EXHIBIT 10.33
NOTE PURCHASE AGREEMENT
DATED AS OF JULY 31, 1998
BY AND BETWEEN
EQUALNET COMMUNICATIONS CORP.
AND
GENESEE FUND LIMITED-PORTFOLIO B
____________________
6% SENIOR SECURED CONVERTIBLE NOTE DUE 2001
and
COMMON STOCK PURCHASE WARRANTS
1
NOTE PURCHASE AGREEMENT
6% SENIOR SECURED CONVERTIBLE NOTE DUE 2001
AND
COMMON STOCK PURCHASE WARRANTS
EQUALNET COMMUNICATIONS CORP.
Page
----
1. AGREEMENT TO PURCHASE................................................. 1
(a) Purchase of Note............................................. 1
(b) Deliveries and Form of Payment............................... 2
(c) Method of Payment............................................ 2
2. BUYER REPRESENTATIONS, WARRANTIES, ETC................................ 2
(a) Purchase for Investment...................................... 2
(b) Accredited Investor.......................................... 2
(c) Reoffers and Resales......................................... 2
(d) Company Reliance............................................. 3
(e) Information Provided......................................... 3
(f) Absence of Approvals......................................... 3
(g) Note Purchase Agreement...................................... 3
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.............................. 3
(a) Organization and Authority................................... 3
(b) Capitalization............................................... 4
(c) Concerning the Common Shares and the Common Stock............ 4
(d) Note Purchase Agreement, Note and Other Transaction Documents 5
(e) Non-contravention............................................ 5
(f) Approvals.................................................... 5
(g) Information Provided......................................... 6
(h) Absence of Certain Changes................................... 6
(i) Absence of Certain Proceedings............................... 6
(j) Properties................................................... 7
(k) Labor Relations.............................................. 8
(l) SEC Filings.................................................. 8
(m) Absence of Brokers, Finders, Etc............................. 8
(n) No Solicitation.............................................. 8
(o) Certain Issuances of Securities.............................. 8
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS................................. 8
(a) Transfer Restrictions........................................ 8
(b) Restrictive Legend........................................... 9
(c) Registration Rights Agreement................................ 10
2
(d) Form D.................................................... 10
(e) Authorization for Trading................................. 10
(f) Use of Proceeds........................................... 10
(g) Blue Sky Laws............................................. 10
(h) Certain Expenses.......................................... 10
(i) Certain Issuances of Securities........................... 11
(j) Stockholder Approval...................................... 11
(k) Best Efforts.............................................. 11
5. TRANSFER AGENT INSTRUCTION......................................... 12
6. CLOSING DATE....................................................... 12
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE........... 12
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE................... 13
9. MISCELLANEOUS...................................................... 13
(a) Governing Law............................................. 13
(b) Counterparts.............................................. 13
(c) Headings, etc............................................. 14
(d) Severability.............................................. 14
(e) Amendments................................................ 14
(f) Waivers................................................... 14
(g) Notices................................................... 14
(h) Assignment................................................ 15
(i) Survival of Representations and Warranties................ 15
(j) Entire Agreement.......................................... 15
(k) Termination............................................... 15
(l) Further Assurances........................................ 16
(m) Public Statements, Press Releases, Etc.................... 16
(n) Construction.............................................. 16
SCHEDULES
Schedule 3(b)-1 Antidilution Adjustments
Schedule 3(b)-2 Certain Registration Rights
Schedule 3(c)-1 Certain Nasdaq Matters
ANNEXES
Annex I Form of 6% Senior Secured Convertible Note due 2001
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Annex II Form of Common Stock Purchase Warrant
Annex III Joint Escrow Instructions
Annex IV Form of Registration Rights Agreement
Annex V Form of Transfer Agent Instruction
Annex VI Form of Opinion of Counsel to Be Delivered on Closing Date
Annex VII Form of Opinion of the Company's General Counsel
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NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of July 31, 1998 (this
"Agreement"), by and between EQUALNET COMMUNICATIONS CORP., a Texas corporation
(the "Company"), with headquarters located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and GENESEE FUND LIMITED-PORTFOLIO B, a British Virgin
Islands corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, a senior secured convertible note of the
Company which will be convertible into shares of Common Stock, $.01 par value
(the "Common Stock"), of the Company and in connection therewith the Company is
to issue to the Buyer warrants to purchase shares of Common Stock as provided in
this Agreement;
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, in connection with this Agreement and the transactions
contemplated hereby, the Company is executing and delivering several Note
Purchase and Exchange Agreements, dated as of the date hereof, with the several
buyers named therein (the "Exchange Agreements"), pursuant to which, among other
things, the Company has agreed, upon the terms and subject to the conditions of
the Exchange Agreements, to sell senior secured convertible notes to such buyers
(the "Other Notes"), to issue shares of Series D Convertible Preferred Stock,
$.01 par value (the "Series D Preferred Stock"), in exchange for outstanding
shares of Common Stock held by such buyers and to issue to such buyers warrants
to purchase shares of Common Stock (the "Other Warrants");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
(A) PURCHASE OF NOTE; ISSUANCE OF WARRANTS. The Buyer hereby agrees to purchase
from the Company a 6% Senior Secured Convertible Note due 2001 in the principal
amount set forth on the signature page of this Agreement, having the terms and
conditions in the form thereof attached hereto as ANNEX I (the "Note") for the
aggregate purchase price set forth on the signature page of this Agreement (the
"Purchase Price"). In connection with the purchase of the Note by the Buyer, the
Company shall issue to the Buyer at the closing on the Closing Date (as defined
herein) Common Stock Purchase Warrants in the form attached hereto as ANNEX II
(the
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"Warrants") to purchase a number of shares of Common Stock equal to the quotient
obtained by dividing (i) the quotient obtained by dividing (x) the Purchase
Price by (y) the Purchase Price (as defined in the Warrants) per share of Common
Stock to be set forth in the Warrants by (ii) 4.6666 (subject to adjustment
after issuance of the Warrants as provided in the Warrants). The 6% Senior
Secured Convertible Notes due 2001 issuable pursuant to Section 1.1 of the Note
or such notes in payment of interest on the Note and such notes are referred to
herein as the "Interest Notes." The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "Warrant Shares." The
Warrant Shares and the shares of Common Stock issuable upon conversion of the
Note and the Interest Notes are referred to herein collectively as the "Common
Shares." The Common Shares, the Note and the Interest Notes are referred to
herein collectively as the "Securities."
