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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
EqualNet Holding Corp.
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
294408109
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(CUSIP Number)
James R. Crane
15350 Vickery Drive
Houston, Texas 77032
(281) 618-3100
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 27, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page should be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP No.144577103
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(1) Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Person
James R. Crane
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(2) Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [X]
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(3) SEC Use Only
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(4) Source of Funds
PF
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(d) or 2(e) [ ]
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(6) Citizenship or Place of Organization
United States of America
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(7) Sole Voting Power 3,570,000 Shares
Number of
Shares
Beneficially -----------------------------------------------------------------
Owned by (8) Shared Voting Power 0 Shares
Each
Reporting
Person -----------------------------------------------------------------
With (9) Sole Dispositive Power 3,570,000 Shares
-----------------------------------------------------------------
(10) Shared Dispositive Power 0 Shares
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
3,570,000 Shares
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(12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
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(13) Percent of Class Represented by Amount in Row (11)
16.6%
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(14) Type of Reporting Person(See Instructions) IN
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ITEM 1. SECURITY AND ISSUER
The class of securities to which this statement relates is common
stock, par value $.01 per share (the "Common Stock"), of EqualNet Holding Corp.,
a Texas corporation (the "Company"). The address of the principal executive
offices of the Company is 1250 Wood Branch Park Drive, Houston, Texas 77032.
ITEM 2. IDENTITY AND BACKGROUND
This statement is filed by James R. Crane ("Mr. Crane"). The business
address of Mr. Crane is 15350 Vickery Drive, Houston, Texas 77032. Mr. Crane is
a citizen of the United States of America, and his principal occupation and
employment is acting as Chairman of the Board of Directors, Chief Executive
Officer and President of Eagle USA Airfreight, Inc., a provider of air freight
forwarding and other transportation and logistics services. Eagle USA
Airfreight, Inc.'s principal executive office address is the same as for Mr.
Crane. During the last five years, Mr. Crane has not (i) been convicted in any
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The source of funds for Mr. Crane's investment was personal funds.
ITEM 4. PURPOSE OF TRANSACTION
On April 27, 1998, Mr. Crane purchased 3,400,000 shares of Common
Stock (the "Shares") and Warrants to purchase 170,000 shares of Common Stock
(the "Warrants") pursuant to a Stock
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and Warrant Purchase Agreement dated as of April 24, 1998 (the "Purchase
Agreement"), a copy of which has been filed as Exhibit 1 hereto and is
incorporated herein by reference. The purchase price for the Shares and the
Warrants was $3,400,000. The terms of Warrants are set forth in a Warrant
Agreement dated as of April 24, 1998 between the Company and Mr. Crane, a copy
of which has been filed as Exhibit 2 hereto and is incorporated herein by
reference. The Warrants are exercisable for five years, and may be exercised by
cash payment, on a cashless basis or by the delivery of other securities of the
Company. The Warrants allow the holder to purchase up to 170,000 shares of
Common Stock at a purchase price of $1.00 per share (such purchase price and
number of shares are subject to certain adjustments). In connection with the
Purchase Agreement, the Company also granted to Mr. Crane registration rights
pursuant to a Registration Rights Agreement dated as of April 24, 1998 between
the Company and Mr. Crane, a copy of which has been filed Exhibit 3 hereto and
is incorporated herein by reference. This agreement provides to Mr. Crane the
right to require the Company, at the Company's expense, to register the resale
of the Shares as well as the shares of Common Stock purchasable upon exercise of
the Warrants on two occasions as well as up to three additional occasions if the
registration is on a Form S-3 Registration Statement. In addition, Mr. Crane was
granted piggyback registration rights in the event the Company files a
registration statement with respect to a firm commitment offering of Common
Stock. The registration rights are subject to certain limitations described in
the Registration Rights Agreement.
Mr. Crane will review on a continuous basis his investment in the
Common Stock and Warrants and the Company's business affairs and financial
condition, as well as conditions in the securities markets and general economic
and industry conditions. Mr. Crane may in the future
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take such actions in respect of his investment in the Common Stock as he deems
appropriate in light of the circumstances existing from time to time. Currently,
these actions include continuing to hold the Common Stock he now beneficially
owns or disposing of such Common Stock. Such dispositions could be effected
through a public offering, in the open market (upon expiration of applicable
holding periods and compliance with other rules under the Securities Act of
1933, as amended) or in private transactions. Additionally, it is possible that
Mr. Crane could seek to acquire additional Common Stock. Any acquisition of
Common Stock could be effected in the open market, in privately negotiated
transactions, or otherwise. Mr. Crane also expects that he will exercise the
Warrants prior to their expiration date if the market price of Common Stock at
the time of exercise exceeds the exercise price of the Warrants. Any sales,
purchases or other actions described herein may be made at any time without
further prior notice. In reaching any conclusion as to the foregoing matters,
Mr. Crane may take into consideration various factors, such as the Company's
business and prospects, other developments concerning the Company and its
industry, the obligations of, cash and financial resources and needs of,
investment goals of and other business opportunities available to him,
developments with respect to his business, general economic conditions, the
market price for shares of Common Stock and stock market conditions. Mr. Crane
may seek to join the Board of Directors of the Company. This possibility has
been discussed with certain members of management, but Mr. Crane has not agreed
to serve as a director nor has the Board of Directors approved and offered any
such directorship.
Except as set forth in this Statement, Mr. Crane has no present plans
or proposals which relate to or would result in any of the actions described in
subparagraphs (a) through (j) of Item 4 of Schedule 13D.
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Mr. Crane beneficially owns an aggregate of 3,570,000 shares of Common
Stock, which equals approximately 16.6% of the 21,563,070 shares of Common Stock
that Mr. Crane believes are deemed to be outstanding (based upon the 17,993,070
shares of Common Stock disclosed by the Company pursuant to the Purchase
Agreement to be outstanding as of April 24, 1998 and the 3,570,000 shares deemed
to have been acquired by Mr. Crane).
Mr. Crane has sole voting power with respect to the Common Stock held
by him, and the sole power to dispose or direct the disposition of the Common
Stock held by him.
Except as set forth in this Schedule 13D, to the best of his
knowledge, Mr. Crane has not effected any transaction in Common Stock during the
past sixty days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
This statement contains summaries of certain provisions of the
Purchase Agreement, the Warrant Agreement and the Registration Rights Agreement,
copies of which have been filed as Exhibits 1, 2, and 3, respectively, hereto
and are incorporated by reference herein; and such summaries are qualified by,
and subject to, the more complete information contained in such agreements. See
Item 4 - Purpose of Transaction.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Stock and Warrant Purchase Agreement by and among Mr.
Crane and the Company dated as of April 24, 1998
Exhibit 2 Warrant Agreement by and among the Company and Mr. Crane
dated as of April 24, 1998.
Exhibit 3 Registration Rights Agreement by and among Mr. Crane and
the Company dated as of April 24, 1998.
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After reasonable inquiry and to the best of his knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Date: May 6, 1998.
/s/ JAMES R. CRANE
-----------------------------------
James R. Crane
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Index to Exhibits
Exhibits
1 Stock and Warrant Purchase Agreement by and among Mr.
Crane and the Company dated as of April 24, 1998
2 Warrant Agreement by and among the Company and Mr. Crane
dated as of April 24, 1998.
3 Registration Rights Agreement by and among Mr. Crane and
the Company dated as of April 24, 1998.
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EXHIBIT 1
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STOCK AND WARRANT PURCHASE AGREEMENT
By and Among
JAMES R. CRANE
and
EQUALNET HOLDING CORP.
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Dated as of April 24, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Common Stock and Warrants; Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.A. Purchase and Sale of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.B. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Purchaser's Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.A. Opinion of the Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.B. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.C. Charter Documents and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.D. Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.E. Letter of Accountants; Accompanying Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 6
3.F. Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.G. No Adverse U.S. Legislation, Action or Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.H. Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.I. Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.K. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Company's Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.A. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.B. Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.C. No Adverse Action or Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.D. Quotation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.A. Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.B. Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.C. Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.D. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.E. Corporate Existence; Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.F. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.G. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.H. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.I. Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.J. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.K. Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.L. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.M. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.N. Certain Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.O. Quotation of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
i
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<TABLE>
<S> <C> <C>
6. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.A. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.B. Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.C. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.D. Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.E. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.F. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.G. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.H. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.I. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.J. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.K. Taxes; Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.L. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.M. Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.N. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.O. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.P. Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.Q. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.R. Structure; Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.S. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.T. Intellectual Property and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.U. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.A. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.B. Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8. Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.A. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.B. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.A. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.B. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.C. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.D. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.E. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.F. Successors and Assigns; No Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.G. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.H. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.I. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.J. Governing Law; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.K. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.L. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.M. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.N. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.O. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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<PAGE> 4
STOCK AND WARRANT PURCHASE AGREEMENT
This STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made
as of April 24, 1998, by and among JAMES R. CRANE (the "Purchaser"), and
EQUALNET HOLDING CORP., a Texas corporation (the "Company").
RECITALS
Purchaser desires to purchase from the Company, and the Company
desires to issue and sell to Purchaser, subject to the terms and conditions set
forth herein, 3,400,000 shares of Common Stock (as hereinafter defined) of the
Company and warrants for the purchase of 170,000 shares of Common Stock.
AGREEMENTS
In consideration of the recitals and the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions. For the purpose of this Agreement, and in
addition to terms defined elsewhere in this Agreement, the following terms
shall have the following meanings. In addition, all terms of an accounting
character not specifically defined herein shall have the meanings assigned
thereto by accounting principles generally accepted in the United States of
America.
"Affiliate" shall mean, with respect to any Person, a Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person, except a Subsidiary of such Person. A Person shall
be deemed to control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Business Day" shall mean any day which is not a Saturday, Sunday or
day on which banks are authorized by law to close in the States of New York and
Texas.
"Capitalized Lease Obligations" shall mean all rental obligations
which, under GAAP in effect on the day such obligation is incurred, are
required to be capitalized on the books of the Company or any Subsidiary, in
each case taken at the amount thereof accounted for as indebtedness (net of
interest expense) in accordance with such principles.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commission" shall mean the United States Securities and Exchange
Commission.
1
<PAGE> 5
"Current Indebtedness" shall mean any obligation for borrowed money
(including notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money) payable on demand
or within a period of one year from the date of creation thereof; provided that
any obligation shall be treated as Funded Indebtedness, regardless of its term,
if such obligation is renewable pursuant to the terms thereof or of a revolving
credit or similar agreement effective for more than one year after the date of
the creation of such obligation, or may be payable out of the proceeds of a
similar obligation pursuant to the terms of such obligation or of any such
agreement. Any obligation secured by a Lien on, or payable out of the proceeds
of production from, property of the Company or any Subsidiary shall be deemed
to be Funded or Current Indebtedness, as the case may be, of the Company or
such Subsidiary even though such obligation shall not be assumed by the Company
or such Subsidiary.
"Environmental Law" shall mean any judgment, decree, order, law,
license, rule, regulation or private agreement (such as covenants, conditions,
and restrictions), of any federal, state or local executive, legislative,
judicial, regulatory or administrative agency, board, or authority designed to
protect the environment, air, surface, water, groundwater or soil, control
pollution, or regulate the exploration, manufacturing, processing,
distributing, use, storage, transport or handling of Hazardous Materials,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"),
the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) ("OPA"), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA"), and
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.)
("CWA"), as such laws have been or hereafter may be amended or supplemented,
and any and all analogous present and future federal, state, and local laws in
jurisdictions where the Company and its Subsidiaries do business.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to ERISA
as in effect at the date of this Agreement and any subsequent provisions of
ERISA amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company or a Subsidiary of the Company
would be deemed to be a "single employer" within the meaning of Section 4001 of
ERISA immediately following the acquisition.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Funded Indebtedness" shall mean and include without duplication any
obligation payable more than one year from the date of the creation thereof
(including the current portion of Funded Indebtedness), which under GAAP is
shown on the balance sheet as a liability (including, without limitation,
Capitalized Lease Obligations and excluding reserves for deferred income taxes
and other reserves to the extent that such reserves do not constitute an
obligation).
"GAAP" shall mean generally accepted accounting principles
consistently applied throughout the period or periods in question.
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<PAGE> 6
"Governmental Authority" shall mean any foreign or domestic federal,
state, county, municipal, or other governmental or regulatory authority,
agency, board, body, commission, instrumentality, court, or any political
subdivision thereof.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization, or other direction or requirement
(including but not limited to any of the foregoing which relate to
Environmental Laws, energy regulations and occupational, safety and health
standards or controls) of any Governmental Authority.
"Hazardous Materials" shall mean, collectively, (i) those substances
included within the definition of or identified as "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in or pursuant to,
without limitation, CERCLA, OPA, RCRA, and the Occupational Health and Safety
Act, and in the regulations promulgated pursuant to said laws, all as amended;
(ii) any material, waste or substance which is or contains (A) petroleum,
including crude oil or any fraction thereof, natural gas, or synthetic gas
usable for fuel or any mixture thereof; (B) asbestos; (C) polychlorinated
biphenyls; (D) designated as a "hazardous substance" pursuant to Section 307
or 311 of the CWA; (E) flammable explosives; or (F) radioactive materials; and
(iii) any such other substances, materials and wastes which are or become
regulated as hazardous or toxic under applicable local, state or federal law,
or which are currently classified as hazardous or toxic under local, state or
federal laws or regulations.
