shall mean the Securities Act of 1933, as amended.
"Agreement" shall mean this Agreement, as the same may from time to time be
amended, modified or supplemented.
"Amended and Restated Note" shall mean the Amended and Restated Note the
form of which is attached hereto as Exhibit A
"Business Day" shall mean a day (other than a Saturday, Sunday or legal
holiday) for commercial lenders pursuant to the laws of the State under which
Coastal is governed.
"Capital Stock" shall mean all common and preferred stock of the Company,
but shall not include preferred stock subject to mandatory redemption
requirements.
"CERCLA" shall have the meaning given in Section 4.01(k).
"Claim" shall have the meaning given in Section 8.02.
"Closing" shall have the meaning given in Section 2.01(b).
"Coastal" shall mean The Coastal Corporation Second Pension Trust.
"Common Stock" means the common shares of ICSL, par value $.01 per share.
"Company" shall mean ICSL, including all successors thereto, and whether
merged, consolidated, reincorporated or as its name, domicile or jurisdiction
may change from time to time.
"Company and its Consolidated Subsidiaries" shall mean the Company and its
Subsidiaries which are taken on a consolidated basis for financial reporting
purposes. The Consolidated Subsidiaries of the Company are: Intelect Systems
Corp.; Intelect Network Technologies Company (formerly Intelect, Inc.); DNA
Enterprises, Inc.; Intelect Visual Communications Corp.; and Intelect Network
Systems, Ltd.
"Default" shall mean the occurrence of any of the events specified in
Article 7 hereof, whether or not any requirement for notice or lapse of time or
other condition precedent has been satisfied.
"Designation of Rights and Preferences" and "Designation" shall have the
meaning given in Section 2.01(a).
"Dollar", "Dollars" and "$" shall mean the lawful currency of the United
States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and all current rules and regulations promulgated thereunder.
"Event of Default" shall mean the occurrence of any of the events specified
in Article 7 hereof, provided that any requirement for notice or lapse of time
or any other condition precedent has been satisfied.
"Financial Statements" shall mean the financial statements of the Company
described in Section 5.01 hereof.
"GAAP" shall mean generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board.
"Indebtedness" shall mean all principal, interest and commitment fees owing
by the Company to Coastal in connection with the Note or this Agreement.
"Indemnified Party" shall have the meaning given in Section 8.02.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"Loan Agreement" shall mean the Loan Agreement dated May 8, 1997, and all
Exhibits hereto, including the Promissory Note, as they may be amended from time
to time.
"Material Adverse Effect" shall mean a material and adverse effect on the
operations or financial condition of the Company or its Subsidiaries.
"Note" shall mean the Promissory Note of the Company described in the Loan
Agreement.
"Parties" shall have the meaning given in the Preamble.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens now or hereafter securing the Note; (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 appeal 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
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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; and (g) Liens securing the indebtedness to St. Xxxxx Capital Corp.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other form of
entity.
"Plan" shall mean any multi-employer plan or single employer plan, as
defined in Section 4001 and subject to Title IV of ERISA, which is maintained,
or at any time during the five (5) calendar years preceding the date of this
Agreement was maintained, for employees of the Company or a Subsidiary.
"Preferred Stock" shall have the meaning given in the Recitals.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Redemption" shall have the meaning given in Section 2.02(a).
"Registration Rights Agreement" means the Registration Rights Agreement the
form of which is attached hereto to Exhibit B, as originally executed or as it
may from time to time be supplemented, modified or amended.
"Securities Act" means the Security Act of 1933, as amended.
"Subsidiary" shall mean any corporation of which more than fifty percent
(50%) of the issued and outstanding securities having ordinary voting power for
the election of directors is owned or controlled, directly or indirectly, by the
Company and/or one or more of its Subsidiaries.
"Transaction Documents" means this Agreement, the Designation, the
Registration Rights Agreement and all Exhibits, Certificates and Opinions
pertaining thereto.
ARTICLE 2
TERMS OF SUBSCRIPTIONS
Section 2.01 Issuance and Purchase of Preferred Stock.
(a) On the terms and subject to the conditions of this Agreement, the
Company agrees to issue, and Coastal agrees to purchase, 2,482,005 shares of the
Preferred Stock for a purchase price of Two and 1.45/100 Dollars ($2.0145) per
share, for an aggregate purchase price of Five Million Dollars ($5,000,000) in
immediately available funds. The Preferred Stock shall have the designations,
preferences, rights and limitations as specified in the Certificate of
Designation of Rights and Preferences dated May 30, 1997.
(b) The sale and purchase of the Preferred Stock shall take place at
10:00 AM, May 30, 1997, at the offices of Coastal at Nine Xxxxxxxx Xxxxx,
Xxxxxxx, Xxxxx and thereafter until completed (the "Closing"). At the Closing,
the Company shall deliver to Coastal certificates evidencing the shares of
Preferred Stock, registered in the name of Coastal, against payment as specified
herein. Payment shall be in the form of a wire transfer to an account designated
by the Company. The Closing shall be subject to the conditions set forth in
Article 3.
Section 2.02 Conversion of Loan to Preferred Stock .
(a) At any time, and from time to time, at which there is Indebtedness
outstanding, Company may request, or Coastal may require, that all or part of
the balance of such Indebtedness be redeemed in the form of
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issuance of the Preferred Stock of the Company at a redemption price of one
hundred percent (100%) of the principal amount of such Indebtedness to be
redeemed, in each case, plus accrued and unpaid interest to the date fixed for
redemption (the "Redemption"). Such request shall be in writing and the stock
shall be issued within five (5) Business Days after receipt of such notice. The
number of shares of Preferred Stock issued in satisfaction of the Redemption
shall be equal to the product of the amount of the Indebtedness to be redeemed
divided by the price per share of the Preferred Stock stipulated in Section
2.07(b) of the Loan Agreement, Two and 1.45/100 Dollars ($2.0145) per share.