(B) DELIVERIES AND FORM OF PAYMENT. The Buyer shall pay the Purchase Price by
delivering good funds in United States Dollars to the escrow agent (the "Escrow
Agent") identified in the Joint Escrow Instructions attached hereto as ANNEX III
(the "Joint Escrow Instructions"). Such delivery of funds shall be made against
delivery by the Company of the certificates for the Note and the Warrants
registered in the name of the Buyer. Promptly following payment by the Buyer to
the Escrow Agent of the Purchase Price, but in any event prior to the Closing
Date (as defined herein), the Company shall deliver certificates for the
Preferred Shares, registered in the name of the Buyer or its nominee, to the
Escrow Agent. The certificates for the Note shall be delivered by the Company to
the Escrow Agent on a delivery against payment basis at the closing. By signing
this Agreement, the Buyer and the Company each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
(C) METHOD OF PAYMENT. Payment of the Purchase Price for the Preferred Shares
shall be made by wire transfer of funds to:
Citibank, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
For credit to A/C#37179446
For credit to the account of ▇▇▇▇▇ ▇. ▇▇▇▇▇ Attorney Escrow Account
Reference: Genesee/Equalnet
Not later than 4:00 p.m., New York City time, on the date which is one Business
Day after the Company shall have accepted this Agreement and returned a signed
counterpart of this Agreement to the Buyer or its legal counsel, the Buyer shall
deposit with the Escrow Agent an amount equal to the Purchase Price. As used in
this Agreement, the term "Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
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2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(A) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Note and acquiring the
Warrants for its own account for investment only and not with a view towards the
public sale or distribution thereof;
(B) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3);
(C) REOFFERS AND RESALES. All subsequent offers and sales of the Securities by
the Buyer shall be made pursuant to registration of the Securities being offered
and sold under the 1933 Act or pursuant to an exemption from registration;
(D) COMPANY RELIANCE. The Buyer understands that the Note is being offered and
sold, the Warrants are being issued, and the Common Shares are being offered, in
each case to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Note and the Warrants and to receive an offer of the Common Shares;
(E) INFORMATION PROVIDED. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Note and the
issuance of the Warrants and the offer of the Common Shares which have been
requested by the Buyer; the Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received satisfactory
answers to any such inquiries; without limiting the generality of the foregoing,
the Buyer has had the opportunity to obtain and to review the Company's (1)
Annual Report on Form 10-K for the fiscal year ended June 30, 1997, as amended
by Amendment No. 1 thereto on Form 10-K/A filed with the SEC on September 30,
1997, Amendment No. 2 thereto on Form 10-K/A filed with the SEC on October 28,
1997, Amendment No. 3 thereto filed with the SEC on January 20, 1998, and
Amendment No. 4 thereto on Form 10-K/A filed with the SEC on January 30, 1998
(the "1997 10-K"), (2) Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1997, December 31, 1997 and March 31, 1998, (3) definitive proxy
statement for the Company's 1997 Annual Meeting of Shareholders, (4) definitive
proxy statement for a Special Meeting of stockholders of the Company held on
June 30, 1998, and (5) Current Reports on Form 8-K dated July 10, 1997, July 23,
1997 and March 10, 1998, in each case as filed with the SEC (collectively, the
"SEC Reports"); and the Buyer understands that its investment in the Securities
involves a high degree of risk;
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(F) ABSENCE OF APPROVALS. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities; and
(G) NOTE PURCHASE AGREEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with,
the Buyer that as of August 31, 1998 except as otherwise specifically provided
herein:
(A) ORGANIZATION AND AUTHORITY. Each of the Company and its subsidiaries listed
in Exhibit 21 to the 1997 10-K (together with USC Telecom, Inc. and Netco
Acquisition Corp., the "Subsidiaries") is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority (i) to own,
lease and operate its properties and to carry on its business as now being
conducted, and (ii) to execute, deliver and perform its obligations under this
Agreement, the Note, the Warrants, the Registration Rights Agreement, the form
of which is attached hereto as ANNEX IV (the "Registration Rights Agreement"),
the Transfer Agent Instruction, the form of which is attached hereto as ANNEX V
(the "Transfer Agent Instruction"), and the other agreements to be executed and
delivered by the Company in connection herewith, and to consummate the
transactions contemplated hereby and thereby. Each of the Company and the
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions wherein such qualification is necessary and
where failure so to qualify could have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and the Subsidiaries, taken as a whole.
The Company has no equity investment in any person other than the Subsidiaries.