"Indebtedness" shall mean Funded Indebtedness and/or Current
Indebtedness.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement or like instrument under the laws of any jurisdiction).
"Material Adverse Effect" or "Material Adverse Change" means any
material and adverse effect on, or change to, (i) the assets, liabilities,
financial condition, business, or operations of the Company and its
Subsidiaries on a Consolidated basis, or (ii) the ability of the Company and
its Subsidiaries on a Consolidated basis to carry out their business as at the
date of this Agreement.
"NASDAQ" shall mean the Nasdaq Stock Market, Inc., National Market
System.
"Officer's Certificate" shall mean a certificate signed in the name of
the delivering party, by its President, one of its Vice Presidents, its
Treasurer or other authorized officer so designated by the receiving party.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor entity thereto.
"Pension Plan" shall mean any multiemployer plan or single-employer
plan, as defined in Section 4001 of ERISA and subject to Title IV of ERISA,
which is maintained after the Acquisition for employees of the Company, any of
its Subsidiaries or any ERISA Affiliates.
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<PAGE> 7
"Permits" shall mean all licenses, permits, exceptions, franchises,
accreditations, privileges, rights, variances, waivers, approvals and other
authorizations (including, without limitation, those relating to environmental
matters) of, by or from Governmental Authorities necessary for the conduct of
the business of the Company and its Subsidiaries immediately prior to the
Closing and as proposed to be conducted by the Company and its Subsidiaries
after the Closing.
"Registration Rights Agreement" means the Registration Rights
Agreement, substantially in the form of Exhibit A hereto, as the same may be
amended, supplemented or otherwise modified from time to time.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a limited
liability company and a government or any department or agency thereof.
"Release" shall mean release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment or into or out of any property, including the movement of
Hazardous Materials through or in the air, surface water, or groundwater.
"Remedial Action" shall mean any action required by any federal, state
or judicial body or administration or agency acting under an Environmental Law
to (i) clean up, remove or treat Hazardous Materials in the environment; (ii)
prevent a Release or threat of Release or minimize the further Release of
Hazardous Materials so they do not migrate or endanger or threaten to endanger
public health or the environment; (iii) perform post-remedial monitoring and
care; or (iv) cure a violation of any Environmental Law.
"Reportable Event" shall mean an event described in Section 4043(b) of
ERISA with respect to which the 30-day notice requirement has not been waived
by the PBGC.
"Responsible Officer" shall mean the President, any Vice President (of
whatever designation), the Treasurer or the Secretary or any officers
performing functions similar to those performed by the persons who at the time
shall be such officers.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Single-Employer Pension Plan" shall mean a Pension Plan which is a
"single-employer plan" as defined in Section 4001 of ERISA.
"Subsidiary" shall mean any corporation or similar entity a majority
of the stock of every class of which, except directors' qualifying shares,
shall, at the time as of which any determination is being made, be owned by the
Company, either directly or indirectly.
"Warrant Agreement" means the Warrant Agreement to be executed by the
Company, substantially in the form of Exhibit B hereto, as the name may be
amended, supplemented, or otherwise modified from time to time.
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<PAGE> 8
"Warrant Certificate" means the certificate evidencing Warrants,
substantially in the form of Exhibit A to the Warrant Agreement, as the same
may be amended, supplemented, or otherwise modified from time to time.
"Warrant Holder" means any holder of the Warrants.
"Warrant Shares" means the shares of common stock issued or issuable
upon the exercise of the Warrants.
"Warrants" means warrants to purchase shares of common stock of the
Company issued to Purchaser pursuant to this Agreement and the Warrant
Agreement and evidenced by the Warrant Certificate.
2. Purchase and Sale of Common Stock and Warrants; Closing.
2.A. Purchase and Sale of Common Stock and Warrants. The
Company, subject to the terms and conditions herein set forth, hereby agrees to
sell to the Purchaser and, subject to the terms and conditions herein set
forth, the Purchaser agrees to purchase from the Company, 3,400,000 shares (the
"Shares") of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), which, if issued as of the date hereof, would constitute approximately
15.9% of the outstanding Common Stock as of the date hereof, and the Warrants.
The aggregate purchase price for the Shares and the Warrants shall be
$3,400,000.
2.B. Closing. The purchase and delivery of the Shares and the
Warrants shall take place at a closing (the "Closing") at the offices of
Fulbright & Jaworski L.L.P., Houston, Texas, at 10:00 a.m., local time, on
April 24, 1998, or at such other time and place or on such other business day
thereafter as the parties hereto may agree (herein called the "Closing Date").
On the Closing Date, the Company will deliver the Shares and the Warrants in
definitive form, and in such authorized denominations as the Purchaser may
request (such request to be in writing and delivered to the Company at least
forty-eight hours prior to the Closing), against receipt of the purchase price
therefor by wire transfer of immediately available funds, to the Company, or by
such other payment method as is mutually agreed to by the Purchaser and the
Company.
3. Purchaser's Conditions of Closing. The Purchasers'
obligation to purchase and pay for the Shares and the Warrants is subject to
the satisfaction or waiver, on or before the Closing Date, of the conditions
contained in Paragraphs 3A through 3K.
3.A. Opinion of the Company's Counsel. The Purchaser shall have
received from Fulbright & Jaworski L.L.P., special counsel for the Company, a
legal opinion addressed to the Purchaser and dated the Closing Date
substantially in the form attached hereto as Exhibit C.
3.B. Representations and Warranties. The representations and
warranties contained in Paragraph 6 hereof shall be true in all material
respects on and as of the Closing Date, except to the extent of changes caused
by the transactions herein contemplated; and the Company shall have delivered
to the Purchaser an Officer's Certificate, dated the Closing Date, to such
effect.
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<PAGE> 9
3.C. Charter Documents and By-Laws. The Purchaser shall have
received a certificate, dated the Closing Date, of the Secretary of the Company
attaching (i) a true and complete copy of the Company's Articles of
Incorporation with all amendments thereto, as filed with the Secretary of State
of the State of Texas, (ii) a true and complete copy of the Company's By-Laws
in effect as of such date, (iii) certificates of good standing of the
appropriate officials of the jurisdiction of incorporation of the Company, and
(iv) resolutions of the Board of Directors of the Company authorizing the
execution and delivery of this Agreement and the issuance of the Shares and the
Warrant Shares.
3.D. Purchase Permitted by Applicable Laws. The purchase of and
payment for the Shares and the Warrants shall not be prohibited by any
applicable law or governmental regulation (including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve System)
and such purchase and payment shall not in and of themselves subject the
Purchaser to any material tax, penalty, liability or other materially onerous
condition under or pursuant to any applicable law or governmental regulation.
3.E. Letter of Accountants; Accompanying Officer's Certificate.
The Purchaser shall have received a certificate from the chief financial
officer or chief executive officer of the Company, dated the Closing Date, to
the effect that the interim financial statements at or for the period ended
December 31, 1997, have been prepared using the same accounting policies as
those used in preparing the financial statements for the year ended June 30,
1997 (except as such policies were otherwise required to be changed or modified
by the Company during the interim period by an appropriate Governmental
Authority or the American Institute of Certified Public Accountants ("AICPA")
or similar accounting boards or bodies), and that since June 30, 1997, such
policies have been used in maintaining the Company's accounting books and
records.
3.F. Compliance with Securities Laws. The offering and sale of
the Shares and the Warrants under this Agreement shall have complied with all
applicable requirements of federal and state securities laws.
3.G. No Adverse U.S. Legislation, Action or Decision. Subsequent
to the date hereof, no legislation, order, rule, ruling or regulation shall
have been enacted or made by or on behalf of any governmental body, department
or agency of the United States, nor shall any legislation have been introduced
and favorably reported for passage to either House of Congress by any committee
of either such House to which such legislation has been referred for
consideration, nor shall any decision of any court of competent jurisdiction
within the United States have been rendered which would materially and
adversely affect an investment in the Shares or the Warrants. There shall be
no action, suit, investigation or proceeding pending, or to the Company's
knowledge, threatened, against or affecting the Company or any of its
Subsidiaries or the Purchaser, or any of their respective properties or rights,
or any of their affiliates, associates, officers or directors, before any
court, arbitrator or administrative or governmental body which (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise adversely affect the
transactions contemplated by this Agreement or (ii) questions the validity or
legality of any such transaction or seeks to recover damages or to obtain other
relief in connection with any such transaction, and to the Company's knowledge
there shall be no valid basis for any such action, proceeding or investigation.
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<PAGE> 10
3.H. Approvals and Consents. The Company shall have duly
received all authorizations, consents, approvals, licenses, franchises, permits
and certificates by or of all federal, state and local governmental
authorities, by any third parties pursuant to the terms of any agreement to
which the Company is a party or by the National Association of Securities
Dealers, Inc. or any other body or agency with jurisdiction, by contract or
otherwise, over the Company, necessary for the issuance of the Shares and the
Warrants by the Company and the consummation of the transactions contemplated
hereby, and all thereof shall be in full force and effect at the time of the
Closing. The Company shall have delivered to the Purchaser an Officer's
Certificate, dated the Closing Date, to such effect.
3.I. Registration Rights Agreement. The Company shall have
executed and delivered to the Purchaser the Registration Rights Agreement.
3.J. Willis Group Waiver. With respect to all securities
convertible into Common Stock, the conversion price of which would otherwise be
adjusted as a result of the transactions contemplated by this Agreement, the
Company shall have received a waiver (the "Willis Group Waiver") of such
adjustment as it applies to the transactions contemplated by this Agreement
from the holder of such securities and Crane shall have received a copy of such
waiver.
3.K. No Material Adverse Change. There shall not have occurred
any Material Adverse Change with respect to the Company since the date hereof.
4. Company's Conditions of Closing. The Company's obligations
to sell the Shares and the Warrants hereunder is subject to the satisfaction or
waiver, on or before the Closing Date, of the conditions contained in
Paragraphs 4A through 4F.
4.A. Representations and Warranties. The representations and
warranties contained in Paragraph 7 hereof shall be true in all material
respects on and as of the Closing Date; and the Purchaser shall have delivered
to the Company an Officer's Certificate, dated the Closing Date, to such
effect.
4.B. Purchase of Shares. The Purchaser shall have purchased and
paid for the Shares and the Warrants.
4.C. No Adverse Action or Decision. There shall be no action,
suit, investigation or proceeding pending, or to the Company's knowledge,
threatened, against or affecting the Company or any of its Subsidiaries, or any
of their respective properties or rights, or any of their affiliates,
associates, officers or directors, before any court, arbitrator or
administrative or governmental body which (i) seeks to restrain, enjoin,
prevent the consummation of or otherwise adversely affect the transactions
contemplated by this Agreement or (ii) questions the validity or legality of
any such transaction or seeks to recover damages or to obtain other relief in
connection with any such transaction.
4.D. Quotation. The Shares and Warrant Shares shall have been
approved for quotation, subject to official notice of issuance, on the NASDAQ
National Market as of the Closing Date.
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<PAGE> 11
5. Affirmative Covenants. All covenants contained herein shall
be given independent effect.
5.A. Conduct of Business of the Company.
