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EXHIBIT 1
NOTE AND WARRANT PURCHASE AGREEMENT
EQUALNET HOLDING CORP.
EQUALNET CORPORATION
TELESOURCE, INC.
EQUALNET WHOLESALE SERVICES, INC.
EQUALNET PLAZA
0000 XXXX XXXXXX XXXX XXXXX
XXXXXXX, XX 00000-0000
February 3, 1997
The Xxxxx Group, Inc.
000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Re: $3,000,000 10% Notes due December 31, 1998, Warrants
for the Purchase of 1,500,000 Shares of Common Stock
and Refinancing Notes due December 31, 1998
Gentlemen:
Since November 1, 1996, EqualNet Holding Corp., a Texas corporation (the
"Company"), and its subsidiary, EqualNet Corporation, a Delaware corporation
("EqualNet Subsidiary"), have used The Xxxxx
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Group, Inc., a New Jersey corporation (the "Purchaser"), as their long-distance
carrier for long-distance services ultimately provided by Sprint Corp., and,
since that time, have been billed by Purchaser at Purchaser's cost without
premium (the "Sprint Arrangement"). In consideration for this valuable service,
the Company agreed to issue Purchaser a warrant to purchase Common Stock (as
herein defined) at an exercise price of $2.00 per share, somewhat above the
trading price of the Common Stock on November 1, 1996 of $1.93 per share. In
consideration for the Company's prior agreement to issue a warrant, and for the
considerations described herein, the Company, EqualNet Subsidiary, TeleSource
Inc., a Texas corporation ("TeleSource"), and EqualNet Wholesale Services, Inc.,
a Delaware corporation ("Wholesale") (each of the Company, EqualNet Subsidiary,
TeleSource and Wholesale are referred to herein individually as an "EqualNet
Company" and collectively as the "EqualNet Companies"), agree with the
Purchaser, as follows:
ARTICLE 1.
PURCHASE AND SALE AND TERMS OF NOTES AND WARRANTS
a. The Notes. The EqualNet Companies have authorized the issuance and
sale to the Purchaser of the EqualNet Companies' 10% Notes due December 31, 1998
(the "Notes"), in the original aggregate principal amount of $3,000,000. The
Notes shall be substantially in the form set forth in Exhibit A attached hereto.
b. The Warrants. The Company has authorized the issuance and sale to the
Purchaser of the Company's Warrants to Purchase Common Stock (the "Warrants")
relating to the purchase of 1,500,000 shares, as adjusted from time to time
pursuant to the terms of the Warrants (the "Warrant Stock"), of common stock,
par value $.01 per share (the "Common Stock"), of the Company. The Warrants
shall be substantially in the form set forth in Exhibit B attached hereto.
c. Purchase and Sale of Notes and Warrants. The EqualNet Companies and the
Company, respectively, shall issue and sell to the Purchaser, and, subject to
and in reliance upon the representations, warranties, terms and conditions of
this Agreement, the Purchaser shall purchase, the Notes and the Warrants. Such
purchase and sale shall take place at a closing (the "Closing") to be held at
the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
at 10:00 a.m. on the date of execution and delivery of this Agreement, or on
such other date and at such time as may be mutually agreed upon (the "Closing
Date"). At the Closing, each EqualNet Company will issue and deliver Notes, and
the Company will issue and deliver the Warrants, in denominations designated by
the Purchaser and registered in the name of the Purchaser or its nominee to
Chase Manhattan Bank, a New York State chartered bank ("Escrowee") under an
Escrow Agreement substantially in the form attached hereto as Exhibit E (the
"Escrow Agreement"), against payment of the purchase price of $3,000,000, of
which $2,070,000 (which represents the purchase price net of payments to be made
out of proceeds to Purchaser and its counsel as designated in Section 1.4
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to be paid upon release of funds from under the Escrow Agreement) shall be
delivered in immediately available funds to the Escrowee under the Escrow
Agreement.
d. Use of Proceeds. The EqualNet Companies will use the proceeds from the
sale of the Notes and Warrants as follows: $1 million for general working
capital needs excluding repayment of the Loans, as hereinafter defined, of which
(a) $790,000 shall be used to repay trade payables currently owed to Purchaser,
(b) $100,000 shall be used as a credit towards certain trade payables owed to
Purchaser and (c) $40,000 shall be paid to Purchaser's legal counsel; $1 million
to reduce the EqualNet Companies' account payable to AT&T; $1 million for sales
and marketing activities directly related to new account generation, of which
$500,000 shall be used exclusively for such activities related to the generation
of new Sprint accounts.
ARTICLE 2.
DELIVERY OF REFINANCING NOTES; REFINANCING LOANS
a. Initial Refinancing Loan. The Company is a party to a Credit Agreement
dated as of November 30, 1995 (as amended to date, the "Credit Agreement") among
the Company and each of the lenders who is or may become from time to time a
party thereto (the "Lenders") and Comerica Bank-Texas, a Texas banking
association ("Comerica"), as Agent (the "Agent") for such Lenders, pursuant to
which the Lenders have and will from time to time make loans ("Loans") to the
Company. Under the terms of an Intercreditor and Subordination Agreement, dated
as of February 3, 1997 (the "Intercreditor Agreement") among the Purchaser, the
Agent, the Lenders and the Company, the Purchaser has the right to repay on
behalf of the Company a portion of the Loans by paying an amount equal to 100%
of the principal amount of the Loans so paid plus unpaid accrued interest. In
the event that the Purchaser repays such Loans pursuant to the Intercreditor
Agreement, each EqualNet Company agrees that the amount paid by the Purchaser,
without any further authorization from any EqualNet Company, shall constitute a
loan (the "Initial Refinancing Loan") by the Purchaser to the EqualNet Companies
in a principal amount equal to the amount so paid by the Purchaser, including
accrued interest. The obligation to repay such Initial Refinancing Loan and any
further loans made by the Purchaser pursuant to Section 2.2 (the Initial
Refinancing Loan and any further loans are herein called the "Refinancing
Loans") shall be evidenced by refinancing promissory notes of the EqualNet
Companies delivered at the Closing (the "Refinancing Notes"). The Refinancing
Notes shall be substantially in the form of Exhibit C attached hereto.
b. Additional Refinancing Loans. If the Purchaser makes the Initial
Refinancing Loan, the Purchaser agrees to make further Refinancing Loans as
follows, subject to the terms and conditions set forth herein. The aggregate
principal amount of the Refinancing Loans outstanding at any time shall not
exceed the lesser of (i) the Borrowing Base (as hereinafter defined) or (ii) an
amount (the "Maximum Commitment")
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equal to the lesser of 100% of the Initial Refinancing Loan or such lower
amount, not less than the principal amount of the Refinancing Notes outstanding,
as the Maker may specify from time to time in writing to the Purchaser.
Notwithstanding the foregoing, in the event that the outstanding principal
amount of the Refinancing Loans shall ever exceed the amount set forth above,
such Refinancing Loans shall nevertheless constitute Refinancing Loans and, as
such, shall be entitled to all the benefits thereof and the security therefor.
The Purchaser is hereby authorized to endorse, or cause to be endorsed, the date
and the amount of each Refinancing Loan made by the Purchaser and each repayment
thereof on a schedule annexed to each Refinancing Note, which endorsement shall
constitute prima facie evidence of the accuracy of the information so endorsed;
in lieu of endorsing such schedule, the Purchaser is hereby authorized, at its
option, to record the amount of each Refinancing Loan and repayments thereof on
its books and records, such books and records to constitute prima facie evidence
of the accuracy of the information contained therein.
c. Repayment of Refinancing Loans. The Refinancing Loans shall
be due and payable as follows:
(a) In the event that the outstanding principal amount of the
Refinancing Loans shall ever exceed the maximum amount set forth in Section 2.2,
the EqualNet Companies shall immediately repay the excess of the outstanding
principal balance, and interest thereon, over such maximum amount, together with
unpaid accrued interest thereon; and
(b) The entire principal amount of the Refinancing Loans,
together with all unpaid interest accrued thereon, unless earlier paid, shall be
due and payable on the earlier of (i) December 31, 1998 or (ii) the Maturity
Date (as defined in the Credit Agreement), as such Maturity Date may be
accelerated or extended under the terms of the Credit Agreement.
