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Agreement To Amend Receivables/Inventory Credit

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Sectors: Telecommunications
Governing Law: Texas, View Texas State Laws
Effective Date: August 13, 1999
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AGREEMENT TO AMEND
RECEIVABLES- AND INVENTORY-BACKED CREDIT LINES


THIS AGREEMENT TO AMEND RECEIVABLES- AND INVENTORY-BACKED CREDIT LINES (this "Agreement") made and entered into as of August 13,1999 by and between INTELECT COMMUNICATIONS, INC., a Delaware corporation ("ICI" or "Borrower"); and THE COASTAL CORPORATION SECOND PENSION TRUST, a trust organized under the laws of the State of Texas ("Lender") (the "Parties"):


W I T N E S S:


WHEREAS, Lender and Borrower entered into a LOAN AGREEMENT FOR RECEIVABLES BACKED BORROWING dated September 14, 1998 as amended by Addendum dated January 13, 1999, and Second Addendum dated July 16, 1999 (the "Receivables Facility"); and


WHEREAS, Lender and Borrower entered into a LOAN AGREEMENT FOR INVENTORY BACKED BORROWING dated November 24, 1998 as amended by Addendum dated December 31, 1998 (the "Inventory Facility"); and


WHEREAS, Borrower has an existing line of credit with St. James Capital Partners, L.P. and SJMB, L.P. (collectively, "St James"); and


WHEREAS, Borrower seeks additional debt funding for its working capital requirements and is willing to issue Warrants for the acquisition of the Common Stock of Borrower as further inducement for the issuance of this facility;


WHEREAS, Lender is willing to accept Common Stock of the Borrower in partial payment of the debt under the Receivables and Inventory Facilities, as amended and restated (the "Loan Agreement"); and


WHEREAS, Lender is willing to continue to loan funds to Borrower to meet its current working capital requirements on a secured basis, including security for the loan in (1) the pledge of the Pledged Securities; (2) a collateral assignment of Accounts of the Designated Subsidiaries; and (3) a secured interest in the Inventory of the Designated Subsidiaries, all as provided herein and in a Security, Assignment and Pledge Agreement among Lender, Borrower and its Designated Subsidiaries of even date herewith, and subject to the Intercreditor Agreement with St. James;


WHEREAS, Borrower and Lender desire to memorialize their intention to combine and amend the Receivables Facility and the Inventory Facility, reduce the current balance of the credit lines by the sale of Common Stock of the Borrower to Lender and application of the proceeds to the loan balance, to advance additional funds, and to issue and reprice warrants;


NOW, THEREFORE, for and in consideration of the premises, and the mutual covenants and agreements herein contained, the Borrower and the Lender agree as follows:


ARTICLE 1
GENERAL TERMS


Section 1.01 Definitions. The terms used herein shall have the meanings given in the Loan Agreement.


ARTICLE 2
AMENDED TERMS OF TRANSACTION DOCUMENTS


Section 2.01 The Loan Agreement. Subject to the terms and conditions and relying on the representations and warranties contained in this Agreement, Borrower and Lender agree to the following:


2


(a) Subject to the terms hereof, Borrower and Lender agree to amend and restate the Receivables Facility and the Inventory Facility as a single loan facility, to permit borrowing up to a total of eighty percent (80%) of the Inventory and Eligible Accounts, to increase the credit line thereunder to a total of Twelve Million Dollars ($12,000,000), based on the combined lending base of Accounts and Inventory, and to extend the Maturity Date and Termination Date to July 31, 2000. All other terms of the facilities shall remain unchanged.


(b) The Notes currently outstanding shall be amended and restated as a single instrument consistent with the Amended and Restated Facility


Section 2.02 The Security Agreement.


(a) Subject to the terms hereof, Borrower and Lender agree to amend and restate the Security Agreement for Receivables Backed Borrowing and the Security Agreement for Inventory Backed Borrowing as a single agreement. The Amended and Restated Security Agreement shall be an extension and renewal of the existing recorded and perfected security interests of the Lender.


ARTICLE 3
REPAYMENT


Section 3.01 Debt Reduction. Borrower and Lender agree to convert Three Million Dollars ($3,000,000) in Indebtedness under the Note and Loan Agreement to Common Stock of the Borrower at the closing of this agreement, provided that St. James converts at least Two Million Dollars ($2,000,000) of Borrower's debt at the same time.