(a) Ordinary Course. Except as set forth in Schedule 5(A)(a),
during the period from the date of this Agreement to the Closing Date, the
Company shall and shall cause its Subsidiaries to carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent therewith, use
commercially reasonable efforts to preserve intact their current officers and
employees and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them, in each case consistent with past practice, to the end that their
goodwill and ongoing businesses shall be unimpaired to the fullest extent
possible at the Closing Date. Without limiting the generality of the
foregoing, except as otherwise expressly contemplated by this Agreement and the
Schedules hereto, without the prior written consent of the Purchaser, the
Company shall not, and shall not permit any of its Subsidiaries to:
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock,
other than dividends and distributions by any direct or indirect
wholly owned Subsidiary of the Company to the Company or a wholly
owned Subsidiary of the Company, (B) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities other than in connection
with the exercise of outstanding stock options and warrants and
satisfaction of withholding obligations under outstanding stock
options and restricted stock;
(ii) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
other than, in the case of the Company, the issuance of shares of
Common Stock upon the exercise of stock options and warrants
outstanding on the date of this Agreement in accordance with their
current terms;
(iii) amend its Articles of Incorporation, By-laws or other
comparable charter or organizational document;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any
corporation, partnership, association, joint venture, limited
liability company or other entity or division thereof or (B) any
assets that, in each case, would be material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a whole,
except purchases in the ordinary course of business consistent with
past practice;
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<PAGE> 12
(v) sell, lease, mortgage, pledge, grant a Lien on or
otherwise encumber or dispose of any of its properties or assets,
except (A) sales or leases in the ordinary course of business
consistent with past practice and (B) other immaterial transactions
not in excess of $250,000 in the aggregate;
(vi) (A) incur indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any
debt securities of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
Person or enter into any arrangement having the economic effect of any
of the foregoing, except for working capital borrowings under
currently existing revolving credit facilities incurred in the
ordinary course of business, or (B) make any loans, advances or
capital contributions to, or investments in, any other Person that
would be material, individually or in the aggregate, to the Company
and its Subsidiaries taken as a whole, other than to the Company or
any direct or indirect wholly owned Subsidiary of the Company;
(vii) make or incur any new capital expenditure (other than
purchases in the ordinary course of business), which, singly or in the
aggregate with all other expenditures, would exceed $100,000;
(viii) make any material election relating to Taxes or
settle or compromise any material Tax liability;
(ix) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in the
Commission Documents or incurred in the ordinary course of business
consistent with past practice;
(x) waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which
the Company or any of its Subsidiaries is a party;
(xi) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(xii) enter into any new collective bargaining agreement;
(xiii) change any material accounting principle used by it,
except as required by regulations promulgated by the Commission or as
mandated by AICPA or similar accounting boards or bodies;
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<PAGE> 13
(xiv) settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) other than settlements
or compromises: (A) of litigation where the amount paid in settlement
or compromise does not exceed $100,000, or (B) in consultation and
cooperation with the Purchaser, and, with respect to any such
settlement, with the prior written consent of the Purchaser, which
shall not be unreasonably withheld or delayed;
(xv) except for those contracts and agreements entered
into in the ordinary course of business with the consent of the
Purchaser, which consent shall not be unreasonably withheld or
delayed, enter into any joint venture or partnership contract or
agreement; or
(xvi) authorize any of, or commit or agree to take any of,
the foregoing actions.
(b) Changes in Employment Arrangements. During the period from
the date of this Agreement to the Closing Date, neither the Company nor any of
its Subsidiaries shall adopt or amend (except as may be required by law) any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any employee,
director or former director or employee, increase the compensation or fringe
benefits of any officer of the Company or any of its Subsidiaries, or, except
as provided in an existing benefit plan or in the ordinary course of business
consistent with past practice, increase the compensation or fringe benefits of
any employee or former employee or pay any benefit not required by any existing
plan, arrangement or agreement.
(c) Severance. During the period from the date of this
Agreement to the Closing Date, neither the Company nor any of its Subsidiaries
shall grant any new or modified severance or termination arrangement or
increase or accelerate any benefits payable under its severance or termination
pay policies in effect on the date hereof.
(d) Other Actions. During the period from the date of this
Agreement to the Closing Date, the Company shall not, and shall not permit any
of its Subsidiaries to, take any action that would, or that could reasonably be
expected to, result (i) in any of the representations and warranties of the
Company set forth in this Agreement becoming untrue or (ii) in any of the
covenants contained in this Agreement becoming unperformable. Pending the
Closing, the Company will promptly advise the Purchaser of any action or event
of which they become aware which has the effect of making incorrect any of such
representations or warranties or which has the effect of rendering
unperformable any of such covenants.
5.B. Valid Issuance. The Company covenants that the Shares and
Warrant Shares, will, upon issuance and upon full payment therefor in
accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
5.C. Government Regulations. The Company covenants that it will
comply, and will cause each of its Subsidiaries to comply, with all applicable
governmental restrictions and regulations, the failure to comply with which
would have a material adverse effect on the business or financial condition of
the Company and its Subsidiaries taken as a whole, and obtain and maintain
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<PAGE> 14
in good standing all licenses, permits and approvals from any and all
governments, governmental commissions, boards or agencies of jurisdictions in
which it or any of its Subsidiaries carries on business required in respect of
the operations of the Company or any of its Subsidiaries, the failure to comply
with which would have a material adverse effect on the business or financial
condition of the Company and its Subsidiaries taken as a whole.
5.D. ERISA. Promptly (and in any event within 30 days) after the
Company or any of its Subsidiaries knows or has reason to know that a
Reportable Event with respect to any Pension Plan has occurred, that any
Pension Plan is or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA or that the Company or any of its
Subsidiaries will or may incur any liability to or on account of a Pension Plan
under Sections 4062, 4063, 4064, 4201 or 4204 of ERISA, the Company will
deliver to the Purchaser a certificate of the chief financial officer of the
Company setting forth information as to such occurrence and what action, if
any, the Company is required or proposes to take with respect thereto, together
with any notices concerning such occurrences which are (a) required to be filed
by the Company or the plan administrator of any such Pension Plan controlled by
the Company or its Subsidiaries, with the PBGC or (b) received by the Company
or its Subsidiaries from any plan administrator of a multiemployer or other
Pension Plan not under their control. The Company shall furnish to the
Purchaser a copy of each annual report (Form 5500 Series) of any Pension Plan
received or prepared by the Company or any of its Subsidiaries. Each annual
report and any notice required to be delivered hereunder shall be delivered no
later than 10 days after the later of the date such report or notice is filed
with the Internal Revenue Service or the PBGC or the date such report or notice
is received by the Company or any of its Subsidiaries, as the case may be.
5.E. Corporate Existence; Maintenance of Properties. The Company
covenants that it (i) will do or cause to be done all things reasonably
necessary to preserve and keep in full force and effect the corporate existence
and material rights of the Company and all of its Subsidiaries, (ii) will cause
its properties and the properties of its Subsidiaries used or useful in the
conduct of their respective businesses to be maintained and kept in good
condition, repair and working order and will use commercially reasonable
efforts to cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereto, and (iii) will, and will cause each of
its Subsidiaries to, qualify and remain qualified to conduct business in each
jurisdiction where the nature of the business or the ownership of property by
the Company or such Subsidiary may require such qualification and where the
failure to so qualify would have a material adverse effect on the business or
financial condition of the Company and its Subsidiaries taken as a whole.
5.F. Insurance. The Company covenants that it will maintain, and
will cause each of its Subsidiaries to maintain, with financially sound and
reputable insurance companies, funds or underwriters, insurance for the Company
and its Subsidiaries of the kinds, covering the risks and in the relative
proportionate amounts usually carried by companies conducting business
activities similar to those of the Company and its Subsidiaries.
5.G. Further Assurances. The Company covenants that it shall
cooperate with the Purchaser and execute such further instruments and documents
as the Purchaser shall reasonably request to carry out to the satisfaction of
the Purchaser the transactions contemplated by this Agreement.
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<PAGE> 15
5.H. Reserved.
5.I. Notices of Certain Events. The Company shall promptly give
notice to the Purchaser (i) of any default or event of default that has not
been cured within any applicable grace period under any (y) Indebtedness of the
Company or any of its Subsidiaries, and (z) contractual obligation of the
Company or any of its Subsidiaries or (ii) of any pending or threatened
litigation, investigation or proceeding to which the Company or any of its
Subsidiaries is or is threatened to be a party and of which the Company has
been given notice; provided that any such default as specified in (z) above,
litigation, investigation or proceeding would have a material adverse effect on
the business or financial condition of the Company and its Subsidiaries taken
as a whole. Any notice delivered pursuant to this Paragraph 5I shall be
accompanied by an Officer's Certificate specifying the details of the
occurrence referred to therein and stating what action the Company proposes to
take with respect thereto.
5.J. Reserved.
5.K. Environmental Laws. The Company and its Subsidiaries shall
comply with all applicable Environmental Laws the failure to comply with which
would have a material adverse effect on the business or financial condition of
the Company and its Subsidiaries taken as a whole. If the Company or any
Subsidiary shall receive written notice that there exists a violation of
Environmental Law with respect to its operations or any real property owned,
formerly owned, used, or leased thereby, which violation could have a material
adverse effect on the business or financial condition of the Company and its
Subsidiaries taken as a whole, the Company shall immediately notify in writing
the Purchaser. Furthermore, if the Company or any Subsidiary shall receive
written notice that there exists a violation of Environmental Law with respect
to its operations or any real property owned, formerly owned, used or leased
thereby, which violation could have a material adverse effect on the business
or financial condition of the Company and its Subsidiaries taken as a whole,
the Company shall within the time period permitted by the applicable
governmental authority (unless otherwise contested by the Company in good
faith) remove or remedy such violation in accordance with all applicable
Environmental Laws unless the Board of Directors of the Company determines that
it would be in the best interest of the Company to delay the remedy of such
violation, so long as no material adverse effect is suffered by the Company
during such delay.
5.L. Reserved.
5.M. Reserved.
5.N. Certain Information. To the extent reasonably requested by
Buyer, and at the expense of Buyer, subject to appropriate confidentiality
agreements by Buyer, the Company shall provide such financial information to
the Buyer as may enable the Buyer to determine whether or not the Company is a
Qualified Small Business within the meaning of Section 1202(d) of the Internal
Revenue Code.
5.O. Quotation of Common Stock. The Company warrants and agrees
for the benefit of the Purchaser that it will use commercially reasonable
efforts to cause the Shares and Warrant Shares
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<PAGE> 16
to be approved for quotation, subject to official notice of issuance, on the
NASDAQ National Market as of the Closing Date.
6. Representations and Warranties of the Company. The Company
represents and warrants to the Purchaser as of the date hereof and as of the
Closing Date that:
6.A. Corporate Existence. The Company is a corporation duly
organized, legally existing, and in good standing under the laws of the State
of Texas.
6.B. Corporate Power and Authorization. The Company has the
requisite corporate power and authority to issue the Shares, the Warrants and
the Warrant Shares, to execute, deliver, and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. All action
on the Company's part requisite for the due issuance of the Shares, Warrants
and the Warrant Shares and for the due execution, delivery, and performance of
this Agreement has been duly and effectively taken.
6.C. Reserved.
6.D. Binding Obligations. This Agreement is enforceable in
accordance with its terms (except that enforcement may be subject to (i) any
applicable bankruptcy, insolvency or similar laws generally affecting the
enforcement of creditors' rights (ii) general principles in equity regardless
of whether such enforcement is sought in a proceeding in equity or at law, and
except to the extent enforceability of the indemnification provisions may be
limited under applicable securities laws).
6.E. No Violation. Except as disclosed in Schedule 6E, neither
the execution and delivery of this Agreement, the consummation of the
transactions provided for herein or contemplated hereby nor the fulfillment by
the Company of the terms hereof will (a) violate any provision of the Articles
of Incorporation or the by-laws of the Company, (b) result in a default or
breach, give rise to any right of termination, cancellation, acceleration or
imposition of any Indebtedness or Lien, conflict with or require any consent or
approval (other than any consent or approval that has previously been obtained)
under any of the terms, conditions or provisions of any of the Permits or any
note, bond, mortgage, indenture, loan, distribution agreement, license,
agreement, lease, or instrument or obligation to which the Company is a party
or by which the Company may be bound (except where the failure to obtain such
consent or approval will not have a Material Adverse Effect), or (c) violate
any law, judgment, order, writ, injunction, decree, statute, rule, or
regulation of any Governmental Authority applicable to the Company (except
where such violation will not have a Material Adverse Effect). Subject to the
receipt by the Company of the Willis Group Waiver, the sale of Shares, the
Warrants and the Warrant Shares will not result in any change in any exercise
price, conversion rate or similar change in price of any convertible or
exchangeable security, option, warrant, right or other derivative security
issued by the Company.
6.F. Consents. Except as disclosed in Schedule 6F, all consents,
approvals, qualifications, orders, or authorizations of, or filings with, any
Governmental Authority, and all consents under any material contracts,
agreements, or instruments by which the Company is bound or to which it is
subject, and required in connection with the Company's valid execution,
delivery, or performance of this Agreement and the offer, sale, and delivery of
the Shares and the consummation of any other transaction contemplated on the
part of the Company have been obtained or made.
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6.G. Financial Information.
(a) The Consolidated balance sheet of the Company and its
Subsidiaries as at June 30, 1997, and the related Consolidated
statements of operations, shareholders' equity and cash flows for the
12-month period then ended, including in each case the related
schedules and notes, reported on by Ernst & Young LLP, are complete
and correct and fairly present in all material respects the
Consolidated financial position of the Company and its Subsidiaries as
at the date thereof and the Consolidated results of operations and
changes in cash flows for such period, in accordance with GAAP.
(b) The unaudited Consolidated balance sheet of the
Company and its Subsidiaries as at December 31, 1997, and the related
unaudited Consolidated statements of operations, shareholders' equity
and cash flows for the three-month period then ended, as included in
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 1997, true copies of which have been previously
delivered to Purchaser, are complete and correct and fairly present in
all material respects the Consolidated financial position of the
Company and its Subsidiaries as at the date thereof and the
Consolidated results of operations and changes in cash flows for such
period in conformity with GAAP, subject only to normal year-end audit
adjustments.
(c) Since June 30, 1997, there has been no Material
Adverse Effect.