(c) All payments of principal, accrued interest, and any other
amounts owed to Purchaser by the EqualNet Companies, shall be effected by wire
transfer to the account of Purchaser, or Purchaser's agent, in the State of New
York. Payments hereunder or in connection with any of the Notes or Refinancing
Notes shall not be made or delivered to Purchaser in any jurisdiction except in
the State of New York.
d. Conditions to Refinancing Loans. The obligation of the
Purchaser to make any Refinancing Loans (other than the Initial Refinancing
Loan) is subject to the following conditions:
(a) The Purchaser shall have received by 10:00 a.m. on any
business day a request in writing signed by the EqualNet Companies specifying
the amount of the proposed borrowing, the proposed borrowing date, which shall
not be earlier than 11:00 a.m. that day (or the next day if notice is given
after 10:00 a.m.), and the account of the EqualNet Companies to which funds are
to be disbursed and a Borrowing Base Certificate as of the most recent
practicable date (and in no event more than 31 days in advance of the date of
the proposed borrowing) demonstrating that the aggregate principal amount of the
Refinancing Loans,
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after taking into account the proposed borrowing, will not exceed the amount of
the Borrowing Base or otherwise exceed the maximum principal amount of the
Refinancing Loans specified in Section 2.2; and
(b) Each of the representations and warranties of the EqualNet
Companies set forth in Article IV of this Agreement and in the Security
Agreement shall be true and correct on the date of such request and on the
proposed date of borrowing, the EqualNet Companies shall have complied with all
covenants set forth in Article V of this Agreement and in the Security
Agreement, no Event of Default (as defined in the Refinancing Notes) or event or
occurrence that with notice or passage of time, or both, would constitute an
Event of Default, shall have occurred and be continuing and the Purchaser shall
have received a certificate signed by the President or the Chief Financial
Officer of each of the EqualNet Companies certifying the foregoing matters.
e. Definitions. The following terms shall have the meanings set
forth below.
"Accounts" shall mean all accounts within the meaning assigned
to such term in the Uniform Commercial Code as in effect in the State of New
York.
"Borrowing Base" shall mean, as of any date, an amount equal
to 87.5% of the Eligible Accounts of the EqualNet Companies at such date.
"Borrowing Base Certificate" shall mean a certificate duly
executed by the Chief Executive Officer, Chief Financial Officer, Treasurer or
Controller of the EqualNet Companies setting forth in reasonable detail
satisfactory to the Purchaser the EqualNet Companies' calculation of the
Eligible Accounts and the Borrowing Base.
"Eligible Accounts" shall mean, as at any date of
determination thereof, each Account of the EqualNet Companies that is subject to
the Security Agreement and on which the Purchaser shall have a first- priority,
perfected security interest and that complies with the following requirements:
(a) The Account arises from the provision of
telecommunications services to an account debtor on an absolute sale basis
on open account and not subject to any other refund agreement, and no
material part of the service has been rejected or is subject to any
claimed dissatisfaction, the Account is stated to be payable in U.S.
dollars and is not evidenced by chattel paper or an instrument of any kind
and such account debtor is not insolvent or subject to any bankruptcy or
insolvency proceedings of any kind;
(b) The account debtor is located in the United States;
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(c) The Account is a valid obligation of the account
debtor thereunder and is not subject to any offset or other defense on the part
of such account debtor or to any claim on the part of such account debtor
denying liability thereunder;
(d) Such Account is subject to no lien or security
interest whatsoever, except for liens created or permitted pursuant to the
Security Agreement;
(e) Such Account is evidenced by an invoice submitted to
the account debtor in a timely fashion in the normal course of business;
(f) Such Account has not remained unpaid beyond 90 days
after the date of the invoice; provided that if such invoice date is on or after
August 5, 1996, and if the applicable account debtor is one which is no longer
being serviced by the EqualNet Companies, the applicable account debtor does not
have any other Account owed to the EqualNet Companies which remain unpaid beyond
90 days after the date of the applicable invoice;
(g) Not more than (1) 75% (if such date is on or after
July 5, 1996 but prior to August 5, 1996), (2) 50% if such date is on or after
August 5, 1996 but prior to September 5, 1996) or (3) 25% (if such date is on or
after September 5, 1996), of the other Accounts of the applicable account debtor
or any of its affiliates owed in the aggregate to the EqualNet Companies fail to
satisfy all of the requirements of an "Eligible Account;"
(h) Such Account does not arise out of transactions with
an employee, officer, agent, director or stockholder of any of the EqualNet
Companies unless approved in writing by the Purchaser; and
(i) The applicable account debtor is not one which the
Purchaser has, in the exercise of its sole discretion, determined to be (based
on such factors as the Purchaser deems appropriate), and has given notice of
such determination to the EqualNet Companies, an ineligible account debtor;
provided, however, that any such notice shall not apply as to any Account of
such account debtor that has previously been included in the Borrowing Base
prior to the giving of such notice by the Purchaser and that meets each and
every other requirement for the denomination of such Account as a "Eligible
Account;"
(j) Each of the representations and warranties set forth
in the Security Agreement executed by the EqualNet Companies with respect
thereto is true and correct in all material respects on such date.
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In the event of any dispute under the foregoing criteria about whether an
Account is or has ceased to be an Eligible Account, the decision of the
Purchaser, made in good faith, shall be conclusive and binding, absent manifest
error.
f. Delivery of Borrowing Base Certificates. The EqualNet
Companies will deliver to the Purchaser a Borrowing Base Certificate at any time
that the Purchaser notifies the Borrower that it is considering making the
Initial Refinancing Loan as provided in Section 2.1 hereof and thereafter during
any period in which any Refinancing Loans are outstanding as often as the
Purchaser shall reasonably request.
ARTICLE 3.
CONDITIONS TO PURCHASER'S OBLIGATION
The obligation of the Purchaser to purchase and pay for the Notes and
Warrants at the Closing is subject to the following conditions:
a. Representations and Warranties. Each of the representations
and warranties of the EqualNet Companies set forth in Article 4 hereof shall be
true on the Closing Date.
b. Execution and Delivery of Intercreditor Agreement. The
Intercreditor Agreement shall have been executed and delivered by all the
parties thereto.
c. Execution and Delivery of Security Agreement. A Security
Agreement ("Security Agreement") in substantially the form of Exhibit D attached
hereto, securing the obligations of the EqualNet Companies under the Notes and
the Refinancing Notes, shall have been executed and delivered by each EqualNet
Company.
d. Execution and Delivery of Right Agreement. The Right in the
Event of a Change of Control (the "Right Agreement") between the Company and
Purchaser shall have been executed and delivered by both parties thereto.
e. Documentation at Closing. The Purchaser shall have received
all of the following, each in form and substance satisfactory to the Purchaser
and its counsel:
(a) Copies of all charter documents and bylaws of each
EqualNet Company and of resolutions of the Board of Directors of each EqualNet
Company evidencing approval of this Agreement, the Notes, the Warrants and the
Refinancing Notes, all certified by the Secretary or any Assistant Secretary of
such EqualNet Company;
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(b) An opinion of Xxxxxxxxx & Xxxxxxxx L.L.P., counsel for the
EqualNet Companies, regarding the due authorization, execution and delivery of
this Agreement, the Notes, the Warrants, the Refinancing Notes, the
Intercreditor Agreement, the Security Agreement, and the Right Agreement, the
validity, binding effect and enforceability thereof, and the due authorization,
validity and fully paid and nonassessable status when issued of the Warrant
Stock and such other matters as the Purchaser shall reasonably request;
(c) A certificate of the Secretary or an Assistant Secretary
of each EqualNet Company that shall certify the names of the officers of such
EqualNet Company authorized to sign the Documents (as hereinafter defined) to
which such EqualNet Company is a party together with the true signatures of such
officers; and
(d) If this Agreement is executed and delivered on a date
other than the Closing Date, a certificate of each EqualNet Company signed by a
duly authorized officer of such EqualNet Company stating that the
representations and warranties of the EqualNet Companies contained in Article 4
hereof are true and correct.
f. Performance; No Default. The EqualNet Companies shall have performed
and complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by them prior to or at the Closing
and, after giving effect to the issue and sale of the Notes and Warrants (and
the application of the proceeds thereof as contemplated hereby) and delivery of
the Refinancing Notes, no Default or Event of Default (as hereinafter defined)
shall have occurred and be continuing.
g. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
Purchaser and its counsel, and Purchaser and its counsel shall have received all
such counterpart originals or certified or other copies of such documents as
they may reasonably request.
h. UCC Matters. The EqualNet Companies shall have provided to Purchaser's
counsel searches, acceptable in all respects to such counsel, of all appropriate
Uniform Commercial Code filing offices for financing statements filed against
any EqualNet Company as debtor, which searches disclose no liens or filings
other than those related to the Credit Agreement and those listed on Schedule
3.8 hereto, and each EqualNet Company shall have executed and caused the filing
with the appropriate offices of all financing statements reasonably requested by
Purchaser or its counsel in connection with this Agreement or any other Document
and shall have furnished evidence of filing of such financing statements to
Purchaser or its counsel.