(b) At the Closing, on the terms and subject to the conditions of this
Agreement, the Company agrees to issue, and Coastal agrees to accept 1,737,404
shares of the Preferred Stock at a purchase price of Two and 1.45/100 Dollars
($2.0145) per share, for an aggregate purchase price of Three Million Five
Hundred Thousand and 36/100 Dollars ($3,500,000.36), said amount to be credited
against, and in partial redemption of, the Indebtedness. The Redemption of the
Preferred Stock shall take place at 10:00 AM, May 30, 1997 at the offices of
Coastal at Nine Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxx. At the Redemption, the Company
shall deliver to Coastal certificates evidencing the shares of Preferred Stock,
registered in the name of Coastal, against payment as specified herein. The
Redemption shall be subject to the conditions set forth in Article 3. Company
shall execute and deliver an Amended and Restated Note in the form attached as
Exhibit B to reflect cancellation of that portion of the Indebtedness redeemed.
(c) Each subsequent Redemption until the Indebtedness, including all
amounts due and owing under the Amended and Restated Note, has been paid in
full, shall be subject to certification satisfactory to Coastal that the
conditions of Article 3 hereof have been met and are satisfied as of the date of
such Redemption. As of each such Redemption, Coastal shall annotate the Amended
and Restated Note to reflect cancellation of that portion of the Indebtedness
redeemed. All fees and disbursements (including, without limitation, all
investment banking, legal and other fees and disbursements) of Coastal in
connection with each Redemption shall be paid, to the extent that the Company
has been billed at least one Business Day prior to the Redemption date, upon the
Redemption, and upon request thereafer to the extent not paid.
Section 2.03 Restrictive Legend. Each certificate representing shares of
the Preferred Stock shall be inscribed with the following restrictive legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. NO SALE, OFFER TO
SELL, TRANSFER OR OTHER DISPOSITION OF THE SHARES REPRESENTED
BY THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION
STATEMENT UNDER THE ACT, WITH RESPECT TO SUCH SHARES IS THEN
IN EFFECT OR UNLESS THE HOLDER OBTAINS AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY
THAT SUCH DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE
ACT OR ANY APPLICABLE STATE BLUE SKY LAW. THE COMPANY WILL
FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT CHARGE, A
FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS
AND RELATIVE RIGHTS OF THE SHARES OF EACH SERIES OF PREFERRED
STOCK AUTHORIZED TO BE ISSUED BY THE COMPANY."
Section 2.04 Rights and Preferences. The Preferred Stock shall have the
designations, preferences, rights and limitations as specified in the
Certificate of Designation of Rights and Preferences dated May 30, 1997,
including rights to convert the Series A Preferred Shares into Common Stock.
Section 2.05 Costs. The Company shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock of the Company or other securities or property upon conversion
of the Preferred Shares; provided, however, that the Company shall not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares or
securities in the name other than that of the holder of the Preferred Shares in
respect of which such shares are being issued.
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Section 2.06 Registration Rights. The Company agrees to grant to Coastal
certain registration rights under a Registration Rights Agreement, the form of
which is attached as Exhibit B, to be executed at Closing, covering registration
rights in respect to the Common Stock to be acquired upon conversion of the
Preferred Stock acquired under this Agreement upon Closing or Redemption or as
dividends upon the Preferred Stock or otherwise.
Section 2.07 Right of First Refusal. Provided that Coastal has acquired the
Series A Preferred Stock as provided in Section 2.01, for so long as Coastal
holds any security or warrant for a security of the Company, in addition to any
other rights granted in this Agreement or the Designation, Company hereby grants
to Coastal the rights of first refusal to participate in any offering of an
equity interest, including common stock, preferred stock, warrants or
convertible debentures, to be offered by Company or brought to Company, but
excluding (i) underwritten public offerings of Common Stock, (ii) project
financings, (iii) bank financings, (iv) any capital stock of the Corporation
issued pursuant to warrants or other rights issued prior to the date hereof, (v)
the issuance, sale, exercise or conversion or grant of options to purchase
Common Stock pursuant to any of the Corporation's employee stock option,
compensation, bonus or incentive plans or otherwise, and (vi) the issuance or
sale of any equity or debt securities used in acquisitions by the Corporation of
operating assets or stock of entities to be owned and operated by the
Corporation or a Subsidiary. The procedures for notice and exercise of such
right of first refusal are as follows:
(a) In the event that Company offers, seeks to offer, or receives a
proposal to offer, an equity interest, including preferred stock, warrants or
convertible debentures, Company shall first offer the right to participate in
such offering to Coastal. Company shall deliver a true copy of such proposal,
term sheet, information memorandum or other offering description ("Proposal") to
Coastal.
(b) Coastal shall have thirty (30) days thereafter to indicate its
intent to participate at the price and otherwise on the terms and conditions
contained in such Proposal by giving written notice to Company to such effect
within said period and stating therein the quantity of securities to be
purchased. All other terms and conditions of Coastal's participation in such
offering shall be on a commercially reasonable basis, and in compliance with all
applicable laws and regulations. Coastal may conduct such due diligence as is
reasonably necessary and appropriate under the circumstances.
(c) If Coastal fails to exercise its right of first refusal within
such thirty (30) day period, then the Company shall have one hundred twenty
(120) days thereafter to sell the securities with respect to which Coastal's
rights were not exercised, at a price and upon general terms no more favorable
to the purchasers thereof than specified in the Company's notice. In the event
that the Company has not sold the securities within such one hundred twenty
(120) day period, the Company shall not thereafter issue or sell any securities
without first offering such securities to Coastal in the manner provided above.
(d) In any event, if and when the proposed transaction is consummated,
a true and correct copy of the offering documents shall be delivered to Coastal.
ARTICLE 3
CONDITIONS
The obligation of Coastal to purchase the Preferred Stock is subject to the
satisfaction of the following conditions:
Section 3.01 Secretary's Certificates. Coastal shall have received
certificates of the Secretary or an Assistant Secretary of the Company setting
forth (i) resolutions of its Board of Directors in form and substance
satisfactory to Coastal with respect to the authorization of this Agreement and
the officers of the Company authorized to sign such instruments, (ii) specimen
signatures of the officers so authorized, and (iii) a certified copy of the
Designation.
Section 3.02 Good Standing. Company shall deliver certificate of good
standing for Company and its Subsidiaries.