6.H. Liabilities. Except for liabilities incurred in the
ordinary course of business, none of the Company or any of its Subsidiaries has
any material (individually or in the aggregate) liabilities, direct or
contingent (including but not limited to liability with respect to any Plan)
except as disclosed or referred to in Schedule 6H or in the financial
statements referred to in Paragraph 6G. Neither the Company nor any of its
Subsidiaries has any Indebtedness other than Indebtedness disclosed in Schedule
6H.
6.I. Litigation. Except as disclosed in Schedule 6I or as
described in any report filed by the Company with the Commission and delivered
to Purchaser, there is no action, suit, or proceeding, or any governmental
investigation or any arbitration, in each case pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries or any
material property of any thereof before any court or arbitrator or any
governmental or administrative body, agency or official (i) which challenges
the validity of this Agreement; or (ii) which, if adversely determined, would
have a Material Adverse Effect.
6.J. Compliance with ERISA. Each Plan is in substantial
compliance with ERISA, no Plan has an accumulated or waived funding deficiency
within the meaning of Section 412 or Section 418(B) of the Code, no proceedings
have been instituted to terminate any Plan, and except as disclosed in Schedule
6J, none of the Company or any of its Subsidiaries nor any ERISA Affiliate has
incurred any material liability to or on account of a Plan under ERISA, and
except as disclosed
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in Schedule 6J, no condition exists which presents a material risk to the
Company or any of its Subsidiaries of incurring such a liability.
6.K. Taxes; Governmental Charges. Each of the Company and its
Subsidiaries has filed all tax returns and reports required to be filed and has
paid all taxes, assessments, fees, and other governmental charges levied upon
any of them or upon any of their respective properties or income which are due
and payable, including interest and penalties, or has provided adequate
reserves for the payment thereof, except where the failure to so file, pay, or
reserve would not have a Material Adverse Effect.
6.L. Defaults. Except as disclosed in Schedule 6L, none of the
Company or any of its Subsidiaries is in default, nor has any event or
circumstance occurred which, but for the passage of time or the giving of
notice, or both, would constitute a default (in any respect which may have a
Material Adverse Effect) under any loan or credit agreement, indenture,
mortgage, deed of trust, security agreement, or other instrument or agreement
evidencing or pertaining to any Indebtedness of the Company or any Subsidiary,
or under any material agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound. No
default hereunder has occurred and is continuing.
6.M. Compliance with the Law. None of the Company or any of its
Subsidiaries (a) is in violation of any Governmental Requirement or (b) has
failed to obtain any license, permit, franchise, or other governmental
authorization necessary to the ownership of any of their respective properties
or the conduct of their respective business, which violation or failure would
have (in the event that such a violation or failure were asserted by any Person
through appropriate action) a Material Adverse Effect.
6.N. Investment Company Act. None of the Company or any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.O. Public Utility Holding Company Act. None of the Company or
any of its Subsidiaries is a "holding company," or a "Subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "Subsidiary
company" of a "holding company," or a "public utility" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
6.P. Fees and Commissions. None of the Company or any of its
Subsidiaries nor, to the knowledge of any of the Company, their Affiliates has
retained a finder, broker, agent, financial advisor, or other intermediary
(collectively, an "Intermediary") in connection with the transactions
contemplated by this Agreement, and the Company agrees to pay and to indemnify
and hold harmless Purchaser from and against liability for any compensation to
any Intermediary and the fees and expenses of defending against such liability
or alleged liability.
6.Q. Disclosure. The Company's filings made pursuant to the
Exchange Act and listed on Schedule 6Q hereto as of their respective dates, did
not contain any untrue statement of a material fact and did not omit to state
any material fact necessary in order to make the statements contained therein
or herein not misleading in the light of the circumstances under which they
were made.
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<PAGE> 19
6.R. Structure; Capitalization.
(a) Schedule 6R contains (except has noted therein) a
complete and correct list of the Company's Subsidiaries, showing, as
to each Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its
capital stock or similar equity interests outstanding owned by the
Company and each other Subsidiary.
(b) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary shown in Schedule 6R as
being owned by the Company and its Subsidiaries have been validly
issued, are fully paid and nonassessable, and are owned by the Company
or such other Subsidiaries free and clear of any Lien (except as
otherwise disclosed in Schedule 6R.
(c) No Subsidiary of the Company is a party to, or
otherwise subject to any legal restriction of any agreement (other
than this Agreement and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends
out of profits or make any other similar distributions of profits to
the Company or any of its Subsidiaries that owns outstanding shares of
capital stock or similar equity interests of such Subsidiary.
(d) As of the Closing Date, immediately after giving
effect to the transactions contemplated in this Agreement (i) the
Company's authorized capital stock will consist of 55,000,000 shares,
of which 50,000,000 are designated Common Stock and 5,000,000 shares
are designated preferred stock (2,000 of which will be designated as
Series A Convertible Preferred Stock, $.01 par value per share and
3,000 of which will be designated as Series B Convertible Preferred
Stock, $.01 par value per share); (ii) the number of Shares of Common
Stock outstanding will be as set forth on Schedule 6R all of which
will be validly issued, fully paid, and non-assessable; (iii) the only
outstanding warrants, options or other securities convertible into
Common Stock will be those set forth (and exercisable on the dates and
at the amounts per share set forth) in Schedule 6R; (iv) no shares of
Common Stock will be owned or held by or for the account of the
Company or any of its Subsidiaries (except as disclosed in the
financial statements described in Paragraph 6G); (v) except as
disclosed on Schedule 6R, neither the Company nor any of its
Subsidiaries will have outstanding any stock or other securities
convertible into or exchangeable for any shares of capital stock, any
rights to subscribe for or to purchase or any options for the purchase
of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any other
character relating to the issuance of, any capital stock, or any stock
or securities convertible into or exchangeable for any capital stock
which have not been waived (other than as contemplated by this
Agreement); and (vi) except as disclosed in Schedule 6R, neither the
Company nor any of its Subsidiaries will be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of capital stock.
6.S. Environmental Matters.
(a) Neither any property of any of the Company or any of
its Subsidiaries nor the operations conducted thereon violate any
order of any court or Governmental Authority or
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Environmental Laws which violations could reasonably be expected to
result in liability in excess of $250,000 or which could reasonably be
expected to result in remedial obligations in excess of $250,000,
assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any, pertaining to
the relevant property.
(b) Without limitation of clause (a) above, no property
of any of the Company or any of its Subsidiaries nor the operations
currently conducted thereon or by any prior owner or operator of such
property or operation, are in violation of or subject to any existing,
pending or, to the knowledge of the Company, threatened action, suit,
investigation, inquiry or proceeding by or before any court or
Governmental Authority or to any remedial obligations under
Environmental Laws which could reasonably be expected to result in
liability in excess of $250,000, or which could reasonably be expected
to result in remedial obligations in excess of $250,000 assuming
disclosure to the applicable Governmental Authority of all relevant
facts, conditions and circumstances, if any, pertaining to the
relevant property.
(c) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the operation or use of any and all property of the Company and
its Subsidiaries, including but not limited to past or present
treatment, storage, disposal or release of Hazardous Materials into
the environment, have been duly obtained or filed, except where the
failure to so obtain or file would not have a Material Adverse Effect.
6.T. Intellectual Property and Other Intangible Assets.
(a) The Company and its Subsidiaries (i) own or have the
right to use, free and clear of all liens, claims, and restrictions,
all patents, trademarks, service marks, trade names, and copyrights,
and all applications, licenses, and rights with respect to the
foregoing, and all trade secrets, including know-how, inventions,
designs, processes, works of authorship, computer programs, and
technical data and information (collectively, "Intellectual Property")
used and sufficient for use in the conduct of its business as now
conducted and/or as presently proposed to be conducted (including,
without limitation, the development, manufacture, operation, and sale
of all products and services sold or proposed to be sold by the
Company and its Subsidiaries during the next 24 months following the
date of this Agreement) without infringing upon or violating any
right, lien, or claim of others, including, without limitation, former
employees and former employers of its past and present employees, and
(ii) except described in Schedule 6T, is not obligated or under any
liability whatsoever to make any payments by way of royalties, fees,
or otherwise to any owner or licensee of, or other claimant to, any
patent, trademark, service mark, trade name, copyright, or other
intangible asset, with respect to the use thereof or in connection
with the conduct of its business or otherwise.
(b) Any and all Intellectual Property of any kind,
relating to the business of the Company and its Subsidiaries currently
being developed, or developed in the future, by any employee of the
Company and its Subsidiaries while in the employ of the Company and
its Subsidiaries shall be the property solely of the Company and its
Subsidiaries. The Company
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and its Subsidiaries have taken security measures to protect the
secrecy, confidentiality, and value of all Intellectual Property,
which measures are reasonable and customary in the industry in which
the Company and its Subsidiaries operate. The Company and its
Subsidiaries' employees and other persons who, either alone or in
concert with others, developed, invented, discovered, derived,
programmed, or designed the Intellectual Property (the "Technical
Employees"), or who have knowledge of or access to information about
the Intellectual Property, have entered into a written agreement with
the Company or its Subsidiaries, in form and substance satisfactory to
the Company's management (the "Proprietary Information Agreement")
regarding ownership and treatment of the Intellectual Property.
(c) Except as described in Schedule 6T, none of the
Company or its Subsidiaries has received any communications alleging
that the Company or such Subsidiary has violated, or by conducting its
business as proposed would violate, any of the patents, trademarks,
service marks, trade names, copyrights, or trade secrets or other
proprietary rights of any other Person or entity. None of the
Company's and its Subsidiaries' employees is obligated under any
contract (including licenses, covenants, or commitments of any nature)
or other agreement, or subject to any judgment, decree, or order of
any court or administrative agency, that would interfere with the use
of such employee's best efforts to promote the interests of the
Company or its Subsidiaries or that would conflict with the Company's
or its Subsidiaries' business as presently conducted and as proposed
to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's or its Subsidiaries'
business by the employees of the Company and its Subsidiaries, nor the
conduct of the Company's or its Subsidiaries' business as proposed to
be conducted, will conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is
now obligated. It is not, and will not become, necessary to utilize
any inventions of any of the Company's or its Subsidiaries' employees
(or people the Company and its Subsidiaries currently intends to hire)
made prior to their employment by the Company and its Subsidiaries
other than those that have been assigned to the Company and its
Subsidiaries pursuant to the Proprietary Information Agreement signed
by such employee.
6.U. Insurance Coverage. The properties of the Company and its
Subsidiaries are insured in amounts deemed adequate by the Company's management
against risks usually insured against by Persons operating businesses similar
to those of the Company and its Subsidiaries in the localities where such
properties are located.
7. Representations and Warranties of Purchaser. To induce the
Company to enter into this Agreement, Purchaser represents and warrants to the
Company that:
7.A. Purchase for Investment.
(a) Purchaser is acquiring the Shares and the Warrants
(and the Warrant Shares) for his own account and not with a view to
the public resale or distribution of all or any part thereof in any
transaction which would constitute a "distribution" within the meaning
of the
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Securities Act. Purchaser acknowledges that he does not currently
intend to assign its rights under this Agreement to any third party
prior to the Closing.
(b) Purchaser acknowledges that the Shares and the
Warrants (and the Warrant Shares) have not been registered under the
Securities Act.
(c) Purchaser is an "accredited investor" within the
meaning of Rule 501 under Regulation D promulgated under the
Securities Act, is experienced in evaluating investments in companies
such as the Company, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of his investment and has the ability to bear the entire
economic risk of his investment. Purchaser has made his own
evaluation of his investment in the Common Stock, based upon such
information as is available to him and without reliance upon the
Company or any other person or entity, and Purchaser agrees that
neither the Company nor any other person or entity has any obligation
to furnish any additional information to Purchaser except as expressly
set forth herein.
(d) Purchaser acknowledges that the Shares and the
Warrants (and the Warrant Shares) may not be sold, transferred,
pledged, hypothecated, or otherwise disposed of without registration
under the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Shares the
Warrants or the Warrant Shares, as applicable, or an available
exemption from registration under the Securities Act, the Shares and
the Warrants (and the Warrant Shares) must be held indefinitely.
(e) Purchaser agrees that the Shares and the Warrants
(and the Warrant Shares) shall bear legends in substantially the
following form:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (ii) AN
APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION
WITH SUCH SALE."
7.B. Authorization; No Conflict. Purchaser has all requisite
capacity and authority to enter into this Agreement and to carry out and
perform his obligations under the terms of this Agreement. This Agreement is a
legal, valid, and binding obligation of Purchaser. The execution, delivery,
and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby will not conflict with or
result in a default under the terms of any material contract, agreement,
obligation or commitment applicable to Purchaser.
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8. Termination, Amendment and Waiver.
8.A. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of Purchaser and the
Company;
(b) by either Purchaser or the Company;
(i) if the transaction contemplated by this
Agreement shall not have been consummated on or before May
31, 1998, unless the failure to consummate the transaction
contemplated by this Agreement is the result of a material
breach of this Agreement by the party seeking to terminate
this Agreement; or
(ii) if any permanent injunction or other order of
a court or other competent authority preventing the
consummation of the transactions contemplated by this
Agreement shall have become final and nonappealable.