i. Business Review. The Purchaser shall be satisfied in its sole
discretion with the results of its review of the business, licenses, properties,
assets, liabilities, technology, contractual arrangements, financial condition,
results of operations and prospects of the EqualNet Companies.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE EQUALNET COMPANIES
The EqualNet Companies, jointly and severally, represent and warrant to
the Purchaser that:
a. Organization and Standing of the Company. Each EqualNet Company is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has all requisite corporate power and
authority to own and operate its properties, to carry on its business as now
conducted and to enter into and, as applicable, perform its obligations
hereunder and under the Notes, the Warrants, the Refinancing Notes, the
Intercreditor Agreement, the Security Agreement and under all other documents
and instruments to be executed and delivered as contemplated by this Agreement
(this Agreement, the Notes, the Warrants, the Refinancing Notes, the
Intercreditor Agreement, the Security Agreement, the Right Agreement and all
such other documents and instruments to be executed by the EqualNet Companies in
connection with the Closing hereinafter referred to, individually, as a
"Document" and collectively, as the "Documents") to which it is a party. Each
EqualNet Company is qualified to do business and is in good standing in each
jurisdiction in which it is required to so qualify and where the failure to be
so qualified would have a material adverse effect on the business, assets,
financial condition or results of operations of the Company or the EqualNet
Companies taken as a whole (a "Material Adverse Effect").
b. Corporate Action. Each EqualNet Company has taken all corporate action
required to make the Documents to which it is a party valid and enforceable
obligations of such EqualNet Company, including, without limitation, approval by
each EqualNet Company's board of directors.
c. Validity of Documents. This Agreement and the other Documents have been
duly authorized and executed by each EqualNet Company that is a party thereto
and constitute valid and legally binding obligations of each such EqualNet
Company, enforceable in accordance with their terms. A sufficient number of
shares of duly authorized and unissued Common Stock of the Company has been
reserved for issuance upon the exercise of the Warrants, and no further
corporate action is required for the valid issuance of the Warrant Stock (as
defined in the form of Warrant) upon the exercise of the Warrants. The issuance
of the Warrant Stock in accordance with the terms of the Warrants will, at the
Closing and thereafter, not be subject to preemptive, antidilution or similar
rights of any Person, and when issued and delivered against payment therefor in
accordance with the terms of the Warrants, will be duly and validly issued,
fully paid and nonassessable.
d. Consents. The execution and delivery by each EqualNet Company of this
Agreement and the other Documents to which it is a party and the performance of
the transactions contemplated hereby and thereby (a) do not and under present
law will not violate, or require any consent or approval pursuant to, any
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law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award, (b) do not violate any provision of its certificate or articles of
incorporation or bylaws, (c) do not and will not give rise to any lien upon any
of its assets, except as otherwise contemplated hereby, and (d) do not violate
any provision of, or cause a default under, any material agreement, lease,
instrument or other contract to which it is a party.
e. Capitalization; Status of Capital Stock. The Company has a total
authorized capitalization consisting of (i) 20,000,000 shares of Common Stock,
of which 6,152,000 shares are currently issued and outstanding and 402,000 are
reserved for issuance upon exercise of outstanding stock options and warrants
and (ii) 1,000,000 shares of Preferred Stock, par value $.01 per share, none of
which are currently issued and outstanding. All the outstanding shares of Common
Stock of the Company have been duly authorized, are validly issued and are fully
paid and nonassessable. No options or rights to purchase shares of capital
stock, or securities convertible into shares of capital stock, are authorized,
issued or outstanding, nor is the Company obligated in any other manner to issue
shares of its capital stock or securities convertible into or evidencing any
right to acquire shares of its capital stock, except as set forth above,
pursuant to this Agreement or as set forth on Schedule 4.5. There are no
restrictions on the transfer of shares of Warrant Stock, other than those
imposed by relevant state and federal securities laws or as expressly set forth
in the form of the Warrants.
f. Private Offering. Based on and assuming the accuracy of the
representations of Purchaser set forth in Section 6.2 hereof, the offer, sale,
issuance and delivery to the Purchaser pursuant to the terms of this Agreement
of the Notes, the Warrants, the Refinancing Notes and the Warrant Stock, are
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") and no qualification of an indenture under the Trust Indenture
Act of 1939, as amended, is required in connection with such transaction.
g. Title to Assets. Each of the EqualNet Companies has good and marketable
title to all of its properties and assets, free and clear of all liens and
encumbrances, other than liens and encumbrances (i) contemplated hereby, (ii) in
existence on the date hereof granted in connection with the Credit Agreement,
(iii) or as set forth on Schedule 4.7 hereto.
h. Insurance. Each of the EqualNet Companies maintains with financially
sound and reputable insurers, risk of physical loss or damage insurance covering
its assets wherever the same may be located, insuring against the risk of fire,
explosion, theft and such other risks as are prudently insured against by
corporations engaged in the same business and similarly situated with the
EqualNet Companies in an amount usually carried by corporations engaged in the
same business and similarly situated with the Companies.
i. Security Interest. The Security Agreement, when it has been duly
executed and delivered by the EqualNet Companies and the financing statements
required to be filed thereunder have been duly filed, will create and grant to
the Purchaser a valid and perfected security interest in the Collateral (as
defined in the Security Agreement).
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j. Financial Statements. The Company's consolidated financial statements,
set forth in the Company's Annual Report on Form 10-K for its latest fiscal year
ended, consisting of balance sheets and statements of operations and cash flows
and accompanying footnotes, certified by the Company's independent accountants,
and the interim financial statements, set forth in the Company's Quarterly
Report on Form 10-Q filed after such Form 10-K, as filed with the Securities and
Exchange Commission (the "SEC Filings"), fairly present, in all material
respects, the financial condition and results of operations of the Company and
its subsidiaries as of the dates and for the periods presented therein, all in
accordance with generally accepted accounting principles consistently applied
("GAAP"). Except as set forth on Schedule 4.10 hereto, (i) there are no
liabilities, fixed or contingent, which are material but not reflected in such
financial statements other than liabilities arising in the ordinary course of
business since the date of the interim financial statements and (ii) there has
been no material change in the business, financial condition or operations of
the Company since September 30, 1996.
k. Books and Records. The books and records of the EqualNet Companies
accurately reflect in all material respects the transactions to which any
EqualNet Company is a party or by which its properties are subject or bound, and
such books and records have been properly kept and maintained.
l. Accounting Controls. The EqualNet Companies maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general and specific
authorization, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain accountability
for assets, (c) access to assets is permitted only in accordance with
management's general or specific authorization, and (d) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
m. No Litigation. Except as disclosed in the SEC Filings filed prior to
the date of this Agreement, no EqualNet Company is now engaged in or threatened
in writing with any litigation or other proceeding in connection with its
affairs which would or could reasonably be expected to have a Material Adverse
Effect.
n. No Default. No Event of Default (as defined in the Notes) or other
event which, with the giving of notice or the passage of time or both, would
constitute an Event of Default has occurred and is continuing.
o. Disclosure Generally. The representations and statements made by the
EqualNet Companies or on their behalf in connection with this Agreement do not
and will not contain any untrue statement of a material fact or, taken
collectively, omit to state a material fact or any fact necessary to make the
representations and statements made not materially misleading. No written
information, exhibit, report or financial statement furnished by the EqualNet
Companies to the Purchaser in connection with this Agreement
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contains or will contain any material misstatement of fact or, taken
collectively, omit to state a material fact or any fact necessary to make the
statements contained therein not materially misleading.
p. Registration Rights. Except as disclosed on Schedule 4.17, (i) no
person has rights to the registration of any securities of the Company or any
subsidiary and (ii) neither the Company nor any of its subsidiaries will have
any liability for any rights of any person for the registration of any
securities of the Company.
q. No Subsidiaries. Except for EqualNet Subsidiary, TeleSource and
Wholesale, the Company has no equity, partnership or other similar interest,
direct or indirect, in any person.
ARTICLE 5.
