EXHIBITS 10.25
AND 10.34
Draft of 9/3/98
ANNEX I ANNEX I
TO TO
NOTE PURCHASE NOTE PURCHASE
AND EXCHANGE AGREEMENT
AGREEMENT
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"). THE ISSUANCE TO THE HOLDER OF THIS NOTE OF THE SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE AND IN PAYMENT OF INTEREST ON
THIS NOTE ARE NOT COVERED BY A REGISTRATION STATEMENT UNDER THE 1933 ACT. THIS
NOTE HAS BEEN ACQUIRED, AND SUCH SHARES MUST BE ACQUIRED, FOR INVESTMENT ONLY
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF
THE RESALE THEREOF UNDER THE 1933 ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
EQUALNET COMMUNICATIONS CORP.
6% SENIOR SECURED CONVERTIBLE NOTE DUE 2001
No. 2 $1,500,000.00
New York, New York
September 4, 1998
FOR VALUE RECEIVED, EQUALNET COMMUNICATIONS CORP., a Texas corporation
(hereinafter called the "Company"), hereby promises to pay to ▇▇▇▇▇▇ GROUP LLC,
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or registered assigns (the
"Holder") or order, the sum of One Million Five Hundred Thousand Dollars
($1,500,000.00), on the Maturity Date, and to pay interest on the unpaid
principal balance hereof at the Applicable Rate from the date hereof, until the
same becomes due and payable, whether at maturity or upon acceleration or by
repurchase in accordance with the terms hereof or otherwise. Any amount of
principal of or interest on this Note which is not paid when due shall bear
interest at the Default Rate from the due date thereof until the same is paid
("Default Interest"). Interest shall be payable in arrears on each Interest
Payment Date, commencing on November 15, 1998, on the principal amount
outstanding on such date. Interest on this Note shall be computed on the basis
of a 360-day year of 12 30-day months and actual days elapsed. No interest
shall be payable on an Interest Payment Date on any portion of the principal
amount of this Note which shall have been converted or redeemed prior to such
Interest Payment Date so long as the Company shall have complied in full with
its obligations with respect to such conversion or redemption.
All payments of principal of and premium, if any, and interest on this
Note shall be made in lawful money of the United States of America, or, at the
option of the Company and subject to the provisions of this Note, interest
payable on the Interest Payment Dates may be paid in whole or in part in
Interest Notes. All cash payments shall be made by wire transfer of immediately
available funds to such account as the Holder may from time to time designate by
written notice in accordance with the provisions of this Note. Whenever any
amount expressed to be due by the terms of this Note is due on any day which is
not a Business Day, the same shall instead be due on the next succeeding day
which is a Business Day and, in the case of any Interest Payment Date which is
not the date on which this Note is paid in full, the extension of the due date
thereof shall not be taken into account for purposes of determining the amount
of interest due on such date. Certain capitalized terms used in this Note are
defined in Article VI.
The obligations of the Company under this Note shall rank in right of
payment on a parity with all other unsubordinated obligations of the Company for
indebtedness for borrowed money or the purchase price of property. This Note is
issued pursuant to the Note Purchase Agreement and the Holder of this Note and
this Note are subject to the terms of the Note Purchase Agreement. The
obligations of the Company under this Note are secured pursuant to, and the
Holder of this Note is entitled to the benefits of, the Security Agreement.
This Note is one of the several 6% Senior Secured Convertible Notes due 2001 in
the original aggregate principal amount of $3,000,000.00 issued by the Company
pursuant to the Master Purchase Agreement, the Note Purchase Agreement and the
Other Note Purchase Agreements.
The following terms shall apply to this Note:
ARTICLE I
INTEREST NOTES; NO PREPAYMENT
1.1 ISSUANCE OF INTEREST NOTES IN LIEU OF CASH INTEREST. (a) If the
Company exercises its option to make a payment of interest on this Note wholly
or partly in Interest Notes (herein sometimes called the "Interest Note Payment
Option"), the issuance of Interest Notes upon such exercise of the Interest Note
Payment Option shall have been authorized by the Board of Directors of the
Company.
(b) The Company shall not be permitted to exercise the Interest Note
Payment Option with respect to any payment of interest on this Note if:
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(i) the number of shares of Common Stock authorized, unissued and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to permit the conversion in full of the Interest Notes to be
so issued;
(ii) the issuance or delivery of such Interest Note or the public
resale of the shares of Common Stock issuable upon conversion of such
Interest Note by the Holder would require registration with or approval of
any governmental authority under any law or regulation, and such
registration or approval has not been effected or obtained or is not in
effect or the Registration Statement is unavailable for use by the Holder
for the resale of such shares of Common Stock; provided, however, that
this limitation shall not be deemed to be applicable prior to the date
which is 105 days after the Issuance Date, if the Registration Statement is
on Form S-3, or the date which is 120 days after the Issuance Date, if the
Registration Statement is on Form S-1, if this limitation otherwise would
be applicable solely because the Registration Statement shall not yet have
been declared effective, so long as the Company shall be in compliance in
all material respects with its obligations under the Registration Rights
Agreement;
(iii) the shares of Common Stock issuable upon conversion of such
Interest Note shall not at the time of issuance have been authorized for
listing, upon official notice of issuance, on the principal securities
exchange on which the Common Stock is then listed and traded;
(iv) an Event of Default has occurred and is continuing;
(v) any Repurchase Event shall have occurred and the Holder or the
holder of any Other Note shall have executed repurchase rights by reason
thereof and the Company shall not have paid the Repurchase Price hereof or
the repurchase price thereof; or
(vi) the Common Stock is neither (i) listed or admitted for trading on
a national securities exchange nor (ii) quoted on the Nasdaq or the Nasdaq
SmallCap.
(c) If the Interest Note Payment Option is elected, the Company shall
issue and deliver or cause to be delivered to the Holder on or before the due
date of such interest payment an Interest Note, duly executed on behalf of the
Company, in the principal amount equal to the total amount of lawful money of
the United States of America which the Holder would receive if the aggregate
amount of interest on this Note which is being paid in such Interest Note were
being paid in such lawful money; provided, however, that if in connection with
any such election the Company shall have failed to deliver such Interest Note to
the Holder within three Trading Days after the applicable Interest Payment Date,
then the Company shall not be entitled to use the
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Interest Note Payment Option in respect of such Interest Payment Date, such cash
interest shall be immediately due and payable and the Company shall pay the
interest for such Interest Payment Date in cash with Default Interest, at the
rate provided in this Note, from such Interest Payment Date until paid.
(d) If the Company exercises the Interest Note Payment Option with
respect to a payment of interest on this Note, the Company shall deliver to the
Holder, on or prior to the date on which such Interest Note is to be received by
the Holder, a Company Certificate setting forth (i) the total amount of the
interest payment to which the Holder is entitled, (ii) the portion of the
interest payment being made in an Interest Note and (iii) a brief statement that
none of the conditions set forth in Section 1.1(b) has occurred and is existing.
Each Interest Note shall be issued in the name of the Holder or its nominee. In
addition, on or before the date of issuance of each Interest Note the Company
shall notify the Transfer Agent of the issuance of such Interest Note, the
principal amount thereof and the name of the registered holder thereof.
(e) Each Interest Note, when issued pursuant to and in compliance with
this Section 1.1, shall be, and for all purposes shall be deemed to be, duly
authorized and a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, and the shares of Common Stock
issuable upon conversion of such Interest Note, when so issued, shall be, and
for all purposes shall be deemed to be, validly issued, fully paid and
nonassessable shares of Common Stock; the issuance and delivery of such Interest
Note and such shares is in all respects authorized; and the issuance of such
Interest Note will be, and for all purposes shall be deemed to be, in full
discharge and satisfaction of the Company's obligation to pay the interest on
this Note to which such Interest Note relates.
1.2 OPTIONAL REDEMPTION. If (1) the Company shall be in compliance
in all material respects with its obligations to the Holder and the holders of
the Other Notes (including, without limitation, its obligations under the
Transaction Documents), (2) on the date the Company Optional Redemption Notice
is given and at all times until the Redemption Date, the Registration Statement
is effective and available for use by the Holder and each holder of Other Notes
for the resale of shares of Common Stock acquired by the Holder upon conversion
of this Note or by such other holders upon conversion of the Other Notes and (3)
no Repurchase Event shall have occurred with respect to which, on the date a
Redemption Notice is to be given or on the Redemption Date, the Holder or any
holder of Other Notes shall have exercised optional repurchase rights under
Sections 5.1 and 5.2 (or the comparable provisions of any Interest Note or Other
Note) by reason of such Repurchase Event and the Company shall not have paid the
Repurchase Price to the Holder or the repurchase price has not been paid to such
holder, as the case may be, then the Company shall have the right, exercisable
by giving a Company Optional Redemption Notice not less than 30 days or more
than 60 days prior to the Redemption Date the Holders, at any time to redeem all
or from time to
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time to redeem any part of the outstanding principal amount of this Note in
accordance with this Section 1.2. The Company Optional Redemption Notice shall
state that: (1) the Company is exercising its right to redeem this Note in
accordance with this Section 1.3, (2) the principal amount of this Note to be
redeemed, (3) the Redemption Event Redemption Price and (4) the Redemption Event
Redemption Date. If the Company shall redeem less than all the outstanding
principal amount of this Note, such redemption shall be made as nearly as
practical pro rata from the Holder and all holders of Other Notes. Any Company
Optional Redemption Notice under this Section 1.2 shall be given to the Holder
at its address appearing on the records of the Company. On the Redemption Date
(or such later date as the Holder surrenders this Note to the Company), the
Company shall make payment of the applicable Redemption Price to the Holder in
immediately available funds to such account as specified by the Holder in
writing to the Company at least one Business Day prior to the Redemption Date.
The Holder shall be entitled to convert this Note or the portion hereof to be
redeemed in accordance with Article II through the day prior to the Redemption
Date and (2) if the Company shall fail to pay the Redemption Price of this Note
or the portion hereof to be redeemed when due, at any time after the due date
thereof until such date as the Company pays the Redemption Price of this Note or
the portion hereof to be redeemed. This Note or any portion hereof as to which
the Holder exercises the right of conversion pursuant to Article II or the
optional repurchase right pursuant to Sections 5.1 and 5.2 may be redeemed by
the Company pursuant to this Section 1.2 on or after the date of exercise of
such conversion right or optional repurchase right, as the case may be,
regardless of whether the Company Optional Redemption Notice shall have been
given prior to, or on or after, the date of exercise of such conversion right or
optional redemption right, as the case may be.
1.3 OPTIONAL REDEMPTION BY COMPANY FOR OPTIONAL REDEMPTION EVENT.
(a) If an Optional Redemption Event occurs the Company shall have the right to
redeem at any one time with respect to such Optional Redemption Event all of the
outstanding principal amount of this Note at the Redemption Event Redemption
Price pursuant to this Section 1.3 on any Redemption Event Redemption Date, so
long as (x) on the date the Redemption Event Redemption Notice is given and at
all times to and including the applicable Redemption Event Redemption Date, no
Event of Default has occurred and is continuing and no Repurchase Event has
occurred with respect to which the Holder or the holder of any Other Note has
exercised repurchase rights pursuant to Sections 5.1 and 5.2 (or the comparable
provisions of any Interest Note or Other Note) and the Repurchase Price has not
been paid to the Holder or the repurchase price has not been paid to such
holder, as the case may be, and (y) on the date a Redemption Event Redemption
Notice is given and at all times to and including the applicable Redemption
Event Redemption Date, the Company is in compliance in all material respects
with its obligations to the Holder and the holders of the Other Notes
(including, without limitation, its obligations under the Transaction
Documents). In order to exercise its right of redemption under this Section
1.3, the Company shall
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give a Redemption Event Redemption Notice to the Holder not later than ten days
after an Optional Redemption Event occurs and not less than 20 days or more than
30 days prior to the Redemption Event Redemption Date stating that: (1) the
Company is exercising its right to redeem this Note in accordance with this
Section 1.3, (2) the principal amount of this Note to be redeemed, (3) the
Redemption Event Redemption Price and (4) the Redemption Event Redemption Date.