(c) by Purchaser, if the Company breaches any of its
representations or warranties herein or fails to perform in any
material respect any of its covenants, agreements or obligations under
this Agreement; and
(d) by the Company, if Purchaser breaches any of its
representations or warranties herein or fails to perform in any
material respect any of its covenants, agreements or obligations under
this Agreement.
8.B. Effect of Termination. In the event of termination of this
Agreement by either the Company or Purchaser as provided in Section 8A, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Purchaser or the Company, other than the
provisions of Section 9A.
9. Miscellaneous.
9.A. Fees and Expenses.
(a) Reserved.
(b) The Company agrees, in the event that the
transactions hereby contemplated shall be consummated, to pay all
reasonable out-of-pocket expenses of the Purchaser arising in
connection with the transactions and other agreements and instruments
contemplated by this Agreement, including reasonable fees and expenses
of counsel incurred in connection with the preparation and negotiation
of this Agreement, any other agreement or instrument to be executed
and delivered in connection with this Agreement. The Company agrees
to pay the Purchaser and/or their counsel, as appropriate, all such
fees and expenses incurred up to and including the Closing, at the
Closing.
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9.B. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
9.C. Extension; Waiver. At any time prior to the Closing Date,
the parties may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or the other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) subject to the
proviso of Section 9B, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
9.D. Assignment. This Agreement shall not be assigned by
operation of law or otherwise before the Closing Date, and any attempt at
assignment shall be void; provided, however, that the Purchaser shall be
permitted to assign its rights under this Agreement to a third party
("Purchaser Assignee") before the Closing Date so long as (i) Purchaser retains
its obligations under this Agreement, (ii) such third party becomes a party to
this Agreement and joins Purchaser in the representations and warranties in
Paragraph 7 of this Agreement, and (iii) Purchaser first offers to assign its
rights under this Agreement to a third party designated by the Company
("Company Designee") on substantially similar terms as offered by Purchaser
Assignee and the Company Designee shall fail to respond or purchase such rights
during the offer period (the term of which period the Parties hereto shall
mutually agree).
9.E. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement in connection herewith shall survive the
execution and delivery of this Agreement, regardless of any investigation made
by the Purchaser or on their behalf, and shall terminate on the fourth
anniversary of the Closing Date.
9.F. Successors and Assigns; No Third Party. All covenants and
agreements in this Agreement contained by or on behalf of the parties hereto
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto and, to the extent provided in this Agreement, to the
benefit of any future holders of any Common Stock. Subject to the foregoing,
nothing in this Agreement shall confer upon any person or entity not a party to
this Agreement, or the legal representatives of such person or entity, any
rights or remedies of any nature or kind whatsoever under or by reason of this
Agreement.
9.G. Notices. All communications provided for hereunder shall be
sent by registered or certified mail and, if to the Purchaser, to the
following: James R. Crane, 15350 Vickery Drive, Houston, Texas 77032, with a
copy to Gene J. Oshman, at Baker & Botts, L.L.P., 3000 One Shell Plaza, 910
Louisiana, Houston, Texas 77002; if to the Company addressed to it at EqualNet
Holding Corp., 1250 Wood Branch Park Drive, Houston, Texas 77079-1212, Attn:
General Counsel, with a copy to Fulbright & Jaworski L.L.P., 1301 McKinney,
Suite 5100, Houston, Texas 77010, Attn: Robert F. Gray, Jr., or to such other
address with respect to any party as such party shall notify the other in
writing; provided, however, that any such communication to the Company may
also, at the option of the Purchaser, be either delivered to the Company at the
Company's address set forth above
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or to any officer of the Company. Within 5 Business Days after the date of
such mailing (save for any postal interruption) such communication shall be
deemed to have been received.
9.H. Descriptive Headings. The descriptive headings of the
several Paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
9.I. Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Purchaser, the determination of
such satisfaction shall be made by the Purchaser in its sole and exclusive
reasonable judgment exercised in good faith.
9.J. Governing Law; Consent to Jurisdiction. This Agreement
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the law of the State of Texas without giving
effect to the choice of law or conflicts principles thereof. Any legal action
or proceeding with respect to this Agreement may be brought in the courts of
the State of Texas or of the United States of America for the Southern District
of Texas, and, by execution and delivery of this Agreement, the Company hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Company
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Company at its address
set forth in Section 9G, such service to become effect 30 days after such
mailing. Nothing herein shall affect the right of the Purchaser to serve
process in any other manner permitted by law or to commence legal proceedings
or otherwise proceed against the Company in any other jurisdiction.
9.K. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Company
or the Purchaser, the Company or the Purchaser, as applicable, may proceed to
protect and enforce its or their rights either by suit in equity and/or by
action at law.
9.L. Entire Agreement. This Agreement, including the Schedules
hereto, and the other writings referred to herein or delivered pursuant hereto
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
9.M. Severability. Any provisions of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.N. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
which together shall constitute a single agreement.
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9.O. Brokerage. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
9.P Indemnification. The Company hereby agrees to indemnify and
defend the Purchaser and his agents and representatives ("Indemnified Persons")
from and hold each of them harmless against any and all losses, liabilities,
claims or damages, arising from any investigation, litigation or other
proceeding related primarily to this Agreement and brought or threatened by any
third-party that is wholly unaffiliated with such Indemnified Person including,
without limitation, amounts paid in settlement, court costs and the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the negligence,
gross negligence or willful misconduct of the Indemnified Persons). All
obligations provided for in this Paragraph 9P shall survive any termination of
this Agreement. Promptly after receipt by an Indemnified Person of notice of
any claim or the commencement of any action, such Indemnified Person shall, if
any claim in respect there is to be made against the Company under this
Paragraph 9P, notify the Company in writing of the claim or the commencement of
that action. The Company shall not be liable for any settlement of any such
claim or action involving the payment of monetary damages effected without its
prior written consent, which consent the Company may grant or withhold in its
sole and absolute discretion. If any such claim or action shall be brought
against an Indemnified Person and it shall notify the Company thereof and the
Company acknowledges its liability in writing pursuant to this paragraph, the
Company shall be entitled to assume and control the defense thereof, subject to
the right of the Indemnified Person to participate in the defense at its own
cost.
[Signatures on following page]
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
duly executed and delivered as of the date first above written.
EQUALNET HOLDING CORP.
By: /s/ ROBERT H. TURNER
----------------------------------------
Robert H. Turner, President and
Chief Executive Officer
/s/ JAMES R. CRANE
-------------------------------------------
JAMES R. CRANE
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<PAGE> 1
EXHIBIT 2
WARRANT AGREEMENT
This WARRANT AGREEMENT dated as of April 24, 1998, between EQUALNET
HOLDING CORP., a Texas corporation (the "Company"), and JAMES R. CRANE, a
natural person residing in Texas ("Crane" and, together with any transferee of
Warrants or Warrant Shares, the "Warrant Holder(s)").
WHEREAS, Crane and the Company have entered into a certain Stock and
Warrant Purchase Agreement (the "Purchase Agreement") dated April 24, 1998; and
WHEREAS, the Company proposes to issue to Crane pursuant to the
Purchase Agreement, common stock purchase warrants (the "Warrants") to purchase
up to 170,000 shares (the "Warrant Shares") of the Company's common stock, par
value $0.01 per share (the "Common Stock"), each Warrant entitling the holder
thereof to purchase one share of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein and in the Agreement set forth and for other good and
valuable consideration, the parties hereto agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. The Company will issue
and deliver the Warrants to Crane on the Closing Date referred to in the
Purchase Agreement. The aggregate number of Warrants to be issued and delivered
shall be 170,000. The Warrants shall be exercisable on or after such Closing
Date. The text of each Warrant shall be substantially as set forth in the
Warrant Certificate attached as Exhibit A hereto. The Warrants shall be
executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chairman of the Board, President, or Vice President of
the Company, attested by the manual or facsimile signature of the present or
future Secretary or an Assistant Secretary of the Company. A Warrant bearing
the manual or facsimile signature of individuals who were at any time the
proper officers of the Company shall bind the Company notwithstanding that such
individuals or any of them shall have ceased to hold such offices prior to the
delivery of such Warrant or did not hold such offices on the date of this
Warrant Agreement.
Warrants shall be dated as of the date of execution thereof by the
Company either upon initial issuance or upon division, exchange, substitution
or transfer.
The demand and the piggy-back registration rights set forth in Section
16 hereof may be exercised at any time during the term of the Warrants.
<PAGE> 2
2. REPRESENTATIONS AND WARRANTIES.
(a) The Company hereby represents and warrants as follows:
(i) POWER AND AUTHORITY. The Company has all requisite
corporate power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this Warrant Agreement, to
grant, issue, and deliver the Warrants and to authorize and reserve
for issuance and, upon payment from time to time of the Exercise
Price, to issue and deliver the shares of Common Stock or other
securities issuable upon exercise of the Warrants. This Warrant
Agreement has been duly executed and delivered by the Company.
(ii) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK.
There have been reserved for issuance, and the Company shall at all
times keep reserved, out of the authorized and unissued shares of
Common Stock, a number of shares sufficient to provide for the
exercise of the rights of purchase represented by the Warrants, and
such shares, when issued upon receipt of payment therefor or upon a
net exercise in accordance with the terms of the Warrants and of this
Warrant Agreement, will be legally and validly issued, fully paid and
non- assessable and will be free of any preemptive rights of
shareholders or any restrictions.
(b) The Warrant Holder hereby represents and warrants as follows:
(i) ACCREDITED INVESTOR. The Warrant Holder is an
"accredited investor" within the meaning of Rule 501 under Regulation
D promulgated under the Securities Act, is experienced in evaluating
investments in companies such as the Company, has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment and has the ability
to bear the entire economic risk of its investment. The Warrant
Holder has made its own evaluation of its investment in the Warrants,
based upon such information as is available to it and without reliance
upon the Company or any other person or entity, and the Warrant Holder
agrees that neither the Company nor any other person or entity has any
obligation to furnish any additional information to the Warrant Holder
except as expressly set forth herein.
3. CONDITIONS TO PURCHASE. Crane's obligations hereunder shall
be subject to satisfaction of the following conditions on the Closing Date and
those referred to in the Purchase Agreement:
(a) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Warrant
Agreement and the Warrants and all other legal matters relating to
this Warrant Agreement, the Warrants and the transactions contemplated
hereby shall be satisfactory in all respects to Baker & Botts L.L.P.,
counsel for Crane, in their reasonable judgment, and the Company shall
have furnished to such counsel
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<PAGE> 3
all documents and information that they may reasonably request to
enable them to pass judgment upon such matters.
(b) There shall have been duly tendered to Crane or upon
the order of Crane a certificate or certificates representing the
Warrants.
(c) Each of the "Conditions Precedent" set forth in
Section 3 of the Purchase Agreement shall have been satisfied.
4. REGISTRATION. The Warrants shall be numbered and shall be
registered on the books of the Company (the "Warrant Register") as they are
issued. The Warrants shall be registered initially in such names and such
denominations as Crane has specified to the Company.
5. EXCHANGE OF WARRANT CERTIFICATES. Subject to any restriction
upon transfer set forth in this Warrant Agreement, each Warrant certificate may
be exchanged at the option of the Warrant Holder thereof for another
certificate or certificates of different denominations entitling the Warrant
Holder thereof to purchase upon surrender to the Company or its duly authorized
agent a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Warrant Holder to purchase. Any
Warrant Holder desiring to exchange a Warrant certificate or certificates shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate or certificates to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant certificate or certificates, as the case may be, as so requested.
Any Warrant issued upon exchange, transfer or partial exercise of the Warrants
shall be the valid obligation of the Company, evidencing the same generic
rights and entitled to the same generic benefits under this Warrant Agreement
as the Warrants surrendered for such exchange, transfer or exercise.
6. TRANSFER OF WARRANTS. Subject to the provisions of Section 14
hereof, the Warrants shall be transferrable only on the Warrant Register upon
delivery to the Company of the Warrant certificate or certificates duly
endorsed by the Warrant Holder or by his duly authorized attorney-in-fact or
legal representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an
attorney-in-fact, the original power of attorney, duly approved, or an official
copy thereof, duly certified, shall be deposited with the Company. In case of
transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto.
7. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Each Warrant entitles the Warrant Holder thereof to purchase
one share of Common Stock during the time period and subject to the conditions
set forth in the respective Warrant
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<PAGE> 4
Certificates at an exercise price of $1.00 per share, subject to adjustment in
accordance with Section 12 hereof (the "Exercise Price"). Each Warrant
terminates on the fifth anniversary of the date on which such Warrant becomes
exercisable in accordance with its terms (the "Expiration Date").
(b) The Exercise Price and the number of shares issuable upon
exercise of Warrants are subject to adjustment upon the occurrence of certain
events, pursuant to the provisions of Section 12 of this Warrant Agreement.