Section 3.03 No Default. Coastal shall have received certificates of an
officer of the Company stating no Default shall have occurred and be continuing
which in any respect could have a Material Adverse Effect on the
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Company or any Subsidiary and there shall not have occurred and be continuing
any condition, event or act which constitutes an Event of Default under any
instrument evidencing borrowed money to which the Company or any Subsidiary is
bound.
Section 3.04 Regulatory Requirements. The Parties to this Agreement have
determined that all regulatory requirements which are conditions precedent to
the execution of this Agreement has been met, or the time for such approvals
shall have lapsed and no further regulatory action be required.
Section 3.05 Representations and Warranties. The representations and
warranties made by the Company herein and in every other written document
delivered pursuant hereto shall then be true in all material respects; and the
Company shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with by them at or before the Closing.
Section 3.06 Payment of Fees and Disbursements. All fees and disbursements
(including, without limitation, all investment banking, legal and other fees and
disbursements) of Coastal in connection with the transactions contemplated by
this Agreement, or any other Transaction Documents shall have been paid, to the
extent that the Company has been billed at least one Business Day prior to the
Closing or Redemption date.
Section 3.07 Opinions of Counsel.
(a) Coastal shall have received from United States counsel for the
Company, an opinion addressed to Coastal to the effect that:
(i) the Company is a corporation duly organized, validly existing,
and in good standing under the laws of Bermuda, and has the corporate power
to conduct its business, to enter into and to perform its obligations under
this Agreement, and to issue the Preferred Stock;
(ii) the authorized capital stock of the Company consists of (x)
80,000,000 shares of Common Stock, US $.01 par value, and (y) 15,000,000
shares of Preferred Shares, US $.01 par value, with the only Preferred
Shares issued being those to be issued to Coastal under this Agreement;
(iii) upon the payment of the consideration described in this
Agreement, the Preferred Stock will be duly authorized, validly issued,
fully paid, and nonassessable;
(iv) all shares of Common Stock issuable upon conversion of the
Preferred Shares have been duly reserved for issuance and, when issued upon
conversion of the Preferred Shares in accordance with its terms, will be
duly authorized, validly issued, fully paid, and nonassessable;
(v) all shares of Common Stock issuable in payment of dividends
on Preferred Shares as provided for in this Agreement will be, when so
issued, duly authorized, validly issued, fully paid, and nonassessable.
(vi) The Company has the corporate power to execute, deliver and
carry out the terms and provisions of the Agreement and the Transaction
Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance thereof. The Agreement and the Note
have been duly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms except to the extent that
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
(vii) To the best of our knowledge without having undertaken an
independent investigation, neither the execution, delivery or performance
by the Company of the Transaction Documents nor the consummation of the
transactions therein contemplated, nor compliance with the terms and
provisions thereof, (i) will contravene any applicable provision of any
law, statute, rule or regulation, or of any order, writ, injunction or
decree of any court or governmental instrumentality known to such counsel
or (ii) will conflict,
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or be inconsistent with, or result in any breach of, or constitute a
default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets
of the Company pursuant to the terms of any indenture, mortgage, deed of
trust, agreement or other instrument to which the Company is a party or by
which it or any of its property or assets is bound or to which it may be
subject, or (iii) will violate any provision of the Memorandum of
Association or Bye-Laws of the Company.
(viii) To the best of our knowledge, except as disclosed in the
Financial Statements, there are no actions, suits or proceedings pending or
threatened against or affecting the Company before any court or before any
governmental or administrative body or agency the outcome of which is
likely to materially and adversely affect the operations, business,
property or assets or the financial condition of the Company.
(ix) No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by,
any governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required in connection with (i) the
execution, delivery and performance of the Agreement or the Transaction
Documents, or (ii) the legality, validity, binding effect or enforceability
of the Agreement or the Transaction Documents.
(x) To the best of our knowledge, each of the representations
and warranties of the Company set forth in any of the Transaction Documents
are true and correct as of the date hereof and all conditions precedent
under the Transaction Documents have been satisfied.
(b) Coastal shall have received from Bermuda counsel for the Company,
an opinion addressed to Coastal in the form attached as Exhibit C.
(c) The opinions required by this Section may, as to matters of fact,
be given in reliance upon certificates of officers of the Company and public
officials and shall contain such other normal and customary qualifications.
Section 3.08 NASDAQ Requirements. Nothing in the Transaction Documents may
be read or construed (i) to violate the rules of the Securities and Exchange
Commission or any market in which shares of ICSL are traded, and including the
maintenance criteria of the NASDAQ Rule 4460(i)(1)(D)(iii), (as applied to all
shares of ICSL's Common and Preferred Stock deemed to be aggregated under said
Rule), or (ii) to trigger the right of first refusal under ICSL's 7.5% and 7%
Convertible Debentures, and the Parties agree that in the event either (i) or
(ii) would otherwise occur, this Agreement shall not be enforceable against
either Party to the extent of such occurrence, and further, the Parties agree
that in the event either (i) or (ii) would otherwise occur, they shall amend
this Agreement to reflect, and the Designation of Rights and Preferences of the
Preferred Stock shall reflect, such adjustment to price or quantity as may be
necessary to avoid the occurrence of either (i) or (ii).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.01 By The Company. The Company represents and warrants to Coastal
that:
(a) Organization. ICSL is a corporation duly existing and in good
standing under the laws of Bermuda. Each of Company and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, has all requisite corporate
power and authority to own its Property and to carry on its business as now
conducted, and is in good standing and authorized to do business in each
jurisdiction in which the Company or such Subsidiary owns real Property or
conducts such business, where the failure to maintain such good standing or
authorization is reasonably expected to have a Material Adverse Effect.
(b) Authorization; No Conflict. The execution and delivery of this
Agreement, and the performance by the Company of its obligations under this
Agreement are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, have received all necessary governmental
approvals (if any shall be required) and do not and will not contravene or
conflict with any rule, regulation, decree or order or provision of law
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or of the charter or the Bye-Laws of the Company or of any agreement binding
upon the Company or any of its properties, except to the extent any such consent
or approval has been obtained or waived, and delivered to Coastal.
