PURCHASE AGREEMENT
DATED AS OF JANUARY 15, 1998
AMONG
SA TELECOMMUNICATIONS, INC.
AND CERTAIN OF ITS SUBSIDIARIES,
SELLERS
EQUALNET CORPORATION,
BUYER
AND
EQUALNET HOLDING CORP.
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS................................................ 2
Section 2. RULES OF CONSTRUCTION, ETC.................................11
Section 3. SALE AND PURCHASE..........................................11
(a) Assets..........................................11
(b) Excluded Assets.................................15
(c) Assumption of Liabilities.......................16
(d) Consideration...................................17
(e) Transferability of Preferred Shares.............18
(f) Payment of Cure Amounts; Assurance of
Future Performance..............................20
(g) Allocation of Consideration Among
Assets..........................................20
(h) Allocation of Consideration Among
Sellers.........................................20
(i) Transfer and Sales Taxes........................21
(j) Disclaimer of Warranties........................21
(k) Prorations; Expenses............................21
(l) Assignment to Buyer's Designees.................22
Section 4. THE CLOSING; ESCROW OF SHARES..............................23
Section 5. POST-CLOSING ADJUSTMENTS...................................25
(a) Verification of Revenue Amount..................25
(b) Adjustment for Post-Closing Monthly
Minutes.........................................28
Section 6. BANKRUPTCY COURT FILINGS...................................32
(a) Approval of Break-up Fee, Expense
Reimbursement and Upset Price...................32
(b) Scheduling of Auction Sale and Approval
of Sale Procedure...............................32
(c) Motion to Approve Sale..........................32
(d) Review by Buyer.................................34
Section 7. REPRESENTATIONS AND WARRANTIES OF SELLERS..................34
(a) Organization and Good Standing..................34
(b) Authority.......................................34
(c) Execution and Delivery..........................35
(d) No Conflict.....................................35
(e) Governmental Approvals..........................36
(f) Legal Proceedings...............................36
(g) Compliance with Law.............................37
(h) Designated Contracts............................37
(i) Title to Assets.................................38
(j) Intellectual Property and Intangibles...........38
(k) Permits, Licenses and Tariffs...................39
(l) Employee Benefit Plans; Labor
Agreements......................................39
(m) No Brokers......................................39
(n) Investor Representations........................40
(o) Subscribers.....................................40
(p) Employees.......................................40
(q) SPC.............................................41
Section 8. REPRESENTATIONS AND WARRANTIES OF BUYER....................41
(a) Organization and Good Standing..................41
(b) Authority; Execution and Delivery...............41
(c) No Conflicts, Etc...............................43
(d) Governmental Approvals..........................43
(e) Preferred Shares................................44
(f) Legal Proceedings...............................44
(g) Financing.......................................45
(h) Financial Statements and Reports................45
(i) No Brokers......................................45
Section 9. CERTAIN COVENANTS AND AGREEMENTS...........................46
(a) Access to Facilities of Sellers.................46
(b) Access to Information and Reports of
EqualNet Parties................................46
(c) Confidentiality.................................47
(d) Conduct of Sellers' Business....................48
(e) Mutual Cooperation..............................49
(f) Consents and Permits............................50
(g) Information.....................................50
(h) Non-Solicitation................................50
(i) Evidence of Buyer's Ability to Close............51
(j) Establishment of SPC............................51
(k) Liens in favor of Greyrock......................52
Section 10. CONDITIONS TO EACH PARTY'S OBLIGATIONS....................53
(a) Bankruptcy Court Approval.......................53
(b) No Adverse Proceedings..........................55
(c) No Change in Law................................55
(d) Governmental Approvals and Consents.............56
(e) Escrow Agreement................................56
Section 11. CONDITIONS TO OBLIGATIONS OF BUYER........................56
(a) Bankruptcy Court Orders; Evidence of
Service.........................................56
(b) Representations and Warranties of
Sellers.........................................56
(c) Corporate Action................................56
(d) Sellers' Performance............................57
(e) Instruments of Conveyance and Transfer..........57
(f) Material Consents...............................57
(g) Escrow Agreement................................57
(h) Sellers' Revenue Amount Certificate.............57
(i) Pre-Closing Monthly Minutes
Certificate.....................................57
(j) Additional Matters..............................57
(k) ................................................58
(l) SPC.............................................58
(m) No Material Adverse Change......................58
Section 12. CONDITIONS TO OBLIGATIONS OF SELLERS......................59
(a) Representations and Warranties True at
the Closing Date................................59
(b) Corporate Action................................59
(c) EqualNet Parties' Performance...................59
(d) Material Consents...............................59
(e) Escrow Agreement................................60
(f) Preferred Stock Provisions......................60
(g) Consideration...................................60
(h) Discharge of ▇▇▇▇▇▇ Group DIP
Financing.......................................60
(i) Additional Matters..............................60
(j) No Material Adverse Change......................60
Section 13. TERMINATION...............................................61
(a) Termination.....................................61
(b) Effect of Termination...........................62
(c) Remedies Cumulative.............................63
(d) Specific Performance............................63
Section 14. BREAK-UP PROVISIONS AND BIDDING
PROCEDURE.................................................63
(a) Upset Price.....................................63
(b) Payment of Break-Up Fee and
Reimbursement of Expenses.......................64
Section 15. ADDITIONAL POST-CLOSING COVENANTS.........................65
(a) Further Assurances..............................65
(b) Benefits under Unassignable Contracts...........66
(c) Use of Sellers' Premises........................66
(d) Records.........................................67
(e) Sellers' Employees..............................68
Section 16. INDEMNIFICATION AND RELATED MATTERS.......................69
(a) Indemnification by Sellers......................69
(b) Indemnification by EqualNet Parties.............69
(c) Determination of Damages and Related
Matters.........................................70
(d) Termination of Representations and
Warranties......................................70
(e) Notice of Indemnification.......................71
(f) Indemnification Procedure for Third
Party Claims....................................72
(h) Exclusive Remedy................................74
Section 17. GOVERNING LAW; SUBMISSION TO
JURISDICTION..............................................74
Section 18. MISCELLANEOUS.............................................74
(a) Notices.........................................74
(b) Entire Agreement; Amendments....................76
(c) Press Releases..................................76
(d) Successors and Assigns..........................77
(e) No Third Party Beneficiaries....................77
(f) Waivers.........................................77
(g) Severability....................................78
(h) Expenses........................................78
(i) No Recourse.....................................78
(j) Guaranty by EqualNet............................79
(k) Counterparts....................................79
EXHIBITS
Exhibit A - Summary of Terms of Preferred Stock
Exhibit B - Form of Escrow Agreement
SCHEDULES
Schedule 3(a)(iii) - Description of Network Facilities
Schedule 3(a)(iv) - Designated Contracts
Schedule 3(a)(v) - Designated Permits
Schedule 3(a)(vi) - Intangibles
Schedule 3(a)(vii) - Intellectual Property
Schedule 3(b)(viii) - Certain Excluded Assets
Schedule 3(b)(ix) - Excluded Contracts and Leases
Schedule 3(b)(x) - Excluded Books and Records
Schedule 3(b)(xi) - Maximum Amount of Current Excluded Receivables to be
retained by Sellers
Schedule 3(g) - Allocation of Consideration Among Assets
Schedule 7(e) - Sellers' Governmental Approvals
Schedule 7(f) - Sellers' Legal Proceedings
Schedule 7(h) - Payment Defaults and Notices of Default
Under Designated Contracts
Schedule 7(i) - Certain Liens
Schedule 7(j) - Liens and Claims on Intellectual Property
Schedule 7(k) - Sellers' Permits, Licenses & Tariffs
Schedule 7(l) - Sellers' Employee Benefit Plans and Labor
Agreements
Schedule 8(d) - EqualNet Parties' Governmental Approvals
Schedule 8(f) - EqualNet Parties' Legal Proceedings
Schedule 10(d) - Governmental Approvals
Schedule 11(f) - EqualNet Parties' Third-Party Consents
Schedule 12(d) - Sellers' Third-Party Consents
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of January 15, 1998 among EQUALNET
CORPORATION, a Delaware corporation ("Buyer"), EQUALNET HOLDING CORP., a Texas
corporation ("EqualNet"), and SA TELECOMMUNICATIONS, INC., a Delaware
corporation ("SA Telecom"), and its subsidiaries named on the signature page
hereof (collectively, "Sellers").