Subject to the provisions of this Warrant Agreement, each Warrant Holder shall
have the right, which may be exercised as expressed in such Warrants, to
purchase from the Company (and the Company shall issue and sell to such Warrant
Holder) the number of fully paid and nonassessable shares of Common Stock
specified in such Warrants, upon surrender to the Company, or its duly
authorized agent, of such Warrants, with the purchase form on the reverse
thereof duly filled in and signed, and upon payment to the Company of the
Exercise Price, as adjusted in accordance with the provisions of Section 12 of
this Warrant Agreement or upon a net exercise pursuant to this subsection of
this Warrant Agreement, for the number of shares in respect of which such
Warrants are then exercised. The Warrant Holder may (i) pay the Exercise Price
in cash, by certified or official bank check payable to the order of the
Company, (ii) pay the Exercise Price by the surrender to the Company of
securities of the Company having a Market Price equal to the Exercise Price or
(iii) make an exercise of Warrants for "Net Warrant Shares." The number of Net
Warrant Shares will be determined as described by the following formula: Net
Warrant Shares = [WS x (MP-EP)]/MP. "WS" is the number of Warrant Shares
issuable upon exercise of the Warrants or portion of Warrants in question.
"MP" is the Market Price of the Common Stock on the last trading day preceding
the date of the request to exercise the Warrants. "Market Price" shall mean
the then current market price per share of Common Stock, as determined in
paragraph 12.1(e). "EP" shall mean the Exercise Price.
Upon such surrender of Warrants, and payment of the Exercise Price,
with cash or securities, or upon a net exercise as aforesaid, the Company at
its expense shall issue and cause to be delivered with all reasonable dispatch
to or upon the written order of the Warrant Holder and in such name or names as
the Warrant Holder may designate, a certificate or certificates for the number
of full shares of Common Stock so purchased upon the exercise of such Warrants,
together with cash, as provided in Section 12 of this Warrant Agreement, in
respect of any fraction of a share of such stock otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been
issued, and any person so designated to be named therein shall be deemed to
have become a holder of record of such shares, as of the date of the surrender
of such Warrants and payment of the Exercise Price or receipt of shares by net
exercise as aforesaid. The rights of purchase represented by the Warrants
shall be exercisable, at the election of the Warrant Holders thereof, either in
full or from time to time in part and, in the event that any Warrant is
exercised in respect of less than all of the shares purchasable on such
exercise at any time prior to the Expiration Date, a new certificate evidencing
the remaining Warrant or Warrants will be issued.
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<PAGE> 5
8. COMPLIANCE WITH GOVERNMENT REGULATIONS. The Company covenants
that if any share of Common Stock required to be reserved for purposes of
exercise or conversion of Warrants require, under any federal or state law or
applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing or
quotation on any such national securities exchange or quotation system, before
such shares may be issued upon exercise, the Company will use its commercially
reasonable efforts to cause such shares to be duly registered, approved or
listed or quoted on the relevant national securities exchange or quotation
system, as the case may be.
9. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants and any securities issued pursuant to Section 12 hereof;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any Warrants or certificates for Warrant Shares and any securities
issued pursuant to Section 12 hereof in a name other than that of the Warrant
Holder of such Warrants.
10. MUTILATED OR MISSING WARRANTS. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company shall issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and in substitution for the Warrant lost, stolen, or
destroyed, a new Warrant of like tenor and representing an equivalent right or
interest.
11. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF
WARRANTS. The Company shall at all times reserve, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the rights of purchase represented by the Warrants, and the
transfer agent for the Common Stock ("Transfer Agent") and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such
purpose. The Company will keep a copy of this Warrant Agreement on file with
the Transfer Agent and with every subsequent transfer agent for any shares of
the Company's capital stock issuable upon the exercise of the rights of
purchase represented by the Warrants. The Company will supply the Transfer
Agent and any such subsequent transfer agent with duly executed stock
certificates for such purpose and will itself provide or otherwise make
available any cash which may be issuable as provided by Section 13 of this
Warrant Agreement. The Company will furnish to the Transfer Agent and any such
subsequent transfer agent a copy of all notices of adjustments, and
certificates related thereto, transmitted to each Warrant Holder pursuant to
Section 12.3 hereof. All warrants surrendered in the exercise of the rights
thereby evidenced shall be canceled, and such canceled Warrants shall
constitute sufficient evidence of the number of shares of stock which have been
issued upon the exercise of such Warrants (subject to adjustment as herein
provided). No shares of stock shall be subject to reservation in respect of
the Warrants subsequent to the Expiration Date except to the extent necessary
to comply with the terms of this Warrant Agreement.
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<PAGE> 6
12. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number and kind of securities purchasable upon the exercise of each Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the occurrence of certain events, as hereafter defined.
12.1. MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price
shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend
to holders of Common Stock in shares of Common Stock or make a
distribution to holders of Common Stock in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number
of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company
(including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving
corporation), the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be
adjusted so that the Warrant Holder shall be entitled to
receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have
been entitled to receive after the happening of any of the
events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record
date with respect thereto regardless of whether the Warrants
are exercisable at the time of the happening of such event or
at the time of any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) In case the Company shall issue rights,
options, or warrants to holders of its outstanding Common
Stock, without any charge to such holders, entitling them to
subscribe for or purchase shares of Common Stock at a price
per share (the "Subscription Price") which is lower at the
record date mentioned below than
(i) the Exercise Price, then (A) the Exercise
Price in effect immediately prior to such issuance
shall immediately be reduced to the price that is
equivalent to such Subscription Price and (B) the
number of Warrant Shares thereafter purchasable upon
the exercise of each Warrant shall be increased in
direct proportion to the increase in the number of
shares of Common Stock outstanding on a fully diluted
basis immediately prior to such issuance; or
(ii) the then current market price of a share
of Common Stock and equal to or greater than the
Exercise Price, then the number of shares of Common
Stock that immediately prior to such issuance the
Warrant Holder
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<PAGE> 7
shall have been entitled to purchase pursuant to this
Warrant shall be increased to the greater of (A) that
number of shares of Common Stock that immediately
prior to such issuance the Warrant Holder shall have
been entitled to purchase pursuant to this Warrant
multiplied by a fraction, the numerator of which is
such current market price and the denominator of
which is the Subscription Price, and (B) the number
of shares of Common Stock otherwise calculated under
this Section 12.1.
Such adjustment shall be made whenever such rights, options,
or warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such rights, options, or warrants;
provided that this Section 12.1(b) shall expire and be of no
force and effect on or after October 24, 1998.
(c) In case the Company shall distribute to
holders of its shares of Common Stock evidences of its
indebtedness or assets (including cash dividends or other cash
distributions) or capital stock other than as provided for in
paragraphs (a) or (b), or rights, options, or warrants, or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding
those referred to in paragraph (b) above), then in each case
the number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, of which the numerator
shall be the then current market price per share of Common
Stock (as determined in accordance with paragraph (e) below)
on the date of such distribution, and of which the denominator
shall be the then current market price per share of Common
Stock, less the then fair value (as determined in good faith
by the Board of Directors of the Company) of the portion of
the assets or evidences of indebtedness so distributed or of
such subscription rights, options, or warrants, or of such
convertible or exchangeable securities applicable to one share
of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
In the event of distribution by the Company to
holders of its shares of Common Stock of stock of a subsidiary
or securities convertible into or exercisable for such stock,
then in lieu of an adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant, the Warrant
Holder, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company,
such subsidiary, or both, as the Company shall determine, the
stock or other securities to which such Warrant Holder would
have been entitled if such Warrant Holder had exercised such
Warrant immediately prior thereto regardless of
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<PAGE> 8
whether the Warrants are exercisable at such time, all subject
to further adjustment as provided in this subsection 12.1;
provided, however, that no adjustment in respect of dividends
or interest on such stock or other securities shall be made
during the term of a Warrant or upon the exercise of a
Warrant; provided further that this Section 12.1(c) shall
expire and be of no force and effect on or after October 24,
1998.
(d) In case the Company shall sell and issue
shares of Common Stock (other than pursuant to rights,
options, warrants, or convertible securities initially issued
before the date of this Agreement) or rights, options,
warrants, or convertible securities containing the right to
subscribe for or purchase shares of Common Stock (excluding
shares, rights, options, warrants, or convertible securities
issued in any of the transactions described in paragraphs (a),
(b) or (c) above) at a price per share of Common Stock
(determined, in the case of such rights, options, warrants or
convertible securities, by dividing (w) the total of the
amount received or receivable by the Company (determined as
provided below) in consideration of the sale and issuance of
such rights, options, warrants, or convertible securities, by
(x) the total number of shares of Common Stock covered by such
rights, options, warrants, or convertible securities) lower
than the Exercise Price in effect immediately prior to such
sale and issuance, then (i) the Exercise Price in effect
immediately prior to such issuance shall immediately be
reduced to the price that is equivalent to such consideration
received by the Company upon such issuance and (ii) the number
of Warrant Shares thereafter purchasable upon the exercise of
the Warrants shall be increased in direct proportion to the
increase in the number of shares of Common Stock outstanding
on a fully diluted basis immediately prior to such issuance;
provided that if such shares of Common Stock, options or other
convertible securities (other than pursuant to rights,
options, warrants, or convertible securities initially issued
before the date of this Agreement) are issued for
consideration per share less than the Exercise Price at the
date of such issue or sale, the number of shares of Common
Stock that immediately prior to such issuance the Warrant
Holder shall have been entitled to purchase pursuant to this
Warrant shall be increased to the greater of (i) that number
of shares of Common Stock that immediately prior to such
issuance the Warrant Holder shall have been entitled to
purchase pursuant to this Warrant multiplied by a fraction,
the numerator of which is the Exercise Price and the
denominator of which is such consideration per share, and (ii)
the number of shares of Common Stock otherwise calculated
under this Section 12.1. Such adjustment shall be made
successively whenever such as issuance is made; provided that
this Section 12.1(d) shall expire and be of no force and
effect on or after October 24, 1998. For the purposes of such
adjustments, the consideration received or receivable by the
Company for rights, options, warrants, or convertible
securities shall be deemed to be the consideration received by
the Company for such rights, options, warrants, or convertible
securities, plus the consideration or premiums stated
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<PAGE> 9
in such rights, options, warrants, or convertible securities
to be paid for the shares of Common Stock covered thereby. In
case the Company shall sell and issue shares of Common Stock,
or rights, options, warrants, or convertible securities
containing the right to subscribe for or purchase shares of
Common Stock, for a consideration consisting, in whole or in
part, of property other than cash or its equivalent, then in
determining the "price per share of Common Stock" and the
"consideration received or receivable by the Company" for
purposes of the first sentence of this paragraph (d), the
Board of Directors shall determine, in its discretion, the
fair value of said property.
(e) For the purpose of any computation under
paragraphs (b), (c), and (d) of this Section, the current
market price per share of Common Stock at any date shall be
the average of the daily closing prices of the Company's
Common Stock, for five consecutive trading days ending one
trading day before the date of such computation. The closing
price for each day shall be the last such reported sales price
regular way or, in case no such reported sale takes place on
such day, the average of the closing bid and asked prices
regular way for such day, in each case on the principal
national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if not listed or
admitted to trading, the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market as
reported by NASDAQ or any comparable system. In the absence
of one or more such quotations, the Board of Directors of the
Company shall determine the current market price, in good
faith, on the basis of such quotations as it considers
appropriate. Notwithstanding the foregoing, for the purpose
of any calculation under paragraph (d) above (A) with respect
to any issuance of options under the Company's employee or
director compensation stock option plans as in effect or as
adopted by the Board of Directors of the Company on the date
hereof, the term "current market price", in such instances,
shall mean the fair market price on the date of the issuance
of any such option determined in accordance with the Company's
employee compensation stock option plans as in effect or
adopted by the Board of Directors of the Company on the date
hereof; and (B) with respect to any issuances of Common Stock
(or rights, options, warrants, or convertible securities
containing the right to subscribe for or purchase shares of
Common Stock) in connection with bona fide corporate
transactions (other than issuances in such transactions for
cash or similar consideration), the term "fair market price"
shall mean the fair market price per share as determined in
arm's-length negotiations by the Company and such other
parties (other than affiliates or subsidiaries of the Company)
to such transactions as reflected in the definitive
documentation with respect thereto, unless such determination
is not reasonably related to the closing market price on the
date of such determination.
(f) In any case in which this Section 12.1 shall
require that any adjustment in the number of Warrant Shares be
made effective as of immediately
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<PAGE> 10
after a record date for a specified event, the Company may
elect to defer until the occurrence of the event the issuing
to the holder of any Warrant exercised after that record date
the shares of Common Stock and other securities of the
Company, if any, issuable upon the exercise of any Warrant
over and above the shares of Common Stock and other securities
of the Company, if any, issuable upon the exercise of any
Warrant prior to such adjustment; provided, however, that the
Company shall deliver to such Warrant Holder a due bill or
other appropriate instrument evidencing the holder's right to
receive such additional shares or securities upon the
occurrence of the event requiring such adjustment.