On the applicable Redemption Event Redemption Date (or such later date as the
Holder surrenders this Note to the Company) the Company shall pay to or upon the
order of the Holder by wire transfer of immediately available funds to such
account as shall be specified for such purpose by the Holder at least one
Business Day prior to the Redemption Event Redemption Date an amount equal to
the Redemption Event Redemption Price of this Note.
(b) The Company shall not be entitled to give a Redemption Event
Redemption Notice or to redeem any portion of this Note with respect to which
the Holder has given a Conversion Notice. Notwithstanding the giving of a
Redemption Event Redemption Notice, the Holder shall be entitled to convert this
Note in accordance with the terms of this Note by giving a Conversion Notice at
any time prior to the later of (1) the date which is one Business Day prior to
the applicable Redemption Event Redemption Date and (2) the date on which the
Company pays the Redemption Event Redemption Price of this Note to the Holder.
The Redemption Event Redemption Price set forth in an Redemption Event
Redemption Notice shall be adjusted to reflect the reduced outstanding principal
amount of this Note and related accrued interest and Default Interest on the
Redemption Event Redemption Date resulting from any permitted conversions of
this Note after the Redemption Event Redemption Notice is given.
(c) Any redemption of this Note pursuant to this Section 1.3 shall be
made at the same time as a redemption by the Company of the Interest Notes and
the Other Notes. The Company shall not redeem any of the Interest Notes or the
Other Notes pursuant to the provisions thereof similar to this Section 1.3 or
repurchase or otherwise acquire any of the Interest Notes or the Other Notes
(other than a mandatory redemption pursuant to provisions of the Interest Notes
or the Other Notes comparable to Section 2.4) unless the Company offers
simultaneously to redeem, repurchase or otherwise acquire a pro rata portion
(based on outstanding principal amount) of this Note for cash at the same price
as the Interest Note or Interest Notes or the Other Note or Other Notes.
1.4 NO PREPAYMENT. Except as otherwise specifically provided in
Section 1.2 and 1.3, this Note may not be prepaid, redeemed or repurchased at
the option of the Company prior to September 4, 2001.
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ARTICLE II
CONVERSION; CERTAIN MANDATORY REDEMPTION
RIGHTS AND OBLIGATIONS
2.1 CONVERSION RIGHT. Upon the terms and subject to the limitations
contained herein, the Holder shall have the right at any time on or after the
earlier of (x) the SEC Effective Date and (y) the date which is 90 days on and
after the Issuance Date, and in either such case at any time prior to the
payment in full of this Note, to convert at any time all or from time to time
any part of the outstanding and unpaid principal amount of this Note, and
accrued and unpaid interest on the principal amount to be converted and Default
Interest on any such interest, into fully paid and nonassessable shares of
Common Stock at the Conversion Price in effect on the date the applicable
Conversion Notice is given in accordance with this Note. Notwithstanding any
other provision of this Note, in no event shall the Holder be entitled at any
time to convert any portion of the principal amount of this Note (and accrued
and unpaid interest thereon and Default Interest on any such interest) in excess
of that portion of the principal amount of this Note (and accrued and unpaid
interest thereon and Default Interest on any such interest) upon conversion of
which the sum of (1) the number of shares of Common Stock beneficially owned by
the Holder (including shares of Common Stock beneficially owned by all
Aggregated Persons) (other than shares of Common Stock deemed beneficially owned
by the Holder or any Aggregated Person of the Holder through the ownership of
(x) the unconverted portion of the principal amount of this Note, any Interest
Notes and the Other Notes and accrued and unpaid interest thereon and on any
such interest and (y) the unconverted or unexercised portion of the Warrants or
any instrument which contains limitations similar to those set forth in this
sentence) and (2) the number of shares of Common Stock issuable upon conversion
of the portion of the principal amount of this Note and accrued and unpaid
interest thereon and Default Interest on any such interest with respect to which
the determination in this sentence is being made, would result in beneficial
ownership by the Holder and all Aggregated Persons of the Holder of more than
4.9% of the outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the 1934 Act, and Regulation 13D-G thereunder, except as
otherwise provided in clause (1) of the immediately preceding sentence. For
purposes of the second preceding sentence, the Company shall be entitled to
rely, and shall be fully protected in relying, on any statement or
representation made by the Holder to the Company in connection with a particular
conversion, without any obligation on the part of the Company to make any
inquiry or investigation or to examine its records or the records of any
transfer agent for the Common Stock and without any liability of the Company
with respect thereto. The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing the sum of (1) that
portion of the principal amount of this Note to be converted plus (2) accrued
and unpaid interest on such principal amount to the date the Conversion Notice
for such conversion is
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given plus (3) accrued and unpaid Default Interest, if any, on the amount
referred to in the immediately preceding clause (2) to the date such Conversion
Notice is given, by the Conversion Price in effect on the date the Conversion
Notice for such conversion is given.
2.2 AUTHORIZED SHARES. The Company covenants that, during the period
the conversion rights exist, the Company will reserve from its authorized,
unissued and otherwise unreserved Common Stock free from preemptive and similar
rights 13,043,468 shares (such amount to be subject to equitable adjustment from
time to time on terms reasonably acceptable to the Holder for stock splits,
stock dividends, combinations, capital reorganizations and similar events
relating to the Common Stock occurring on or after the Issuance Date) to provide
for the issuance of Common Stock upon the conversion in full of this Note, the
Interest Notes and the Other Notes, subject to reduction from time to time by
the number of shares of Common Stock issued on conversion of this Note, the
Interest Notes and the Other Notes. The Company shall, from time to time,
authorize and reserve additional shares of Common Stock, free from preemptive
and similar rights, to be issuable pursuant to the terms of this Note as shall
be necessary to ensure that an adequate number of shares of Common Stock are at
all times authorized and reserved for issuance upon conversion in full of this
Note, the Interest Notes and the Other Notes. The Company shall notify the
Holder promptly, but in no event more than ten Business Days, after the Company
so reserves additional shares of Common Stock, which notice shall set forth the
number of additional shares of Common Stock so reserved. If at any time the
number of authorized but unissued shares of Common Stock not reserved or
required to be reserved for any other purpose shall be insufficient to effect
the conversion of this Note, all Interest Notes and all Other Notes, the Company
promptly shall seek, and use its best efforts to obtain and complete, such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose. The Company represents and warrants that
upon issuance, such shares of Common Stock will be duly and validly issued,
fully paid and non-assessable. The Company agrees that its issuance of this
Note shall constitute full authority to its officers and agents who are charged
with the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the conversion of this Note.
2.3 METHOD OF CONVERSION. (a) The right of the Holder to convert
this Note shall be exercised by delivering (which may be made by telephone line
facsimile transmission) to the Transfer Agent at the addresses or telephone line
facsimile transmission number provided in or pursuant to the Transfer Agent
Instruction, a Conversion Notice. On the date the Conversion Notice is
delivered, the Company shall acknowledge the Conversion Notice and forward the
Conversion Notice as so acknowledged to the Transfer Agent. The number of
shares of Common Stock to be issued upon each conversion of this Note shall be
the number set forth in the applicable
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Conversion Notice, which number shall be conclusive absent manifest error. The
Company shall notify the Holder of any claim by the Company of manifest error in
a Conversion Notice within one Trading Day after the Holder gives such
Conversion Notice and no such claim of error shall limit or delay performance of
the Company's obligation to issue upon such conversion the number of shares of
Common Stock which are not in dispute. A Conversion Notice shall be deemed for
all purposes to be in proper form unless the Company notifies the Holder by
telephone line facsimile transmission within one Trading Day after a Conversion
Notice has been given (which notice from the Company shall specify all defects
in the Conversion Notice) and any Conversion Notice containing any such defect
shall nonetheless be effective on the date given if the Holder promptly
undertakes to correct all such defects. If the Company shall have notified the
Transfer Agent and such holder of any such manifest error, and the Company and
such holder do not agree as to a resolution of such manifest error on or before
the date of such notice by the Company of an error in such Conversion Notice,
the Company shall on the date such notice is given submit the dispute to Ernst &
Young LLP or another firm of independent public accountants of recognized
national standing (the "Auditors") for determination and shall instruct the
Auditors to resolve such dispute and to notify the Company, the Transfer Agent
and such holder within one Trading Day after such dispute is submitted to the
Auditors. Immediately after receipt of timely notice of the Auditors'
determination (but in any event within three Trading Days after the applicable
Conversion Notice is given to the Transfer Agent), the Transfer Agent shall
issue to the converting Holder any additional shares of Common Stock to which
such holder is entitled based on the determination of the Auditors. The Transfer
Agent is authorized and directed to rely on the Auditors' determination. If the
Auditors shall fail to notify the Transfer Agent of their determination within
three Trading Days after the applicable Conversion Notice is given to the
Transfer Agent, then the Transfer Agent shall, within three Trading Days after
receipt of the applicable Conversion Notice, issue to the converting holder any
additional shares of Common Stock to which such Holder is entitled based on the
applicable Conversion Notice. The Company shall pay any transfer or issuance
taxable payable in connection with any conversion of this Note except that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of shares of Common Stock or
other securities or property on conversion of this Note in a name other than
that of the Holder, and the Company shall not be required to issue or deliver
any such shares or other securities or property unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of any such tax or shall have established to the satisfaction of the
Company that such tax has been paid. The Holder shall be responsible for the
amount of any withholding tax payable in connection with any conversion of this
Note.
(b) If the Holder elects to convert this Note in accordance with
Section 2.1(a), the Holder shall not be required to surrender this Note
physically unless the entire unpaid principal amount of this Note is so
converted. The Company shall
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maintain records showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder, so as not to require physical surrender of this Note upon each such
conversion. In the event of any dispute or discrepancy, such records of the
Company shall be controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if any portion of this Note is converted without
physical surrender of this Note to the Company as aforesaid, the Holder may not
transfer this Note unless (1) the Holder first physically surrenders this Note
to the Company, whereupon the Company will forthwith issue and deliver upon the
order of the Holder a new note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this Note
and (2) such transfer is otherwise in compliance with Section 7.7 hereof. The
Company may by notice to the Holder from time to time require the Holder to
surrender this Note in exchange for the issuance by the Company of a new Note in
a principal amount equal to the outstanding principal amount of this Note and
otherwise having terms identical to this Note. Such new Note shall be delivered
by the Company to the Holder within three Trading Days after the Company
receives this Note from the Holder in response to such notice. The Holder and
any assignee, by acceptance of this Note, acknowledge and agree that, by reason
of the provisions of this paragraph, following conversion of a portion of this
Note, the unpaid and unconverted principal amount of this Note represented by
this Note may be less than the amount stated on the face hereof.