R E C I T A L S
A. Sellers are full service regional interexchange carriers providing long
distance telecommunication services (the "Services") in the west, southwest and
south central United States, including domestic long distance services,
wholesale long distance services, operator and wireless services, voice and data
private lines, "800/888" services, internet access and telephone travel cards.
▇. ▇▇▇▇▇▇▇ provide the Services through a network of owned and leased
switching and transmission facilities (the "Network Facilities") consisting of
equipment, switches, software and line capacity (the Services and the Network
Facilities collectively, the "Business").
C. On November 19, 1997 (the "Petition Date") Sellers filed petitions for
relief under Chapter 11 of title 11 of the United States Code, as amended (the
"Bankruptcy Code"), in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"), Case Nos. 97-2395 through 97-2401 (PJW).
▇. ▇▇▇▇▇▇▇ have determined that it is in their best interests to sell to
Buyer, and for Buyer to purchase from Sellers, pursuant to Section 363(b) of the
Bankruptcy Code, specified assets and rights of Sellers described herein for the
consideration and upon the terms and conditions hereinafter set forth, and Buyer
is willing, in connection with its purchase of the Assets, to assume certain
liabilities and obligations of Sellers, all on the terms and conditions set
forth below.
E. Buyer is a wholly owned subsidiary of EqualNet.
ACCORDINGLY, in consideration of the mutual benefits to be derived from
this Agreement and the representations, warranties, covenants and agreements
contained herein, the parties hereto represent, warrant, covenant and agree as
follows:
Section 1. DEFINITIONS. As used herein the following terms shall have the
respective meanings set forth for such terms in this Section 1 or elsewhere in
this Agreement:
"Adjusted Pre-Closing Monthly Minutes" shall mean (i) the Pre-Closing
Monthly Minutes multiplied by (ii) the seasonality factor referred to in clause
(ii) of the definition of the term Revenue Amount.
"Assets" shall have the meaning specified in Section 3(a).
"Assumed Liabilities" shall have the meaning specified in Section 3(c).
"Bankruptcy Cases" shall mean the cases under Chapter 11 of the Bankruptcy
Code commenced by the Debtors in the Bankruptcy Court (Case Nos. 97-2395 through
97-2401 (PJW)) and any cases under Chapter 7 of the Bankruptcy Code to which any
such cases are converted.
"Bankruptcy Code" and "Bankruptcy Court" shall have the meanings specified
in Recital C hereto.
"Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure.
"Billable Minute" shall mean (i) prior to the Closing Date, all billable
minutes generated by Sellers' Business and (ii) after the Closing Date, all
billable minutes generated by the Subscribers, in each case as measured by call
detail records supplied by switch tapes and carrier tapes.
"Break-up Fee" shall have the meaning specified in Section 14(b).
"Business" shall have the meaning specified in the Recitals hereto.
"Buyer" shall mean EqualNet Corporation, a Delaware corporation.
"Buyer's Auditor" and "Buyer's Auditor Certificate" shall have the
respective meanings specified in Section 5(a)(ii).
"Closing" and "Closing Date" shall have the meanings specified in Section
4(a).
"Closing Date Market Value" shall mean, with respect to the Common Stock,
the average of the last sale price of shares of the Common Stock on the five (5)
business days ending on the third business day immediately preceding the Closing
Date.
"Common Stock" shall mean the common stock, par value $.01 per share, of
EqualNet.
"Confidentiality Agreement" shall have the meaning specified in Section
9(c).
"Consideration" shall have the meaning specified in Section 3(d).
"Conversion Rate" shall mean the number of shares of Common Stock that the
holder of Preferred Shares shall receive upon conversion of one Preferred Share,
as set forth below (subject to adjustment as set forth in the Preferred Stock
Provisions for the effect of dilutive and concentrative events affecting the
Common Stock). If the Closing Date Market Value of Common Stock is less than or
equal to $2.07 per share, one Preferred Share shall be convertible into ten
shares of the Common Stock. If the Closing Date Market Value of the Common Stock
is greater than $2.07 per share, one Preferred Share shall be convertible into
the number of shares of the Common Stock equal to the product of (i) ten and
(ii) a fraction, the numerator of which is equal to $2.75 and the denominator of
which is equal to 133% of the Closing Date Market Value.
"Creditors' Committee" shall mean the Official Unsecured Creditors'
Committee appointed in the Bankruptcy Cases.
"Cure Amounts" shall mean all monetary amounts which the Bankruptcy Court
finds are required to cure monetary defaults under the Designated Contracts so
as to permit Sellers to assume the Designated Contracts pursuant to Section
365(b)(1) of the Bankruptcy Code and to assign them to Buyer under Section
365(f) of the Bankruptcy Code.
"Damages" means, as to any party, all claims, actions, losses, damages,
costs (including, without limitation, costs of investigation), expenses and
liabilities (including reasonable attorneys' fees incident to the foregoing),
incurred or suffered by such party.
"Designated Contracts" shall have the meaning specified in clause (iii) of
Section 3(a).
"Designated Permits" shall have the meaning specified in clause (iv) of
Section 3(a).
"Designee" shall have the meaning specified in Section 3(e).
"DIP Financing" shall mean the Greyrock Financing and the ▇▇▇▇▇▇ Group DIP
Financing.
"DIP Financing Documents" shall mean all agreements, instruments,
stipulations and Bankruptcy Court orders pursuant to which the DIP Financing is
extended, evidenced and authorized.
"Dispute Auditor" and "Dispute Auditor's Certificate" shall have the
respective meanings specified in Section 5(a)(iii).
"Employee Benefit Plan" shall mean any "employee pension benefit plan",
"employee benefit plan" or "employee welfare plan" as defined in Sections 3(1)
or 3(3) of ERISA including any multiemployer employee benefit plan.
"EqualNet" shall mean EqualNet Holding Corp., a Texas corporation.
"EqualNet Party" shall mean Buyer or EqualNet.
"ERISA" shall mean the Employee Retirement Security Act of 1974, as
amended, and all regulations issued thereunder.
"Escrow Agent", "Escrow Agreement" and "Escrowed Shares" shall have the
meanings specified in Section 4(d).
"Excluded Assets" shall have the meaning specified in Section 3(b).
"Excluded Liabilities" shall mean all liabilities and obligations of
Sellers other than the Assumed Liabilities.
"Excluded Receivables" shall have the meaning specified in the DIP
Financing Documents.
"FCC" shall mean the Federal Communications Commission.
"Final Auditor's Certificate" shall mean (a) the Sellers' Auditor
Certificate if no Buyer's Notice of Disagreement is delivered, (b) the Buyer's
Auditor Certificate if a Buyer's Notice of Disagreement is delivered but no
Sellers' Notice of Disagreement is delivered, and (c) the Dispute Auditor's
Certificate if both a Buyer's Notice of Disagreement and a Sellers' Notice of
Disagreement is delivered.
"GAAP" shall mean generally accepted accounting principles in the United
States.
"Governmental Entity" shall mean any domestic or foreign court, government,
governmental agency, authority, entity or instrumentality.
"Greyrock" shall mean Greyrock Business Credit, a division of NationsCredit
Commercial Corporation.
"Greyrock Financing" shall mean the pre-petition and post-petition
financing provided by Greyrock to Sellers pursuant to that certain Loan and
Security Agreement, dated December 26, 1996, between Greyrock and Sellers, as
amended, restated or otherwise modified.