(c) Capitalization. At the date of this Agreement, the authorized
Capital Stock of the Company consists of 80,000,000 shares of Common Stock, US
$.01 of which ____ are issued and outstanding as of ___________, 1997, and
15,000,000 preferred shares, US $.01 of which no shares are issued and
outstanding prior to the issuance of the Preferred Stock to Coastal under this
Agreement. As of May 8, 1997, there were 20,531,598 shares of Common Stock
outstanding.
(d) Valid Issuance of Securities. Upon receipt of the consideration
from Coastal as described herein, the Preferred Stock will be duly authorized,
validly issued, fully paid, and nonassessable. All shares of Common Stock
issuable in payment of dividends on outstanding Preferred Shares, and all shares
of Common Stock issuable upon conversion of the Preferred Stock, will be duly
reserved for issuance, and when so issued, will be duly authorized, fully paid,
and nonassessable.
(e) Binding Obligations. This Agreement constitutes the binding
obligation of the Company, enforceable in accordance with its terms, except to
the extent that the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally or the
right to obtain the remedy of specific performance.
(f) Financial Condition. The audited annual consolidated Financial
Statements of the Company and its Consolidated Subsidiaries for its most
recently ended fiscal year (the "1996 Financial Statements"), and the unaudited
consolidated interim Financial Statements of the Company and its Consolidated
Subsidiaries for its most recently ended fiscal quarter (for which such annual
or quarterly Financial Statements are available), which have been delivered to
Coastal, are complete and correct in all material respects, have been prepared
in accordance with GAAP, consistently applied, and present fairly the
consolidated financial condition and results of the operations of the Company
and its Consolidated Subsidiaries as at the date or dates and for the period or
periods stated (subject only to normal year-end audit adjustments with respect
to such unaudited interim statements). No material adverse change has since
occurred in the consolidated financial condition or operations of the Company
and its Consolidated Subsidiaries, except as otherwise disclosed to Coastal.
(g) Defaults. Except for defaults in payments required to be made in
connection with the acquisition of DNA Enterprises, Inc., as described in "Note
24 (b)" of the 1996 Financial Statements, neither the Company nor any Subsidiary
is in Default (in any respect which materially and adversely affects the
consolidated business, Property, operations or financial condition of the
Company and its Consolidated Subsidiaries) under any instrument evidencing
borrowed money to which the Company or a Subsidiary is a party or by which it is
bound.
(h) Tax Returns and Payments. The Company has (i) filed all tax
returns which it is required to file, where the failure to file such returns
would have a Material Adverse Effect on the consolidated financial condition or
operations of the Company and its Consolidated Subsidiaries, and (ii) paid, or
has provided adequate reserves for the payment of all material federal and state
income taxes applicable for all prior fiscal years and for the current fiscal
year down to the date hereof.
(i) Litigation Representation. Except for those matters disclosed in
"Notes 19 and 24 (b)" of the 1996 Financial Statements, there is no litigation
(including without limitation, derivative actions), arbitration proceedings or
governmental proceedings pending or, to the knowledge of the Company, threatened
against it or any Subsidiary which involves the reasonable probability of a
judgment not covered by insurance and which would have a Material Adverse Effect
on the Company and its Consolidated Subsidiaries.
(j) Compliance with ERISA. The Company and each of its Subsidiaries
are in compliance in all material respects with ERISA. Neither the Company nor
any of its Subsidiaries has any material liability under any type of Plan. No
reportable event, as set forth in Section 4043(b) of ERISA, has occurred and is
continuing with respect to any Plan which results in any material liability to
the PBGC.
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(k) Environmental Matters. Neither the Company nor any Subsidiary (i)
has received written notice, nor has any officer of the Company otherwise
learned, of any claim, demand, action, event, condition, report or investigation
indicating or concerning any potential or actual liability which individually or
in the aggregate would have a Material Adverse Effect, arising in connection
with: (x) any noncompliance with or violation of the requirements of any
applicable federal, state or local environmental health and safety statutes and
regulations or (y) the release or threatened release of any toxic or hazardous
waste, substance or constituent, or other substance into the environment, (ii)
to the best of Company's knowledge, has any liability in connection with the
release or threatened release of any toxic or hazardous waste, substance or
constituent, or other substance into the environment which in the aggregate
would have a Material Adverse Effect, (iii) has received notice of any federal
or state investigation evaluating whether any remedial action is needed to
respond to a release or threatened release of any toxic or hazardous waste,
substance or constituent or other substance into the environment for which the
Company or any Subsidiary is or may be liable where the taking or the failure to
take such remedial action would have a Material Adverse Effect, or (iv) has
received notice that the Company or any Subsidiary is or may be liable to any
Person under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq. ("CERCLA"), or
any analogous state law, the failure to comply with which would have a Material
Adverse Effect. To the best of the Company's knowledge, the Company and each
Subsidiary is in compliance in all material respects with the financial
responsibility requirements of federal and state environmental laws to the
extent applicable, including, without limitation, those contained in 40 C.F.R.,
parts 264 and 265, subpart H, and any analogous state law, the failure to comply
with which would have a Material Adverse Effect.
(l) Compliance with Applicable Laws. Neither the Company nor any
Subsidiary is in default with respect to any judgment, order, writ, injunction,
decree or decision of any governmental authority, which default would have a
Material Adverse Effect. To the best of the Company's knowledge, the Company and
each Subsidiary is in compliance with all applicable statutes, rules and
regulations, including ERISA, of all governmental authorities, and (except as
disclosed to Coastal) of every exchange on which the Capital Stock of the
Company is listed, a violation of which would have a Material Adverse Effect.
(m) Patents, Licenses, Etc. Except for those matters described in
"Note 8" to the 1996 Financial Statements, the Company warrants that it has all
right and title to, and has maintained and caused each Subsidiary to maintain in
full force and effect, all material licenses, copyrights, patents, permits,
applications, reports, authorizations, easements and other rights as are
necessary for the conduct of the business of Company and its Consolidated
Subsidiaries, where the termination of such rights would have a Material Adverse
Effect.