(c) In case of any consolidation or merger of the Company with any
other corporation (other than a wholly-owned subsidiary of the Company) in which
the Company is not the surviving corporation, or in case of any sale or transfer
of all or substantially all of the assets of the Company, or in the case of any
share exchange pursuant to which all of the outstanding shares of Common Stock
are converted into other securities or property, the Company shall make
appropriate provision or cause appropriate provision to be made so that the
Holder shall have the right thereafter to convert this Note into the kind of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer or share exchange by the persons who were
holders of Common Stock immediately prior to the effective date of such
consolidation, merger, sale, transfer or share exchange and on a basis which
preserves the economic benefits of the conversion rights of the Holder on a
basis as nearly as practical as such rights existed prior to such consolidation,
merger, sale, transfer or share exchange. If, in connection with any such
consolidation, merger, sale, transfer or share exchange each holder of shares of
Common Stock is entitled to elect to receive either securities, cash or other
assets upon completion of such transaction, the Company shall provide or cause
to be provided to the Holder the right to elect the securities, cash or other
assets into which this Note shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to
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elect, limitations on the period in which such election shall be made, and the
effect of failing to exercise the election). The Company shall not effect any
such transaction unless the provisions of this paragraph have been complied
with. The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.
Whenever the Company shall propose to take any of the actions
specified in this Section 2.3(c), the Company shall cause a notice to be mailed
to the Holder at least 20 days prior to the date on which the books of the
Company will close or on which a record will be taken for such action. Such
notice shall specify the action proposed to be taken by the Company and the date
as of which holders of record of the Common Stock shall participate in any such
actions or be entitled to exchange their Common Stock for securities or other
property, as the case may be.
(d) Upon receipt by the Transfer Agent from the Holder of a Conversion
Notice meeting the requirements for conversion as provided in Section 2.1(a) and
this Section 2.3, the Company shall issue and deliver or cause to be issued and
delivered to the Holder certificates for the Common Stock issuable upon such
conversion by the close of business on the third Trading Day after the date of
such receipt, and as of the close of business on the date of receipt of such
Conversion Notice the Holder shall be deemed to be the holder of record of the
Common Stock issuable upon such conversion, the outstanding principal amount and
the amount of accrued and unpaid interest and Default Interest on this Note
shall be reduced to reflect such conversion, and all rights with respect to the
portion of this Note being so converted shall forthwith terminate except the
right to receive the Common Stock or other securities, cash or other assets, as
herein provided, on such conversion except as otherwise provided herein. If the
Holder shall have given a Conversion Notice in accordance with the terms of this
Note, the Company's obligation to issue and deliver the certificates for Common
Stock shall be absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Company to the Holder, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with such conversion. The occurrence of an
event which requires an equitable adjustment of the Market Price as contemplated
by the definition thereof in Section 6.1 shall in no way restrict or delay the
right of the Holder to receive shares of Common Stock upon conversion of this
Note and the Company shall use its best efforts to implement such adjustment on
terms reasonably acceptable to the Holder within two Business Days after such
occurrence. If the Company fails to issue and deliver the certificates for the
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Common Stock to the Holder pursuant to the first sentence of this Section 2.3(d)
as and when required to do so, in addition to any other liabilities the Company
may have hereunder and under applicable law (1) the Company shall pay or
reimburse the Holder on demand for all out-of-pocket expenses, including,
without limitation, fees and expenses of legal counsel, incurred by the Holder
as a result of such failure, (2) the Conversion Percentage used to determine the
Conversion Price applicable to such conversion shall be reduced by one
percentage point from the Conversion Percentage otherwise used to calculate the
Conversion Price applicable to such conversion or, if such conversion is based
on the Ceiling Price, the ceiling price used to determine the Conversion Price
applicable to such conversion shall be reduced by one percentage point from the
amount that the Conversion Price otherwise would have been without reduction
pursuant hereto, in either case, for each Trading Day after such third Trading
Day until such shares of Common Stock are delivered to the Holder and (3) the
Holder may by notice (which may be given by mail, courier, personal service or
telephone line facsimile transmission) or oral notice (promptly confirmed in
writing) given at any time prior to delivery to the Holder of the shares of
Common Stock issuable upon such conversion of this Note, rescind such
conversion, whereupon the Holder shall have the right to convert this Note
thereafter in accordance herewith.
(e) No fractional shares of Common Stock shall be issued upon
conversion of this Note but, in lieu of any fraction of a share of Common Stock
which would otherwise be issuable in respect of the aggregate number of such
shares converted at one time by the same holder, the Company may round the
number of shares of Common Stock issued on such conversion up to the next
highest whole share or may pay lawful money of the United States of America for
such fractional share, based on a value of one share of Common Stock being equal
to the Market Price, as reported by Bloomberg, L.P, of the Common Stock on the
date the applicable Conversion Notice is given to the Company.
2.4 LIMITATION ON SHARES ISSUABLE ON CONVERSION; MANDATORY
REDEMPTION. (a) Notwithstanding any other provision herein, unless the
Stockholder Approval shall have been obtained from the stockholders of the
Company or waived by Nasdaq (or other appropriate stock exchange or market), so
long as the Common Stock is listed on the Nasdaq, the Nasdaq SmallCap, the NYSE
or the AMEX the Company shall not be required to issue upon conversion of this
Note and the Interest Notes a number of shares of Common Stock in excess of the
Maximum Share Amount. The Company shall maintain records which show the number
of shares of Common Stock issued by the Company upon conversion from time to
time of this Note and any Interest Notes, which records shall be controlling in
the absence of manifest error. The Company shall maintain records which show
the principal amount of Interest Notes issued by the Company pursuant to Section
1.1 in payment of interest on this Note and issued pursuant to any Interest Note
in payment of interest thereon, which records shall be controlling in the
absence of manifest error. Each Interest Note shall be allocated a
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portion of the Maximum Share Amount allocated to this Note and the other
Interest Notes outstanding at the time of issuance of such Interest Note, based
on the outstanding principal amounts thereof at the time of such issuance, and
the certificate for such Interest Note shall bear a notation as to the
certificate number of this Note. Upon surrender of this Note for transfer or re-
registration hereof (or, at the option of the Holder, for conversion pursuant to
Section 2.1(a) of less than all of this Note), the Company shall make a notation
on the new Note issued upon such transfer or re-registration or evidencing such
unconverted portion of this Note, as the case may be, as to the remaining number
of shares of Common Stock from the Maximum Share Amount remaining available for
conversion of the Note evidenced by such new certificate. If this Note is
surrendered for split-up into two or more Notes representing an aggregate
principal amount equal to the principal amount of this Note at the time so
surrendered (as reduced by any contemporaneous conversion of this Note), each
Note issued on such split-up shall bear a notation of the portion of the Maximum
Share Amount allocated thereto determined by pro rata allocation from among the
remaining Maximum Share Amount at the time this Note is so surrendered. If this
Note is converted in full, repaid, repurchased or redeemed, all of the Maximum
Share Amount which remains unissued after such conversion, repayment, repurchase
or redemption shall be re-allocated (1) to all Interest Notes and Other Notes
held by the Holder at the close of business on the Conversion Date for such
conversion, based on the outstanding principal amounts thereof, and (2) if the
Holder does not hold any Interest Notes or Other Notes at the close of business
on such Conversion Date, to the Other Notes, based on the principal amounts
thereof outstanding at the close of business on such Conversion Date. If any
Other Note is converted in full, repaid, repurchased or redeemed, all of the
portion of the Maximum Share Amount (as defined in such Other Note) of such
Other Note not re-allocated to Other Notes held by the holder of such Other Note
and which remains unissued after such conversion, repayment, repurchase or
redemption shall be re-allocated to this Note, the Interest Notes and the Other
Notes outstanding at the close of business on the date of such conversion,
repayment, repurchase or redemption of the Other Note so converted, repaid,
repurchased or redeemed pro rata based on the principal amounts outstanding at
the close of business on such date.
(b) (1) If on or after December 16, 1998 and on or prior to September
4, 2001 a Maximum Share Amount Inconvertibility occurs, then the Company shall
promptly, but in no event later than five Business Days after each such
occurrence, give an Inconvertibility Notice to the Holder (by telephone line
facsimile transmission at such number as the Holder has specified in writing to
the Company for such purposes or, if the Holder shall not have specified any
such number, by overnight courier at the Holder's address as the same appears on
the records of the Company) and the Holder may at any time after such occurrence
give an Inconvertibility Notice to the Company. If the Company shall have given
or been required to give any Inconvertibility Notice, or if the Holder shall
have given any Inconvertibility Notice, then within the applicable
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Redemption Election Period the Holder shall have the right by a Redemption
Election given to the Company (which may be contained in the Inconvertibility
Notice given by the Holder) to direct the Company to redeem the portion of this
Note (which, if applicable, shall be all of this Note) as shall not, on the
Business Day prior to the applicable Share Limitation Redemption Date be
convertible into shares of Common Stock by reason of the limitations set forth
in Section 2.4(a) on the applicable Share Limitation Redemption Date, at a price
equal to the Share Limitation Redemption Price, payable on the date which is
five Business Days after the Holder gives such Redemption Election. If the
Holder directs the Company to redeem this Note or any portion hereof and, prior
to the date the Company is required to redeem this Note or such portion hereof,
the Company would have been able, within the limitations set forth in Section
2.4(a), to convert all of this Note (determined without regard to the
limitation, if any, on beneficial ownership of shares of Common Stock by the
Holder contained in the second sentence of Section 2.1) on any ten Trading Days
within any period of 15 consecutive Trading Days commencing after the period of
20 consecutive Trading Days which gave rise to the applicable Inconvertibility
Notice from the Company or the Holder, as the case may be, had the Holder
exercised its right to convert this Note in full on each of such ten Trading
Days within such 15 Trading Day period, then the Company shall not be required
to redeem any of this Note by reason of such Inconvertibility Notice.
(2) An Inconvertibility Notice or a Redemption Election given by the
Holder shall be deemed for all purposes to be in proper form unless the Company
notifies the Holder in writing within three Business Days after an
Inconvertibility Notice or a Redemption Election has been given (which notice
shall specify all defects in the Inconvertibility Notice or Redemption
Election), and any Inconvertibility Notice or Redemption Election containing any
such defect shall nonetheless be effective on the date given if the Holder
promptly undertakes to correct all such defects. Whether or not the Holder has
given such undertaking, no such claim of error shall limit or delay performance
of the Company's obligation to redeem the full amount of the portion of this
Note as to which a Redemption Election has been given and which is not in
dispute.
(c) Notwithstanding the giving of any Inconvertibility Notice by the
Company to the Holder or the giving or the absence of any Inconvertibility
Notice or Redemption Election by the Holder or any redemption of an
inconvertible portion of this Note pursuant to Section 2.4(b), thereafter the
provision of Section 2.4(b) shall continue to be applicable on any occasion
unless the Stockholder Approval shall have been obtained or waived by the
Nasdaq.
(d) On each Share Limitation Redemption Date, the Company shall make
payment in immediately available funds of the applicable Share Limitation
Redemption Price to or upon the order of the Holder as specified by the Holder
in writing to the Company at least one Business Day prior to such Share
Limitation
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Redemption Date. If the Company is required to redeem this Note or any portion
hereof pursuant to this Section 2.4, the Company shall make payment to the
Holder of an amount equal to the Share Limitation Redemption Price. Upon
redemption of less than all of this Note, promptly, but in no event later than
three Business Days after surrender of this Note to the Company, the Company
shall issue a replacement Note of like tenor having a principal amount equal to
the principal amount of this Note remaining after such redemption.