(B) CAPITALIZATION. The authorized capital stock of the Company consists of (a)
50,000,000 shares of Common Stock of which 21,393,070 shares were outstanding on
August 10, 1998, all of which are fully paid and nonassessable; and (b)
5,000,000 shares of Preferred Stock, $.01 par value, of which 2,000 shares have
been designated Series A Convertible Preferred Stock and of which 2,000 shares
are outstanding, 3,000 shares have been designated Series B Senior Convertible
Preferred Stock and of which 3,000 shares are outstanding, of which 300,000
shares have been designated Series C Convertible Preferred Stock (the "Series C
Stock") and of which 195,073 shares are outstanding, and of which 6,500 shares
will, be designated as Series D Convertible Preferred Stock, of which 5,000
shares will be issued pursuant to the Exchange Agreements; and on the Closing
Date there will be (x) no material increase from August 10, 1998 in the number
of shares of Common Stock outstanding and (y) no issuances of preferred stock
except as issued pursuant to the Exchange Agreements. As of August 10, 1998, the
Company had outstanding options, warrants and similar rights entitling the
holders to purchase
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14,563,462 shares of Common Stock. Other than as set forth in the preceding
sentence, the Company does not have outstanding any material amount of
securities (or obligations to issue any such securities) convertible into,
exchangeable for or otherwise entitling the holders thereof to acquire shares of
Common Stock, except as disclosed in the SEC Reports. The Company has duly
reserved from its authorized and unissued shares of Common Stock the full number
of shares required for (a) all options, warrants, convertible securities and
other rights to acquire shares of Common Stock which are outstanding and (b) all
shares of Common Stock and options and other rights to acquire shares of Common
Stock which may be issued or granted under the stock option and similar plans
which have been adopted by the Company or any of the Subsidiaries. Each
outstanding class or series of securities for which any antidilution or similar
adjustment arising by reason of the issuance or conversion of the Note and the
Interest Notes or the issuance or exercise of the Warrants or the issuance or
conversion of the shares of Series D Preferred Stock or the issuance or exercise
of the Other Warrants to be issued pursuant to the Exchange Agreements will
occur is identified on SCHEDULE 3(B)-1 attached hereto, together with the amount
of such antidilution adjustment. The outstanding shares of Common Stock and
outstanding options, warrants and other securities convertible into,
exchangeable for or otherwise entitling the holder thereof to acquire shares of
Common Stock have been duly authorized and validly issued. None of such
outstanding shares of Common Stock, options, warrants and other securities has
been issued in violation of the preemptive rights of any securityholder of the
Company. The offers and sales of the outstanding shares of Common Stock and such
options, warrants and other securities were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements. No holder of any of the Company's securities has any
rights, "demand," "piggy-back" or otherwise, to have such securities registered
by reason of the intention to file, filing or effectiveness of the Registration
Statement (as defined in the Registration Rights Agreement), except as set forth
on SCHEDULE 3(B)-2 attached hereto.
(C) CONCERNING THE COMMON SHARES AND THE COMMON STOCK. The Common Shares have
been duly authorized and, when issued upon conversion of the Note or the
Interest Notes or upon exercise of the Warrants, as the case may be, will be
duly and validly issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such holder. There are
no preemptive or similar rights of any stockholder of the Company or any other
person to acquire the Note, the Interest Notes or any of the Common Shares. The
Company has duly reserved 13,043,468 shares of Common Stock for conversion of
the Note, the Interest Notes, the Other Notes, and the shares of Series D
Preferred Stock and exercise of the Warrants and the Other Warrants, and such
shares shall remain so reserved (subject to reduction from time to time for
shares of Common Stock issued upon conversion of the Note, the Interest Notes,
the Other Notes, and the shares of Series D Preferred Stock and exercise of the
Warrants and the Other Warrants), and the Company shall from time to time
reserve such additional shares of Common Stock as shall be required to be
reserved pursuant to the Note and the Interest Notes, as long as the Note and
the Interest Notes are convertible, and pursuant to the Warrants, as long as the
Warrants are exercisable. The Common Stock is listed for trading on the Nasdaq
National Market ("Nasdaq") and (1) the Company and the Common Stock meet the
criteria for continued listing and trading on Nasdaq; (2) except as set forth on
SCHEDULE 3(C)-1 attached hereto, the Company has not been notified since January
1, 1996 by Nasdaq of any failure or potential
9
failure to meet the criteria for continued listing and trading on Nasdaq and (3)
no suspension of trading in the Common Stock is in effect. The Company knows of
no reason that the Common Shares will not be eligible for listing on Nasdaq.
(D) NOTE PURCHASE AGREEMENT, NOTE AND OTHER TRANSACTION DOCUMENTS. This
Agreement, the Note, the Registration Rights Agreement, the Warrants and the
Transfer Agent Instruction and the other agreements and instruments contemplated
hereby and thereby have been duly and validly authorized by the Company, this
Agreement has been duly executed and delivered by the Company and this Agreement
is, and the Note, the Registration Rights Agreement, the Warrants and the
Transfer Agent Instruction and such other agreements, when executed and
delivered by the Company, will be, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
(E) NON-CONTRAVENTION. The execution and delivery by the Company of this
Agreement and the other documents contemplated by this Agreement and the
consummation by the Company of the issuance of the Note and the Warrants as
contemplated by this Agreement, and the other transactions contemplated by this
Agreement, the Note, the Registration Rights Agreement, the Warrants and the
Transfer Agent Instruction do not and will not, with or without the giving of
notice or the lapse of time, or both (i) result in any violation of any terms of
the Articles of Incorporation or By-laws of the Company or any Subsidiary, (ii)
conflict with or result in a breach by the Company or any Subsidiary of any of
the terms or provisions of, or constitute a default under, or result in the
modification, amendment, termination or cancellation of, result in the
acceleration of any obligation of the Company or any Subsidiary under, or result
in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any
Subsidiary pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of their respective properties or
assets is bound or affected, (iii) violate or contravene any applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any Subsidiary or any
of their respective properties or assets, including, without limitation, any law
of the State of New York or the State of Texas relating to usury or the maximum
rate chargeable with respect to indebtedness, or (iv) have any material adverse
effect on any permit, certification, registration, approval, consent, license or
franchise necessary for the Company or any Subsidiary to own or lease and
operate any of their respective properties or to conduct any of their respective
businesses or the ability of the Company or any Subsidiary to make use thereof.
(F) APPROVALS. No authorization, approval or consent of, or filing with, any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained or made by the Company for (1) the execution, delivery and performance
by the Company of this Agreement, the Registration Rights Agreement, the
Warrants, the Transfer Agent Instruction and the other agreements and
instruments contemplated hereby and thereby, (2) the execution and issuance of
the Note and the
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Interest Notes, (3) the issuance and sale of the Note, the issuance of the
Interest Notes and the issuance of the Warrants as contemplated by this
Agreement and (4) the issuance of Common Shares on conversion of the Note or the
Interest Notes or upon the exercise of the Warrants or the issuance of Interest
Notes in payment of interest on the Note or the Interest Notes, other than (w)
the listing of the Common Shares on Nasdaq, (x) registration of the resale of
the Common Shares under the 1933 Act as contemplated by the Registration Rights
Agreement, (y) as may be required under applicable state securities or "blue
sky" laws and (z) filing of one or more Forms D with respect to the Securities
as required under Regulation D.