"Indemnitor" and "Indemnitee" shall have the respective meanings specified
in Section 16(e).
"Intangibles" shall have the meaning specified in clause (v) of Section
3(a).
"Intellectual Property" shall have the meaning specified in clause (vi)
Section 3(a).
"Legal Proceedings" shall mean any judicial, administrative, regulatory or
arbitral proceeding, investigation or inquiry or administrative charge or
complaint pending at law or in equity before any Governmental Entity.
"Legal Requirements" shall have the meaning specified in Section 7(g).
"Letter of Intent" shall mean the Letter of Intent dated December 24, 1997,
as amended by the Amendment to Letter of Intent dated as of January 7, 1998,
among Sellers, EqualNet, the ▇▇▇▇▇▇ Group and Greyrock.
"Liens" shall mean liens, security interests, mortgages, pledges, charges,
claims, conditional sales arrangements, adverse interests (whether legal or
equitable) and other encumbrances of any kind.
"Network Facilities" shall have the meaning specified in Recital B.
"Payment Order" shall have the meaning specified in Section 6(a).
"Permitted Liens" shall mean the Liens securing the DIP Financing and any
Liens to which any real estate owned by the Borrower is subject.
"Person" shall mean an individual corporation, partnership, trust, limited
liability company, Governmental Entity or other type of entity.
"Petition Date" shall have the meaning specified in Recital C.
"Post-Petition Overadvances" shall mean advances under the Greyrock
Financing after the Petition Date to the extent that after giving effect thereto
the principal amount of the DIP Financing exceeds the sum of (i) $1,276,031 plus
(ii) 80% of the Eligible Receivables (as defined in the DIP Financing Documents)
as of the date of any such advance.
"Pre-Closing Monthly Minutes" and "Post-Closing Monthly Minutes" shall have
the respective meanings specified in Section 5(b)(i).
"Preferred Shares" shall mean the shares of Preferred Stock issued to
Sellers as part of the Consideration pursuant to Sections 3(d) and 5(a),
including the Escrowed Shares.
"Preferred Stock" shall mean the Series B Convertible Preferred Stock of
EqualNet.
"Preferred Stock Provisions" shall mean the provisions of EqualNet's
Statement of Resolution Establishing Series B Convertible Preferred Stock
setting forth the terms of the Preferred Stock, which terms shall be consistent
with the terms specified for the Preferred Stock herein and in Exhibit A hereto.
"Revenue Amount" shall mean (i) the gross revenue of Sellers, determined in
accordance with GAAP, during the two calendar month period immediately preceding
the month in which the Closing occurs multiplied by (ii) an adjustment factor
mutually agreed to by the EqualNet Parties and Sellers to reflect industry
seasonality, such factor to be determined based on data available from the FCC
for interstate access minutes, by month, for Southwestern ▇▇▇▇ in Texas.
"SA Telecom" shall mean SA Telecommunications, Inc., a Delaware
corporation.
"Sale Order" shall have the meaning specified in Section 10(a).
"Scheduling Order" shall have the meaning specified in Section 6(b).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sellers" shall mean SA Telecom and its subsidiaries named on the signature
page hereof.
"Sellers' Auditor" and "Sellers' Auditor Certificate" shall have the
respective meanings specified in Section 5(a)(i).
"Sellers' Revenue Amount Certificate" shall mean a certificate of SA
Telecom setting forth SA Telecom's determination of the Revenue Amount, subject
to the final determination thereof pursuant to Section 5(a).
"SPC" shall have the meaning specified in Section 9(j).
"Subscribers" shall have the meaning specified in clause (i) of Section
3(a).
"Transaction Documents" shall mean this Agreement, the Escrow Agreement,
the Confidentiality Agreement and all bills of sale, assignment instruments and
assumption instruments executed or delivered by the parties hereto at the
Closing.
"Upset Price" shall have the meaning specified in Section 14(a).
"▇▇▇▇▇▇ Group" shall mean the ▇▇▇▇▇▇ Group LLC, a Texas limited liability
company.
"▇▇▇▇▇▇ Group DIP Financing" shall mean the post-petition financing, if
any, provided by the ▇▇▇▇▇▇ Group to Sellers.
Section 2. RULES OF CONSTRUCTION, ETC.
(a) Unless the context otherwise requires, (i) all references to Sections,
Schedules or Exhibits are to Sections of or to Schedules or Exhibits to this
Agreement, (ii) each accounting term not otherwise defined in this Agreement has
the meaning assigned to it in accordance with GAAP, (iii) "or" is disjunctive
but not necessarily exclusive, and (iv) words in the singular include the plural
and vice versa. All references to "$" or dollar amounts will be to lawful
currency of the United States of America.
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which either such
party or its counsel participated in the drafting thereof.
(c) The Section headings and other captions contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 3. SALE AND PURCHASE.
(a) Assets. Subject to the terms and conditions hereof, on the Closing
Date, Sellers will sell, convey, transfer and deliver to Buyer, and Buyer will
purchase from Sellers, except as provided in Section 3(b), all of the assets of
Sellers' Business (collectively, the "Assets"), free and clear of liens,
encumbrances and claims other than Permitted Liens, including any and all of the
following assets:
(i) Subscribers. All of Sellers' rights and interests to all accounts
of subscribers to the Services of Sellers (collectively, the "Subscribers")
as of the Closing Date;
(ii) all accounts receivable and notes receivable of Sellers (other
than Excluded Receivables specified in Section 3(b)(xi));
(iii) Network Facilities. The Network Facilities of Sellers, as more
fully described in Schedule 3(a)(iii) (provided that to the extent the
Network Facilities are represented by contracts, said contracts shall not
be an Asset unless they are Designated Contracts);
(iv) Contracts. All rights, title and interests of Sellers under the
leases, contracts and agreements specified in Schedule 3(a)(iv), to the
extent assignable pursuant to applicable law without regard to the consent
of any third party that may be required with respect to such assignment or
as to which such third party consents have been obtained (collectively, the
"Designated Contracts");
(v) Permits. All rights, title and interest of Sellers in and under
the licenses, permits, authorizations and approvals issued to Sellers by
any Governmental Entity and listed on Schedule 3(a)(v), but only to the
extent the same are assignable under applicable law (collectively, the
"Designated Permits");
(vi) Intangible Telecommunications Assets. To the extent assignable,
all rights, title and interest of Sellers in and to the intangible
telecommunications assets owned or used by Sellers in connection with the
Business, including, telecommunications numbering codes, locating routing
codes and "800" and "888" numbers and other customer billing and inquiry
numbers, carrier identification codes and other operating codes, including,
without limitation, those listed or described on Schedule 3(a)(vi)
(collectively, the "Intangibles");
(vii) Intellectual Property. All rights, title and interest of Sellers
in and to all domestic and foreign letters patent, patents, patent
applications, patent licenses, software licenses and know-how licenses,
trade names, trademarks, registered copyrights, service marks, trademark
registrations and applications, service ▇▇▇▇ registrations and applications
and copyright registrations and applications, if any, owned or used by
Sellers and all trade secrets, technical knowledge, know-how and other
confidential proprietary information and related ownership, use and other
rights of Sellers, including, without limitation, those listed or described
on Schedule 3(a)(vii) (collectively, the "Intellectual Property");
(viii) Sellers' Names. All of Sellers' rights to use their corporate
names as well as the names "USC", "USI", "First Choice Long Distance",
"Southwest Long Distance Network", "Addtel", "SA Telecom" and any other
trade names used in Sellers' Business and any and all variants,
combinations and derivatives thereof, and any and all trademarks, service
marks, tradenames and copyrights which contain said names or any variants,
combinations and derivatives thereof; provided, however, that Sellers shall
be entitled to continue to use their respective corporate name for purposes
of the Bankruptcy Cases and filing tax returns;
(ix) Manufacturers Warranties. All of Sellers' rights under
warranties, representations and guaranties made by suppliers and
manufacturers of the Assets or the Business;
(x) Books and Records. All of Sellers' existing books and records
relating to the foregoing Assets or the Business, including, but not
limited to, sales records, customer lists, customer folders and all
historical customer records and files which relate to the Business, but
excluding those books and records listed on Schedule 3(b)(x) or specified
in Section 3(b);
(xi) Shares of SPC. All shares of the capital stock of the SPC, if it
is established pursuant to Section 9(j); and
(xii) Goodwill. All goodwill relating to the foregoing Assets and the
Business.