ARTICLE III
CERTAIN COVENANTS
So long as the Company shall have any obligation under this Note:
3.1 CERTAIN REPURCHASES. (a) The Company shall not itself, and
shall not permit any Subsidiary to redeem, repurchase or otherwise acquire in
any one transaction or series of related transactions any shares of Common Stock
if the number of shares so repurchased, redeemed or otherwise acquired in such
transaction or series of related transactions (excluding any Option Share
Surrender) is more than either (x) 5.0% of the number of shares of Common Stock
outstanding immediately prior to such transaction or series of related
transactions or (y) 1% of the number of shares of Common Stock outstanding
immediately prior to such transaction or series of related transactions if such
transaction or series of related transactions is with any one person or group of
affiliated persons, unless the Company or such Subsidiary offers to purchase for
cash from the Holder at the time of such redemption, repurchase or acquisition
the same percentage of the outstanding principal amount of this Note as the
percentage of the number of outstanding shares of Common Stock to be so
redeemed, repurchased or acquired at a purchase price equal to the greater of
(i) the Premium Price on the date of purchase pursuant to this Section 3.1(a)
and (ii) the Converted Market Price on the date of purchase pursuant to this
Section 3.1(a); provided, however, that if in connection with any determination
of the purchase price payable pursuant to this Section 3.1 the amount specified
in clause (y) of the definition of the term Converted Market Price is greater
than 200% of the Ceiling Price on the date as of which such amount is
determined, then for purposes of computing the purchase price payable pursuant
to this Section 3.1 in such instance, the amount otherwise specified in clause
(y) of the definition of the term Converted Market Price shall be reduced by 20%
of the amount by which (A) the amount otherwise specified in clause (y) of the
definition of the term Converted Market Price exceeds (B) the Ceiling Price on
the date as of which such amount is determined.
(b) The Company shall not, and shall not permit any Subsidiary,
directly or indirectly to repurchase, redeem or otherwise acquire any shares of
its
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capital stock other than Common Stock other than repurchases or redemptions
of the Company's Series A Preferred Stock or Series D Convertible Preferred
Stock which are required to be made by the Company in accordance with the terms
thereof as in effect on the Issuance Date or as proposed to be amended pursuant
to the Amendment Agreement.
3.2 CERTAIN TENDER OFFERS. The Company shall not itself, and shall
not permit any Subsidiary to (1) make any Tender Offer for outstanding shares of
Common Stock unless the Company contemporaneously therewith makes an offer, or
(2) enter into an agreement regarding a Tender Offer for outstanding shares of
Common Stock by any person other than the Company or any Subsidiary, unless such
person agrees with the Company to make an offer, in either such case, to the
Holder to purchase the same percentage of the outstanding principal amount of
this Note held by the Holder as the percentage of outstanding shares of Common
Stock offered to be purchased in such Tender Offer, at a price equal to the
greater of (i) the Premium Price on the date of purchase pursuant to this
Section 3.2 and (ii) the greater of (x) the Converted Market Price on the date
of purchase pursuant to this Section 3.2 and (y) the greater of (A) the
Converted Market Price on the date of the first public announcement of such
Tender Offer and (B) the Converted Market Price on the date of purchase pursuant
to this Section 3.2.
3.3 PAYMENT OF OBLIGATIONS. The Company will pay and discharge, and
will cause each Subsidiary to pay and discharge when due, all their respective
obligations and liabilities which are material to the Company and the
Subsidiaries, taken as a whole, including, without limitation, tax liabilities,
except where the same may be contested in good faith by appropriate proceedings
and for which appropriate reserves have been made on the books of the Company or
such Subsidiary.
3.4 MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company will keep,
and will cause each Subsidiary to keep, all property useful and necessary in its
business in good working order and condition, ordinary wear and tear excepted.
(b) The Company will maintain, and will cause each Subsidiary to
maintain, with financially sound and responsible insurance companies, insurance
against loss or damage by fire or other casualty and such other insurance,
including but not limited to, product liability insurance, in such amounts and
covering such risks as is reasonably adequate for the conduct of their
businesses and the value of their properties in at least such amounts and
against such risks as is reasonably adequate for the conduct of their respective
businesses and the value of their respective properties.
3.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company
will continue, and will cause each Subsidiary to continue, to engage in business
of the same general type as conducted by the Company and the Subsidiaries
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on the Issuance Date, and will preserve, renew and keep in full force and
effect, and will cause each Subsidiary to preserve, renew and keep in full force
and effect, their respective corporate existence and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business.
3.6 COMPLIANCE WITH LAWS. The Company will comply, and will cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, decisions, orders and requirements of
governmental authorities and courts (including, without limitation,
environmental laws) except (i) where compliance therewith is contested in good
faith by appropriate proceedings or (ii) where non-compliance therewith could
not reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Company and the Subsidiaries, taken as a whole.
3.7 INVESTMENT COMPANY ACT. The Company will not be or become an
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
3.8 TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Subsidiary, directly or indirectly, to pay any funds to or for the
account of, make any investment (whether by acquisition of stock or
Indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Indebtedness,
or otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with, any joint enterprise or other joint arrangement with, any
Affiliate of the Company or any Affiliate of any Subsidiary, except, on terms to
the Company or such Subsidiary no less favorable than terms that could be
obtained by the Company or such Subsidiary from a Person that is not an
Affiliate of the Company or an Affiliate of any Subsidiary, as determined in
good faith by the Board of Directors.
3.9 COMPLIANCE. The Company shall (a) use its commercially
reasonable best efforts to obtain knowledge of any failure or default by the
Company in the timely performance of any material obligation to the Holder or
the holder of any Interest Note or Other Note under the terms of this Note or
any other Transaction Document and (b) shall notify the Holder promptly, but in
no event later than three Business Days after the Company first learns of any
such failure or default.
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ARTICLE IV
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur:
4.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Company fails (a) to
pay the principal, Redemption Price, Redemption Event Redemption Price or
Repurchase Price hereof or of any Interest Note when due, whether at maturity,
upon redemption, upon acceleration or otherwise, as applicable, or (b) to pay
any installment of interest hereon or on any Interest Note when due and, in the
case of this clause (b) of this Section 4.1 only, such failure continues for a
period of three Business Days after the due date thereof; or
4.2 CONVERSION AND THE SHARES. The Company fails to issue or cause
to be issued shares of Common Stock to the Holder upon exercise by the Holder of
the conversion rights of the Holder in accordance with the terms of this Note or
upon exercise of the Warrants or fails to transfer any certificate for shares of
Common Stock issued to the Holder upon conversion of this Note or any Interest
or upon exercise of the Warrants as and when required by this Note, the Interest
Notes, the Note Purchase Agreement, the Transfer Agent Instruction and the
Warrants; or
4.3 BREACH OF COVENANT. The Company (a) fails to comply with Section
3.1, 3.2 or 3.9 or (b) fails to comply in any material respect with any
provision of Article III of this Note (other than Section 3.1, 3.2 or 3.9) or
breaches any other material covenant or other material term or condition of this
Note (other than as specifically provided in Sections 4.1, 4.2, 4.3(a)), the
Note Purchase Agreement, the Security Agreement, the Transfer Agent Instruction
or the Warrants, and in the case of this clause (b) of this Section 4.3 only,
such breach continues for a period of 20 days after written notice thereof to
the Company from the Holder; or
4.4 BREACH OF REPRESENTATIONS AND WARRANTIES. Any material
representation or warranty of the Company made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Note Purchase Agreement, the
Security Agreement, the Transfer Agent Instruction and the Warrants) shall be
false or misleading in any material respect when made; or
4.5 CERTAIN VOLUNTARY PROCEEDINGS. The Company or any Subsidiary
shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
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generally to pay its debts as they become due or shall admit in writing its
inability generally to pay its debts as they become due; or
4.6 CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or other
proceeding shall be commenced against the Company or any Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 consecutive days; or
4.7 JUDGMENTS. Any court of competent jurisdiction shall enter one
or more final judgments against the Company or any Subsidiary or any of their
respective properties or other assets in an aggregate amount in excess of
$100,000, which is not vacated, bonded, stayed, discharged, satisfied or waived
for a period of 30 consecutive days; or
4.8 DEFAULT UNDER OTHER AGREEMENTS. Except as otherwise agreed in
writing by the Company and the original Holder of this Note (which agreement
shall be binding on any subsequent Holder of this Note or any Interest Note)
(a) the Company or any Subsidiary shall default in any payment with respect to
any indebtedness for borrowed money (other than this Note) which indebtedness
has an outstanding principal amount in excess of $100,000 individually or
$200,000 in the aggregate for the Company and the Subsidiaries, beyond the
period of grace, if any, provided in the instrument or agreement under which
such indebtedness was created; provided, however, that the events and conditions
described in the preceding clause shall not constitute an Event of Default
unless and until the Company fails to take the action necessary to correct such
event or condition within five (5) Business Days of becoming aware of such event
or condition; or (b) any indebtedness of the Company or any Subsidiary which has
an outstanding principal amount in excess of $100,000 individually or $200,000
in the aggregate shall, in accordance with its terms, be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled or
required payment prior to the stated maturity thereof;
4.9 DELISTING OF COMMON STOCK. The Common Stock shall cease to be
listed on any of Nasdaq, the NYSE or the AMEX and shall remain unlisted for a
period of three Trading Days; or
4.10 FAILURE TO OBTAIN OPINION. The Company fails to deliver an
opinion of its counsel, Weil, Gotshal & ▇▇▇▇▇▇ LLP addressed to the Holder as
provided in Section 4(l) of the Note Purchase Agreement within seven (7)
Business Days of the issuance of this Note;
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then, (X) upon the occurrence and during the continuation of any Event of
Default specified in Section 4.1, 4.2, 4.3, 4.4, 4.7, 4.8, 4.9 or 4.10, at the
option of the Holder the Company shall, and upon the occurrence of any Event of
Default specified in Section 4.5 or 4.6, the Company shall, pay to the Holder an
amount equal to the Premium Price on the date of such payment, (Y) all other
amounts payable hereunder shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, reasonable legal fees
and expenses, of collection, and (Z) the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity, including all
rights and remedies under or in connection with the Security Agreement;
provided, however, that if in connection with any Event of Default the Company
shall not at such time be in compliance with its obligations under Section 1.2,
3.1 or 3.2 or shall be obligated, or to cause another Person, to redeem,
repurchase or purchase all or any portion of this Note, then in lieu of payment
of the amount provided in the preceding clause (X) the Company shall pay to the
Holder an amount equal to the amount which would be payable to the Holder upon
redemption, repurchase or purchase of this Note in accordance with Section 1.2,
3.1 or 3.2 as if the Company had exercised its right to redeem or repurchase
this Note (or such Person had become obligated to purchase this Note) pursuant
thereto on the date of such payment pursuant hereto.
ARTICLE V
REPURCHASE UPON A REPURCHASE EVENT
5.1 REPURCHASE RIGHT UPON REPURCHASE EVENT. If a Repurchase Event
occurs, then the Holder shall have the right, at the Holder's option, to require
the Company to repurchase all of this Note, or any portion hereof (in a minimum
principal amount of $100,000 or integral multiples thereof (or such lesser
remaining principal amount of this Note)), on the repurchase date that is five
Business Days after the date of the Holder Notice delivered with respect to such
Repurchase Event. The Holder shall have the right to require the Company to
repurchase all or any such portion of this Note if a Repurchase Event occurs at
any time while any portion of the principal amount of this Note is outstanding
at a price equal to the Repurchase Price.