(n) Disclosure. Each of Company's representations in the Transaction
Documents are true, complete and accurate in all material respects. Company has
disclosed all material facts of which it has knowledge and regarding the
transaction contemplated by this Agreement. Company has not failed to disclose
to Coastal any material fact necessary in order to make any statement made, in
light of the circumstances under which made, not misleading.
Section 4.02 By Coastal. Coastal represents and warrants to the Company
that:
(a) Binding Obligation. his Agreement constitutes a valid and binding
obligation of Coastal enforceable against it in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or affecting
enforcement of creditors' rights, and equitable remedies.
(b) No Conflict. Coastal's execution, delivery and performance of this
Agreement does not, violate, conflict with, or constitute a breach of or default
under any loan or credit agreement, indenture, mortgage, deed of trust,
contract, lease, license, or other contract or agreement to which Coastal is a
party or by which its property is bound, or violate any order, writ, injunction,
or decree of any court, administrative agency or governmental body.
(c) No Approvals. No consent, approval or authorization of, or
declaration to or filing with, any governmental or private party is required for
the valid authorization, execution, delivery and performance by Coastal of this
Agreement.
- 9 -
(d) No Litigation. There are no claims, actions, suits, proceedings or
investigations pending, or, to the knowledge of Coastal threatened against it,
which, if adversely resolved, would materially impair its ability to perform its
obligations under this Agreement or which challenge the legality of, or seek to
enjoin, restrain or prohibit the consummation of the transactions contemplated
by this Agreement.
(e) Investment Purpose. The Securities to be issued to Coastal under
or as contemplated in this Agreement are being acquired, or will be acquired for
investment, for its own account, and not with a view to, or for resale in
connection with, any distribution of Securities within the meaning of the
Securities Act. No Securities may be sold, transferred, or otherwise disposed of
without registration under the Securities Act and any applicable state
securities laws, except under any exemption from those laws.
ARTICLE 5
AFFIRMATIVE COVENANTS
Section 5.01 Financial Statements and Reports. The Company will promptly
furnish to Coastal:
(a) Annual Reports. As soon as available and in any event within one
hundred and twenty (120) days after the close of each fiscal year of the
Company, the audited balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such year, the audited statement of income of the
Company and its Consolidated Subsidiaries for such year, and the audited
statement of reconciliation of capital accounts of the Company and its
Consolidated Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
accompanied by the opinion of independent public accountants of national
standing; and
(b) Quarterly Reports. As soon as available and in any event within
sixty (60) days after the end of each of the first three quarterly periods in
each fiscal year of the Company, a copy of the Company's Form 10-Q as filed with
the Securities and Exchange Commission.
(c) Other Information. Such other information regarding the financial
condition and operations of the Company and its Consolidated Subsidiaries as
Coastal may reasonably request. All such balance sheets and other Financial
Statements referred to in Subsections 501(a) and (b) above shall conform to GAAP
except for such changes in accounting principles or practice with which the
independent public accountants concur, and subject to normal year-end audit
adjustments with respect to the unaudited quarterly statements described in
Subsection 5.01(b) hereof.
(d) Actions. Notice of all actions, suits, claims, proceeding,
investigation and inquiries that could reasonably be expected to have a Material
Adverse Effect
(e) Defaults. Promptly, and in any event within three(3) Business
Days, after any officer of the Company obtains knowledge of the existence of any
Default under this Agreement or a default under any other contract to which the
Company is a party and which could reasonably be expected to have a Material
Adverse Effect.
Section 5.02 Legal Existence. The Company will, and will cause each
Subsidiary to do, or cause to be done, all things necessary to preserve and keep
in full force and effect its legal existence, rights and franchises; provided,
however, that nothing in this Section 5.02 shall prevent (i) the withdrawal by
the Company or any Subsidiary of its qualification as a foreign corporation in
any jurisdiction; (ii) a consolidation or merger permitted by other provisions
of this Agreement; or (iii) the redomicile of ICSL as to a jurisdiction within
the United States. The Company will use, and will cause each Subsidiary to use,
its best efforts to comply with all applicable statutes, regulations and orders
of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its Property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls).
Section 5.03 Use of Proceeds. The proceeds hereunder are to be used to meet
the working capital requirements of Company and its Subsidiaries. No part of the
proceeds may be used to prepay any loan or debt obligation of the Company, to
acquire the stock or assets of any unrelated entity, or for any other purpose
not in the ordinary course of business of Company or its Subsidiaries, provided
that the proceeds may be used to pay the current obligations and other corporate
requirements of Company, provided further, that the proceeds may not be used to
pay
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the obligations incurred by the Company in connection with the acquisition of
DNA Enterprises, Inc. without Coastal's written consent, which shall not be
unreasonably withheld.
Section 5.04 Insurance. The Company shall maintain, and cause each
Subsidiary to maintain, insurance on its Property against such risks and in
substantially the same amounts as are currently maintained, including, without
limitation, general liability and workers' compensation insurance.
Section 5.05 Maintenance of Property. The Company shall cause all material
Property owned by or leased to the Company or any Subsidiary and used or useful
in the conduct of the Company's business or the business of any Subsidiary to be
maintained and kept in normal condition, repair and working order and supplied
with all necessary equipment and cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company or such Subsidiary may be necessary, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company or any Subsidiary from discontinuing the use, operation or
maintenance of any such Property, or disposing of any such Property, if such
discontinuance or disposal is, in the judgment of the Board of Directors or the
board of directors, board of trustees or managing partners of the Subsidiary
concerned, or of any officer (or other agent employed by the Company or any of
its Subsidiaries) of the Company or such Subsidiary having managerial
responsibility for any such Property, desirable in the conduct of the business
of the Company or any Subsidiary, and if such discontinuance or disposal is not
disadvantageous in any material respect to Coastal.
Section 5.06 Inspection of Property; Books and Records; Discussions. Upon
reasonable request by Coastal, the Company shall permit representatives of
Coastal, upon at least two (2) Business Days' prior written notice to a
financial officer of the Company and subject to assertions of attorney-client
privilege and to confidentiality obligations reasonably necessary to protect
proprietary information, to visit the offices of the Company and its
Subsidiaries, to inspect, under guidance of officers of the Company, any of its
Property and examine and make copies or abstracts from any of its books and
records at any reasonable time and as often as may reasonably be desired, and to
discuss the business, operations, prospects, licenses, Property and financial
condition of the Company and its Subsidiaries with the officers thereof.