COVENANTS
Each EqualNet Company shall, for so long as any portion of the Notes or
the Refinancing Notes is unpaid, comply with the covenants set forth in Sections
7.1 through 7.8, 7.10 through 7.14 and Article VIII (substituting the Purchaser
for the Agent and the Lenders where appropriate) of the Credit Agreement, as
such covenants are in effect on the date hereof and irrespective of any
amendment, modification or termination of the Credit Agreement or any waiver by
the Lenders thereunder. In addition to such covenants, the Company agrees to
promptly have any shares of Warrant Stock that are issued pursuant to the
Warrants approved for quotation on the Nasdaq National Market or such other
primary market or trading system on which the Common Stock then trades.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
AND COVENANTS OF THE PURCHASER
The Purchaser represents and warrants to the EqualNet Companies and
covenants and agrees with the EqualNet Companies as follows:
a. Authorization. This Agreement constitutes a valid and legally binding
obligation of the Purchaser enforceable in accordance with its terms.
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b. Investment Representations; Transfer.
(a) The Notes, the Warrants and the Refinancing Notes are
being acquired by the Purchaser for investment for its own account, and not with
a view to the sale or distribution of any part thereof or of the Warrant Stock,
and it has no present intention of selling, granting participation in, or
otherwise distributing the same except for distributions that are exempt from
the registration requirements of applicable securities laws (other than any
notice provisions thereof) or pursuant to a registered offering.
(b) The Purchaser understands that the Notes, the Refinancing
Notes, the Warrants and the Warrant Stock have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") on the basis that the
offer and sale thereof as provided for in this Agreement and the issuance of the
Warrant Stock are exempt from registration under the Securities Act pursuant to
Section 4(2) thereof, and that the Company's reliance on such exemption is
predicated on the Purchaser's representations set forth herein.
(c) The Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act, is
experienced in evaluating investments in companies such as the Company, has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment and has the ability to bear
the entire economic risk of its investment. The Purchaser has made its own
evaluation of its investment in the Notes and the Warrants, and will make its
own evaluation of its investment in the Refinancing Notes, based upon such
information as is available to it and without reliance upon the Company or any
other person or entity, and the Purchaser agrees that neither the Company nor
any other person or entity has any obligation to furnish any additional
information to the Purchaser except as expressly set forth herein.
(d) The Purchaser understands that the Notes, the Refinancing
Notes, the Warrants and Warrant Stock may not be sold, transferred, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Notes, the Refinancing Notes, the Warrants
or the Warrant Stock or an available exemption from registration under the
Securities Act, the Notes, the Refinancing Notes, the Warrants and the Warrant
Stock must be held indefinitely.
c. Legends; Stop Transfer. Each Purchaser agrees that all Notes,
Refinancing Notes, Warrants and Warrant Stock shall bear legends in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY OTHER STATE. THE SECURITIES REPRESENTED HEREBY HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
14
SCHEDULE 13D
CUSIP NO. 000000000 PAGE 21 OF 25
STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
For Notes and Refinancing Notes only:
THIS NOTE IS SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT
REFERRED TO HEREIN.
ARTICLE 7.
MISCELLANEOUS
a. Costs, Expenses and Taxes. The EqualNet Companies shall bear all costs
and expenses in connection with the preparation, execution and delivery of this
Agreement, the Notes, the Refinancing Notes, the Warrants and the Warrant Stock,
provided that EqualNet shall only be obligated for up to $30,000 of Purchaser's
reasonable attorney fees incurred in connection therewith. The EqualNet
Companies shall pay any and all stamp and other taxes payable or determined to
be payable in connection with the execution and delivery of this Agreement, and
the original issuance of the Notes, the Refinancing Notes, the Warrants and the
Warrant Stock.
b. Limitation on Liability; Indemnification.
(a) Purchaser shall not have any liability to any EqualNet Company for
any matter arising under or relating in any manner to the Documents unless
caused exclusively by the gross negligence or willful misconduct of Purchaser.
To the extent permitted by applicable law, in addition to the payment of costs
and expenses pursuant to Section 7.1 hereof, and irrespective of whether the
transactions contemplated hereby shall be consummated, the EqualNet Companies
agree to indemnify, exonerate, pay and hold the Purchaser, and any holder of any
interest in the Notes, the Refinancing Notes, the Warrants or the Warrant Stock,
and the officers, directors, employees and agents of the Purchaser or such
holders (collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, causes of action,
judgments, suits, claims, costs, expenses, and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, irrespective of whether
such Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against such Indemnitee, in any matter relating to or
arising out of this Agreement or any of the other Documents or in connection
with any claim asserted against the Purchaser by any person or entity arising
out of or in any way connected with this Agreement or any of the other Documents
(collectively, the
15
SCHEDULE 13D
CUSIP NO. 000000000 PAGE 22 OF 25
"Indemnified Liabilities"); provided however, that the EqualNet Companies shall
have no obligation hereunder with respect to an Indemnitee for any Indemnified
Liabilities proximately caused by the gross negligence or willful misconduct of
such Indemnitee.
(b) If for any reason the indemnification provided in paragraph (a) is
unavailable to any Indemnitee or insufficient to hold it harmless as
contemplated thereby then the EqualNet Companies shall contribute to the amount
paid or payable by the Indemnitee as a result of such loss, claim, liability or
expense in such proportion as is appropriate to reflect not only the relative
benefits received by the EqualNet Companies, on the one hand and such Indemnitee
on the other hand, but also the relative fault of the EqualNet Companies and the
Indemnitee, as well as any equitable considerations.
c. Survival of Representations. The representations and warranties
contained in this Agreement or in any certificate furnished hereunder shall
survive the Closing. Notwithstanding any investigation conducted by the
Purchaser before or after the Closing or the decision of the Purchaser to
complete the Closing, the Purchaser shall be entitled to rely upon the
representations and warranties set forth herein.
d. Prior Agreements. This Agreement and the other Documents constitute the
entire agreement between the parties concerning the subject matter hereof and
supersede any prior representations, understandings or agreements. There are no
representations, warranties, agreements, conditions or covenants, of any nature
whatsoever (whether express or implied, written or oral) between the parties
hereto with respect to such subject matter except as expressly set forth herein
or therein, and the Purchaser acknowledges not having relied upon any such
representations, warranties, agreements, conditions or covenants which may have
been previously made by or on behalf of the EqualNet Companies or any officers
or agents or any other person or entity.
e. Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
f. GOVERNING LAW. THIS AGREEMENT AND THE OTHER DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO ITS CHOICE OF LAW RULES.
g. Litigation. Each of the EqualNet Companies and the Purchaser hereby
waives trial by jury in any action or proceeding of any kind or nature in any
court in which an action may be commenced by or against it arising out of or
relating this Agreement or any of the other Documents. The EqualNet Companies
and the Purchaser hereby agree that the United States District Court for the
Southern District of New York, if a basis for jurisdiction exists, and otherwise
the courts of the State of New York located in the Borough of Manhattan, the
City of New York, shall have exclusive jurisdiction to hear and determine any
claims or disputes between any of the EqualNet Companies and the Purchaser,
pertaining directly or indirectly to this Agreement or to any of the Documents
or to any matter arising therefrom, provided that notwithstanding the
16
SCHEDULE 13D
CUSIP NO. 000000000 PAGE 23 OF 25
foregoing, Purchaser may bring any suit action or proceeding arising out of or
relating to this Agreement or any of the other Documents, in the courts of any
place where Purchaser can establish jurisdiction over the EqualNet Companies.
The parties hereto expressly submit and consent in advance to such jurisdiction
in any action or proceeding commenced in such courts, hereby waiving personal
service of the summons and complaint, or other process or papers issued therein
and agreeing that service of such summons and complaint or other process or
papers may be made by registered or certified mail addressed to such party at
its address provided herein. Each of the parties hereto waives any objection
that it may now or hereafter have to the laying of venue brought in the
aforementioned courts and hereby waives and agrees not to plead or claim in such
courts that any such action or proceeding brought in such court is brought in an
inconvenient forum.
h. Headings. Article and Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
i. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
j. Binding Effect. This Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
k. Publicity. Except as required by law or the rules of the Nasdaq Stock
Market, neither the EqualNet Companies nor the Purchaser shall, nor shall they
permit their respective stockholders, directors, officers or advisors to, issue
or cause the publication of any press release or make any other public
statement, filing or announcement with respect to this Agreement and the
transactions contemplated hereby without the prior consent of the other parties.
The Company and the Purchaser shall cooperate in issuing press releases or
otherwise making public statements with respect to this Agreement and the
transactions contemplated hereby, which cooperation shall include first
consulting the other party hereto concerning the requirement for, and timing and
content of, such public announcement.
17
SCHEDULE 13D
CUSIP NO. 000000000 PAGE 24 OF 25
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed by their respective duly authorized
officers, as of the date first above written.
EQUALNET COMPANIES:
EQUALNET HOLDING CORP.