5.2 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHTS, ETC. (a) On or
before the fifth Business Day after the occurrence of a Repurchase Event, the
Company shall give to the Holder a Company Notice of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising as a
result thereof. Such Company Notice shall set forth:
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(i) a statement that a Repurchase Event has occurred, the date of such
occurrence and the type of Repurchase Event (by reference to the applicable
clause of the definition of such term);
(ii) the date by which the repurchase right must be exercised, and
(iii) a description of the procedure (set forth in this Section 5.2)
which the Holder must follow to exercise the repurchase right.
No failure of the Company to give a Company Notice or defect therein shall limit
the Holder's right to exercise the repurchase right or affect the validity of
the proceedings for the repurchase of this Note or portion hereof.
(b) To exercise the repurchase right, the Holder shall deliver to the
Company on or before the 30th day after a Company Notice (or if no such Company
Notice has been given, within 40 days after the Holder first learns of the
Repurchase Event) (i) a Holder Notice setting forth the name of the Holder and
the principal amount of this Note to be repurchased, and (ii) this Note, duly
endorsed for transfer to the Company of the portion of the principal amount of
this Note to be repurchased. A Holder Notice may be revoked by the Holder at
any time prior to the time the Company pays the applicable Repurchase Price to
the Holder.
(c) If the Holder shall have given a Holder Notice, on the date which
is five Business Days after the date such Holder Notice is given (or such later
date as the Holder surrenders this Note) the Company shall make payment in
immediately available funds of the applicable Repurchase Price to such account
as specified by the Holder in writing to the Company at least one Business Day
prior to the applicable repurchase date.
5.3 OTHER. (a) If the Company fails to repurchase on the applicable
repurchase date this Note (or portion hereof) as to which the repurchase right
has been properly exercised pursuant to this Article V, then the Repurchase
Price for the portion (which, if applicable, may be all) of this Note which is
required to have been so repurchased shall bear interest to the extent not
prohibited by applicable law from the applicable repurchase date until paid at
the Default Rate.
(b) If a portion of this Note is to be repurchased, upon surrender of
this Note to the Company in accordance with the terms of this Article V, the
Company shall execute and deliver to the Holder without service charge, a new
Note or Notes, having the same date hereof and containing identical terms and
conditions, in such denomination or denominations as requested by the Holder in
aggregate principal amount equal to, and in exchange for, the unrepurchased
portion of the principal amount of the Note so surrendered.
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(c) A Holder Notice given by the Holder shall be deemed for all
purposes to be in proper form unless the Company notifies the Holder within
three Business Days after such Holder Notice has been given (which notice shall
specify all defects in the Holder Notice), and any Holder Notice containing any
such defect shall nonetheless be effective on the date given if the Holder
promptly undertakes to correct all such defects. No such claim of defect shall
limit or delay performance of the Company's obligation to repurchase any portion
of this Note, the repurchase of which is not in dispute.
ARTICLE VI
DEFINITIONS
6.1 CERTAIN DEFINED TERMS. (a) All the agreements or instruments
herein defined shall mean such agreements or instruments as the same may from
time to time be supplemented or amended or the terms thereof waived or modified
to the extent permitted by, and in accordance with, the terms thereof and of
this Note.
(b) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or under common control with the subject Person. For purposes of
the term "Affiliate", the term "control" (including the terms "controlling",
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or to cause the direction of the management and
policies of a Person, whether through the ownership of securities, by contract
or otherwise.
"Aggregated Person" means any person whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder.
"Amendment Agreement" means the Amendment Agreement, dated as of July
31, 1998, by and between the Company and MCM Partners, relating to amendment of
the rights and preferences of the Series A Preferred Stock.
"AMEX" means the American Stock Exchange, Inc.
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"Applicable Rate" means six percent per annum.
"Average Market Price" for any date means the arithmetic average of
the Market Price on each of the five Trading Days, whether or not consecutive,
during the applicable Measurement Period having the lowest Market Prices.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in The City of New York are authorized or required
by law or executive order to remain closed.
"Ceiling Price" means $.9006 (subject to equitable adjustments from
time to time on terms reasonably acceptable to the Majority Holders for stock
splits, stock dividends, combinations, recapitalizations, reclassifications and
similar events occurring or with respect to which "ex-" trading commences on or
after the Issuance Date); provided, however, that, notwithstanding any other
provision hereof, the Ceiling Price applicable to a particular conversion shall
be subject to reduction as provided in Section 2.3(d); provided further,
however, that if a Registration Event occurs, then, in addition to any other
right or remedy of the Holder, thereafter the Ceiling Price shall be permanently
reduced on each Computation Date by an amount equal to two percent of the amount
that the Ceiling Price otherwise would have been without any reduction pursuant
to this proviso (pro rated in the case of any Computation Date which is less
than 30 days after a Registration Event occurs or less than 30 days after
another Computation Date).
"Common Stock" shall mean the Common Stock, $.01 par value, or any
shares of capital stock into which such stock shall be changed or reclassified
after the Issuance Date.
"Company" shall have the meaning provided in the first paragraph of
this Note.
"Company Certificate" means a certificate of the Company signed by an
Officer.
"Company Notice" means a notice from the Company to the Holder setting
forth the information provided in Section 5.2.
"Company Optional Redemption Notice" means a notice from the Company
to the Holder setting forth the information required by Section 1.2.
"Computation Date" means, if a Registration Event occurs, any of (1)
the date which is 30 days after such Registration Event occurs, if any
Registration Event is continuing on such date, (2) each date which is 30 days
after a Computation Date, if any
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Registration Event is continuing on such date, and (3) the date on which all
Registration Events cease to continue.
"Conversion Date" means the date on which a Conversion Notice is
actually received by the Transfer Agent, whether by mail, courier, personal
service, telephone line facsimile transmission or other means.
"Conversion Notice" means a Notice of Conversion of 6% Senior
Convertible Note due 2001 substantially in the form attached hereto as EXHIBIT
A, given by the Holder.
"Conversion Percentage" means 85%; provided, however, that,
notwithstanding any other provision hereof, if a Registration Event occurs, then
such percentage stated above shall be permanently reduced by two percentage
points on each Computation Date (pro rated in the case of any Computation Date
which is less than 30 days after a Registration Event occurs or less than 30
days after another Computation Date).
"Conversion Price" means the lesser of:
(1) the product of (a) the Average Market Price for such date times
(b) the applicable Conversion Percentage; and
(2) the Ceiling Price;
provided, however, that the Conversion Price applicable to a particular
conversion shall be subject to reduction as provided in Section 2.3(d).
"Converted Market Price" means, for this Note or any portion hereof as
of any date of determination, an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, at the time of
such determination, be issuable on conversion in accordance with Article II of
this Note or such portion hereof and any accrued and unpaid interest hereon and
any accrued and unpaid Default Interest hereon if a Conversion Notice were given
by the Holder on the date of such determination (determined without regard to
any limitation on conversion based on beneficial ownership contained in Section
2.1 times (y) the arithmetic average of the Market Price of the Common Stock for
the five consecutive Trading Days ending on the Trading Day prior to the date of
such determination.
"Default Interest" shall have the meaning provided in the first
paragraph of this Note.
-24-
"Default Rate" means 14 percent per annum (or such lesser rate equal
to the highest rate permitted by applicable law).
"Event of Default" shall have the meaning provided in Article IV.
"Generally Accepted Accounting Principles" for any Person means the
generally accepted accounting principles and practices applied by such Person
from time to time in the preparation of its audited financial statements.
"Holder" shall have the meaning provided in the first paragraph of
this Note.
"Holder Notice" means a Holder Notice in the form attached hereto as
EXHIBIT E.
"Inconvertibility Notice" means a notice from the Company to the
Holder in the form set forth in EXHIBIT B or a notice from the Holder to the
Company in the form set forth in EXHIBIT C.
"Indebtedness" as used in reference to any Person means all
indebtedness of such person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required to
be capitalized in accordance with Generally Accepted Accounting Principles and
shall include all such indebtedness guaranteed in any manner by such person or
in effect guaranteed by such person through a contingent agreement to purchase
and all indebtedness for the payment or purchase of which such person has
contingently agreed to advance or supply funds and all indebtedness secured by
mortgage or other lien upon property owned by such person, although such person
has not assumed or become liable for the payment of such indebtedness, and, for
all purposes hereof, such indebtedness shall be treated as though it has been
assumed by such person.
"Interest Note" means any 6% Senior Convertible Note due 2001 of like
tenor with this Note which is issued by the Company in payment of interest on
this Note or any Interest Note in accordance with the terms hereof or thereof.
"Interest Note Payment Option" shall have the meaning provided in
Section 1.1(a).
"Interest Payment Dates" shall mean each February 15, May 15, August
15 and November 15 and the Maturity Date.
"Issuance Date" means the date this Note was issued to the original
Holder of this Note.
-25-
"Majority Holders" means at any time the holders of this Note,
Interest Notes and the Other Notes which hold Notes, Interest Notes and Other
Notes which, based on the outstanding principal amounts thereof, represent a
majority of the aggregate outstanding principal amount of this Note, the
Interest Notes and the Other Notes.