Buyer shall have the right, exercisable in writing prior to the Closing
Date, to exclude from the Assets any asset it elects, and specifically to
exclude from Designated Contracts any contract or lease it elects, but such
election shall not entitle Buyer to any adjustment in the Consideration.
(b) Excluded Assets. There are expressly excluded from the sale,
conveyance, transfer and delivery referred to in Section 3(a) above, and the
term "Assets" shall not include, the following assets of Sellers' Business (the
"Excluded Assets"):
(i) all cash and cash equivalent of Sellers;
(ii) all income tax refunds and income tax credits of Sellers;
(iii) all claims and causes of action of Sellers;
(iv) all claims and causes of action of Sellers' estates arising under
Sections 509, 510, 542 through 549, inclusive, 550, 552 or 553 of the
Bankruptcy Code;
(v) all assets excluded from the Assets by Buyer in writing prior to
the Closing Date;
(vi) all rights of Sellers under insurance policies and under
warranties (expressed or implied), representations and guaranties made by
suppliers, manufacturers and contractors relating to Excluded Assets or any
event, condition or occurrence that gives rise to a liability that is not
an Assumed Liability;
(vii) all capital stock and stock certificates of Sellers (other than
to the stock of the SPC and the certificates representing the same),
including all treasury stock and stock of subsidiaries;
(viii) the assets listed in Schedule 3(b)(viii);
(ix) the contracts and leases listed in Schedule 3(b)(ix);
(x) the books and records listed on Schedule 3(b)(x) and any other
books, records or other data relating to Sellers' ownership or operation of
the Business which are required by applicable law to be retained by
Sellers; provided, however, that copies of such books, records and other
data relating to the Business shall be furnished to Buyer promptly upon
Buyer's written request; and
(xi) All Excluded Receivables more than 90 days past due as of the
Closing Date and Excluded Receivables 90 days or less past due as of the
Closing Date in an amount equal to the lesser of (A) 133% of the claims of
Zero Plus Dialing, Inc., d/b/a U.S. Billing ("ZPDI/USBI") against Sellers
as of the Closing Date for outstanding advances by ZPDI/USBI to Sellers in
respect of the Excluded Receivables and (B) the amount specified in
Schedule 3(b)(xi).
(c) Assumption of Liabilities. Subject to the terms and conditions hereof,
on the Closing Date Buyer shall assume and agree to pay, perform and discharge
(i) all liabilities arising out of, related to or incurred in connection with
the ownership of the Assets after the Closing Date; (ii) all liabilities and
obligations of each Seller (x) under all Designated Contracts and the other
Assets which accrue after the Closing Date and (y) in respect of all security
deposits, if any, of the Subscribers to be acquired hereunder; and (iii) all
liabilities and obligations of Sellers in respect of indebtedness accruing on or
before the Closing Date under the Greyrock Financing and all interest, costs and
attorneys' fees accruing under the Greyrock Financing after the Closing Date
(limited to principal (not to exceed $7,000,000), interest and costs and
attorneys' fees, provided that Buyer shall not be required to assume or pay (x)
any Post-Petition Overadvances or any interest thereon or (y) more than $100,000
of costs and attorneys' fees under the Greyrock Financing, other than any such
costs and expenses arising after the Closing Date and attributable to actions of
Buyer after the Closing Date, all at which shall be guarantied by EqualNet
pursuant to Greyrock's standard form guaranty) (all the foregoing herein
collectively called the "Assumed Liabilities"). Except as expressly provided in
this Section 3(c), Buyer will not assume or be bound by any liabilities or
obligations of Sellers.
(d) Consideration. In addition to the assumption of the Assumed Liabilities
and subject to Section 4(d), the consideration to be paid or delivered by Buyer
to Sellers on the Closing Date for the Assets (the "Consideration") shall
consist of: (i) the payment and discharge by Buyer of all obligations of Sellers
on the Closing Date in respect of the outstanding principal amount of, and all
accrued and unpaid interest on, the ▇▇▇▇▇▇ Group DIP Financing, if any; plus
(ii) a cash payment in an amount equal to the excess of $3,000,000 over the
outstanding principal amount of, and all accrued and unpaid interest on, the
▇▇▇▇▇▇ Group DIP Financing on the Closing Date; plus (iii) a cash payment in the
amount of $22,500 per calendar day for each day from January 30, 1998 through
the Closing Date (provided that the cash payment referred to in this clause
(iii) shall not exceed $472,500 in the aggregate and shall stop accruing on the
date following the satisfaction or waiver of all conditions precedent set forth
in Sections 10, 11 and 12); plus (iv) a promissory note (the "Note") to be
issued by Buyer in favor of Greyrock in an amount equal to the lesser of (a) the
amount of the outstanding indebtedness (limited to principal (excluding
Post-Petition Overadvances), interest and up to $100,000 of costs and attorneys'
fees) of Sellers to Greyrock under the Greyrock Financing on the Closing Date in
excess of 75% of Sellers then outstanding accounts receivable that have aged by
no more than 119 days (excluding Excluded Receivables) and (b) $1,000,000; plus
(v) a cash payment equal to all Cure Amounts; plus (vi) the number of shares of
Preferred Stock equal to the quotient of (A) (x) 40% of the annualized Revenue
Amount (i.e., the Revenue Amount multiplied by six (6)) less (y) the aggregate
amount paid by Buyer pursuant to clauses (i), (ii), (iii), (iv) and (v) above,
and (B) $27.50. Said shares of Preferred Stock shall be convertible at the
option of the holder thereof into shares of Common Stock at the Conversion Rate.
(e) Transferability of Preferred Shares. The Preferred Shares will not be
registered under the Securities Act. Accordingly, unless and until Sellers
deliver to EqualNet a "no action letter" from the Securities and Exchange
Commission or a final order of the Bankruptcy Court providing that the Preferred
Shares will be exempt from registration under the Securities Act and any state
law pursuant to Section 1145 of the Bankruptcy Code, the Preferred Shares may
not be sold, assigned, hypothecated or otherwise disposed by Sellers (except
that Sellers may grant to Greyrock (which retains a security interest in the
Preferred Shares as proceeds of its collateral) a security interest in the
Preferred Shares to secure the Greyrock Financing) until such time that the sale
and transfer of the Preferred Shares is registered under the Securities Act;
provided that any such sale, transfer or other disposition may be made if the
holder of the Preferred Shares seeking to effect such disposition delivers to
EqualNet an opinion of counsel for such holder reasonably satisfactory to
EqualNet to the effect that such registration is not required for such
disposition. Absent such "no action letter," final order of the Bankruptcy Court
or opinion of counsel reasonably satisfactory to EqualNet, then prior to any
distribution of the Preferred Shares to any creditors or equity security holders
of the Sellers or to any other Person, EqualNet will at the request of SA
Telecom register the Preferred Shares under the Securities Act and under any
applicable state securities laws. EqualNet may defer such registration for a
period not exceeding 75 days after SA Telecom's request therefor if EqualNet
reasonably determines that to do so is necessary to avoid an adverse effect on
any pending or contemplated securities offering by EqualNet. The cost of any
such registration of the Preferred Shares shall be borne 50% by Sellers and 50%
by EqualNet.
(f) Payment of Cure Amounts; Assurance of Future Performance. Sellers shall
apply the applicable portion of the Consideration to the payment of the Cure
Amounts, as and when required to do so by Section 365 of the Bankruptcy Code.