(G) INFORMATION PROVIDED. The information provided by or on behalf of the
Company to the Buyer in connection with the transactions contemplated by this
Agreement, including, without limitation, the information referred to in Section
2(e) of this Agreement, does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, it being understood that, for purposes of this Section 3(g), any
statement contained in such information shall be deemed to be modified or
superseded for purposes of this Section 3(g) to the extent that a statement in
any document included in such information which was prepared or filed with the
SEC on a later date modifies or replaces such statement, whether or not such
later prepared or filed statement so states. The Company has not filed any
reports with the SEC under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), since June 30, 1997 other than the SEC Reports.
(H) ABSENCE OF CERTAIN CHANGES. Since March 31, 1998, there has been no material
adverse change and no material adverse development in the business, properties,
operations, condition (financial or other), results of operations or prospects
of the Company and the Subsidiaries, taken as a whole, except as disclosed in
the SEC Reports or in SCHEDULE 3(H) attached hereto. Except as and to the extent
disclosed, reflected or reserved against in the financial statements of the
Company and the notes thereto included in the SEC Reports, neither the Company
nor any Subsidiary has any material (individually or in the aggregate)
liabilities, debts or obligations whether accrued, absolute, contingent or
otherwise, and whether due or to become due. Subsequent to March 31, 1998,
neither the Company nor any Subsidiary has incurred any liabilities, debts or
obligations of any nature whatsoever which are individually or in the aggregate
material to the Company and the Subsidiaries, taken as a whole, other than those
incurred in the ordinary course of their respective businesses or disclosed in
the SEC Reports.
(I) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in the SEC Reports or on
SCHEDULE 3(I) attached hereto, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or governmental
agency (collectively, an "Action") pending or, to the knowledge of the Company
or any Subsidiary, threatened against the Company or any Subsidiary, in any such
case wherein an unfavorable decision, ruling or finding would have a material
adverse effect on the business, properties, condition (financial or other),
results of operations or prospects of the Company and the Subsidiaries, taken as
a whole, or the transactions contemplated by this Agreement or any of the
documents contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents;
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neither the Company or any Subsidiary nor any director or officer thereof is or
has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty; the Company does not have pending before the SEC any request for
confidential treatment of information and to the best of the Company's knowledge
no such request will be made by the Company prior to the time the Registration
Statement relating to the Common Shares which is contemplated by the
Registration Rights Agreement is first ordered effective by the SEC; and there
has not been, and to the best of the Company's knowledge there is not pending or
contemplated, any investigation by the SEC involving the Company or any current
or former director or officer of the Company.
(J) PROPERTIES. The Company and the Subsidiaries have good title to all property
real and personal (tangible and intangible) and other assets owned by them, free
and clear of all security interests, charges, mortgages, liens or other
encumbrances, except those in favor of RFC Capital Corporation or Greyrock
Business Credit, Finova Capital Corporation, ▇▇▇▇▇▇ Group, LLC and Netco LLC and
such as are described in the SEC Reports or such as do not materially interfere
with the use of such property made, or proposed to be made, by the Company or
any Subsidiary. The leases, licenses or other contracts or instruments under
which the Company and the Subsidiaries lease, hold or are entitled to use any
property, real or personal, are valid, subsisting and enforceable with only such
exceptions as do not materially interfere with the use of such property made, or
proposed to be made, by the Company or any Subsidiary. Neither the Company nor
any Subsidiary has received notice of any material violation of any applicable
law, ordinance, regulation, order or requirement relating to its owned or leased
properties. The Company does not have any knowledge of, and the Company has not
given or received any notice of, any pending conflicts with or infringement of
the rights of others with respect to any Company Proprietary Rights (as defined
herein) or with respect to any license of Company Proprietary Rights. No action,
suit, arbitration, or legal, administrative or other proceeding or investigation
is pending, or, to the best knowledge of the Company, threatened, which involves
any Company Proprietary Rights. Neither the Company nor any Subsidiary is
subject to any judgment, order, writ, injunction or decree of any court or any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
arbitrator, or has entered into or is a party to any contract which restricts or
impairs the use of any such Company Proprietary Rights in a manner which would
have a material adverse effect on the use by the Company or any Subsidiary of
any of the Company Proprietary Rights. To the best knowledge of the Company, no
Company Proprietary Rights and no services or products sold by the Company or
any Subsidiary, conflict with or infringe upon any proprietary rights available
to any third party. Neither the Company nor any Subsidiary has received written
notice of any pending conflict with or infringement upon such third-party
proprietary rights. Neither the Company nor any Subsidiary has entered into any
consent, indemnification, forbearance to ▇▇▇ or settlement agreement with
respect to Company Proprietary Rights other than in the ordinary course of
business. No claims have been asserted by any person with respect to the
validity of the Company's or any Subsidiary's ownership or right to use the
Company Proprietary Rights and, to the best knowledge of the Company, there is
no reasonable basis for any such claim to be successful. To the best knowledge
of the Company, the Company Proprietary Rights are valid and enforceable. No
registration relating to the Company Proprietary Rights has lapsed, expired or
been abandoned or canceled or is the subject of
12
cancellation or other adversarial proceedings, and all applications therefor are
pending and are in good standing, except for such lapses, expirations,
abandonments, cancellations, adversarial proceedings or failures to be in good
standing which would not, singly or in the aggregate, have a material adverse
effect on the business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Company and the
Subsidiaries, taken as a whole. The Company and the Subsidiaries have complied,
in all material respects, with their respective contractual obligations relating
to the protection of the Company Proprietary Rights used pursuant to licenses.
To the best knowledge of the Company, no person is infringing on or violating
the Company Proprietary Rights. As used herein, the term "Company Proprietary
Rights" means all patents, patent applications, inventions, trademarks, trade
names, applications for registration of trademarks, service marks, service ▇▇▇▇
applications, copyrights, know-how, manufacturing processes, formulae, trade
secrets, licenses and rights in any thereof and any other intangible property
and assets which are material to the businesses of the Company and the
Subsidiaries as now conducted, as proposed to be conducted or as described in
this Agreement.