"Market Price" of the Common Stock on any date means the lowest sale
price (regular way) for one share of Common Stock on such date on the first
applicable among the following: (a) the national securities exchange on which
the shares of Common Stock are listed which constitutes the principal securities
market for the Common Stock, (b) the Nasdaq, if the Nasdaq constitutes the
principal market for the Common Stock on such date, or (c) the Nasdaq SmallCap,
if the Nasdaq SmallCap constitutes the principal securities market for the
Common Stock on such date, in any such case as reported by Bloomberg, L.P.;
provided, however, that if during any Measurement Period or other period during
which the Market Price is being determined:
(i) The Company shall declare or pay a dividend or make a distribution
to all holders of the outstanding Common Stock in shares of Common Stock or
fix any record date for any such action, then the Market Price for each day
in such Measurement Period or such other period which day is prior to the
earlier of (1) the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution and (2) the date on
which ex-dividend trading in the Common Stock with respect to such dividend
or distribution begins shall be reduced by multiplying the Market Price
(determined without regard to this proviso) for each such day in such
Measurement Period or such other period by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding at the
close of business on the earlier of (1) the record date fixed for such
determination and (2) the date on which ex-dividend trading in the Common
Stock with respect to such dividend or distribution begins and the
denominator of which shall be the sum of such number of shares and the
total number of shares constituting such dividend or other distribution;
(ii) The Company shall issue rights or warrants to all holders of its
outstanding shares of Common Stock, or fix a record date for such issuance,
which rights or warrants entitle such holders (for a period expiring within
forty-five (45) days after the date fixed for the determination of
stockholders entitled to receive such rights or warrants) to subscribe for
or purchase shares of Common Stock at a price per share less than the
Market Price (determined without regard to this proviso) for any day in
such Measurement Period or such other period which day is prior to the end
of such 45-day period, then the Market Price for
-26-
each such day shall be reduced so that the same shall equal the price
determined by multiplying the Market Price (determined without regard to
this proviso) by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding at the close of business on the record
date fixed for the determination of stockholders entitled to receive such
rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at such
Market Price, and the denominator of which shall be the number of shares of
Common Stock outstanding on the close of business on such record date plus
the total number of additional shares of Common Stock so offered for
subscription or purchase. In determining whether any rights or warrants
entitle the holders to subscribe for or purchase shares of Common Stock at
less than the Market Price (determined without regard to this proviso), and
in determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received for such
rights or warrants, the value of such consideration, if other than cash, to
be determined in good faith by a resolution of the Board of Directors of
the Corporation;
(iii) The outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock or a record date for any such
subdivision shall be fixed, then the Market Price of the Common Stock for
each day in such Measurement Period or such other period which day is prior
to the earlier of (1) the day upon which such subdivision becomes effective
and (2) the date on which ex-dividend trading in the Common Stock with
respect to such subdivision begins shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Market Price
each trade (regular way) on for each day in such Measurement Period or such
other period which day is prior to the earlier of (1) the date on which
such combination becomes effective and (2) the date on which trading in the
Common Stock on a basis which gives effect to such combination begins,
shall be proportionately increased;
(iv) The Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which clause (i) of
this proviso applies) or evidences of its indebtedness, cash or other
assets (including securities, but excluding any rights or warrants referred
to in clause (ii) of this proviso and dividends and distributions paid
exclusively in cash and excluding any capital stock, evidences of
indebtedness, cash or assets distributed upon a merger or consolidation)
(the foregoing hereinafter in this clause (iv) of this proviso called the
"Securities"), or fix a record date for any such distribution, then, in
each such case, the Market Price for each day in such Measurement Period or
such other period which day is prior to the earlier of (1) the record date
-27-
for such distribution and (2) the date on which ex-dividend trading in the
Common Stock with respect to such distribution begins shall be reduced so
that the same shall be equal to the price determined by multiplying the
Market Price (determined without regard to this proviso) by a fraction, the
numerator of which shall be the Market Price (determined without regard to
this proviso) for such date less the fair market value (as determined in
good faith by resolution of the Board of Directors of the Company) on such
date of the portion of the Securities so distributed or to be distributed
applicable to one share of Common Stock and the denominator of which shall
be the Market Price (determined without regard to this proviso) for such
date; provided, however, that in the event the then fair market value (as
so determined) of the portion of the Securities so distributed applicable
to one share of Common Stock is equal to or greater than the Market Price
(determined without regard to this clause (iv) of this proviso) for any
such Trading Day, in lieu of the foregoing adjustment, adequate provision
shall be made so that the Holder shall have the right to receive upon
conversion of this Note the amount of Securities the Holder would have
received had the holders of shares of Series C Preferred Stock converted
the shares of Series C Preferred Stock immediately prior to the record date
for such distribution. If the Board of Directors of the Corporation
determines the fair market value of any distribution for purposes of this
clause (iv) by reference to the actual or when issued trading market for
any securities comprising all or part of such distribution, it must in
doing so consider the prices in such market on the same day for which an
adjustment in the Market Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is
applicable that also includes shares of Common Stock, or rights or warrants
to subscribe for or purchase shares of Common Stock to which clause (i) or
(ii) of this proviso applies (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets, shares
of capital stock, rights or warrants other than such shares of Common Stock
or rights or warrants to which clause (i) or (ii) of this proviso applies
(and any Market Price reduction required by this clause (iv) with respect
to such dividend or distribution shall then be made) immediately followed
by (2) a dividend or distribution of such shares of Common Stock or such
rights or warrants (and any further Market Price reduction required by
clauses (i) and (ii) of this proviso with respect to such dividend or
distribution shall then be made), except that any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the date fixed for such determination" within
the meaning of clause (i) of this proviso;
(v) The Company or any Subsidiary shall (x) by dividend or otherwise,
distribute to all holders of its Common Stock cash in (or fix any record
date for
-28-
any such distribution), or (y) repurchase or reacquire shares of its Common
Stock (other than an Option Share Surrender) for, in either case, an
aggregate amount that, combined with (1) the aggregate amount of any other
such distributions to all holders of its Common Stock made exclusively in
cash after the Issuance Date and within the 12 months preceding the date of
payment of such distribution, and in respect of which no adjustment
pursuant to this clause (v) has been made, (2) the aggregate amount of any
cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Company) of consideration paid
in respect of any repurchase or other reacquisition by the Company or any
Subsidiary of any shares of Common Stock (other than an Option Share
Surrender) made after the Issuance Date and within the 12 months preceding
the date of payment of such distribution or making of such repurchase or
reacquisition, as the case may be, and in respect of which no adjustment
pursuant to this clause (v) has been made, and (3) the aggregate of any
cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Company) of consideration
payable in respect of any Tender Offer by the Company or any Subsidiary for
all or any portion of the Common Stock concluded within the 12 months
preceding the date of payment of such distribution or completion of such
repurchase or reacquisition, as the case may be, and in respect of which no
adjustment pursuant to clause (vi) of this proviso has been made (such
aggregate amount combined with the amounts in clauses (1), (2) and (3)
above being the "Combined Amount"), exceeds 10% of the product of the
Market Price (determined without regard to this proviso) for any day in
such Measurement Period or such other period which day is prior to the
earlier of (A) the record date with respect to such distribution and (B)
the date on which ex-dividend trading in the Common Stock with respect to
such distribution begins or the date of such repurchase or reacquisition,
as the case may be, times the number of shares of Common Stock outstanding
on such date, then, and in each such case, the Market Price for each such
day shall be reduced so that the same shall equal the price determined by
multiplying the Market Price (determined without regard to this proviso)
for such day by a fraction (i) the numerator of which shall be equal to the
Market Price (determined without regard to this proviso) for such day less
an amount equal to the quotient of (x) the excess of such Combined Amount
over such 10% and (y) the number of shares of Common Stock outstanding on
such day and (ii) the denominator of which shall be equal to the Market
Price (determined without regard to this proviso) for such day; provided,
however, that in the event the portion of the cash so distributed or paid
for the repurchase or reacquisition of shares (determined per share based
on the number of shares of Common Stock outstanding) applicable to one
share of Common Stock is equal to or greater than the Market Price
(determined without regard to this clause (v) of this proviso) of the
Common Stock for any such day, then in lieu of the foregoing adjustment
with respect to such day, adequate provision shall be made so that the
Holder shall
-29-
have the right to receive upon conversion of this Note the amount of cash
the Holders would have received had the Holder converted this Note
immediately prior to the record date for such distribution or the payment
date of such repurchase, as applicable; or
(vi) A Tender Offer made by the Company or any Subsidiary for all or
any portion of the Common Stock shall expire and such Tender Offer (as
amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the
terms of the Tender Offer) of Purchased Shares (as defined herein)) of an
aggregate consideration having a fair market value (as determined in good
faith by resolution of the Board of Directors of the Company) that combined
together with (1) the aggregate of the cash plus the fair market value (as
determined in good faith by a resolution of the Board of Directors of the
Company), as of the expiration of such Tender Offer, of consideration
payable in respect of any other Tender Offers, by the Company or any
Subsidiary for all or any portion of the Common Stock expiring within the
12 months preceding the expiration of such Tender Offer and in respect of
which no adjustment pursuant to this clause (vi) has been made, (2) the
aggregate amount of any cash plus the fair market value (as determined in
good faith by a resolution of the Board of Directors of the Company) of
consideration paid in respect of any repurchase or other reacquisition by
the Company or any Subsidiary of any shares of Common Stock (other than an
Option Share Surrender) made after the Issuance Date and within the 12
months preceding the expiration of such Tender Offer and in respect of
which no adjustment pursuant to clause (v) of this proviso has been made,
and (3) the aggregate amount of any distributions to all holders of Common
Stock made exclusively in cash within 12 months preceding the expiration of
such Tender Offer and in respect of which no adjustment pursuant to clause
(v) of this proviso has been made, exceeds 10% of the product of the Market
Price (determined without regard to this proviso) for any day in such
period times the number of shares of Common Stock outstanding on such day,
then, and in each such case, the Market Price for such day shall be reduced
so that the same shall equal the price determined by multiplying the Market
Price (determined without regard to this proviso) for such day by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such day multiplied by the Market Price (determined
without regard to this proviso) for such day and the denominator of which
shall be the sum of (x) the fair market value (determined as aforesaid) of
the aggregate consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the Tender Offer) of all
shares validly tendered and not withdrawn as of the last time tenders could
have been made pursuant to such Tender Offer (the "Expiration Time") (the
shares deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of shares of
-30-
Common Stock outstanding (less any Purchased Shares) on such day times the
Market Price (determined without regard to this proviso) of the Common
Stock on the Trading Day next succeeding the Expiration Time. If the
application of this clause (vi) to any Tender Offer would result in an
increase in the Market Price (determined without regard to this proviso)
for any trade, no adjustment shall be made for such Tender Offer under this
clause (vi) for such day.
"Master Purchase Agreement" means the Master Purchase Agreement, dated
as of July 31,1998, by and between the Company Genesee Fund Limited-Portfolio B,
a British Virgin Islands corporation, ▇▇▇▇▇▇ Group, LLC, a Texas limited
liability company and Advantage Fund Limited, a British Virgin Islands
corporation.
"Maturity Date" means September 4, 2001.
"Maximum Share Amount" means 142,620 shares, less from time to time
the number of shares issued upon exercise of the Warrants, or such greater
number as permitted by the rules of Nasdaq (such amount to be subject to
equitable adjustment from time to time on terms reasonably acceptable to the
Majority Holders for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
the Issuance Date) of Common Stock; provided, however, that if for purposes of
Rule 4460(i) of the Nasdaq (or any successor or replacement provision of any
stock exchange or stock market on which the Common Stock is listed or traded)
the (x) issuance of the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants or (y) the issuance of shares of Series D Convertible
Preferred Stock and the issuance of shares of Common Stock upon conversion
thereof or (z) the issuance of the common stock purchase warrants issued in
connection with the issuance of the Series D Convertible Preferred Stock and the
issuance of shares of Common Stock upon exercise thereof is not required to be
integrated with the issuance of this Note and the Other Notes and the issuance
of shares of Common Stock upon conversion thereof, then in each such case the
"Maximum Share Amount" shall mean such greater number as equals the maximum
number of shares of Common Stock as are permitted by the rules of the Nasdaq or
such exchange or market (determined by pro rata allocation of any increase
thereof among the Note and the Other Notes based on the original principal
amounts thereof) (such amount to be subject to equitable adjustment in terms
reasonably acceptable to the Majority Holders from time to time for stock
splits, stock dividends, combinations, capital reorganizations and similar
events relating to the Common Stock occurring after the Issuance Date).
"Maximum Share Amount Inconvertibility" means the occurrence within
any period of ten consecutive Trading Days of five or more Trading Days on which
all or any portion of this Note is inconvertible due to the restrictions in
Section 2.4.
-31-
"Measurement Period" means with respect to any date the period of 25
consecutive Trading Days ending on the Trading Day prior to such date.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Note" means this instrument as originally executed, or if later
amended or supplemented in accordance with its terms, then as so amended or
supplemented.
"Note Purchase Agreement" shall mean the Note Purchase Agreement or
Note Purchase and Exchange Agreement, as the case may be, dated as of July 31,
1998, by and between the Company and the original Holder of this Note.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Financial Officer of the Company.
"Optional Redemption Event" means that on each Trading Day in any
period of 20 consecutive Trading Days commencing on or after the date which is
730 days after the Issuance Date, the Market Price of the Common Stock shall
have been not less than 200% of the Ceiling Price in effect on such Trading Day.
"Option Share Surrender" means the surrender of shares of Common Stock
to the Company in payment of the exercise price or tax obligations incurred in
connection with the exercise of a stock option granted by the Company to any of
its employees, directors or consultants.
"Other Notes" means the several 6% Senior Convertible Notes due 2001
issued by the Company pursuant to the Other Note Purchase Agreements and any
other promissory notes of like tenor issued by the Company in payment of
interest thereon or on any Other Note so issued.