Buyer will provide adequate assurances of future performance in respect of
Designated Contracts, in such manner and in such amounts as the Bankruptcy Court
may direct.
(g) Allocation of Consideration Among Assets. The Consideration shall be
allocated among the Assets in accordance with the provisions of Schedule 3(g),
which allocation shall be binding upon Buyer and the Sellers, provided that such
allocation shall not preclude or limit any allocation of the Assets or
Consideration among Sellers pursuant to Section 3(h). Each party agrees to
report the transactions contemplated hereby on all applicable tax returns or
filings in a manner consistent with such allocation.
(h) Allocation of Consideration Among Sellers. The Consideration shall be
delivered by Buyer to SA Telecom, as agent for all Sellers, and shall be held by
SA Telecom for all Sellers. SA Telecom shall apply the portion of the
Consideration consisting of the Cure Amounts to the payment of the Cure Amounts.
The balance of the Consideration shall be allocated among Sellers in such manner
as Sellers shall agree, subject to the approval of the Bankruptcy Court,
consistent with each Seller's interest in the Assets, Designated Contracts and
Assumed Liabilities.
(i) Transfer and Sales Taxes. All sales, transfer and similar taxes
incurred as a result of the sale of the Assets shall be paid 50% by Buyer and
50% by Sellers.
(j) Disclaimer of Warranties. Buyer and EqualNet hereby acknowledge and
agree that the Sellers are not making any representation or warranty whatsoever,
express or implied, except those representations and warranties of Sellers
expressly set forth in this Agreement. Subject to the foregoing, THE ASSETS
BEING PURCHASED BY BUYER PURSUANT TO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE ACQUIRED BY BUYER ON AN "AS IS, WHERE IS" BASIS AND
IN THEIR THEN PRESENT CONDITION, AND BUYER SHALL RELY SOLELY UPON ITS OWN
EXAMINATION THEREOF. Without limiting the generality of the foregoing, except as
expressly set forth in this Agreement, NONE OF SELLERS OR ANY OF THEIR OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, AFFILIATES OR REPRESENTATIVES HAS MADE OR IS
MAKING ANY REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE VALUE OF ANY ASSET
BEING ACQUIRED, OR ANY WARRANTY OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR QUALITY WITH RESPECT TO ANY OF THE ASSETS, OR AS TO THE
CONDITION OR WORKMANSHIP THEREOF, OR AS TO THE ABSENCE OF ANY DEFECTS THEREIN,
WHETHER LATENT OR PATENT.
(k) Prorations; Expenses. Prepaid rentals, prepaid utility charges, real
property taxes, personal property taxes, similar assessments and other prepaid
expenses (the "Expenses") payable in respect of any of the Assets applicable to
periods both prior to and after Closing, shall be prorated as of the Closing
Date. The estimated net amounts of such prorations shall be subtracted from the
cash portion of the Consideration if Buyer is entitled to a credit therefor, or
added to the cash portion of the Consideration if Sellers are entitled to a
credit therefor. Buyer and Sellers shall use their reasonable best efforts to
calculate all prorations and the Expenses at or prior to the Closing. In the
event that such proration cannot be agreed to by Sellers and Buyer, such dispute
shall be referred to the Dispute Auditor under and in accordance with the
provisions of Section 5(a), whose determination shall be binding upon the
parties.
(l) Assignment to Buyer's Designees. Subject to Bankruptcy Court approval,
Buyer shall have the right to assign to one or more subsidiaries of Buyer the
right to purchase such of the Assets as Buyer shall determine and to designate
one or more subsidiaries of Buyer to assume all or any portion of the Assumed
Liabilities specified by Buyer, provided that (i) Buyer shall unconditionally
guarantee the performance by each such designated subsidiary of all Assumed
Liabilities assumed by such subsidiary and (ii) no such assignment or
designation may be made if it would materially delay the Closing or otherwise
adversely affect the prompt consummation of the transactions contemplated
hereby. Any such assignee or designee of Buyer is herein called a "Designee".
Section 4. THE CLOSING; ESCROW OF SHARES.
(a) Subject to the satisfaction of all of the conditions in Sections 10, 11
and 12, the closing of the sale and transfer of the Assets (the "Closing") shall
take place at the offices of White & Case LLP (or at such other place as the
parties may designate) on the first business day after each condition specified
in Sections 10, 11 and 12 has been satisfied (or waived by the party entitled to
waive that condition). The date on which the Closing occurs is herein called the
"Closing Date."
(b) At the Closing: (i) Buyer shall pay the cash portion of the
Consideration by a wire transfer in immediately available funds to the account
of SA Telecom, as agent for Sellers, at __________________________ or to such
other account or accounts as SA Telecom shall specify by a notice in writing to
Buyer at least two business days prior to the Closing Date; (ii) EqualNet shall
deliver to SA Telecom, as agent for Sellers, or (to the extent provided in
Section 4(d)) to the Escrow Agent the Preferred Shares, registered in such names
as SA Telecom shall reasonably specify; (iii) Buyer shall deliver to SA Telecom,
as agent for Sellers, such documentation as Sellers shall reasonably specify
evidencing Buyer's assumption of the Assumed Liabilities; (iv) Sellers shall
deliver to Buyer a ▇▇▇▇ of sale in form and substance reasonably satisfactory to
Buyer and consistent with the terms hereof and such other instruments of
assignments as Buyer shall reasonably specify; and (v) Sellers and Buyer shall
deliver to each other the respective documents, certificates and agreements
specified in Sections 10, 11 and 12.
(c) All proceedings to be taken and all documents to be executed and
delivered at the Closing shall be reasonably satisfactory in form and substance
to Buyer and its counsel and to Sellers and their counsel. All proceedings to be
taken and all documents to be executed and delivered by all parties at the
Closing shall be deemed to have been taken, executed and delivered
simultaneously, and no proceedings shall be deemed taken nor any documents
executed or delivered until all have been taken, executed and delivered.
(d) On the Closing Date a number of Preferred Shares having a value (as
determined below) equal to 20% of the total Consideration to be paid to Sellers
pursuant to Section 3(d) shall be placed in escrow with an escrow agent mutually
acceptable to EqualNet and Sellers (the "Escrow Agent") pursuant to an Escrow
Agreement substantially in the form of Exhibit B hereto (the "Escrow
Agreement"). The Preferred Shares so placed in escrow are herein called the
"Escrowed Shares." For purposes of the foregoing, each Preferred Share shall be
deemed to have a value equal to $27.50. The Escrowed Shares shall be released
from escrow on the terms set forth in the Escrow Agreement and Section 5(b).
Section 5. POST-CLOSING ADJUSTMENTS.
(a) Verification of Revenue Amount. (i) As soon as practicable, but in any
event no later than fifteen (15) days after the Closing Date, Sellers will cause
Price Waterhouse LLP (the "Sellers' Auditor") to verify Sellers' calculation of
the Revenue Amount. The Sellers' Auditor will deliver certified copies of its
calculations (the "Sellers' Auditor Certificate") simultaneously to Sellers,
Buyer.
(ii) If, on or prior to the 15th day following its receipt of the Sellers'
Auditor Certificate, Buyer shall not have delivered to Sellers a notice
("Buyer's Notice of Disagreement") stating that Buyer disagrees with the
Sellers' Auditor Certificate, the Revenue Amount shall be deemed to be finally
determined for the purposes of this Agreement in accordance with the Sellers'
Auditor Certificate. Buyer's Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. If a Buyer's Notice of
Disagreement has been delivered to Sellers within such 15-day period, then (x)
Sellers shall have five (5) business days to review the objections set forth
therein, (y) Sellers and Buyer will seek in good faith to resolve in writing
such matters of disagreement specified in such Buyer's Notice of Disagreement
for a period of 30 days after the delivery thereof, and (z) if no such
resolution has been reached at the end of such 30-day period, the parties hereto
will submit any matters remaining in disagreement to Ernst & Young (the "Buyer's
Auditor") for review. The Buyer's Auditor shall determine all disputed
calculations relating to the Revenue Amount and shall deliver a certificate to
the parties as soon as practicable, which certificate shall set forth the
Buyer's Auditor's determination of the Revenue Amount (the "Buyer's Auditor
Certificate").