(K) LABOR RELATIONS. No material labor problem exists or, to the knowledge of
the Company or any Subsidiary, is imminent with respect to any of the employees
of the Company or any Subsidiary.
(L) SEC FILINGS. The Company has timely filed all required forms, reports and
other documents required to be filed with the SEC under the 1934 Act since
January 1, 1997. All of such forms, reports and other documents complied, when
filed, in all material respects, with all applicable requirements of the 1933
Act and the 1934 Act.
(M) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or similar person is
entitled to any commission, fee or other compensation in respect of the
transactions contemplated by this Agreement by reason of any action or conduct
of the Company or any Subsidiary or any person acting on behalf of any of them,
and the Company shall pay, and indemnify and hold harmless the Buyer from, any
claim made against the Buyer by any person for any such commission, fee or other
compensation.
(N) NO SOLICITATION. No form of general solicitation or general advertising was
used by the Company or, to the best of its knowledge, any other person acting on
behalf of the Company, in respect of or in connection with the offer and sale of
the Securities. Neither the Company nor, to its knowledge, any person acting on
behalf of the Company has, either directly or indirectly, sold or offered for
sale to any person any of the Notes or the Warrants or, within the six months
prior to the date hereof, any other similar security of the Company except for
the Series C Stock and as contemplated by this Agreement or the Exchange
Agreements; and neither the Company nor any person authorized to act on its
behalf will sell or offer for sale any debt securities, shares of Common Stock
or Warrants, or solicit any offers to buy any debt securities, shares of Common
Stock or Warrants, so as thereby to cause the issuance or sale of the Note or
the Interest Notes or the issuance of the Warrants to be in violation of Section
5 of the 1933 Act.
(O) CERTAIN ISSUANCES OF SECURITIES. The Company has not issued any shares of
Common Stock or shares of any series of preferred stock or other securities
convertible into, exchangeable
13
for or otherwise entitling the holder to acquire shares of Common Stock which
are subject to Rule 4460(i) of Nasdaq (or any successor, replacement or similar
provision thereof or of any other market on which the Common Stock is listed for
trading) and which would be integrated with the sale of the Note to the Buyer or
the issuance of Interest Notes in payment of interest on the Note or the
Interest Notes or the issuance of Common Shares upon conversion thereof or upon
exercise of the Warrants for purposes of such Rule 4460(i) (or any successor,
replacement or similar provision thereof or of any other market on which the
Common Stock is listed for trading).
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Company and the Buyer acknowledge and agree that
(1) the Note and the Warrants have not been and are not being registered under
the provisions of the 1933 Act and, except as provided in the Registration
Rights Agreement with respect to the resale of the Common Shares, the Common
Shares have not been and are not being registered for resale under the 1933 Act,
and the Securities may not be transferred unless (A) subsequently registered for
resale thereunder or (B) the Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration; (2) any resale
of the Securities made in reliance on Rule 144 promulgated under the 1933 Act
may be made only in accordance with the terms of said Rule and further, if said
Rule is not applicable, any such resale of Securities under circumstances in
which the seller, or the person through whom the sale is made, may be deemed to
be an underwriter, as that term is used in the 1933 Act, may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder (other than pursuant to Section 4(d) hereof and
pursuant to the Registration Rights Agreement).
(b) RESTRICTIVE LEGEND. (1) The Buyer acknowledges and agrees that the Note
shall bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of the Note):
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.
14
(2) The Buyer further acknowledges and agrees that the Warrants shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the Warrants):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned in
the absence of an effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
(3) The Buyer further acknowledges and agrees that until such time as the
Common Shares have been registered for resale under the 1933 Act as contemplated
by the Registration Rights Agreement, the certificates for the Common Shares may
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of the certificates for the Common
Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned in
the absence of an effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
(4) Once the Registration Statement required to be filed by the Company
pursuant to Section 2 of the Registration Rights Agreement has been declared
effective, thereafter (1) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for any Common Shares
issued prior to the date such Registration Statement is declared effective by
the SEC which bear such restrictive legend and remove any stop-transfer
restriction relating thereto promptly, but in no event later than three trading
days after surrender of such certificates by the Buyer and (2) the Company shall
not place any restrictive legend on certificates for Common Shares issued on
conversion of or as dividends on the Preferred Shares or upon exercise of the
Warrants or impose any stop-transfer restriction thereon.
(c) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter into the
Registration Rights Agreement in the form attached hereto as ANNEX IV on or
before the Closing Date.
(d) FORM D. The Company agrees to file a Form D with respect to the Securities
as required under Regulation D and to provide a copy thereof to the Buyer
promptly after such filing. The Buyer agrees to cooperate with the Company in
connection with such filing and, upon request of the Company, to provide all
information relating to the Buyer reasonably required for such filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before the Closing Date,
the Company shall file a notification for listing of additional shares with the
Nasdaq relating to the Common Shares and shall provide evidence of such filing
to the Buyer. So long as the Buyer beneficially owns any of the Note, the
Interest Notes, the Warrants or the Common Shares, the
15
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination.
(f) USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or has any
present intention of acquiring any "margin stock" as defined in Regulation G
(12 CFR Part 207) of the Board of Governors of the Federal Reserve System
("margin stock"). The proceeds of sale of the Note will be used for general
working capital purposes and in the operation of the Company's business. None of
such proceeds will be used, directly or indirectly (1) to make any loan to or
investment in any other person (other than financing the Company's subsidiaries
in the ordinary course of business) or (2) for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose which might constitute the transactions
contemplated by this Agreement a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the transactions
contemplated hereby to violate Regulation G, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the 1934 Act, in each case as in effect now or as the same may hereafter be in
effect.