(g) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent
(1%) in the number of Warrant Shares purchasable upon the
exercise of each Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share.
(h) Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Warrant Price payable upon the exercise
of each Warrant shall be adjusted by multiplying such Warrant
Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of such Warrant immediately
prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately.
(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made
under paragraphs (a), (b) and (c) if the Company issues or
distributes to each Warrant Holder the rights, options,
warrants, or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those
paragraphs which each Warrant Holder would have been entitled
to receive had the Warrants been exercised prior to the
happening of such event or the record date with respect
thereto regardless of whether the Warrants are exercisable at
the time of the happening of such event or at the time of any
record date with respect thereto. No adjustment need be made
for a change in the par value of the Warrant Shares.
(j) For the purpose of this Section 12.1, the
terms "shares of Common Stock" shall mean (i) the class of
stock designated as the Common Stock of the Company at the
date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such
shares consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In
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<PAGE> 11
the event that at any time, as a result of an adjustment made
pursuant to paragraph (a) above, the Warrant Holders shall
become entitled to purchase any securities of the Company
other than shares of Common Stock, thereafter the number of
such other securities so purchasable upon exercise of each
Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares contained in paragraphs (a)
through (i), inclusive, above, and the provisions of Section 7
and Section 12.2 through 12.5, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other
securities.
(k) Upon the expiration of any rights, options,
warrants, or conversion or exchange privileges, if any thereof
shall not have been exercised, the Warrant Price and the
number of shares of Common Stock purchasable upon the exercise
of each warrant shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (A) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants, or conversion or exchange rights and (B)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all
such rights, options, warrants, or conversion or exchange
rights whether or not exercised; provided, however, that no
such readjustment shall have the effect of increasing the
Warrant Price or decreasing the number of Warrant Shares by an
amount in excess of the amount of the adjustment initially
made with respect to the issuance, sale or grant of such
rights, options, warrants, or conversion or exchange rights.
(l) In addition to the adjustments set forth
above, the Exercise Price shall be immediately reduced and the
number of Warrant Shares shall be immediately increased, in
each case, on a pari passu basis with the conversion,
exercise, or strike price of any other derivative securities
of the Company whether now outstanding or hereafter issued.
12.2. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company
may, at its option, at any time during the term of the Warrants,
reduce the then current Exercise Price to any amount determined
appropriate by the Board of Directors of the Company.
12.3. NOTICE OF ADJUSTMENT. When the number of Warrant
Shares purchasable upon the exercise of each Warrant or the Exercise
Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class, postage prepaid, to each
Warrant Holder notice of such adjustment or adjustments and a
certificate of a firm of
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<PAGE> 12
independent public accountants selected by the Board of Directors of
the Company (who may be the regular accountants employed by the
Company) setting forth the number of Warrant Shares purchasable upon
the exercise of each Warrant and the Exercise Price of such Warrant
Shares after such adjustment and setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such certificate, absent manifest
error, shall be conclusive evidence of the correctness of such
adjustment.
12.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC. In case of any consolidation of the Company with
or merger of the Company into another person or in case of any sale,
transfer, or lease to another person of all of or substantially all
the assets of the Company, the Company or such successor or purchaser,
as the case may be, shall execute with each Warrant Holder an
agreement that each Warrant Holder shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to such
action to purchase upon exercise of each Warrant the kind and amount
of shares and other securities and property which the Warrant Holder
would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, transfer, or lease had such
Warrant been exercised immediately prior to such action regardless of
whether the Warrants are exercisable at the time of such action. Such
agreement shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in
this Section 12. The provisions of this Section 12.4 shall similarly
apply to successive consolidations, mergers, sales, transfers, or
leases.
12.5. STATEMENT ON WARRANTS. Even though Warrants
heretofore or hereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Warrant Agreement, the parties understand
and agree that such Warrants will represent rights consistent with any
adjustments in the Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants.
13. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Warrant Holder, the number of full Warrant Shares which shall be issuable upon
the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
13, be issuable on the exercise of any Warrant (or specified portion, thereof),
the Company shall pay an amount in cash equal to the closing price for one
share of the Common Stock on the trading day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
14. REGISTRATION UNDER THE SECURITIES ACT OF 1933. Crane
represents and warrants to the Company that it will not dispose of the Warrant
or Warrant Shares except pursuant to (i) an
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<PAGE> 13
effective registration statement, or (ii) an applicable exemption from
registration under the Securities Act of 1933 (the "Act"). In connection with
any sale by Crane pursuant to clause (ii) of the preceding sentence, it shall
furnish to the Company an opinion of counsel reasonably satisfactory to the
Company to the effect that such exemption from registration is available in
connection with such sale.
15. CERTIFICATE TO BEAR LEGENDS. The Warrants shall be subject to
a stop-transfer order and the certificate or certificates therefor shall bear
the following legend by which each Warrant Holder shall be bound:
"THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
OTHER STATE. THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED, EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT. ANY SALE PURSUANT TO CLAUSE (ii) OF THE
PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH
SALE."
The Warrant Shares or other securities issued upon exercise of the
Warrants shall, unless issued pursuant to an effective registration statement,
be subject to a stop-transfer order and the certificate or certificates
evidencing any such Warrant Shares or securities shall bear the following
legend by which the Warrant Holder thereof shall be bound:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED,
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT. ANY SALE PURSUANT TO CLAUSE (ii) OF THE
PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH
SALE."
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<PAGE> 14
16. REGISTRATION RIGHTS. The Warrant Shares shall be subject to
the registration rights set forth in the Registration Rights Agreement of even
date herewith between Crane and the Company.
17. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS. Nothing
contained in this Warrant Agreement or in any of the Warrants shall be
construed as conferring upon the Warrant Holders or their transferees the right
to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company. If, however, at any time prior to the expiration
of the Warrants and prior to their exercise, any of the following events shall
occur:
(a) the Company shall declare any dividend payable in any
securities upon its shares of Common Stock or make any distribution
(other than a cash dividend) to the holders of its shares of Common
Stock; or
(b) the Company shall offer to the holders of its shares
of Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe to or purchase any thereof; or
(c) a dissolution, liquidation, or winding up of the
Company (other than in connection with a consolidation, merger, sale,
transfer, or lease or all or substantially all of its property,
assets, and business as an entirety) shall be proposed; or
(d) the Company shall take any action that would cause an
adjustment to the number of Warrant Shares or the Exercise Price
pursuant to Section 12.1 hereof,
then in any one or more of said events the Company shall give notice in writing
of such event to the Warrant Holders as provided in Section 20 hereof, with
such notice to be completed at least 15 days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution, or subscription
rights, or for the determination of stockholders entitled to vote on such
proposed dissolution, liquidation or winding up. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to provide or receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such dividend, distribution, or subscription rights, or such proposed
dissolution, liquidation or, winding up.
18. EXPENSES. The Company shall pay all legal and other
reasonable out-of-pocket expenses of the Warrant Holders and of their counsel
(up to a maximum of $25,000). The Company agrees to reimburse Crane upon
demand for its reasonable out-of-pocket costs and expenses incurred
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<PAGE> 15
in connection with the preparation, review, negotiation, execution, and
delivery of this Warrant Agreement and all other related documents.
19. RIGHT TO INFORMATION. The Company, in accordance with Section
16(c) above, will provide to all Warrant Holders and to all holders of Warrant
Shares, on a timely basis, copies of all documents and reports delivered to its
shareholders.
20. NOTICES. Any notice pursuant to this Warrant Agreement to be
given or made by the holder of any Warrant or Warrant Shares to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed as follows:
EqualNet Holding Corp.
1250 Wood Branch Park Drive
Houston, Texas 77079
Attention: General Counsel
Notices or demands authorized by this Warrant Agreement to be given or made to
or on the Warrant Holder of any Warrant or Warrant Shares shall be sufficiently
given or made (except as otherwise provided in this Warrant Agreement) if sent
by registered mail, return receipt requested, postage prepaid, addressed to
such Warrant Holder at the address of such Warrant Holder as shown on the
Warrant Register or the Common Stock Register, as the case may be.
21. GOVERNING LAW. THIS WARRANT AGREEMENT, THE WARRANTS AND ALL
RELATED DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. ANY DISPUTE HEREUNDER
OR UNDER THE WARRANTS OR RELATED DOCUMENTS SHALL BE DETERMINED EXCLUSIVELY IN
ACCORDANCE WITH SECTION 9J OF THE PURCHASE AGREEMENT.
22. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
Holders may from time to time supplement or amend this Warrant Agreement in
order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Warrant Holder may deem necessary or
desirable and which shall not be inconsistent with the provisions of the
Warrants and which shall not adversely affect the interests of the Warrant
Holders. Any amendment to this Warrant Agreement may be effected with the
consent of Warrant Holders of at least a majority of the total then outstanding
Warrants (for this purpose Warrant Shares shall be deemed to be Warrants in the
proportion that Warrant Shares are then issuable upon the exercise of
Warrants); provided that any amendment which shall have the effect of
materially adversely affecting the interests of any Warrant Holder shall not be
effective with respect to such Warrant Holder if such Warrant Holder shall not
have consented thereto.
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<PAGE> 16
23. SURVIVAL OF COVENANTS. All covenants and agreements made
herein shall survive the execution and delivery of this Warrant Agreement and
the Warrants and shall remain in force and effect until the Expiration Date of
all Warrants.
24. SUCCESSORS. All representations and warranties of the Company
and all covenants and agreements of this Warrant Agreement by or for the
benefit of the Company or the Warrant Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
25. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant
Agreement shall be construed to give to any person or corporation other than
the Company and the Warrant Holders, any legal or equitable right, remedy, or
claim under this Warrant Agreement, but this Warrant Agreement shall be for the
sole and exclusive benefit of the Company and the holders of the Warrants and
Warrant Shares.
26. CAPTIONS. The captions of the sections and subsections of
this Warrant Agreement have been inserted for convenience and shall have no
substantive effect.
27. COUNTERPARTS. This Warrant Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but such counterparts together shall constitute but one and the same
instrument.
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed on the day, month and year first above written.
EQUALNET HOLDING CORP.
By: /s/ ROBERT H. TURNER
----------------------------------
Robert H. Turner, President and Chief
Executive Officer
/s/ JAMES R. CRANE
----------------------------------
JAMES R. CRANE
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<PAGE> 18
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY OTHER STATE. THE
WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR (ii) AN APPLICABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT. ANY SALE PURSUANT TO CLAUSE (ii) OF THE
PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH EXEMPTION FROM REGISTRATION
IS AVAILABLE IN CONNECTION WITH SUCH SALE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS AND COMMON STOCK UNDERLYING SUCH
WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN.
No. _____
170,000 Warrants
VOID AFTER 5:00 P.M. HOUSTON, TEXAS TIME
ON APRIL 23, 2003
EQUALNET HOLDING CORP.
WARRANT CERTIFICATE
THIS CERTIFIES THAT for value received JAMES R. CRANE, the registered
holder hereof or registered assigns (the "Warrant Holder"), is the owner of the
number of the Warrants set forth above, each of which entitles the owner
thereof to purchase at any time from 9:00 A.M., Houston, Texas time, on April
24, 1998, until 5:00 P.M., Houston, Texas time on April 23, 2003, one fully
paid and nonassessable share of the common stock (subject to adjustment), par
value $0.01 per share (the "Common Stock"), of EQUALNET HOLDING CORP., a Texas
corporation (the "Company"), at the exercise price of $1.00 per share, subject
to adjustment and limitation as described in the Warrant Agreement referred to
below (the "Exercise Price"). The Warrant Holder may pay the Exercise Price in
cash, or by certified or official bank check or by delivery of securities or by
making a net exercise for Net Warrant Shares as described in the Warrant
Agreement.
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<PAGE> 19
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement dated April 24,
1998 (the "Warrant Agreement"), between the Company and Crane which Warrant
Agreement is hereby incorporated herein by reference and made a part hereof and
to which Warrant Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Company and the Warrant Holders of the Warrant Certificates. Copies of
the Warrant Agreement are on file at the principal office of the Company.
The Warrant Holder hereof may be treated by the Company and all other
persons dealing with this Warrant Certificate as the absolute owner hereof for
any purpose and as the person entitled to exercise the rights represented
hereby, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding, and until such transfer on such books, the
Company may treat the Warrant Holder hereof as the owner for all purposes.
The Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the Warrant Holder to purchase a like aggregate
number of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered entitled to such Warrant Holder
to purchase. If this Warrant Certificate shall be exercised in part, the
Warrant Holder shall be entitled to receive upon surrender hereof, another
Warrant Certificate or Warrant Certificates for the number of whole Warrants
not exercised.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
Neither the Warrants nor the Warrant Certificate entitles any Warrant
Holder hereof to any of the rights of a stockholder of the Company.
THIS WARRANT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
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<PAGE> 20
IN WITNESS WHEREOF, the Company has caused the signature of its
President and Secretary to be printed hereon.