(iii) If, on or prior to the 15th day following its receipt of the Buyer's
Auditor Certificate, SA Telecom shall not have delivered to Buyer a notice
("Sellers' Notice of Disagreement") stating that Sellers disagree with the
Buyer's Auditor Certificate, the Revenue Amount shall be deemed to be finally
determined for the purposes of this Agreement in accordance with the Buyer's
Auditor Certificate. Any Sellers' Notice of Disagreement shall specify in
reasonable detail the nature of any disagreement so asserted. If a Sellers'
Notice of Disagreement has been delivered to Buyer within such 15-day period,
then (x) Buyer shall have five (5) business days to review the objections set
forth therein, (y) Sellers and Buyer will seek in good faith to resolve in
writing such matters of disagreement specified in Sellers' Notice of
Disagreement for a period of 30 days after the delivery thereof, and (z) if no
such resolution has been reached at the end of such 30-day period, the parties
hereto will submit any matters remaining in disagreement to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
(the "Dispute Auditor") for review;
(iv) The Dispute Auditor shall determine all disputed calculations relating
to the Revenue Amount and shall deliver a certificate to the parties as soon as
practicable, which certificate shall set forth the Dispute Auditor's
determination of the Revenue Amount (the "Dispute Auditor's Certificate"). Upon
receipt of the Dispute Auditor's Certificate, the Revenue Amount shall be deemed
to be finally determined for purposes of this Agreement in accordance with such
Certificate. The fees and expenses of Sellers' Auditor shall be borne by
Sellers, the fees and expenses of Buyer's Auditor shall be borne by Buyer and
the fees and expenses of the Dispute Auditor shall be borne 50% by Buyer and 50%
by Sellers; provided that if the Dispute Auditor determines that one party's
position is completely correct, then such party shall not pay any of the fees,
costs and expenses charged by the Dispute Auditor and the other party shall pay
all of such fees, costs and expenses.
(v) If the Revenue Amount, as set forth in the Final Auditor's Certificate
is greater than or less than the Revenue Amount set forth in the Sellers'
Revenue Amount Certificate, the number of Preferred Shares constituting the
Consideration shall be recalculated in accordance with the provision of clause
(iv) of Section 3(d). If the Revenue Amount as so finally determined is greater
than the amount set forth in the Sellers' Revenue Amount Certificate, EqualNet
will, subject to compliance with applicable securities laws, deliver to Sellers
additional Preferred Shares equal to the difference between the recalculated
number of the Preferred Shares and the number of Preferred Shares delivered on
the Closing Date. If the Revenue Amount as so finally determined is less than
the Revenue Amount set forth in the Sellers' Revenue Amount Certificate,
EqualNet shall cancel, and Sellers shall return to EqualNet, so many of the
Preferred Shares as exceed such recalculated number of Preferred Shares. If the
escrow referred to in Section 5(b) below is in effect on the date that the
recalculation specified in this paragraph (iv) is made, 20% of all additional
Preferred Shares to be delivered to Sellers shall be delivered instead to the
Escrow Agent and shall constitute additional Escrowed Shares and 20% of all
Preferred Shares required to be returned by Sellers to Buyer shall be returned
by the Escrow Agent from the Escrowed Shares.
(b) Adjustment for Post-Closing Monthly Minutes.
(i) On or before the Closing Date, Sellers shall calculate the average
monthly Billable Minutes for each of the two full calendar months immediately
preceding the month in which the Closing occurs (the "Pre-Closing Monthly
Minutes") and notify Buyer thereof, which notice shall set forth in reasonable
detail Sellers' calculation thereof. On the fifth business day following the end
of the first two full calendar months immediately following the month in which
the Closing occurs, Buyer shall calculate the average monthly Billable Minutes
for each of such two calendar months (the "Post-Closing Monthly Minutes") in
respect of all Subscribers acquired by Buyer pursuant hereto and shall notify
Sellers thereof, which notice shall set forth in reasonable detail Buyer's
calculation thereof. Subject to paragraph (ii) below, if the Post-Closing
Monthly Minutes are at least equal to 90% of the Adjusted Pre-Closing Monthly
Minutes, 100% of the Escrowed Shares shall be delivered by the Escrow Agent to
SA Telecom. If the Post- Closing Monthly Minutes are more than 87% but less than
90% of the Adjusted Pre-Closing Monthly Minutes, 50% of the Escrowed Shares
shall be delivered to SA Telecom, and the balance of the Escrowed Shares shall
be returned to, and cancelled by, Buyer. If the Post Closing Monthly Minutes are
equal to or less than 87% of the Adjusted Pre-Closing Monthly Minutes, 100% of
the Escrowed Shares shall be returned to, and cancelled by, Buyer. All Escrowed
Shares delivered by the Escrow Agent to SA Telecom shall be held by it as agent
for all Sellers.
(ii) Sellers' calculation of the Pre-Closing Monthly Minutes shall be
verified by the Sellers' Auditor at the time Sellers' Auditor verifies the
Revenue Amount. Concurrently with the delivery to Buyer of the Sellers' Auditor
Certificate, Sellers' Auditor shall deliver to Buyer and the Escrow Agent a
certificate setting forth the Seller's Auditor's calculation of the Pre-Closing
Monthly Minutes. The Sellers' Auditor's calculation of the Pre- Closing Monthly
Minutes, as set forth in the certificate referred to above, shall be conclusive
unless, within 15 days after its receipt of such certificate, any EqualNet Party
delivers a notice to SA Telecom and the Escrow Agent disputing such calculation,
which notice shall specify in reasonable detail the nature of any disagreement.
In the event of any such dispute by any EqualNet Party, such dispute shall be
resolved in accordance with the provisions of Section 2(a) of the form of the
Escrow Agreement attached hereto.
(iii) Buyer's calculation of the Post-Closing Monthly Minutes shall be
verified by the Buyer's Auditor, and the Buyer's Auditor shall deliver to
Sellers and the Escrow Agent a certificate setting forth the Buyer's Auditor's
calculation of the Post-Closing Monthly Minutes, which certificate shall be
delivered no later than fifteen (15) days after Buyer's notice to Sellers of the
Post-Closing Monthly Minutes. The Buyer's Auditor's calculation of the
Post-Closing Monthly Minutes, as set forth in the certificate referred to above,
shall be conclusive unless, within fifteen (15) days after its receipt of such
certificate, any Seller delivers a notice to Buyer disputing such calculation,
which notice shall specify in reasonable detail the nature of any disagreement.
In the event of such dispute by any Seller, such dispute shall be resolved in
accordance with the provisions of Section 2(b) of the form of Escrow Agreement
attached hereto.
(iv) Seller shall pay the fees and expenses of Sellers' Auditor for
verifying the Pre-Closing Monthly Minutes and the Post-Closing Monthly Minutes,
and Buyer shall pay the fees and expenses of Buyer's Auditor for verifying the
Pre-Closing Monthly Minutes and the Post- Closing Monthly Minutes. Buyer shall
pay all fees and expenses of the Dispute Auditor in calculating the Pre- Closing
Monthly Minutes unless the Dispute Auditor determines that the Pre-Closing
Monthly Minutes are more than 103% of the amount thereof calculated by Sellers'
Auditor, in which case Sellers shall pay such fees and expenses of the Dispute
Auditor. Sellers shall pay all fees and expenses of the Dispute Auditor in
calculating the Post-Closing Monthly Minutes, unless the Dispute Auditor
determines that the Post-Closing Monthly Minutes are more than 103% of the
amount thereof calculated by Buyer's Auditor, in which case Buyer shall pay such
fees and expenses of the Dispute Auditor.