(g) BLUE SKY LAWS. On or before the Closing Date, the Company shall take such
action as shall be necessary to qualify, or to obtain an exemption for, the Note
for sale to the Buyer and the Warrants for issuance to the Buyer pursuant to
this Agreement and the Common Shares for issuance to the Buyer on conversion of
the Note under such of the securities or "blue sky" laws of jurisdictions as
shall be applicable to the sale of the Note and the issuance of the Warrants
pursuant to this Agreement and the issuance to the Buyer of Common Shares on
conversion of the Note and exercise of the Warrants. The Company shall furnish
copies of all filings, applications, orders and grants or confirmations of
exemptions relating to such securities or "blue sky" laws on or prior to the
Closing Date.
(h) CERTAIN EXPENSES. Whether or not the closing occurs, the Company shall pay
or reimburse the Buyer for all reasonable expenses (including, without
limitation, legal fees and expenses of counsel to the Buyer) incurred by the
Buyer in connection with this Agreement and the transactions contemplated
hereby. The Company shall pay on demand all reasonable expenses incurred by the
Buyer, including reasonable attorneys' fees and expenses, as a consequence of,
or in connection with (1) the negotiation, preparation or execution of any
amendment, modification or waiver of this Agreement, the Note, the Registration
Rights Agreement, the Warrants, the Transfer Agent Instruction and the other
agreements and instruments contemplated hereby and thereby requested by the
Company, (2) any default or breach of any of the Company's obligations set forth
in any of such agreements or instruments and (3) the enforcement or
restructuring of any right of, including the collection of any payments due, the
Buyer under any of such agreements or instruments, 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 Buyer, in
which the Buyer prevails.
16
(i) CERTAIN ISSUANCES OF SECURITIES. (1) Unless the Company obtains the
Stockholder Approval (as defined in the Note) or a waiver thereof from the
Nasdaq, the Company will not issue any shares of Common Stock or shares of
preferred stock or other securities convertible into, exchangeable for, or
otherwise entitling the holder to acquire, shares of Common Stock which would be
subject to the requirements of Rule 4460(i) of Nasdaq (or any successor,
replacement, or similar provision thereof or of any other market on which the
Common Stock is listed for trading) and which would be integrated with the sale
of the Note and issuance of the Warrants to the Buyer or the issuance of Common
Shares upon conversion of the Note or Interest Notes or exercise of the Warrants
for purposes of Rule 4460(i) of Nasdaq (or any successor, replacement or similar
provision thereof or of any other market on which the Common Stock is listed for
trading).
(2) Subject to the restrictions in Section 4(i)(1), during the period
from the date of execution and delivery of this Agreement to the date which is
one year after the Closing Date, the Company shall not offer, sell, contract to
sell or issue (or engage any person to assist the Company in taking any such
action) any Discounted Securities without giving the Buyer the first right to
acquire all or any portion, as determined by the Buyer in its discretion, of
such Discounted Securities on the same terms as the Discounted Securities are to
be offered to other investors. In each instance of proposed issuance of
Discounted Securities the Company shall give notice to the Buyer of the detailed
terms of such Discounted Securities proposed to be issued and, promptly after
requested by the Buyer, such other information as requested by the Buyer. The
Buyer may, by notice to the Company, exercise such right of first refusal at any
time until the later of (x) ten Business Days after such notice from the Company
to the Buyer and (y) three Business Days after the Company provides such
additional information as shall have been requested by the Buyer.
(j) STOCKHOLDER APPROVAL. The Company shall seek and use its best efforts to
obtain, on or before the date which is 120 days after the Closing Date, the
Stockholder Approval of the issuance of the Note, the Interest Notes, the
Warrants and the Common Shares. The Company shall call a meeting of stockholders
to be held within 120 days after the Closing Date, shall prepare and file with
the SEC no later than 45 days after the Closing Date, preliminary proxy
materials which set forth a proposal to seek such Stockholder Approval and shall
recommend approval thereof by its stockholders. The Company shall provide the
Buyer an opportunity to review and comment on such proxy materials by providing
copies of such proxy materials and any revised preliminary proxy materials to
the Buyer a reasonable period of time prior to their filing with the SEC. The
Company shall furnish to the Buyer and its counsel a copy of its definitive
proxy materials for such meeting of stockholders and any amendments or
supplements thereto promptly after the same are mailed to stockholders or filed
with the SEC, shall inform the Buyer of the progress of solicitation of proxies
for such meeting and shall inform the Buyer of any adjournment of such meeting
and shall report the result of the vote of any stockholders on such proposition
on the day such vote is taken. If for any reason the Company fails to obtain
such Stockholder Approval, the Company shall be required to redeem the Note and
any Interest Notes in accordance with Sections 5.1 and 5.2 thereof. As used
herein, "Stockholder Approval" shall have the meaning to be provided or provided
in the Note.
17
(k) NASDAQ DETERMINATION. The Company shall promptly seek and use its best
efforts to obtain a written determination from Nasdaq that neither the Warrants
and the issuance of shares of Common Stock upon exercise of the Warrants nor the
Series D Preferred Stock and the issuance of shares of Common Stock upon
conversion of the Series D Preferred Stock need to be integrated with the Note
and the issuance of shares of Common Stock upon conversion of the Note for
purposes of Rule 4460(i) of the Nasdaq (or any successor, replacement or similar
provision thereof or of any other market on which the Common Stock is listed for
trading).
(l) OPINION. The Company shall deliver an opinion of Weil, Gotshal and ▇▇▇▇▇▇,
LLP, counsel for the Company, addressed to the Buyer, in substantially the form
set forth in ANNEX X attached hereto, on or before the date which is (7)
Business Days after the Closing Date.
(m) BEST EFFORTS. Each of the parties shall use its best efforts timely to
satisfy each of the conditions to the other party's obligations to sell and
purchase the Preferred Shares set forth in Section 7 or 8, as the case may be,
of this Agreement on or before the Closing Date.