EQUALNET HOLDING CORP.
By:
----------------------------------
Robert H. Turner, President and
Chief Executive Officer
ATTEST:
- ---------------------------------------
Dean H. Fisher, Secretary
20
<PAGE> 1
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of April 24, 1998 is
entered into between EQUALNET HOLDING CORP., a Texas corporation (the
"Company") and JAMES R. CRANE, a natural person residing in Texas ("Crane").
Recitals
In connection with the consummation of the transactions contemplated
by the certain Stock and Warrant Purchase Agreement dated April 24, 1998 among
the Company and Crane (the "Agreement"), 3,400,000 shares (the "Shares") of the
Common Stock of the Company, $.01 par value per share (the "Common Stock"), and
a warrant (the "Warrant") for the purchase of an additional 170,000 shares of
Common Stock were issued to Crane.
Pursuant to the terms of this Agreement, the Company has agreed to
grant to Crane (and his successors and permitted assigns) certain registration
rights with respect to the Shares and the Common Stock issuable upon exercise
of the Warrant (collectively, the "Registrable Shares").
NOW, THEREFORE, in and for the mutual covenants and agreements set
forth herein, the Company and Crane agree as follows:
A. Registration Rights.
1. Demand Registration Rights. (a) The Company covenants and
agrees with Crane that within 60 days after receipt of a written request from
Crane (the "Initiating Holder"), the Company shall file a registration
statement (and use its commercially reasonable efforts to cause such
registration statement to become effective under the Securities Act of 1933, as
amended (the "Securities Act")) with respect to the offering and sale or other
disposition of any number of shares of the Registrable Securities (the "Demand
Securities"); provided that the Company may defer its obligations under this
Section 1 for a period of no more than 90 days if the Company's Board of
Directors adopts a resolution that filing such a registration statement would
require a public disclosure by the Company which disclosure would have material
adverse consequences for the Company, such as a disclosure regarding a pending
material acquisition by the Company; provided further that once such
information has been publicly disclosed, then the Company shall promptly
proceed to fulfill its obligations under this Section 1. The Company shall
continuously maintain the effectiveness of such registration statement for the
lesser of (i) 180 days after the effective date of the registration statement
or (ii) the consummation of the distribution by the holders of the Demand
Securities covered by such registration statement (the "Termination Date");
provided, however, that
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<PAGE> 2
if at the Termination Date, the Demand Securities are covered by a registration
statement which also covers other securities and which is required to remain in
effect beyond the Termination Date, the Company shall maintain in effect such
registration statement as it relates to the Demand Securities for so long as
such registration statement (or any subsequent registration statement) remains
or is required to remain in effect for any of such other securities. The
Company shall not be required to comply with more than two requests for
registration pursuant to this Section 1. In addition, the Company shall be
required to effect up to three registrations of the Registerable Securities on
Form S-3 or any successor to such form promulgated under the Securities Act at
the request of Crane; provided that the requirements for use of such from set
forth in the instructions to such form are met. All expenses of such
registration shall be borne by the Company, except that underwriting
commissions and expenses attributable to the Demand Securities and fees and
disbursements of counsel and other advisors (if any) to the Initiating Holder
will be borne by such holders requesting that such securities be offered.
(b) If the Initiating Holder intends to distribute the
Demand Securities covered by their request by means of an underwriting, they
shall so advise the Company as a part of their request made pursuant to this
Section 1. The right of any other holder to registration pursuant to this
Section 1 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Demand Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holder and such holder with respect to such participation and
inclusion) to the extent provided herein. A holder may elect to include in
such underwriting all or a part of the Demand Securities it holds. If other
holders of registration rights request inclusion in any registration statement
pursuant to this Section 1(b), such holders may be included in the underwriting
conditioned on their acceptance of the further applicable provisions of this
Section 1(b). The Company shall (together with other holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with a representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holder. If the representative advises the
Initiating Holder in writing that marketing factors require a limitation on the
number of shares to be underwritten, then securities held by holders other than
the Initiating Holder shall be excluded from such registration to the extent so
required by such limitation.
2. Piggy-back Registration Rights. The Company covenants and
agrees with Crane that, in the event the Company proposes to file a
registration statement under the Securities Act with respect to a firm
commitment offering of Common Stock (other than in connection with an exchange
offer or a registration statement on Form S-4 or S-8 or other similar
registration statements not available to register securities so requested to be
included), the Company shall in each case give written notice of such proposed
filing to Crane at least 30 days before the earlier of the anticipated or the
actual effective date of the registration statement and at least ten days
before the initial filing of such registration statement and such notice shall
offer to such holders the opportunity to include in such registration statement
such number of shares of the Registrable Securities (the "Piggyback
Securities") as they may request. Holders desiring inclusion of Piggy-back
Securities in such
2
<PAGE> 3
registration statement shall so inform the Company by written notice, given
within ten days of the giving of such notice by the Company. The Company shall
permit, or shall cause the managing underwriter of a proposed offering to
permit, the holders of Piggy-back Securities requested to be included in the
registration to include such securities in the proposed offering on the same
terms and conditions as applicable to securities of the Company, if any,
included therein for the account of any person other than the Company and the
holders. Notwithstanding the foregoing, if any such managing underwriter shall
advise the Company in writing that, in its opinion, the distribution of
securities by holders thereof, including all or a portion of the Piggy-back
Securities, requested to be included in the registration concurrently with the
securities being registered by the Company, would materially adversely affect
the distribution of such securities by the Company for its own account, then
the holders of the Registrable Securities shall delay their offering and sale
of the Registrable Securities (or the portions thereof so designated by such
managing underwriter) for such period, not to exceed 120 days, as the managing
underwriter shall request, provided that if any other securities are included
in such registration statement for the account of any person other than the
Company and the holders of Piggy-back Securities, then such securities,
including the Piggy-back Securities, so included shall be apportioned among
holders who wish to be included therein pro rata according to amounts so
requested to be included by each such person. No such delay shall in any event
impair any right granted hereunder to make subsequent requests for inclusion
pursuant to the terms of this Section 2. The Company shall continuously
maintain in effect any registration statement with respect to which the
Piggy-back Securities have been requested to be included (and so included) for
a period of not less than 180 days after the effectiveness of such registration
statement ("Piggy-back Termination Date"); provided, however, that if at the
Piggy-back Termination Date the Piggy-back Securities are covered by a
registration statement which is, or is required to remain, in effect beyond the
Piggy-back Termination Date, the Company shall maintain in effect the
registration statement as it relates to the Piggy-back Securities for so long
as such registration statement remains or is required to remain in effect for
any of such other securities. All expenses of such registration shall be borne
by the Company, except that underwriting commissions and expenses attributable
to the Piggy-back Securities and fees and distributions of counsel and other
advisors (if any) to the holders requesting that the Piggy-back Securities be
offered will be borne by such holders.
3. Other Matters. In connection with the registration of
Registrable Securities in accordance with Sections 1 or 2 above, the Company
agrees to:
(i) Use its commercially reasonable efforts to register
or qualify the Registrable Securities for offer or sale under state
securities or Blue Sky laws of such jurisdictions in which the holders
of such Registrable Securities shall designate; provided that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action
which would subject it to general service of process in any
jurisdiction where it is not now so subject, and use its commercially
reasonable efforts to do any and all other acts and things which may
be necessary or advisable to enable the holders of Registrable
Securities to consummate the sale, transfer, or other disposition of
such securities in any jurisdiction;
3
<PAGE> 4
(ii) Enter into indemnity and contribution agreements,
each in customary form, with each underwriter, if any, and each holder
of Registrable Securities included in such registration statement;
and, if requested, enter into an underwriting agreement containing
customary representations, warranties, covenants, allocation of
expenses, and customary closing conditions including, but not limited
to, opinions of counsel and accountants' cold comfort letters with any
underwriter who participates in the offering of Registrable
Securities;
(iii) Pay all expenses in connection with the registration
of the Registrable Securities under the Securities Act and compliance
with the provisions of clause (i) above, except to the extent
otherwise provided in Sections 1 or 2; and
(iv) List or quote the Registrable Securities on each
securities exchange or quotation system, if any, on which the Common
Stock is listed or quoted.
In connection with the registration of Registrable Securities in
accordance with Section 2, the holders agree to enter into an underwriting
agreement containing customary representations, warranties, covenants,
allocation of expenses (not otherwise inconsistent with this Agreement), and
customary closing conditions, with any underwriter who participates in the
offering of Registrable Securities.
4. Restrictions on Public Sale by the Company. The Company
agrees not to effect any public sale or distribution of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
such shares of Common Stock (or any option or other right for such securities),
except for any securities that may be issued to the holders upon conversion of
Preferred Stock, during the 15-day period prior to, and during the 60-day
period beginning on the effective date of any registration statement under
which the Registrable Securities are registered in accordance with Sections 1
or 2 above (other than as part of such registration).
5. Rule 144. With a view to making available to Crane the
benefits of certain rules of the Securities and Exchange Commission (the
"Commission") that may permit the sale of Registrable Securities to the public
without registration, the Company hereby covenants and agrees to use its
commercially reasonable best efforts to: (i) file in a timely manner all
reports and other documents required to be filed by it under the Securities Act
and the Securities Exchange Act of 1934, as amended, and the rules and
regulations adopted by the Commission thereunder necessary to permit sales
under Rule 144 under the Securities Act, and the Company will take such further
action to the extent reasonably required from time to time to permit Crane to
sell Registrable Securities (whether or not any such securities have been the
subject of a demand or piggy-back request under Sections 1 and 2 hereof)
without registration under the Securities Act within the limitation of the
exemptions provided by (A) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (B) any similar rule or regulation hereafter
adopted by the Commission and (ii) promptly furnish to Crane a copy of all such
reports and documents upon
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<PAGE> 5
request. Upon the request of Crane, the Company will deliver to Crane a
written statement as to whether it has complied with such requirements.
6. Other Registration Rights. The Company hereby agrees that it
shall not grant any additional registration rights with respect to shares of
its Common Stock, warrants to purchase its Common Stock or securities
convertible into its Common Stock, which are inconsistent with the provisions
of this Agreement. The Company hereby represents that, subject to the receipt
of the Willis Group Waiver (as defined in the Agreement), this Registration
Rights Agreement does not conflict with any outstanding registration rights
granted by the Company with respect to any shares of its Common Stock, warrants
to purchase its Common Stock or securities convertible into its Common Stock.
7. Miscellaneous.
(a) This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
(b) All covenants and agreements in this Agreement
contained by or on behalf of the parties hereto shall bind and inure to the
benefit of the respective successors and permitted assigns of the parties
hereto and, to the extent provided in this Agreement, to the benefit of any
future holders of any Registrable Securities. Neither this Agreement nor any
of the rights, interest or obligations hereunder shall be assigned by either of
the parties hereto without the prior written consent of the other party hereto.
Subject to the foregoing, nothing in this Agreement shall confer upon any
person or entity not a party to this Agreement, or the legal representatives of
such person or entity, any rights or remedies of any nature or kind whatsoever
under or by reason of this Agreement.
(c) All communications provided for hereunder shall be
sent by registered or certified mail and, if to Crane, to the following: James
R. Crane, 15350 Vickery Drive, Houston, Texas 77032, with a copy to Gene J.
Oshman, at Baker & Botts, L.L.P., 3000 One Shell Plaza, 910 Louisiana, Houston,
Texas 77002; if to the Company addressed to it at EqualNet Holding Corp., 1250
Wood Branch Park Drive, Houston, Texas 77079-1212, Attn: General Counsel, with
a copy to Fulbright & Jaworski L.L.P., 1301 McKinney, Suite 5100, Houston,
Texas 77010, Attn: Robert F. Gray, Jr., or to such other address with respect
to any party as such party shall notify the other in writing; provided,
however, that any such communication to the Company may also, at the option of
Crane, be either delivered to the Company at the Company's address set forth
above or to any officer of the Company. Within five business days after the
date of such mailing (save for any postal interruption) such communication
shall be deemed to have been received.
(d) This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of Texas without giving effect to the choice of law or conflicts
principles thereof. Any legal action or proceeding with respect to this
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Agreement may be brought in the courts of the State of Texas or of the United
States of America for the Southern District of Texas, and, by execution and
delivery of this Agreement, the Company hereby accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The Company irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Company at its address set forth in above, such service to become effect 30
days after such mailing. Nothing herein shall affect the right of the Crane to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other jurisdiction.
(e) In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Company
or Crane, the Company or Crane, as applicable, may proceed to protect and
enforce its or their rights either by suit in equity and/or by action at law.
(f) This Agreement contains the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
and contemporaneous arrangements or understandings with respect thereto.
(g) This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but which
together shall constitute a single agreement.
EQUALNET HOLDING CORP.
By: /s/ ROBERT H. TURNER
---------------------------------------------
Robert H. Turner, President and
Chief Executive officer
/s/ JAMES R. CRANE
---------------------------------------------------
JAMES R. CRANE
6