Section 5.07 Patents, Licenses, Etc. With the exception of the matter in
"Note 8" of the 1996 Financial Statements, the Company shall maintain and cause
each Subsidiary to maintain, in full force and effect, all material licenses,
copyrights, patents, permits, applications, reports, authorizations, easements
and other rights as are necessary for the conduct of its business, the
termination of which would have a Material Adverse Effect. With the exception of
the matter in "Note 8" of the 1996 Financial Statements, Company shall pay all
royalties, annuities and license fees as they become due and shall not forfeit
or allow to lapse any rights under any patent, copyright or license.
Section 5.08 Further Assurances. The Company will promptly cure any defects
in the creation and execution of the Transaction Documents. The Company, at its
expense, will promptly execute and deliver to Coastal all such further
documents, agreements and instruments as may reasonably be requested by Coastal
in order to effect any obligation of the Company under this Agreement.
Section 5.09 Reimbursement of Expenses. The Company will, upon request,
promptly reimburse Coastal for all amounts expended, advanced or incurred by
Coastal (including reasonable attorneys' fees and disbursements) to satisfy any
obligations of the Company under this Agreement or to enforce the rights of
Coastal under this Agreement, including all fees and disbursements (including,
without limitation, all investment banking, legal and other fees and
disbursements) of Coastal in connection with the transactions contemplated by
this Agreement, or any other Transaction Documents.
Section 5.10 Notice of Certain Events. The Company shall promptly notify
Coastal if the Company learns of any of the following if such occurs while the
Loan is outstanding: (i) any event which constitutes a continuing Default or
Event of Default, together with a detailed statement by a financial officer of
the Company of the steps being taken to cure the effect of such Default or Event
of Default; or (ii) the receipt of any notice from, or the taking of any other
action by, the holder of any promissory note, debenture or other evidence of
indebtedness for borrowed money of the Company or any Subsidiary with respect to
a claimed default, together with a detailed statement by a financial officer of
the Company specifying the notice given or other action taken by such holder and
the nature of the claimed
- 11 -
default and what action the Company or such Subsidiary is taking or proposes to
take with respect thereto, or (iii) the commencement of any legal, judicial, or
regulatory proceedings affecting the Company or any Subsidiary or any Property
of the Company or such Subsidiary not covered by insurance and which could
reasonably be expected to be adversely determined and which, if so determined,
would have a Material Adverse Effect on the business or the financial condition
of the Company and its Consolidated Subsidiaries; or (iv) any dispute between
the Company or any Subsidiary and any governmental or regulatory body or any
other Person which, could reasonably be expected to be adversely determined, and
which, if so determined, could reasonably be expected to materially interfere
with the normal business operations of the Company and its Consolidated
Subsidiaries; or (v) the occurrence of any material adverse changes in the
financial condition or operations of the Company and its Consolidated
Subsidiaries from those reflected in the latest Financial Statements.
Section 5.11 Xxxx-Xxxxx-Xxxxxx. The Company agrees to file such notices of
exemption or applications for approval or authority as it, in consultation with
legal counsel, deems necessary or advisable with the Federal Trade Commission
and the Antitrust Division of the Department of Justice as required by the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, (15 U.S.C. ss.18a) as
amended and the rules and regulations promulgated thereunder by the Federal
Trade Commission. Coastal will assist in preparation of the filing and any
response required by either entity.
ARTICLE 6
NEGATIVE COVENANTS
Without the consent of Coastal, the Company will not:
Section 6.01 Payment of Dividends. Declare or pay any dividend or make any
distribution on its Capital Stock or to the holders of its Capital Stock (other
than (i) dividends or distributions payable in its Capital Stock and (ii)
dividends on its Preferred Stock other than mandatory redemption Preferred Stock
of the Company) or purchase, redeem or otherwise acquire or retire for value, or
permit any Subsidiary to purchase or otherwise acquire for value, any such
Capital Stock if at the time of such action any Loan under this Agreement is
outstanding; provided, however that Company shall be permitted to repurchase its
7.5% Convertible Debentures dated August 9, 1996 and 7% Convertible Debentures
dated October 15, 1996.
Section 6.02 Liens and Pledges of Assets and Stock. Company shall not, nor
permit any Subsidiary to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on all or substantially all of the assets of the Company or
any Subsidiary or the capital stock of any Subsidiary without the consent of
Coastal which consent shall not be unreasonably withheld; provided, however,
that this Section shall not prohibit the Company or any Subsidiary from
creating, assuming or suffering to exist the following Liens: (i) Liens existing
as of the date hereof and renewals and replacements thereof or the repledging of
assets pledged thereunder; (ii) Liens created under existing mortgages and
pledge agreements; (iii) Liens incurred in the ordinary course of business not
in connection with the borrowing of money; or (iv) Permitted Liens.
Section 6.03 Patents, Licenses, Etc. The Company shall not sell or transfer
any material licenses, copyrights, patents, permits, applications, reports,
authorizations, easements and other rights necessary for the conduct of its
business, the termination of which would have a Material Adverse Effect. Company
shall not forfeit or allow to lapse any rights under any patent, copyright or
license, the loss of which would have a Material Adverse Effect.
Section 6.04 Consolidation or Merger. Enter into or permit any Subsidiary
to enter into any merger or consolidation unless, in the case of the Company,
the surviving entity (i) is in compliance with the covenants contained in this
Agreement immediately after such merger, (ii) assumes all obligations of the
Company under this Agreement, and (iii) is organized under the laws of the
United States or any state thereof, provided that nothing herein shall prohibit
the merger of one or more Subsidiaries into the Company or any other Subsidiary.
Section 6.05 Sale of Assets. Sell or otherwise transfer all or
substantially all of its fixed assets or permit any Subsidiary to do so;
provided that nothing herein shall prohibit the sale or transfer of fixed assets
of a Subsidiary to the Company or to another Subsidiary.