(v) From the Closing Date until the expiration of the first two full
calendar months immediately following the month in which the Closing occurs (the
"Relevant Period") Buyer shall not reduce the level or quality of services
provided to Subscribers acquired by Buyer from Sellers from that provided by
Sellers to such Subscribers as of the Closing Date or increase the rates charged
to such Subscribers from those charged by Sellers to such Subscribers for such
services as of the Closing Date; provided, however, that Buyer shall be
permitted to (x) terminate service to any Subscriber whose account is more than
60 days past due and (y) increase the rates charged to any Subscriber to the
extent necessary to cover increased costs arising after the date hereof of
providing Services to such Subscriber that affect the entire industry. Buyer
shall take all appropriate steps during the Relevant Period (including
maintenance of appropriate identifying codes) to ensure that Billable Minutes of
any Subscriber acquired by the Buyer from Sellers are properly attributed to
such Subscriber for purpose of determining the Post-Closing Monthly Minutes.
Buyer shall also take due care to implement any network changes during the
Relevant Period so as not to affect the number of billable minutes recorded for
purposes of determining the Post-Closing Monthly Minutes. Buyer's calculation of
the Post-Closing Monthly Minutes shall account for any unidentifiable or
unbillable traffic or service disruptions resulting from any network changes.
Section 6. BANKRUPTCY COURT FILINGS.
(a) Approval of Break-up Fee, Expense Reimbursement and Upset Price. On
December 23, 1997, Sellers have filed motions with the Bankruptcy Court to
approve the provisions of Section 14 relating to the Break-up Fee, the Expense
Reimbursement and the Upset Price and have given notice thereof as required by
the Bankruptcy Court, and on January 8, 1998 the Bankruptcy Court entered an
order (the "Payment Order") granting such approval.
(b) Scheduling of Auction Sale and Approval of Sale Procedure. On December
23, 1997 Sellers filed a motion with the Bankruptcy Court for an order
scheduling an auction sale of the Assets and setting forth the procedures for
such auction sale and on January 9, 1998 the Bankruptcy Court entered such order
(the "Scheduling Order").
(c) Motion to Approve Sale. As promptly as practicable after the date
hereof, but in any event no later than January 16, 1998, Sellers shall file
motions with the Bankruptcy Court for an order approving the sale of the Assets
pursuant to ▇▇.▇▇. 363(b) and 363(f) of the Bankruptcy Code and authorizing
Sellers to assume and assign the Designated Contracts pursuant to ss. 365 of the
Bankruptcy Code and authorizing Sellers to execute and deliver such instruments
as Sellers are required to execute and deliver pursuant to the terms of this
Agreement. Sellers shall give prompt notice of such motions, in accordance with
Rules 6004 and 6006 of the Bankruptcy Rules, to the U.S. Trustee, to all other
parties in interest who have filed a notice of appearance in the Bankruptcy
Cases and as directed by the Bankruptcy Court. As part of the motion to approve
the sale, Sellers shall request that the Bankruptcy Court's order provide that
(i) Buyer is acting and has acted in good faith and is entitled to the
protections of a buyer under Section 363(m) of the Bankruptcy Code; (ii) notice
of the transactions contemplated by this Agreement has been properly given;
(iii) the transfer of the Assets by Sellers to Buyer will be a legal, valid and
effective transfer of the Assets notwithstanding any requirement for approval or
consent by any Person; (iv) title to the Assets will be transferred to Buyer
free and clear of (x) all Liens and claims, other than Permitted Liens, and (y)
all rights or options to effect any forfeiture, modification or termination of
Sellers' or Buyer's interest in the Assets by reason of such transfer, and any
such Liens or claims which existed prior to the sale of the Assets shall attach
to the Consideration paid to the Sellers; (v) neither Buyer nor EqualNet shall
be deemed to be a successor to Sellers for any purpose, including claims arising
out of the Employee Benefit Plans, other than ss. 1145(a) of the Bankruptcy
Code; (vi) in the event the Preferred Shares are distributed to the creditors or
equity security holders of any of Sellers in exchange for a claim against or
interest in any of the Sellers in connection with plans or reorganization of
Sellers, EqualNet shall be deemed to be persons that participate in good faith
in the offer, issuance or sale of a security offered or sold under the plan or
plans of the Sellers as provided in ss. 1125(e) of the Bankruptcy Code and a
successor of the Sellers solely for purposes of Section 1145 of the Bankruptcy
Code; and (vii) the transfer of the Assets to Buyer is not subject to taxation
under any state or local law imposing a stamp or similar tax in accordance with
▇▇.▇▇. 1146(c) and 105 of the Bankruptcy Code.
(d) Review by Buyer. Sellers will provide Buyer and EqualNet with a
reasonable opportunity to review and comment upon all motions, applications and
supporting papers prepared by Sellers relating to this Agreement (including
forms of orders and notices to interested parties) prior to the filing thereof
in the Bankruptcy Cases.
Section 7. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby
represent and warrant to Buyer and EqualNet as follows:
(a) Organization and Good Standing. Each Seller is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
incorporation. Each Seller has all requisite corporate power to carry on its
business as it is now being conducted and to own, lease or otherwise hold the
Assets owned, leased or held by it.
(b) Authority. Each Seller has the requisite corporate power and authority
to execute and deliver this Agreement and each other Transaction Document to
which it is a party and to carry out the transactions contemplated hereby and
thereby. The execution, delivery and performance by Sellers of this Agreement
and the other Transaction Documents to which any of them is a party, including,
without limitation, the sale of the Assets contemplated hereby, have all been
duly and effectively authorized by each of the Sellers' Board of Directors. No
other corporate proceedings on the part of the Sellers are necessary to
authorize this Agreement and the other Transaction Documents and the
transactions contemplated herein and therein.
(c) Execution and Delivery. This Agreement has been duly executed and
delivered by each Seller and when approved by the Bankruptcy Court (and assuming
the due execution and delivery of this Agreement by Buyer) will constitute, the
legal, valid and binding obligation of each Seller enforceable against each
Seller in accordance with its terms, subject to all orders of the Bankruptcy
Court (including the Sale Order). When executed and delivered by each Seller and
Buyer and when approved by the Bankruptcy Court, each of the other Transaction
Documents to which any Seller is a party will constitute the legal, valid and
binding obligation of each Seller enforceable against each Seller in accordance
with its terms, subject to all orders of the Bankruptcy Court (including the
Sale Order).
(d) No Conflict. Assuming the approval of this Agreement by the Bankruptcy
Court, neither the execution and delivery of this Agreement or the other
Transaction Documents to which any Seller is a party, nor the consummation by
Sellers of the transactions contemplated herein and therein, nor the compliance
by Sellers with any of the provisions hereof or thereof will (with or without
the giving of notice or the passage of time) (i) violate, conflict with, result
in a breach of, or constitute a default under (x) the certificate of
incorporation or by-laws of any Seller or (y) any contract, agreement,
instrument, security, lease or license to which any Seller is a party or by
which it or any of its assets or properties may be bound, or (ii) violate any
law, regulation or any order of any Governmental Entity applicable to any Seller
or any of its assets other than, in the case of clause (i), any violation,
conflict, breach or default which, individually or in the aggregate, would not
materially adversely affect the Assets or materially impair or delay the ability
of Sellers to perform their obligations hereunder.
(e) Governmental Approvals. The only approvals, licenses, permits or
authorizations of, or filing or qualifications with, any Governmental Entity
required to be obtained or made by Sellers to consummate the transactions
contemplated by this Agreement and the other Transaction Documents to which any
Seller is a party (other than the Sale Order and other required Bankruptcy Court
orders) are those specified in Schedule 7(e) hereto.