Section 3.02 Shares Issued. Borrower shall issue to Lender 2,777,778 shares of Common Stock in repayment of Three Million Dollars ($3,000,000) in principal under the Advances (the "Repayment Shares").


ARTICLE 4
WARRANTS


Section 4.01 Warrants. As an inducement to enter this Agreement, but for which Lender would not do, Borrower agrees to issue to Lender Warrants to purchase 1,067,308 shares of Common Stock at a price per share of ONE AND 30/100 DOLLARS ($1.30). Borrower agrees to issue a Warrant in the form of Exhibit A.


Section 4.02 Reissued Warrants. As a further inducement, Borrower agrees to reissue to Lender the Warrants issued on August 27, 1997 at an exercise price per share of Six Dollars ($6.00). The exercise price shall be the same as for the Warrants issued under section 4.01, and the number of Warrants shall be adjusted for dilution as specified in the Warrant. (The Warrants issued under section 4.01 and 4.02 are referred to herein collectively as the "Warrants").


Section 4.03 Registration Rights. Borrower further agrees to register the resale of the shares of Common Stock to be issued in accordance with Article 3 in accordance with the Registration Rights Agreement attached hereto as Exhibit B, provided that the registration statement shall be filed with the Securities and Exchange Commission not later than ten (10) days following the Effective Date, and Borrower shall seek to make the registration effective within sixty (60) days of filing.


ARTICLE 5
REPRESENTATIONS AND WARRANTIES


In order to induce the Lender to enter into the Note and Agreement, Borrower represents and warrants to the Lender (which representations and warranties shall survive the closing) that:


Section 5.01 Organization. Borrower is a corporation duly existing and in good standing under the laws of the State of Delaware. Each of the Borrower and its Material 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 Borrower or such Material 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.


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Section 5.02 Authorization; No Conflict. The execution and delivery of this Agreement, the execution and delivery of the Note and the performance by the Borrower of its obligations under this Agreement, the Loan Agreement and the Note are within the Borrower'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 or of the charter or by-laws of the Borrower or of any material agreement binding upon the Borrower or any of its properties, except to the extent any such consent or approval has been obtained or waived, and delivered to Lender.


Section 5.03 Binding Obligations. This Agreement constitutes the legal valid and binding obligation of the Borrower, 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 under general principles of equity.


Section 5.04 Defaults. Except as disclosed to the Lender, neither the Borrower nor any Subsidiary is in Default in any respect which has or would have a Materially Adverse Effect on the consolidated business, Property, operations or financial condition of the Borrower and its Consolidated Subsidiaries under any instrument evidencing borrowed money to which the Borrower or a Subsidiary is a party or by which it is bound.


Section 5.05 Outstanding Common Stock. As of August 10, 1999, there were 48,885,278 shares of Common Stock outstanding, including 191,435 shares in treasury.


ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF LENDER


Section 6.01 Lender hereby represents and warrants to the Company as follows:


(a) Organizational Status; Authority; Enforceability; No conflicts; etc. Lender is a trust, duly formed under the laws of the State of Texas, and has all requisite power and authority to enter into and perform its obligations under this Agreement. The execution and delivery of this Agreement and the consummation of the transactions hereunder have been duly authorized by all required action. This Agreement has been duly executed and delivered on behalf of Lender and is a legal, valid and binding obligation, enforceable in accordance with its terms, subject to applicable bankruptcy and insolvency laws and general principles of equity. This Agreement does not conflict with any of Lender's organizational documents or partnership agreement, or any other contract or agreement to which it is a party, or any law, rule or regulation binding on or applicable to Lender.


(b) Investment Intent. Lender is acquiring the Repayment Shares, the Warrants and the share of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, it does not agree to hold any of the Repayment Shares or Warrant Shares for any minimum or other specific term and reserves the right to dispose of the Repayment Shares or Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act, except as otherwise provided in this Agreement.


(c) Accredited Investor Status. Lender is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.


(d) Reliance on Exemptions. Lender understands that the Repayment Shares, the Warrants and the Warrant Shares are being issued to it in reliance on specific exemptions from the registration requirements of United States federal
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