By: /s/ Xxxx Xxxxxx
-----------------------------
President
EQUALNET CORPORATION
By: /s/ Xxxx Xxxxxx
-----------------------------
President
TELESOURCE, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------
President
EQUALNET WHOLESALE SERVICES, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------
President
PURCHASER:
THE XXXXX GROUP, INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------
Xxxxxxx Xxxxxx
Executive Vice President
18
EXHIBIT B
THE SECURITIES REPRESENTED HEREBY AND THE COMMON STOCK ISSUABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY OTHER
STATE. THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT NO.___ _____ SHARES
EQUALNET HOLDING CORP.
Warrant for Purchase of Common Stock
___________, 199__
This is to certify that ________________
(the "Holder"), with an address at _______________________________, is entitled
to purchase _______ shares of Common Stock, par value $.01 per share (the
"Warrant Stock"), of EqualNet Holding Corp., a Texas corporation (the
"Company"), at a price and subject to the terms and conditions contained
herein. This warrant is one of the warrants (collectively, "Warrants") of the
Company issued under a Notes and Warrants Purchase Agreement (the "Agreement")
dated as of February 3, 1997 between the Company, EqualNet Corporation,
TeleSource, Inc. and EqualNet Wholesale Services, Inc. and The Xxxxx Group,
Inc., a New Jersey corporation. Capitalized terms used herein and not
otherwise defined herein (including in Section 13 hereof) have the meanings
specified in the Agreement.
Section 1. Exercise of the Warrant
(a) This Warrant shall be exercisable at
any time subsequent to the date hereof until 5:00 P.M. Houston, Texas time on
December 31, 1999, at which time this Warrant shall expire.
(b) This Warrant may be exercised by the
Holder in whole or in part upon surrender of the Warrant with the duly
completed and executed subscription form attached hereto at the office of the
Company at its address set forth in Section 7, or at such other place in the
19
United States as the Company may designate for such purpose by notice
hereunder, upon payment to the Company of the Warrant Price (as hereinafter
defined in Section 2). Payment of the Warrant Price may be made:
(i) by delivery of Notes or
Refinancing Notes in an unpaid principal amount which
is, together with unpaid accrued interest, equal to
the Warrant Price;
(ii) by delivery of cash or a bank
cashier's or certified check payable in United States
currency to the order of the Company in the amount of
the Warrant Price or wire transfer of the Warrant
Price in immediately available funds; or
(iii) by delivery of a combination of
(i) and (ii).
(c) The Holder may also effect a
cashless exercise by surrender of this Warrant at such office with a duly
completed and executed cashless exercise form attached hereto (a "Cashless
Exercise"). In the event of a Cashless Exercise, the Holder shall exchange this
Warrant for that number of shares of Warrant Stock determined by multiplying
the number of shares of Warrant Stock as to which a Cashless Exercise is made
by a fraction, the numerator of which shall be the difference between the then
Current Price Per Share as of the close of business on the business day prior
to the date of exercise and the Warrant Price, and the denominator of which
shall be such Current Price Per Share.
(d) Stock issuable upon the exercise of
this Warrant shall be and will be deemed to be issued to the Holder or its
nominee as record owner of such shares as of the close of business on the date
on which this Warrant shall have been surrendered and the Warrant Price paid as
provided above (and any Notes or Refinancing Notes delivered as aforesaid shall
be deemed paid on such date) or Cashless Exercise is effected. Certificates
for such shares shall be delivered to the Holder as soon as practicable but not
later than seven business days after such exercise to the Holder or its agent
at an address in the State of New York provided to the Company by the Holder.
Section 2. Warrant Price and Warrant Stock
Adjustments.
(a) The price at which the shares of
Warrant Stock shall be purchasable upon the exercise of this Warrant shall be
$2.00 per share (the "Warrant Price"), subject to adjustments as hereinafter
set forth:
(i) If the Company shall issue or
sell Options or Convertible Securities (other than
Excluded Securities) for consideration less than the
Warrant Price at the date of such issue or sale, the
Warrant Price shall be adjusted down to an amount
that is equivalent to such consideration.
(ii) If the Company shall issue or
sell Common Stock (other than pursuant to Excluded
Securities or pursuant to Options or Convertible
Securities outstanding on the date hereof) for a
consideration per share less than the Warrant Price
at
20
the date of such issue or sale, the Warrant Price
shall be adjusted down to an amount that is
equivalent to such consideration.
(iii) The Warrant Price shall be
adjusted as provided in subsection 2(b)(v) hereof.
(iv) In the event that (A) at any
time Xxxx Xxxxxxx ceases to be and act as the chief
executive officer of the Company or (B) Xxxxxxx
Xxxxxx ceases to be and act as chief operating
officer of the Company, the Warrant Price shall be
adjusted down to that number that is equal to the
Warrant Price at the time of such failure or
cessation divided by two; provided that, if such
cessation is a result of a termination for good
cause, as determined in good faith by the Board of
Directors of the Company, or the death, disability or
incapacity of Xxxx Xxxxxxx or Xxxxxxx Xxxxxx,
respectively, no adjustment in the Warrant Price
shall be made under this subparagraph (iv); provided
further that no adjustments shall be made to the
Warrant Price with respect to (B) above after the
earlier to occur of the passage of one year from the
date of the Agreement or the date on which Xxxxxxx
Xxxxxx and the Company enter into an employment
agreement containing terms consistent with industry
practice and Xxxxxxx Xxxxxx'x position with the
Company and with a term of at least one year.
(v) The Warrant Price shall be
adjusted as provided in subsection 2(c) hereof.
(b) The number of shares purchasable
upon the exercise of this Warrant and the Warrant Price shall upon the
occurrence of any of the following events after the date hereof be subject to
adjustment as follows:
(i) In case the Company shall issue
shares of Common Stock, Options or Convertible
Securities (except Excluded Securities and shares of
Common Stock issuable pursuant to the exercise of
Excluded Securities), the number of shares of Warrant
Stock that immediately prior to such issuance the
Holder of this Warrant shall have been entitled to
purchase pursuant to this Warrant shall be increased
in direct proportion to the increase in the number of
shares of Common Stock outstanding immediately prior
to such issuance (in the case of the issuance of
Options or Convertible Securities, the number of
shares of Common Stock outstanding shall include the
maximum aggregate number of shares of Common Stock
issuable pursuant to such Options and Convertible
Securities assuming full exercisability thereof at
the time of issuance); provided that if such shares
of Common Stock, Options or Convertible Securities
(except Excluded Securities and shares of Common
Stock issuable pursuant to the Exercise of Excluded
Securities) are issued for a consideration per share
less than the Warrant Price at the date of such issue
or sale, the number of shares of Warrant Stock that
immediately prior to such issuance the Holder of this
Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased to the greater of
(A) that number of shares that is equal to the number
of shares of Warrant Stock that immediately prior to
such issuance the Holder of this Warrant shall have
been entitled to purchase pursuant to this Warrant
multiplied by a
21
fraction, the numerator of which is the Warrant Price
and the denominator of which is such consideration
per share, and (B) the number of shares of Warrant
Stock otherwise calculated under this paragraph (i).
(ii) In case the Company shall (A)
pay a dividend in Common Stock, (B) subdivide its
outstanding Common Stock, or (C) combine its
outstanding Common Stock into a smaller number of
shares, the number of shares of Warrant Stock which
immediately prior to such event the Holder of this
Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in
direct proportion to the increase or decrease,
respectively, in the number of shares of Common Stock
outstanding immediately prior to such event. An
adjustment made pursuant to this subsection 2(b)(ii)
shall become effective retroactively immediately
after the record date in the case of a dividend and
shall become effective immediately after the
effective date in the case of a subdivision or
combination.
(iii) In case the Company shall
distribute to all holders of its Common Stock
evidences of its indebtedness or other assets (other
than distributions payable in Common Stock, then in
each such case the number of shares of Warrant Stock
thereafter purchasable upon the exercise of this
Warrant shall be determined by multiplying the number
of shares of Warrant Stock theretofore purchasable
upon the exercise of this Warrant, by a fraction, of
which the numerator shall be the then Current Price
Per Share on the date of such distribution and of
which the denominator shall be such Current Price Per
Share less the then Fair Market Value of the portion
of the assets or evidences of indebtedness so
distributed to one share of Common Stock. Such
adjustment shall be made whenever any such
distribution is made, and shall become effective
retroactively immediately after the record date for
the determination of stockholders entitled to receive
such distribution.