5. TRANSFER AGENT INSTRUCTION. Prior to the Closing Date, the Company will
execute and deliver the Transfer Agent Instruction in the form attached hereto
as ANNEX V and thereby (1) irrevocably instruct American Stock Transfer & Trust
Company, as Transfer Agent and Registrar (the "Transfer Agent"), to issue
certificates for the Common Shares from time to time upon conversion of the Note
and the Interest Notes and exercise of the Warrants in such amounts as specified
from time to time to the Transfer Agent in the Notices of Conversion surrendered
in connection with such conversions and in the form attached to the Note and the
Form of Subscription in the form attached to the Warrants and (2) appoint the
Transfer Agent the conversion agent for the Note and the Interest Notes and the
exercise agent for the Warrants. The certificates for the Common Shares may bear
the restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the resale of the Common Shares under the 1933 Act. The
certificates for the Common Shares shall be registered in the name of the Buyer
or its designee and in such denominations to be specified by the Buyer in
connection with each conversion of the Note or any Interest Note or exercise of
the Warrants. The Company warrants that no instruction other than (x) such
instructions referred to in this Section 5, (y) stop transfer instructions to
give effect to Section 4(a) prior to registration of the resale of the Common
Shares under the 1933 Act and (z) the instructions required by Section 3(n) of
the Registration Rights Agreement will be given by the Company to the Transfer
Agent and that the Common Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement. Nothing in this Section 5 shall limit in any way the Buyer's
obligations and agreement to comply with the registration requirements of the
1933 Act upon resale of the Common Shares. If the Buyer provides the Company
with an opinion of counsel, reasonably satisfactory in form, scope and substance
to the Company and its legal counsel, that registration of a resale by the Buyer
of any of the Securities is not required under the 1933 Act, the Company shall
permit the transfer of such Securities and, in the case of the Common Shares, in
accordance with clause (1)(B) of Section 4(a) of this Agreement, promptly
instruct the Company's transfer agent to issue upon transfer one or more share
certificates in such name and
18
in such denominations as specified by the Buyer within three trading days after
receipt of such opinion. Nothing in this Section 5 shall limit the obligations
of the Company under Section 3(n) of the Registration Rights Agreement.
6. CLOSING DATE.
Subject to the satisfaction or waiver of the conditions set forth in
Sections 7 and 8, the date and time of the issuance and sale of the Preferred
Shares (the "Closing Date") shall be 12:00 noon, New York City time, on or
before the date which is three Business Days after the date the Buyer has
deposited the Purchase Price with the Escrow Agent in accordance with Section
1(c), or such other mutually agreed to time. The closing shall occur on the
Closing Date at the Law Offices of ▇▇▇▇▇ ▇ ▇▇▇▇▇, Penthouse Suite, ▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the Note and
issue the Warrants to the Buyer pursuant to this Agreement is conditioned
upon the satisfaction of the following conditions precedent on or before
the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as payment in
full of an amount equal to the Purchase Price for the Note in accordance
with Section 1(b) hereof; and
(c) The accuracy on the Closing Date of the representations and warranties
of the Buyer contained in this Agreement as if made on the Closing Date
and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or
before the Closing Date.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Note
and acquire the Warrants on the Closing Date is conditioned upon the
satisfaction of the following conditions precedent on or before the Closing
Date (any or all of which may be waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Escrow Agent of the certificates for the
Note and the Warrants in accordance with this Agreement;
19
(b) The accuracy on the Closing Date of the representations and warranties
of the Company contained in this Agreement as if made on the Closing Date and
the performance by the Company on or before the Closing Date of all covenants
and agreements of the Company required to be performed on or before the Closing
Date and receipt by the Buyer of a certificate, dated the Closing Date, of the
Chief Executive Officer or the Chief Financial Officer of the Company confirming
such matters and such other matters as the Buyer may reasonably request;
(c) The receipt by the Buyer of a certificate, dated the Closing Date, of
the Secretary of the Company certifying (1) the Articles of Incorporation and
By-Laws of the Company as in effect on the Closing Date, (2) all resolutions of
the Board of Directors (and committees thereof) of the Company relating to this
Agreement and the transactions contemplated hereby and (3) such other matters as
reasonably requested by the Buyer;
(d) The Transfer Agent shall have acknowledged receipt of the Transfer
Agent Instruction in the form attached hereto as ANNEX V and shall not have
objected or declined to follow the instructions contained therein;
(e) Receipt by the Buyer on the Closing Date of an opinion of Weil, Gotshal
& ▇▇▇▇▇▇ LLP, counsel for the Company, dated the Closing Date, in form, scope
and substance reasonably satisfactory to the Buyer, to the effect set forth in
ANNEX VI attached hereto; and
(f) Receipt by the Buyer on the Closing Date of an opinion of the Company's
General Counsel, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX VII attached hereto.
9. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
(b) COUNTERPARTS. This Agreement may be executed in counterparts and by the
parties hereto on separate counterparts, all of which together shall constitute
one and the same instrument. A facsimile transmission of this Agreement bearing
a signature on behalf of a party hereto shall be legal and binding on such
party. Although this Agreement is dated as of the date first set forth above,
the actual date of execution and delivery of this Agreement by each party is the
date set forth below such party's signature on the signature page hereof. Any
reference in this Agreement or in any of the documents executed and delivered by
the parties hereto in connection herewith to (1) the date of execution and
delivery of this Agreement by the Buyer shall be deemed a reference to the date
set forth below the Buyer's signature on the signature page hereof, (2) the date
of execution and delivery of this Agreement by the Company shall be deemed a
reference to the date set forth below the Company's signature on the signature
page hereof and (3) the date of execution and delivery of this Agreement or the
date of execution and delivery of this Agreement by the Buyer and the Company
shall be deemed a reference to the later of the dates set forth below the
signatures of the parties on the signature page hereof. The Company and the
Buyer hereby represent, warrant, covenant and agree that this Agreement has been
signed
20
and delivered in the State of New York and it is the intention of the Company
and the Buyer that this Agreement shall be construed accordingly for all
purposes.
(c) HEADINGS, ETC. The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) AMENDMENTS. No amendment, modification, waiver, discharge or termination of
any provision of this Agreement nor consent to any departure by the Buyer or the
Company therefrom shall in any event be effective unless the same shall be in
writing and signed by the party to be charged with enforcement, and then shall
be effective only in the specific instance and for the purpose for which given.