- 12 -
Section 6.06 Liquidation. The Company shall not adopt a plan of liquidation
which provides for, contemplates or the effectuation of which is preceded by (i)
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company otherwise than substantially as an entirety and (ii)
the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and of the remaining assets of the
Company to the holders of Capital Stock of the Company unless the Company shall
in connection with the adoption of such plan make provision for, or agree that
prior to making any liquidating distributions it will make provision, reasonably
satisfactory to Coastal, for the satisfaction of the Company's obligations under
the Transaction Documents.
Section 6.07 Restrictive Agreements Prohibited. Enter into or continue to
be a party to any agreement which by its terms restricts the Company's
performance of this Agreement or any related document or the terms of the
Preferred Stock or any agreement which by its terms restricts the payment by the
Company of any dividends or other distributions with respect to Coastal's shares
of Preferred Stock or Common Stock.
Section 6.08 Bye-Laws. Amend the Bye-Laws in any way which would by its
terms restrict the Company's performance of this Agreement or any related
document or the terms of the Preferred Stock or which by its terms restricts the
payment by the Company of any dividends or other distributions with respect to
Coastal's shares of Preferred Stock or Common Stock.
ARTICLE 7
EVENTS OF DEFAULT
Section 7.01 Events. Any of the following events shall be considered an
"Event of Default" as that term is used herein:
(a) Default on Other Debt. Other than the matters disclosed in "Notes
8" and "24(b)" of the 1996 Financial Statements, the Company or any Subsidiary
fails to make payment when due on any indebtedness for borrowed money in an
aggregate principal amount in excess of One Hundred Thousand Dollars ($100,000)
at the time outstanding (after giving effect to any applicable grace periods);
or any default shall occur with respect to any such indebtedness, or under any
agreement securing or relating to such indebtedness, the effect of which is to
cause or to permit any holder of such indebtedness or a trustee to cause
(whether or not such holder or trustee elects to cause) such indebtedness, or
portion thereof, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment and such default remains uncured for a
period of thirty (30) days; or
(b) Non-Payment of Indebtedness. Default is made in the payment or
prepayment when due of any Indebtedness and such Default continues for a period
in excess of five (5) days; or
(c) Representations and Warranties. Any representation or warranty
made by the Company in this Agreement proves to have been incorrect in any
material respect as of the date hereof; or any representation, statement
(including Financial Statements), certificate or data furnished or made by the
Company under this Agreement, proves to have been untrue in any material
respect, as of the date as of which the facts therein set forth were stated and
which in either such case may constitute a Material Adverse Effect; or
(d) Covenants. Default is made in the due observance or performance of
any of the covenants or agreements contained in this Agreement to be kept or
performed by the Company and such Default continues unremedied for a period of
thirty (30) days after the earlier of (i) notice thereof being given by Coastal
to the Company, or (ii) such Default otherwise becoming known to the Company,
where such Default would have a Material Adverse Effect; or
(e) Involuntary Bankruptcy or Receivership Proceedings. A custodian,
receiver, conservator, liquidator or trustee of the Company or any Subsidiary or
of any Property thereof is appointed by the order or decree of any court or
agency or supervisory authority having jurisdiction, and such decree or order
remains unstayed for more than sixty (60) days; or the Company or any Subsidiary
is adjudicated bankrupt or insolvent and such order or decree remains unstayed
for more than sixty (60) days; or any Property of the Company or any Subsidiary
is sequestered by court order; or a petition is filed against the Company or any
Subsidiary under any state or federal bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or receivership law
of any
- 13 -
jurisdiction, whether now or hereafter in effect, and is not stayed or dismissed
within sixty (60) days after such filing; or
(f) Voluntary Petitions. The Company or any Subsidiary files a
petition in voluntary bankruptcy or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, or consents to the filing of
any such petition under any such law; or
(g) Assignments for Benefit of Creditors, Etc. The Company or any
Subsidiary makes an assignment for the benefit of its creditors, or admits its
inability to pay its debts as they become due, or consents to the appointment of
a receiver, custodian, trustee or liquidator of the Company or any Subsidiary or
of all or any part of its respective Property; or
(h) Discontinuance of Business. The Company, Intelect Network
Technologies Company, DNA Enterprises, Inc., or Intelect Visual Communications
Corp. discontinues its business; or
(i) ERISA Default. A Plan fails to maintain the qualifications for any
Plan required by ERISA, and there shall result from any such event or events
either liability or a material risk of incurring liability to the PBGC or to a
Plan, which would have a Material Adverse Effect; or
(j) Cross Default. Company is in Default under any of the other
Transaction Documents.
ARTICLE 8
SPECIAL INDEMNITY
Section 8.01 Expenses. The Company shall pay (to the maximum extent
permitted by law) all investment fees and expenses and all other reasonable fees
and disbursements (including without limitation, all reasonable fees and
disbursements of counsel) in connection with the transactions contemplated
hereby and by the other Transaction Documents, whether or not such transactions
shall be consummated, and shall pay the reasonable fees and disbursements of
counsel for the holders of the Preferred Stock in connection with any subsequent
amendment, waiver, consent, modification or enforcement hereof or thereof.
Section 8.02 Indemnity. The Company agrees to indemnify and hold harmless
(to the maximum extent permitted by law) Coastal and its Affiliates and their
respective directors, members, beneficiaries, trustees beneficial owners,
employees, agents and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel and consultants)
(any of the foregoing a "Claim") that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising in each case arising out of
or in connection with or by reason of the actual or proposed use of the proceeds
of the sale of the Series A Preferred Stock (except to the extent, and only to
the extent, that such Claim is for any loss in value of the Series A Preferred
Stock).
ARTICLE 9
MISCELLANEOUS
Section 9.01 Notices. Except as otherwise specified herein, 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 Agreement or the Note, 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 Company: INTELECT COMMUNICATIONS SYSTEMS LIMITED
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxx Xxxxxxxx, Chairman and CEO
- 14 -
with a copy to: XXXX & SUDAN, L.L.P.
000 Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxx X. Sudan, Jr.