(iv) No adjustment in the number of
shares purchasable hereunder shall be required unless
such adjustment would require an increase or decrease
of at least one percent (1%) in the number of shares
purchasable upon the exercise of this Warrant;
provided, however, that any adjustments which by
reason of this sentence are not required to be made
shall be carried forward and taken into account on
any subsequent adjustment.
(v) Whenever the number of shares
purchasable upon the exercise of this Warrant is
adjusted as herein provided in subsection 2(b)(ii) or
2(b)(iii) above, the Warrant Price per share payable
upon exercise of this Warrant shall be adjusted by
multiplying such Warrant Price immediately prior to
such adjustment by a fraction, of which the numerator
shall be the number of shares purchasable upon the
exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the
number of shares so purchasable immediately
thereafter.
(vi) In case of any capital
reorganization or reclassification of the capital
stock of the Company, the Holder of this Warrant
shall thereafter be entitled to
22
purchase, for the aggregate Warrant Price payable
hereunder in order to exercise this Warrant, the
Other Securities and property receivable upon such
capital reorganization or reclassification by a
holder of the number of shares of Common Stock which
this Warrant entitled the Holder hereof to purchase
immediately prior to such capital reorganization or
reclassification.
(vii) If the Company shall at any time
consolidate with or merge with or into another
corporation or entity or shall sell or transfer to
another entity all or substantially all of the assets
of the Company, the Holder of this Warrant will
thereafter have the right to purchase, for the
aggregate Warrant Price payable hereunder in order to
exercise this Warrant, the Other Securities and/or
property receivable by a holder of the number of
shares of Common Stock which this Warrant entitled
the Holder of this Warrant to purchase immediately
prior to such consolidation, merger, sale or
transfer, if any. The Company shall take such steps
in connection with such consolidation, merger, sale
or transfer, as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as
nearly as reasonably may be, in relation to Other
Securities or property thereafter deliverable upon
the exercise of this Warrant. The Company, the
successor corporation or the purchasing entity, as
the case may be, shall execute and deliver to the
Holder a supplemental Warrant so providing.
(viii) In the event that at any time,
as a result of an adjustment made pursuant to
subsection 2(a)(vi) or 2(a)(vii) above, the Holder of
this Warrant shall become entitled to purchase any
Other Securities or property other than Common Stock,
thereafter the number of such Other Securities or
property so purchasable upon exercise of this Warrant
and the Warrant Price shall be subject to adjustment
from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with
respect to the Common Stock contained in this Section
2.
(ix) The number of shares
purchasable upon the exercise of this Warrant shall
be adjusted as set forth in subsection 2(c)
(c) (i) In the event that the Company
becomes aware that it will fail to satisfy the quantitative continued listing
requirements of the Nasdaq National Market, the Company shall, as promptly as
practicable, give written notice (the "Delisting Notice") to the Holder and
request the Holder to exercise all or a portion of the Warrant. The Delisting
Notice shall set forth the dollar amount (the "Exercise Amount") that the
Company requires to continue satisfying the quantitative continued listing
requirements. Upon receipt of the Delisting Notice, the Holder shall have the
right at its sole option to exercise (or elect not to exercise) all or part of
the Warrant, provided that, as to that portion of the Warrant so exercised (up
to the Exercise Amount), the Warrant Price shall be adjusted down to that
number that is equal to the Warrant Price at the time of receipt of the
Delisting Notice divided by two (but not less than $1.00 per share), and the
number of shares purchasable under that portion of the Warrant so exercised at
the time of receipt of the Delisting Notice shall be increased by multiplying
such number by two (but not more than 3,000,000 shares). No change shall be
made as to the Warrant Price or the number of shares purchasable under all or
that portion of the Warrant that is not so exercised.
23
(As an example, if the Warrant Price is $2.00 and the number of shares
purchasable under the Warrant is 1,500,000 at the time the Holder receives a
Delisting Notice, and the Exercise Amount set forth in the Delisting Notice is
$1,000,000, the Holder shall have the option of exercising Warrants to purchase
1,000,000 shares at $1.00 per share, and, if the Holder elects to so exercise,
the remaining Warrant will continue to permit the Holder to purchase 1,000,000
shares at $2.00 per share).
(ii) If the Company fails to provide
the Delisting Notice to the Holder and the Company is subsequently suspended or
delisted from trading on the Nasdaq National Market, the Warrant Price shall be
adjusted down to that number that is equal to the Warrant Price at the time of
such suspension or delisting divided by two, and the number of shares
purchaseable under the Warrant at the time of such suspension or delisting
shall be increased by multiplying such number by two.
(d) For the purposes of this Section 2:
(i) the consideration for the issue
or sale of any Common Stock shall, irrespective of
the accounting treatment of such consideration,
(A) insofar as it
consists of cash, be computed
at the net amount of cash received by
the Company, after deducting any
expenses paid or incurred by the
Company and any commissions or
compensations paid or concessions or
discounts allowed to underwriters,
dealers or others performing similar
services in connection with such issue
or sale,
(B) insofar as it
consists of property (including
securities) other than cash, be
computed at the Fair Market Value
thereof at the time of such issue or
sale, and
(C) in case Common Stock,
Options or Convertible
Securities are issued or sold together
with other stock or securities or other
assets of the Company for a
consideration which covers both, be the
portion of such consideration so
received, computed as provided in
clauses (A) and (B) above, allocable to
such Common Stock, Options or
Convertible Securities all as
determined by an independent appraiser
reasonably satisfactory to both the
Holder and the Company;
(ii) Options and Convertible
Securities shall be deemed to have been
issued for a consideration per share
determined by dividing
(A) the total amount, if
any, received and receivable by
the Company as consideration for the
issue, sale, grant or assumption of the
Options or Convertible Securities in
question, plus the minimum aggregate
amount of additional consideration (as
set forth in the instruments relating
thereto, without regard to any
provision contained therein for a
subsequent
24
adjustment of such consideration to
protect against dilution) payable to
the Company upon the exercise in full
of such options or the conversion or
exchange of such Convertible Securities
or, in the case of Options for
Convertible Securities, the exercise
of such Options for Convertible
Securities and the conversion or
exchange of such Convertible
Securities, in each case computing
such consideration as provided in the
foregoing subsection 2(d)(i).
by
(B) the maximum number
of shares of Common Stock (as
set forth in the instruments relating
thereto, without regard to any
provision contained therein for a
subsequent adjustment of such number to
protect against dilution) issuable upon
the exercise of such Options or the
conversion or exchange of such
Convertible Securities; and
(iii) Common Stock issued as a result
of stock dividends, stock splits, etc., shall
be deemed to have been issued for no
consideration.
Section 3. Notification Upon the Occurrence of
Certain Events. (a) Upon any adjustment pursuant to Section 2 hereof, the
Company within 10 days thereafter shall give notice thereof to the Holder of
this Warrant, in the manner specified in Section 7 hereof, which notice shall
state the adjusted Warrant Price, the increased or decreased number of shares
or the adjusted other securities or property purchasable hereunder and the
method of calculation and the facts upon which such calculation is based.
(b) In case:
(i) the Company shall propose to
take a record of the holders of its Common Stock (or
other securities at the time receivable upon the
exercise of the Warrant) for the purpose of entitling
them to receive any dividend or distribution or any
right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other
securities, or to receive any other right, or
(ii) of any capital reorganization of
the Company, any reclassification of the capital
stock of the Company, any consolidation with or
merger of the Company with and into another
corporation or other entity, or any conveyance of all
or substantially all of the assets of the Company to
another entity, or
(iii) of any voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Holder of this Warrant, at least 30 days in advance of any of the foregoing
actions, a notice specifying, as the case may be, (y) the date on which a
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend,
25
distribution or right, or (z) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation
or winding-up is to take place, and the time, if any, as to which the holders
of record of Common Stock (or such other securities at the time receivable upon
the exercise of the Warrant) shall be entitled to exchange their shares of
Common Stock (or such other securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger.
Section 4. Reservation of Warrant Stock;
Representations.
The Company covenants that it will at all
times reserve and keep available out of its authorized shares of stock, solely
for the purpose of issue upon exercise of this Warrant as herein provided, such
number of shares of Common Stock or Other Securities as shall then be issuable
upon the exercise of the Warrant. The Company represents that all shares of
Warrant Stock to which the Holders of the Warrants shall be entitled upon the
exercise thereof (i) are duly authorized by the Articles of Incorporation of
the Company in accordance with the laws of the State of Texas, (ii) have been
duly authorized to be issued upon the exercise of the Warrants from time to
time in whole or in part, (iii) will be, when issued in accordance with the
terms of the Warrants, duly authorized and validly issued and fully paid and
nonassessable and free and clear of all liens and rights of others whatsoever
(other than liens and rights of others claiming by, through or under the
Holder) and (iv) will not be at the time of such exercise subject to any
restrictions on transfer or sale except as provided by applicable securities
laws or otherwise herein.