"Other Note Purchase Agreements" means the several Note Purchase and
Exchange Agreements or the Note Purchase Agreement, as the case may be, dated as
of the date of the Note Purchase Agreement, by and between the Company and the
several buyers named therein.
-32-
"Permitted Transferee" means any person who is an "accredited
investor" as defined in Regulation D under the 1933 Act.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, unincorporated association
or similar entity or any government, governmental agency or political
subdivision.
"Premium Percentage" means 115%.
"Premium Price" means, for this Note or any portion hereof as of any
date of determination, the product obtained by multiplying (a) the sum of (1)
the outstanding principal amount of this Note or such portion hereof plus (2) an
amount equal to the accrued but unpaid interest on this Note or such portion
hereof to the date of determination, plus (3) an amount equal to the accrued and
unpaid Default Interest on this Note or such portion hereof to the date of
determination times (b) the Premium Percentage.
"Redemption Date" means the date of a redemption of this Note or a
portion hereof pursuant to Section 1.2, determined in accordance herewith.
"Redemption Election" means (1) a notice by the Holder to the Company
substantially in the form set forth in EXHIBIT D or (2) a notice by the Holder
to the Company included in the form of Inconvertibility Notice set forth in
EXHIBIT C.
"Redemption Election Period" means, with respect to a particular
inconvertibility of this Note pursuant to Section 2.4, the period of ten
Business Days after the later of (x) the date an Inconvertibility Notice with
respect to such inconvertibility is given or (y) the date such Inconvertibility
Notice was required to have been given by the Company.
"Redemption Event Redemption Date" means any Business Day during the
period commencing on the date which is 730 days after the Issuance Date and
ending on September 4, 2001.
"Redemption Event Redemption Notice" means a Redemption Event
Redemption Notice setting forth the information required by Section 1.3(a).
"Redemption Event Redemption Price" means an amount in cash equal to
the sum of (1) the outstanding principal amount of this Note on the Redemption
Event Redemption Date plus (2) accrued and unpaid interest on such principal
amount to the Redemption Event Redemption Date plus (3) accrued and unpaid
Default Interest, if any, on the amount referred to in the immediately preceding
clause (2) at the rate provided in this Note to the Redemption Event Redemption
Date.
-33-
"Redemption Price" means the greater of:
(1) the Premium Price on the applicable Redemption Date; and
(2) the Converted Market Price on the applicable Redemption Date;
provided, however, that if in connection with any determination of the
Redemption Price the amount specified in clause (y) of the definition of
the term Converted Market Price is greater than 200% of the Ceiling Price
on the date as of which such amount is determined, then for purposes of
computing the Redemption Price in such instance, the amount otherwise
specified in clause (y) of the definition of the term Converted Market
Price shall be reduced by 20% of the amount by which (A) the amount
otherwise specified in clause (y) of the definition of the term Converted
Market Price exceeds (B) the Ceiling Price on the date as of which such
amount is determined.
"Registration Event" shall mean (1) the Registration Statement is not
effective within 105 days after the Issuance Date, if the Registration Statement
is on Form S-3, or 120 days after the Issuance Date, if the Registration
Statement is on Form S-1, (2) the Company fails to file the Registration
Statement with the SEC within 60 days after the Issuance Date, (3) the Company
fails to submit a request for acceleration of the effective date of the
Registration Statement in accordance with Section 3(a) of the Registration
Rights Agreement, (4) the Registration Statement shall cease to be available for
use by the Holder for any reason (including, without limitation, by reason of an
SEC stop order, a material misstatement or omission in the Registration
Statement or the information contained in the Registration Statement having
become outdated); provided, however, that no Registration Event pursuant to this
clause (4) shall be deemed to occur prior to the SEC Effective Date, (5) the
Common Stock is not listed for trading on any of the NYSE, the AMEX, the Nasdaq
or the Nasdaq SmallCap, or (6) the Holder having become unable to convert this
Note in accordance with Article II for any reason (other than by reason of the
4.9% limitation on beneficial ownership set forth therein or a redemption or
repurchase thereof).
"Registration Rights Agreements" means the several Registration Rights
Agreements entered into between the Company and the original Holder and the
original holders of the Other Notes, as amended or modified from time to time in
accordance with their respective terms.
"Registration Statement" means the Registration Statement required to
be filed by the Company with the SEC pursuant to Section 2(a) of the
Registration Rights Agreements.
-34-
"Repurchase Event" means the occurrence on or before September 4, 2001
of any one or more of the following events:
(1) For any period of five consecutive Trading Days following the date
hereof there shall be no reported sale price of the Common Stock on the
Nasdaq, the Nasdaq SmallCap, the NYSE or the AMEX;
(2) The Common Stock is not listed for trading on any of the Nasdaq,
the Nasdaq SmallCap, the NYSE or the AMEX;
(3) The inability for 45 or more days (whether or not consecutive) of
the Holder or the holder of any Other Note to sell shares of Common Stock
issued or issuable on conversion of this Note, any Interest Note or any
Other Note pursuant to the Registration Statement for any reason on each of
such 45 days;
(4) The Company shall (A) default in the timely performance of the
obligation to issue shares of Common Stock upon conversion of this Note,
any Interest Note or any Other Note as and when required by hereby or
thereby or the timely performance of its obligations under Section 3.9 or
(B) the Company shall fail or default in the timely performance of any
material obligation (other than as specifically set forth elsewhere in this
definition) to the Holder or the holder of any Other Note under the terms
of this Note, any Interest Note, any Other Note or any of the other
Transaction Documents, as such instruments may be amended from time to
time, and in the case of this clause (B) only, such failure or default
shall continue for ten Business Days after notice thereof from the Holder
to the Company;
(5) Any consolidation or merger of the Company with or into another
entity (other than a merger or consolidation of a Subsidiary into the
Company or a wholly-owned Subsidiary) where the stockholders of the Company
immediately prior to such transaction do not collectively own at least 51%
of the outstanding voting securities of the surviving corporation of such
consolidation or merger immediately following such transaction or the
common stock of such surviving corporation is not listed for trading on the
NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap, or any sale or other
transfer of all or substantially all of the assets of the Company;
(6) The taking of any action, including any amendment to the Company's
Articles of Incorporation, without the consent of the Majority Holders
which materially and adversely affects the rights of the Holder or any
holder of Other Notes;
-35-
(7) The Stockholder Approval shall not have been obtained on or before
the date which is 120 days after the Issuance Date; or
(8) The occurrence of any Event of Default specified in Article IV of
this Note.
"Repurchase Price" means with respect to any repurchase pursuant to
Sections 5.1 and 5.2 an amount in cash equal to the Premium Price on the
applicable repurchase date.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date on which the Registration
Statement is first declared effective by the SEC.
"Security Agreement" means the Security Agreement, dated as of
September 4, 1998, by and between the Company and the original Holder of this
Note.
"Series A Preferred Stock" means the Company's Series A Convertible
Preferred Stock, $.01 par value.
"Share Limitation Redemption Date" shall mean each date on which the
Company is required to redeem this Note or any portion hereof as provided in
Section 2.4(b).
"Share Limitation Redemption Price" means an amount in cash equal to
the Premium Price on the applicable Share Limitation Redemption Date.
"Stockholder Approval" means the approval by a majority of the votes
cast by the holders of shares of Common Stock (in person or by proxy) at a
meeting of the stockholders of the Company (duly convened at which a quorum was
present), or a written consent of holders of shares of Common Stock entitled to
such number of votes given without a meeting, of the issuance by the Company of
20% or more of the outstanding Common Stock of the Company for less than the
greater of the book or market value of such Common Stock on conversion of this
Note and the Other Notes, as and to the extent required under Rule 4460(i) of
Nasdaq as in effect at such time (or any successor or replacement provision
thereof).
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the Company.
-36-
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on whichever of (x) the national securities
exchange, (y) Nasdaq or (z) the Nasdaq SmallCap which at the time constitutes
the principal securities market for the Common Stock is open for general trading
of securities.
"Transaction Documents" means this Note, the Interest Notes, the Other
Notes, the Note Purchase Agreement, the Other Note Purchase Agreements, the
Security Agreement, the Transfer Agent Instruction from the Company to the
Transfer Agent for the benefit of, among others, the Holder of this Note and the
Holders of the Other Notes, as contemplated by the Note Purchase Agreement.
"Transfer Agent" means American Stock Transfer & Trust Company, its
successor or such other person who shall be serving as transfer agent and
registrar for the Common Stock and who shall have been authorized by the Company
to act as conversion agent for this Note in accordance with the Transfer Agent
Instruction and the name, address and telephone number of whom shall have been
given to the Holder by notice from the Company.
"Transfer Agent Instruction" means the Transfer Agent Instruction from
the Company to the Transfer Agent for the benefit of, among others, the Holder
of this Note and the holders of the Other Notes, as contemplated by the Note
Purchase Agreement.
"Warrants" means the Common Stock Purchase Warrants of the Company
issued to the original Holder of this Note pursuant to the Note Purchase
Agreement and to the original holders of the Other Notes pursuant to the Other
Note Purchase Agreements.
ARTICLE VII
MISCELLANEOUS
7.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
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7.2 NOTICES. Except as otherwise specifically provided herein, any
notice herein required or permitted to be given shall be in writing and may be
personally served, sent by telephone line facsimile transmission or delivered by
courier or sent by United States mail and shall be deemed to have been given
upon receipt if personally served, sent by telephone line facsimile transmission
or sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Company (telephone line facsimile transmission number 011-599-
932-2008, with a copy to Genesee International, Inc., 10500 ▇.▇. ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (telephone line facsimile number
(▇▇▇) ▇▇▇-▇▇▇▇); and the address of the Company shall be ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer (telephone line
facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇). The Holder or the Company may
change its address for service by service of written notice to the other as
herein provided.
7.3 AMENDMENT, WAIVERS, ETC.. (a) Neither this Note, any Interest
Note or any Other Note nor the Security Agreement nor any terms hereof or
thereof may be changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by the Majority Holders,
provided that no such change, waiver, discharge or termination shall, without
the consent of the Holder and the holders of the Other Notes affected thereby
(i) extend the scheduled final maturity of this Note, any Interest Note or any
Other Note, or reduce the rate or extend the time of payment of interest (other
than as a result of waiving the applicability of any post-default increase in
interest rates) hereon or thereon or reduce the principal amount hereof or
thereof or the Redemption Price, the Redemption Event Redemption Price, the
Share Limitation Redemption Price or the Repurchase Price, (ii) release the
collateral or reduce the amount of collateral required to be deposited or
maintained by the Company pursuant to the Security Agreement except as expressly
provided in the Security Agreement, (iii) amend, modify or waive any provision
of this Section 7.3, (iv) reduce any percentage specified in, or otherwise
modify, the definition of Majority Holders or (v) except as provided in this
Note, change the method of calculating the Conversion Price in a manner adverse
to the Holder.
(b) Notwithstanding any other provision of this Note or the Note
Purchase Agreement, in addition to the requirements of Section 7.3(a), any
amendment of (x) the second or third sentence of Section 2.1, (y) the definition
of the term Aggregated Person or (z) this Section 7.3(b) shall require approval
by the affirmative vote of the holders of a majority of the outstanding shares
of Common Stock, present in person or represented by proxy at a duly convened
meeting of stockholders of the Company, and entitled to vote or the consent
thereto in writing by holders of a majority of the outstanding shares of Common
Stock, and the stockholders of the Company are hereby expressly made third party
beneficiaries of this Section 7.3(b).