To Coastal: THE COASTAL CORPORATION SECOND PENSION TRUST
Nine Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attn: Corporate Secretary
with a copy to: THE COASTAL CORPORATION
Nine Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attn: Director, Financial Administration
Section 9.02 Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the Parties hereto; provided, however, the Company may not assign or
transfer any of its interest hereunder without the prior written consent of
Coastal and provided further that Coastal may not assign its interest hereunder
without the prior written consent of the Company, which consent of either party
shall not be withheld unreasonably.
Section 9.03 Survival of Agreements. All representations and warranties of
the Company herein shall survive the effective date of this Agreement.
Section 9.04 Invalidity. In the event that any one or more of the
provisions contained in this Agreement shall, for any reason, be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of the this Agreement.
Section 9.05 Amendment or Waiver. This Agreement may not be amended,
changed, waived, discharged or terminated without the written consent of the
Company and Coastal.
Section 9.06 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Company or Coastal in exercising any right, power or privilege
hereunder and no course of dealing between the Company and Coastal shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Company or Coastal would otherwise have.
Section 9.07 Headings. The descriptive headings of this Agreement are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
Section 9.08 Counterparts. This Agreement may be executed in any number of
counterparts and by the different Parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Company and Coastal.
- 15 -
Section 9.09 Governing Law. THIS AGREEMENT, AND THE APPLICATION OR
INTERPRETATION THEREOF, SHALL BE GOVERNED EXCLUSIVELY BY ITS TERMS AND BY THE
LOCAL, INTERNAL LAW OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THE CONFLICTS OF
LAWS RULES OF THE STATE OF TEXAS WOULD REQUIRE THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION IN WHICH CASE THE LAWS OF THE STATE OF TEXAS SHALL
NONETHELESS APPLY. THE PARTIES CONSENT TO JURISDICTION IN THE STATE AND FEDERAL
COURTS LOCATED IN XXXXXX COUNTY, TEXAS.
Section 9.10 Entire Agreement. This Agreement, including the Exhibits
attached hereto and the documents delivered pursuant hereto, constitutes the
entire agreement between the Parties with respect to the subject matter of this
Agreement and supersedes all previous communications, representations,
understandings, and agreements, either oral or written, between the Parties with
respect to the subject matter.
[Signature Page Follows]
- 16 -
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
duly executed as of the date first above written.
INTELECT COMMUNICATIONS THE COASTAL CORPORATION SECOND
SYSTEMS LIMITED PENSION TRUST
By: _________________________ By: ____________________________
Xxxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxxxxx
Chairman & CEO Senior Vice President
The Coastal Corporation
Signature Page to Subscription Agreement for Series A Preferred Stock
- 17 -
PREFERRED SHARES SUBSCRIPTION AGREEMENT
BETWEEN
THE COASTAL CORPORATION SECOND PENSION TRUST
AND
INTELECT COMMUNICATIONS SYSTEMS LIMITED
TABLE OF CONTENTS
(This Table of Contents attached to the Agreement is provided for convenience
only, is not a part of such, and shall not in any way affect the meaning or
construction thereof.)
Page
ARTICLE 1 GENERAL TERMS.............................................. 1
1.01 Definitions................................................ 1
ARTICLE 2 TERMS OF SUBSCRIPTIONS..................................... 3
2.01 Issuance and Purchase of Preferred Stock................... 3
2.02 Conversion of Loan to Preferred Stock...................... 3
2.03 Restrictive Legend......................................... 4
2.04 Rights and Preferences..................................... 4
2.05 Costs...................................................... 4
2.06 Registration Rights........................................ 5
2.07 Right of First Refusal..................................... 5
ARTICLE 3 CONDITIONS................................................. 5
3.01 Secretary's Certificates................................... 5
3.02 Good Standing.............................................. 5
3.03 No Default................................................. 6
3.04 Regulatory Requirements.................................... 6
3.05 Representations and Warranties............................. 6
3.06 Payment of Fees and Disbursements.......................... 6
3.07 Opinions of Counsel........................................ 6
3.08 NASDAQ Requirements........................................ 7
ARTICLE 4 REPRESENTATIONS AND WARRANTIES............................. 7
4.01 By The Company............................................. 7
4.02 By Coastal................................................. 9
ARTICLE 5 AFFIRMATIVE COVENANTS...................................... 10
5.01 Financial Statements and Reports........................... 10
5.02 Legal Existence............................................ 10
5.03 Use of Proceeds............................................ 10
5.04 Insurance.................................................. 11
5.05 Maintenance of Property.................................... 11
5.06 Inspection of Property; Books and Records; Discussions..... 11
5.07 Patents, Licenses, Etc..................................... 11
5.08 Further Assurances......................................... 11
5.09 Reimbursement of Expenses.................................. 11
5.10 Notice of Certain Events................................... 11
5.11 Xxxx-Xxxxx-Xxxxxx.......................................... 12
ARTICLE 6 NEGATIVE COVENANTS......................................... 12
6.01 Payment of Dividends....................................... 12
6.02 Liens and Pledges of Assets and Stock...................... 12
6.03 Patents, Licenses, Etc..................................... 12
- i -
6.04 Consolidation or Merger.................................... 12
6.05 Sale of Assets............................................. 12
6.06 Liquidation................................................ 12
6.07 Restrictive Agreements Prohibited.......................... 13
6.08 Bye-Laws................................................... 13
ARTICLE 7 EVENTS OF DEFAULT.......................................... 13
7.01 Events..................................................... 13
ARTICLE 8 SPECIAL INDEMNITY.......................................... 14
8.01 Expenses................................................... 14
8.02 Indemnity.................................................. 14
ARTICLE 9 MISCELLANEOUS.............................................. 14
9.01 Notices.................................................... 14
9.02 Benefit of Agreement....................................... 15
9.03 Survival of Agreements..................................... 15
9.04 Invalidity................................................. 15
9.05 Amendment or Waiver........................................ 15
9.06 No Waiver; Remedies Cumulative............................. 15
9.07 Headings................................................... 15
9.08 Counterparts............................................... 15
9.09 Governing Law.............................................. 16
9.10 Entire Agreement........................................... 16
EXHIBIT A AMENDED AND RESTATED NOTE
EXHIBIT B REGISTRATION RIGHTS AGREEMENT
EXHIBIT C OPINION OF COUNSEL
- ii -