No course of dealing between the parties hereto shall operate as an amendment of
this Agreement.
(f) WAIVERS. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
or any course of dealings between the parties, shall not operate as a waiver
thereof or an amendment hereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) NOTICES. Any notices required or permitted to be given under the terms of
this Agreement shall be delivered personally (which shall include telephone line
facsimile transmission with answer back confirmation) or by courier and shall be
effective upon receipt, if delivered personally or by courier, in the case of
the Company addressed to the Company at its address shown in the introductory
paragraph of this Agreement, Attention: Chief Executive Officer (telephone line
facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇ or, in the case of the Buyer, at
its address or telephone line facsimile transmission number shown on the
signature page of this Agreement, with a copy to Genesee International, Inc.,
▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (telephone
line facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇) or such other address or
telephone line facsimile transmission number as a party shall have provided by
notice to the other party in accordance with this provision. The Buyer hereby
designates as its address for any notice required or permitted to be given to
the Buyer pursuant to the Note the address shown on the signature page of this
Agreement, with a copy to: Genesee Fund Limited - Portfolio B, c/o Genesee
International, Inc., 10500 ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ (facsimile number (▇▇▇) ▇▇▇-▇▇▇▇), until the Buyer shall designate
another address for such purpose.
(h) ASSIGNMENT. Prior to the Closing Date, with the prior written consent of the
Company, which consent will not be unreasonably withheld, the Buyer shall have
the right to assign its
21
rights and obligations under this Agreement with respect to the purchase of all
or any portion of the Note and the issuance of the Warrants, provided any such
assignee, by written instrument duly executed by such assignee, assumes all
obligations of the Buyer hereunder with respect to the purchase of the portion
of the Preferred Shares or the acquisition of the Warrants so assigned and makes
the same representations and warranties with respect thereto as the Buyer makes
in this Agreement, whereupon the Buyer shall be relieved of any further
obligations, responsibilities and liabilities with respect to the purchase of
all or the portion of the Note and acquisition of the related Warrants the
obligation for the purchase or acquisition of which has been so assigned. In the
case of any such assignment, the Company shall agree in writing with such
assignee to make available to such assignee the benefits of the Registration
Rights Agreement with respect to the Common Shares issuable on conversion of the
Note and exercise of the Warrants with respect to which the purchase under this
Agreement has been so assigned. Any transfer of the Note or the Warrants by the
Buyer after the Closing Date shall be made in accordance with Section 4(a).
After the Closing Date, the Buyer shall have the right to assign its rights and
obligations under this Agreement in connection with any transfer of the Buyer's
rights under the Registration Rights Agreement by compliance with the provisions
of Section 9 of the Registration Rights Agreement.
(i) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective representations,
warranties, covenants and agreements of the Buyer and the Company contained in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall survive the delivery of payment for the Preferred Shares and
shall remain in full force and effect regardless of any investigation made by or
on behalf of them or any person controlling or advising any of them.
(j) ENTIRE AGREEMENT. This Agreement and its Schedule and Annexes set forth the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, whether written or
oral, with respect thereto.
(k) TERMINATION. (1) The Buyer shall have the right to terminate this Agreement
by giving notice to the Company at any time at or prior to the Closing Date if:
(A) the Company shall have failed, refused, or been unable at or prior to
the date of such termination of this Agreement to perform any of its obligations
hereunder;
(B) any other condition of the Buyer's obligations hereunder is not
fulfilled when required to be fulfilled; or
(C) the closing shall not have occurred on a Closing Date on or before
September 5, 1998, other than solely by reason of a breach of this Agreement by
the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, neither the Buyer nor the Company shall have any
further obligation hereunder or in connection herewith one to the other.
22
(2) The Company shall have the right to terminate this Agreement by giving
notice to the Buyer at any time at or prior to the Closing Date if:
(A) the Buyer shall have failed, refused, or been unable at or prior to the
date of such termination of this Agreement to perform any of its obligations
hereunder;
(B) any other condition of the Company's obligations hereunder is not
fulfilled when required to be fulfilled; or
(C) the closing shall not have occurred on a Closing Date on or before
September 5, 1998, other than solely by reason of a breach of this Agreement by
the Company.
Any such termination shall be effective upon the giving of notice thereof by
the Company. Upon such termination, neither the Company nor the Buyer shall
have any further obligation hereunder or in connection herewith one to the
other.
(l) FURTHER ASSURANCES. Each party to this Agreement will perform any and all
acts and execute any and all documents as may be necessary and proper under the
circumstances in order to accomplish the intents and purposes of this Agreement
and to carry out its provisions.
(m) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the Buyer shall have
the right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law or Nasdaq regulation (although the
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
(n) CONSTRUCTION. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer and
the Company by their respective officers or other representatives thereunto duly
authorized on the respective dates set forth below.
PRINCIPAL AMOUNT OF NOTE: $1,500,000.00
PURCHASE PRICE: $1,400,000.00
GENESEE FUND LIMITED - PORTFOLIO B
By:
--------------------------------
▇.▇. ▇▇▇▇▇
President
Date:
------------------------------
Address: ▇/▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ Antilles
Facsimile No.: 011-599-9732-2008
EQUALNET COMMUNICATIONS CORP.
By:
--------------------------------
Name:
Title:
Date:
------------------------------
24
SCHEDULE 3(b)-1
CERTAIN ANTIDILUTION ADJUSTMENTS
--------------------------------
[To come from the Company]
25
SCHEDULE 3(b)-2
CERTAIN REGISTRATION RIGHTS
----------------------------
1. Holders of the Company's Series A Convertible Preferred Stock have
demand and piggyback registration rights.
2. Holders of Series C Preferred Stock have demand registration rights.
3. RFC Capital Corp. has demand and piggyback registration rights.
26
SCHEDULE 3(c)-1
CERTAIN NASDAQ MATTERS
----------------------
[To come from the Company]
27
SCHEDULE 3(i)
CERTAIN LEGAL PROCEEDINGS
-------------------------
[To come from the Company]
28