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7.4 ASSIGNABILITY. This Note shall be binding upon the Company and
its successors, and shall inure to the benefit of and be binding upon the Holder
and its successors and permitted assigns. The Company may not assign its rights
or obligations under this Note.
7.5 CERTAIN EXPENSES. The Company shall pay on demand all expenses
incurred by the Holder, including reasonable attorneys' fees and expenses, as a
consequence of, or in connection with (x) any amendment, modification, waiver or
consent relating to this Note, (y) any default or breach of any of the Company's
obligations set forth in the Transaction Documents and (z) the enforcement or
restructuring of any right of, including the collection of any payments due, the
Holder under the Transaction Documents, including any action or proceeding
relating to such enforcement or any order, injunction or other process seeking
to restrain the Company from paying any amount due the Holder.
7.6 GOVERNING LAW; EXECUTION, ISSUANCE AND DELIVERY. This Note shall
be governed by the internal laws of the State of New York, without regard to the
principles of conflict of laws. This Note has been signed, issued and delivered
in the State of New York and it is the intention of the Company and the Holder
that this Note shall be construed accordingly for all purposes.
7.7 TRANSFER OF NOTE. This Note has not been and is not being
registered under the provisions of the 1933 Act or any state securities laws and
this Note may not be transferred unless (1) the transferee is a Permitted
Transferee and (2) the Holder shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that this Note may be sold or transferred without registration under
the 1933 Act. Prior to any such transfer, such transferee shall have
represented in writing to the Company that such transferee has requested and
received from the Company all information relating to the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and the Subsidiaries deemed relevant by such transferee; that
such transferee has been afforded the opportunity to ask questions of the
Company concerning the foregoing and has had the opportunity to obtain and
review the Registration Statement and the prospectus included therein, each as
amended or supplemented to the date of transfer to such transferee, and the
reports and other information concerning the Company which at the time of such
transfer have been filed by the Company with the SEC pursuant to the 1934 Act
and which are incorporated by reference in such prospectus as of the date of
such transfer. If such transfer is intended to assign the rights and
obligations under (x) Sections 4, 5 and 9 of the Note Purchase Agreement, such
transfer shall otherwise be made in compliance with Section 9(h) of the Note
Purchase Agreement and (y) the Registration Rights Agreement to which the
-39-
Holder is entitled to the benefits such transfer shall otherwise be made in
compliance with Section 9 of such Registration Rights Agreement.
7.8 ENFORCEABLE OBLIGATION. The Company represents and warrants that
at the time of the original issuance of this Note it received the full purchase
price payable pursuant to the Note Purchase Agreement in an amount at least
equal to the original principal amount of this Note, and that this Note is an
enforceable obligation of the Company which is not subject to any offset,
reduction, counterclaim or disallowance of any sort.
7.9 CERTAIN AMOUNTS. Whenever pursuant to this Note the Company is
required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Company and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Note may be difficult to determine and the amount to be so paid by the
Company represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this Note
and to earn a return from the sale of shares of Common Stock acquired upon
conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note. The Company and the Holder hereby agree that such amount
of stipulated damages is not plainly disproportionate to the possible loss to
the Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.
7.10 REPLACEMENT OF NOTES. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Note and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security) or (b)
in the case of mutilation, upon surrender and cancellation of this Note, the
Company will execute and deliver to the Holder a new Note of like tenor without
charge to the Holder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-40-
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer on the day and in the year first above
written.
EQUALNET COMMUNICATIONS CORP.
By:
--------------------------------------
Name:
Title:
-41-
EXHIBIT A
NOTICE OF CONVERSION
OF 6% SENIOR SECURED CONVERTIBLE NOTE DUE 2001
OF EQUALNET COMMUNICATIONS CORP.
To: American Stock Transfer & Trust Company,
as Transfer Agent
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(1) Pursuant to the terms of the 6% Senior Secured Convertible Note
due 2001 (the "Note"), the undersigned hereby elects to convert
$_________________ of the Note, equal to the sum of $_________________ principal
amount of the Note, $________________ of accrued and unpaid interest on such
principal amount and $________________ of Default Interest on such interest into
shares of Common Stock of Equalnet Communications Corp., a Texas corporation
(the "Company"), at a Conversion Price per share equal to $_____________.
Capitalized terms used herein and not otherwise defined herein have the
respective meanings provided in the Note.
(2) The number of shares of Common Stock issuable upon the conversion
of the Note to which this Notice relates is ___________________.
(3) If the conversion of the Note by this Notice is based on the
Market Prices during a Measurement Period, set forth below or on a schedule
which accompanies this Notice are the Market Prices during the Measurement
Period applicable to this Notice and an indication of the five Market Prices
used to determine the Conversion Price set forth above.
Date Trading Price
---- -------------
1. _______________, _______ $_________________
2. _______________, _______ $_________________
3. _______________, _______ $_________________
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4. _______________, _______ $_________________
5. _______________, _______ $_________________
6. _______________, _______ $_________________
7. _______________, _______ $_________________
8. _______________, _______ $_________________
9. _______________, _______ $_________________
10. _______________, _______ $_________________
11. _______________, _______ $_________________
12. _______________, _______ $_________________
13. _______________, _______ $_________________
14. _______________, _______ $_________________
15. _______________, _______ $_________________
16. _______________, _______ $_________________
17. _______________, _______ $_________________
18. _______________, _______ $_________________
19. _______________, _______ $_________________
20. _______________, _______ $_________________
21. _______________, _______ $_________________
22. _______________, _______ $_________________
23. _______________, _______ $_________________
24. _______________, _______ $_________________
25. _______________, _______ $_________________
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(4) Please issue a certificate or certificates for ____________ shares
of Common Stock in the name(s) specified immediately below or, if additional
space is necessary, on an attachment hereto:
----------------------------- --------------------------
Name Name
----------------------------- ---------------------------
Address Address
----------------------------- ---------------------------
SS or Tax ID Number SS or Tax ID Number
Delivery Instructions
for Common Stock:
---------------------------
(5) The Holder hereby represents to the Company that the exercise of
conversion rights contained herein does not violate the provisions of Section
2.1(a) of the Note relating to beneficial ownership in excess of 4.9% of the
Common Stock.
(6) If this Notice is given on or prior to the date which is two years
after the Issuance Date and the shares of Common Stock issuable upon conversion
of the Note have not been registered under the Securities Act of 1933, as
amended (the "Act"), the undersigned represents and warrants that (i) the shares
of Common Stock issuable upon the conversion of the Note to which this Notice
relates are being acquired for the account of the undersigned for investment,
and not with a view to, or for resale in connection with, the distribution
thereof and (ii) the undersigned is an "accredited investor" as defined in
Regulation D under the 1933 Act. The undersigned further agrees that (A) such
shares shall not be sold or transferred unless either (i) they first shall have
been registered under the 1933 Act and applicable state securities laws or (ii)
the Company shall have been furnished with an opinion of legal counsel
reasonably satisfactory to the Company to the effect that such sale or transfer
is exempt from the
-44-
registration requirements of the 1933 Act and (B) until such shares are
registered under the 1933 Act, the Company may place a legend on the
certificate(s) for the shares to that effect and place a stop-transfer
restriction in its records relating to the shares.
NAME:
---------------------------------
Date ---------------------------------
------------------------- Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
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EXHIBIT B
COMPANY INCONVERTIBILITY NOTICE
(SECTION 2.4(b) OF 6% SENIOR SECURED CONVERTIBLE NOTE DUE 2001)
TO: ___________________________
(Name of Holder)
(1) Pursuant to the terms of the 6% Senior Secured Convertible Note
due 2001 (the "Note"), Equalnet Communications Corp., a Texas corporation (the
"Company"), hereby notifies the above-named Holder:
(a) On ___________________ (fill in date) five Inconvertibility Days
had occurred in a period of ten Trading Days and on such date
$_______________ (fill in amount) of principal of the Note and the related
interest, if any, became inconvertible by reason of the occurrence of five
Inconvertibility Days within a period of ten consecutive Trading Days.
(b) The five Inconvertibility Days covered by this Notice and the
applicable Conversion Price on each such day are as follows:
___________ , _______ $_____________
___________ , _______ $_____________
___________ , _______ $_____________
___________ , _______ $_____________
___________ , _______ $_____________
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date EQUALNET COMMUNICATIONS CORP.
________________________
By
---------------------------------
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EXHIBIT C
HOLDER INCONVERTIBILITY NOTICE
(SECTION 2.4(b) OF 6% SENIOR SECURED CONVERTIBLE NOTE DUE 2001)
TO: EQUALNET COMMUNICATIONS CORP.
(1) Pursuant to the terms of the 6% Senior Secured Convertible Note
due 2001 (the "Note"), the undersigned (the "Holder"), hereby notifies Equalnet
Communications Corp., a Texas corporation (the "Company"):
(a) On __________________ (fill in date) five Inconvertibility Days
had occurred in a period of ten Trading Days and on such date
$_______________ (fill in amount) of principal of the Note and the related
interest, if any, became inconvertible by reason of the occurrence of five
Trading Days on which all or a portion of this Note was inconvertible
within a period of ten consecutive Trading Days.
(b) The five Trading Days on which all or a portion of this Note was
inconvertible and which are covered by this Notice and the applicable
Conversion Price on each such day are as follows:
___________ , _______ $_____________
___________ , _______ $_____________
___________ , _______ $_____________
___________ , _______ $_____________
___________ , _______ $_____________
(2) If the following date and amounts are completed in this Notice,
the Holder hereby directs the Company to redeem the principal amount set forth
below (and the related interest) in accordance with Section 7(a) of the
Certificate of Designations set forth below:
(a) Principal amount of Note to be redeemed: ______________ (fill in)
(b) On __________________ (fill in Redemption Date), the Company shall
pay the Holder the Share Limitation Redemption Price of the portion (which,
if applicable, may be all) of the Note to be redeemed.
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(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date NAME OF HOLDER:
------------------------
--------------------------------
By
-----------------------------
Title:
-48-
EXHIBIT D
HOLDER REDEMPTION ELECTION
(SECTION 2.4(b) OF 6% SENIOR
SECURED CONVERTIBLE NOTE DUE 2001)
TO: EQUALNET COMMUNICATIONS CORP.
(1) Pursuant to the terms of the 6% Senior Secured Convertible Note
due 2001 (the "Note"), the undersigned (the "Holder") hereby notifies Equalnet
Communications Corp., a Texas corporation (the "Company"), that the Holder is
exercising its right to require the Company to redeem a portion (which, if
applicable, may be all) of the Note as set forth below in accordance with
Section 2.4(b) of the Note. On ________________________ (fill in Redemption
Date), the Company shall pay the Holder the Share Limitation Redemption Price
for redemption of $________________________ principal amount of the Note and the
related interest.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date NAME OF HOLDER:
------------------------
By
------------------------------
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EXHIBIT E
HOLDER NOTICE
(SECTION 5.2(b) OF 6% SENIOR SECURED CONVERTIBLE NOTE DUE 2001)
TO: EQUALNET COMMUNICATIONS CORP.
(1) Pursuant to the terms of the 6% Senior Secured Convertible Note
due 2001 (the "Note"), the undersigned Holder hereby elects to exercise its
right to require repurchase by the Company pursuant to Sections 5.2(a) and
5.2(b) of $_________________________ of the Note, equal to the sum of
$____________________ principal amount of the Note, $____________________ of
accrued and unpaid interest on such principal amount and $____________________
of Default Interest on such interest at the Repurchase Price provided in the
Note.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date: NAME OF HOLDER:
-----------------------
By
---------------------------------
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
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