Section 5. Registration Rights.
(a) As promptly as practicable after the
Closing Date, the Company will file a registration statement (the "Shelf
Registration") with the Commission under the Securities Act permitting the
disposition of the Warrant Stock in accordance with the intended methods
thereof as specified in writing by the Purchaser. The Company will use its
commercially reasonable efforts to have the Shelf Registration declared
effective by the Commission as soon as practicable after the filing date and to
at all times maintain the effectiveness thereof. The Holders of Warrants and
Warrant Stockholders representing (assuming exercise of all Warrants) more than
50% of the Warrant Stock ("Majority Holders") may, at any time, request that
the Company supplement or amend the Shelf Registration to effect an
underwritten offering of the Warrant Stock by one or more underwriters selected
by the Majority Holders; provided that the Majority Holders may only make such
request a total of three (3) times. The Company will as promptly as
practicable supplement or amend such Shelf Registration to the extent required
to permit the disposition in accordance with such request and use its
commercially reasonable efforts to have the amendment declared effective by the
SEC as soon as practicable after the filing date. The Company shall enter into
an underwriting agreement in customary form used by such underwriter or
underwriters, which shall include, among other provisions, contribution and
indemnities of the Company and the Holders to the effect and to the extent
provided in this Section 5. The Warrant Stockholders whose Warrant Stock is to
be distributed by such underwriters shall be parties to such underwriting
agreement. No Warrant Stockholder may
26
participate in such underwritten offering unless such Warrant Stockholder
agrees to sell its Warrant Stock on the basis provided in such underwriting
agreement and completes and executes all questionnaires, powers of attorney,
indemnities and other documents reasonably required under the terms of such
underwriting agreement. The obligations of the Company under this Section 5
(a) shall terminate on the earlier to occur of (i) the third anniversary of the
date of this Warrant and (ii) at such time as all Holders and Warrant
Stockholders may transfer, without restriction whatsoever, all of the Warrant
Stock held by them or issuable to them upon conversion of Warrants held by
them, pursuant to Rule 144(k) promulgated under the Securities Act.
(b) At any time that the Shelf
Registration is not available for any reason or not required pursuant to
Section 5(a), upon written notice ("Registration Notice") from the Majority
Holders to the Company requesting that the Company effect the registration
under the Securities Act of at least 15% of the Warrant Stock or any lesser
percentage so long as the anticipated proceeds from such offering exceed
$500,000, which Registration Notice shall specify the intended method or
methods of disposition of such Warrant Stock, the Company shall use its
commercially reasonable efforts to effect (at the earliest practicable date)
the registration under the Securities Act of such Warrant Stock (each, a
"Demand Registration") for disposition in accordance with the intended method
or methods of disposition stated in such Registration Notice; provided that a
Holder shall have the right to deliver Registration Notices to effect three (3)
demand registrations pursuant to this Section 5(b) and no more without regard
to the number of underwritten offerings requested pursuant to Section 5(a)
hereof.
(c) Whenever the Company proposes to
file a Registration Statement with the Commission pursuant to the Securities
Act in connection with a public offering by the Company of its Common Stock,
whether for the Company's own account or for the account of others, other than
a Registration Statement on Form S-4 or Form S-8 or any successor forms thereto
(a "Piggyback Registration"), the Company will give prompt written notice to
all Holders and Warrant Stockholders and will include in such Piggyback
Registration all Warrant Stock with respect to which the Company has received
written requests for inclusion within 20 days after the Company's mailing of
such notice; provided that if the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number that can be sold in such offering, at a
price reasonably related to fair value, the Company will allocate the
securities to be included first to the Company, then on a pro rata basis among
the Holders and Warrant Stockholders and any other person with registration
rights not subordinated to those of the Warrant Stockholders.
(d) If the proposed filing of a
Registration Statement of which the Company gives notice pursuant to Section
5(c) hereof is for a registered public offering involving an underwriting, the
Company shall so advise the Holders and the Warrant Stockholders as part of the
written notice given pursuant to Section 5(c). In such event, if a Warrant
Stockholder proposes to distribute Warrant Stock through such underwriting,
such Warrant Stockholder shall (together with the Company and the other holders
of securities of the Company distributing their securities through such
underwriting) enter into an underwriting agreement in such form as shall have
been negotiated and agreed to by the Company with the underwriter or
underwriters
27
selected for such underwriting by the Company. The Company will give the
Holders and the Warrant Stockholders notice (the "Pricing Notice") of the
anticipated range of the public offering price not later than two weeks prior
to the anticipated effective date of any Registration Statement which includes
Warrant Stock to be sold for the account of a Holder or Warrant Stockholder. A
Holder or Warrant Stockholder may in its discretion withdraw any time prior to
five days after receipt of the Pricing Notice, but may not thereafter withdraw
any Warrant Stock, unless the public offering price is below the lowest price
in the range of anticipated public offering prices specified in the Pricing
Notice. In order to facilitate the execution of the underwriting agreement and
the closing thereunder, a Holder or Warrant Stockholder will, at the request of
the managing underwriter, enter into a custody agreement and power of attorney
consistent with the preceding sentence.
(e) Notwithstanding the foregoing, if,
at any time after giving written notice of its proposal to file a Registration
Statement pursuant to Section 5(c) hereof and prior to the effective date of
such Registration Statement, the Company shall determine for any reason not to
register the securities proposed to be covered thereby, the Company may, at its
election, give written notice of such determination to the Holders and Warrant
Stockholders and upon the withdrawal of such Registration Statement shall have
no further obligation to register any Warrant Stock held by the Holders or
Warrant Stockholders in connection with such registration. In the event of
such withdrawal by the Company, the Company shall promptly reimburse the
Holders and Warrant Stockholders for the reasonable fees and expenses of their
own legal counsel and other reasonable expenses incurred in connection with
such registration.
(f) Subject to subsection 5(g)(ii)
below, in connection with any registration effected hereunder, the Company
shall bear all expenses incurred by it in connection therewith and in
connection with the related distribution, which shall include, without
limitation, the following costs and expenses: (i) printing and engraving
costs; (ii) transfer agent's and registrar's fees; (iii) legal and accounting
fees and expenses (provided that such expenses shall include only one counsel
for all selling Warrant Stockholders); (iv) registration and filing fees with
the Commission and any other regulatory or self-regulatory agencies or bodies;
and (v) reasonable costs of investigation of matters subject to disclosure in
the Registration Statement, including the fees and appraisers or other experts.
Notwithstanding the foregoing, and subject to subsection 5(g)(i) below, in
connection with any registration effected hereunder, a Warrant Stockholder
shall bear all of his own expenses, including, without limitation, any
underwriting commissions or discounts in respect of the sale of its Warrant
Stock and the legal fees of its own counsel.
(g) In connection with any Registration
Statement filed hereunder in which the Holder participates as a selling
stockholder, the following provisions as to indemnification shall apply:
(i) The Company shall indemnify and
hold harmless the Warrant Stockholders against any losses, claims, damages or
liabilities to which he may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any
28
preliminary prospectus, the prospectus or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are
made, not misleading; and the Company will reimburse any legal or other
expenses reasonably incurred by the Warrant Stockholders in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage, liability, action or
proceeding arises out of or is based upon any untrue statement or alleged
untrue statement, or upon any omission or alleged omission, of any material
fact contained in the Registration Statement, any preliminary prospectus, the
prospectus or any such amendment or supplement, to the extent that such fact
was included or omitted in reliance upon and in conformity with information
furnished to the Company by or through such Warrant Stockholder specifically
for use in the preparation thereof. This indemnity will be in addition to any
liability which the Company may otherwise have.
(ii) A Warrant Stockholder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement and each person, if any, who
controls the Company, within the meaning of the Securities Act or otherwise,
against any losses, claims, damages or liabilities to which it may become
subject under the Securities Act or otherwise insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, the prospectus or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading; and a Warrant Stockholder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that the
Holder will be liable in each case under this subsection 5(g)(ii) to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the prospectus or any such amendment or
supplement in reliance upon and in conformity with information furnished to the
Company by or through such Warrant Stockholder specifically for use in the
preparation thereof. This indemnity will be in addition to any liability which
the Warrant Stockholder may otherwise have.
(iii) Promptly after receipt by an
indemnified party pursuant to the foregoing provisions of notice of the
commencement of any action or proceeding, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party hereunder,
notify the indemnifying party of the commencement thereof, provided that the
omission to so notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party under this
Agreement or otherwise unless such failure results in material prejudice to the
indemnifying party. In case any such action or proceeding is brought against
any indemnified party, and such party notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein
29
and, to the extent that it may wish, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party or its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party hereunder for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that if an indemnified party
determines in good faith that it has existing or potential claims against, or
other conflicts with, the indemnifying party, the indemnifying party may not
assume the defense of such indemnified party but shall remain liable for the
separate legal and other expenses of such indemnified party incurred in
connection therewith. An indemnifying party shall not be liable for any
settlement of any action or claim affected without its written consent thereto.
Section 6. Transfer, Exchange or Replacement of
Warrant, Etc.
(a) Subject to compliance with the
transfer restrictions set forth herein and in the Agreement, the Holder may
surrender this Warrant at the office of the Company determined in accordance
with Section 7 hereof for transfer or exchange. Within a reasonable time after
notice to the Company from a Holder of its intention to make such transfer or
exchange and without expense (other than applicable transfer taxes, if any) to
such Holder, the Company shall issue in exchange therefor another Warrant or
Warrants containing the same provisions and in the aggregate for the same
number of shares of Common Stock as the Warrant so surrendered. Subject to the
restrictions on transfer set forth in the Agreement, each new Warrant shall be
registered in the name of such person or entity as the Holder of the
surrendered Warrant may designate. Warrants issued upon any transfer or
exchange shall be only in authorized denominations, which shall be for 1,000
shares of Common Stock and amounts in excess thereof.
(b) Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
this Warrant, and in the case of any such loss, theft, or destruction upon
delivery of any indemnity agreement of the Holder as shall be reasonably
satisfactory to the Company, or in the case of such mutilation upon surrender
and cancellation of this Warrant, the Company will issue at the expense of the
Company in lieu thereof a new Warrant of like tenor for the same number of
shares of Common Stock.
Section 7. Notices
(a) Any notice hereunder shall be given
to the Company in writing and such notice and any payment by the Holder of this
Warrant hereunder shall be deemed duly given or made only upon receipt thereof
at the Company's office at EqualNet Plaza, 0000 Xxxx Xxxxxx Xxxx Xxxxx,
Xxxxxxx, XX 00000-0000 or at such other address as the Company may designate
by notice to the Holder. A copy of the notice shall be given to Fulbright &
Xxxxxxxx L.L.P., 0000 XxXxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000-0000, to the
attention of Xxxxxx X. Xxxx, Xx.
(b) Any notice or other communication to
the Holder of this Warrant or to a Warrant Stockholder upon exercise of this
Warrant shall be in writing and such notice shall be
30
deemed duly given or made only upon receipt thereof at the address specified
herein or such other address as the Holder or a Warrant Stockholder may
designate by notice to the Company.
Section 8. Waiver.
Neither this Warrant nor any term thereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
Section 9. Fractional Shares.
Nothing contained herein shall obligate the
Company to issue fractional shares of its securities. Any exercise of this
Warrant shall be for the purpose of whole shares only. If any fraction of a
share of stock would be, except for this provision, issuable on the exercise of
this Warrant, the Company may at its option purchase such fraction for an
amount equal in cash to the Current Price Per Share of such fraction.
Section 10. GOVERNING LAW.
THIS WARRANT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO ITS CHOICE OF LAW RULES.
Section 11. Successors and Assigns.
All of the provisions of this Warrant shall
be binding upon the Company and its successors and assigns.
Section 12. No Rights as Stockholder; Limitation of
Liability.
This Warrant shall not entitle the Holder
hereof to any of the rights of a stockholder of the Company. No provision
hereof, in the absence of affirmative action by the Holder hereof to purchase
shares of Warrant Stock, and no mere enumeration herein of the rights or
privileges of the Holder hereof, shall give rise to any liability of such
Holder for the Warrant Price or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
Section 13. Definitions.
As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Commission: the Securities and Exchange
Commission or any other Federal agency at the time administering the Securities
Act.
31
Common Stock: the class of stock designated
as Common Stock, par value $.01 per share, of the Company on the date of this
Agreement. For purposes of Section 2 only, Common Stock shall also include any
capital stock with voting rights of the Company.
Convertible Securities: any evidences of
indebtedness, shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Common Stock.
Current Price Per Share: the Current Trading
Price Per Share or, if no Current Trading Price Per Share is available, Fair
Market Value.
Current Trading Price Per Share: the
"Current Trading Price Per Share" of any security, including the Common Stock
(a "Security"), on any date shall be deemed to be the average of the daily
closing prices (as such term is hereinafter defined) per share of such Security
for the 20 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date. The "closing price" for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange but is
included in the Nasdaq Stock Market, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices, in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day. The
term "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which The New York Stock Exchange is closed.
Excluded Securities: the 1,050,000 shares of
Common Stock reserved for issuance pursuant to the EqualNet Holding Corp.
Employee Stock Option and Restricted Stock Plan and the EqualNet Holding Corp.
Non-Employee Director Stock Plan and any additional shares of Common Stock
issuable pursuant to any antidilution provisions thereof; the warrants to
purchase not more than 1,000,000 shares of Common Stock issuable to certain
agents of the Company pursuant to agent agreements substantially in the form
delivered to the Holder prior to the date of the Agreement; the 100,000 shares
of Common Stock issuable to Creative Communications, Inc. pursuant to a warrant
dated November 12, 1996, and not more than 150,000 shares of Common Stock that
the Company may issue in future periods for purposes of management incentive
compensation to officers and employees.
Fair Market Value: the amount a willing
buyer under no compulsion to buy and in possession of all relevant information
would pay a willing seller under no compulsion to sell.
Holder: the person or entity in whose name
this Warrant is registered.
32
. Holders: the persons or entities in whose
name this Warrant and other Warrants are registered.
Options: rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
Other Securities: any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holders of the Warrants at any time shall be
entitled to receive, or shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 2 or otherwise.
Securities Act: the Securities Act of 1933,
as amended.
Warrant Stockholders: the persons or
entities in whose names Warrant Stock is registered unless such shares have
been sold pursuant to a Registration Statement filed pursuant to Section 5
hereof or pursuant to Rule 144 under the Securities Act.
33
IN WITNESS WHEREOF, EQUALNET HOLDING CORP.
has caused this Warrant to be signed in its corporate name by its President as
of the day and year above written.
EQUALNET HOLDING CORP.
By
------------------------
President
34
ASSIGNMENT
(To be Executed by the Holder if such Holder Desires to
Transfer the Within Warrant)
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
--------------------------
(Name)
--------------------------
(Address)
the right to purchase ____ shares of Common Stock, covered by the within
Warrant and does hereby irrevocably constitute and appoint ________________
Attorney to make such transfer on the books of the Company maintained for the
purpose, with full power of substitution.
Signature
------------------
Dated: , 19
----------- --
NOTICE
The signature of the foregoing Assignment must
correspond to the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change whatsoever.
35
SUBSCRIPTION FORM
(TO BE EXECUTED UPON EXERCISE PURSUANT TO SECTION 1(b)(i), (ii) OR (iii))
TO: EQUALNET HOLDING CORP.
1. The undersigned Holder of the attached original, executed
Warrant to purchase Common Stock of EqualNet Holding Corp., a Texas corporation
(the "Company"), hereby elects to exercise its purchase right under such
Warrant with respect to _________ shares of Warrant Stock.
2. The undersigned Holder elects to pay the aggregate
exercise price for such Warrant Shares in the following manner:
by delivery of Notes or Refinancing Notes in a
----- principal amount plus unpaid accrued interest of
$__________;
by lawful money of the United States or the
----- enclosed bank cashier's check or certified check
to the order of the Company in the amount of
$________;
by wire transfer of United States funds to the
----- account of the Company in the amount of
$____________, which transfer has been made
before or simultaneously with the delivery of
this Subscription Form pursuant to the
instructions of the Company; or
by the combination of the foregoing indicated
----- above or on the attached sheet.
3. Please issue a stock certificate or certificates
representing the appropriate number of shares of Warrant Stock in the name of
the undersigned as is specified below:
Name:
----------------------------------------------------------
Address:
----------------------------------------------------------
----------------------------------------------------------
Tax Identification No.:
----------------------------------------------
HOLDER:
------------------------------------------
By:
----------------------------------------------
Its:
---------------------------------------------
Date:
--------------------------------------------
NOTE: The signature of the Warrant Holder must conform in all respects to
the name of the Warrant Holder as specified on the face of the Warrant, without
alteration, enlargement or any change whatsoever.