(f) Legal Proceedings. Except for the Bankruptcy Cases, there are no Legal
Proceedings pending or, to the knowledge of Sellers, threatened that question
the validity of this Agreement or any other Transaction Document to which any
Seller is a party or any action taken or to be taken by Sellers in connection
with the consummation of the transactions contemplated hereby or thereby. All
Legal Proceedings relating to the Business pending or, to the knowledge of
Sellers, threatened in which any Seller is or would be the defendant and which,
if adversely determined, would have a material adverse effect on the Assets or
would result in a judgment against any Sellers, not covered by insurance,
exceeding $10,000 are set forth in SA Telecom's Report on Form 10-K for its
fiscal year ended December 31, 1996, its Report on Form 10-Q for its fiscal
quarter ended June 30, 1997 or in Schedule 7(f).
(g) Compliance with Law. Except for violations of law asserted in the Legal
Proceedings referred to in Section 7(f), Sellers are in compliance with all
federal, state and local laws, regulations, permits, orders and decrees,
including those relating to protection of the environment and employee health
and safety ("Legal Requirements"), except for any failure to comply which would
not, alone or in the aggregate, have a material adverse effect on the Assets.
Nothing in this Section 7(g) is intended to address any compliance issue that is
specifically addressed by any other representation or warranty set forth herein.
(h) Designated Contracts. To Sellers' knowledge, other than (i) payment
defaults listed in Schedule 7(h) or in the Schedule of Liabilities filed by
Sellers with the Bankruptcy Court and (ii) defaults triggered by the financial
condition or insolvency of the Sellers or the existence of the Bankruptcy Cases,
Sellers and all other parties to the Designated Contracts are in compliance with
the provisions thereof. Other than as set forth on Schedule 7(h), Sellers have
not received notice that any event has occurred which with or without the giving
of notice or lapse of time, or both, would constitute a default under any
Designated Contract. The copies of the Designated Contracts provided to Buyer by
Sellers pursuant to Section 9(l) shall be true and complete copies of such
Designated Contracts.
(i) Title to Assets. Except for Liens securing the DIP Financing, Liens
covering real estate owned by Sellers or Liens listed or described on Schedule
7(i) and except for lessors' interest in assets leased by Sellers, Sellers have
good and valid title to all Assets, free and clear of all Liens.
(j) Intellectual Property and Intangibles. Except as set forth on Schedule
7(j), Sellers own the entire right, title and interest in and to the
Intellectual Property, if any, and Intangibles included in the Assets
(including, without limitation, the right to use and license the same). Except
as set forth in Schedule 7(j), there are no pending or, to the knowledge of the
Sellers, threatened actions of any nature affecting the Intellectual Property or
Intangibles. Schedule 7(j) lists all notices or claims concurrently pending or
received by Sellers that claim infringement of any domestic or foreign letters
patent, patents, patent applications, patent licenses, software licenses and
know-how licenses, trade names, trademark registrations and applications,
service marks, copyrights, copyright registrations and applications, trade
secrets, technical knowledge, know-how or other confidential proprietary
information relating to the Assets. All letters patent, registrations and
certificates issued by any Governmental Entity relating to any of the
Intellectual Property or Intangibles and all licenses and other agreements
pursuant to which Sellers use any of the Intellectual Property or Intangibles
are valid and subsisting, have been properly maintained and, to the knowledge of
Sellers, neither Sellers nor any other persons are in material default or
violation thereunder.
(k) Permits, Licenses and Tariffs. The permits listed on Schedule 7(k)
represent all material permits, tariffs, authorizations, variances, exemptions,
orders and approvals from Governmental Entities required to be held by Sellers
in order to conduct the Business substantially in the manner heretofore
conducted.
(l) Employee Benefit Plans; Labor Agreements. Except as set forth on
Schedule 7(l), (i) Sellers do not maintain or contribute to, are not required to
contribute to, and are not a party to or a participating employer of, any
Employee Benefit Plans and (ii) Sellers are not parties to any collective
bargaining or other labor agreements.
(m) No Brokers. Such Seller has not entered into and will not enter into
any agreement, arrangement or understanding with any person or firm which will
result in the obligation of Buyer to pay any finder's fee, brokerage commission
or similar payment in connection with the transactions contemplated hereby or by
the other Transaction Documents.
(n) Investor Representations. Sellers understand that the Preferred Shares
have not been registered under the Securities Act and that the transferability
thereof is restricted as provided in Section 3(e). Sellers recognize that
ownership of the Preferred Shares involves a high degree of risk including, but
not limited to, the risk of economic losses from the EqualNet Parties'
operations and the total loss of investment. Sellers have been furnished by
EqualNet with copies of all reports filed by EqualNet under the Securities
Exchange Act of 1934, as amended, since June 30, 1995.
(o) Subscribers. Sellers have heretofore delivered, or prior to the Closing
Date will deliver, to Buyer a complete and correct list of the names, addresses
and account information of all Subscribers of Sellers as of a date close to the
date of such delivery, including the security deposits paid by each Subscriber.
All of Sellers' rights and interests to all accounts of the Subscribers to the
Services of Sellers are assignable to Buyer without the consent of the
Subscribers.
(p) Employees. Each Seller acknowledges and agrees that Buyer may, but
shall not be required to, offer employment to and employ any employees or
officers of Sellers following the Closing Date. Notwithstanding the foregoing,
Sellers have assumed that Buyer will not hire any employees or officers of
Sellers and Sellers have given, or prior to the Closing Date will give, all
notices (if any) required by the Worker Adjustment and Retraining Notification
Act (WARN) as if all of Sellers' employees and officers will be terminated by
Sellers as of the Closing Date.
(q) SPC. If the SPC is established pursuant to Section 9(j), it shall be a
corporation duly organized and validly existing under the laws of the State of
Delaware and shall have all requisite power to hold the assets transferred to it
by Sellers. The shares of the SPC transferred to Buyer on the Closing Date shall
constitute all outstanding shares of the capital stock of the SPC and all such
shares shall be duly issued, fully paid and non-assessable.
(r) Schedules. All Schedules delivered to Buyer by Sellers pursuant to
Section 7 are complete and correct.
(s) Sellers. The subsidiaries of SA Telecom named as Sellers in this
Agreement are all the operating subsidiaries of SA Telecom and own all the
operating assets of the Business.
Section 8. REPRESENTATIONS AND WARRANTIES OF BUYER. Each EqualNet Party
hereby represents and warrants to each Seller as follows:
(a) Organization and Good Standing. Each EqualNet Party is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power to carry on
its business as it is now being conducted and contemplated to be conducted after
the Closing.
(b) Authority; Execution and Delivery. Each EqualNet Party has the
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each other Transaction Document to which it
is a party, to purchase the Assets in accordance with the terms hereof (in the
case of Buyer) and to issue to Sellers the Preferred Shares (in the case of
EqualNet). The execution, delivery and performance by each EqualNet Party of
this Agreement and the other Transaction Documents to which it is a party,
including, without limitation, the purchase of the Assets contemplated hereby
and the issuance to Sellers of the Preferred Shares, have all been duly and
effectively authorized by each EqualNet Party's Board of Directors. No other
corporate proceedings on the part of any EqualNet Party are necessary to
authorize this Agreement, the other Transaction Documents, the issuance of the
Preferred Shares to Sellers pursuant hereto and the transactions contemplated
herein and therein. This Agreement has been duly executed and delivered by each
EqualNet Party and (assuming the due execution and delivery of this Agreement by
each Seller) constitutes the legal, valid and binding obligation of each
EqualNet Party enforceable against it in accordance with its terms, subject to
the orders of the Bankruptcy Court (including the Sale Order). When executed and
delivered by the EqualNet Party and each Seller party thereto and approved by
the Bankruptcy Court, each of the other Transaction Documents to which Buyer is
a party will constitute the legal, valid and binding obligation of each EqualNet
Party enforceable against it in accordance with its terms, subject to all orders
of the Bankruptcy Court (including the Sale Order).
(c) No Conflicts, Etc. Neither the execution and delivery of this Agreement
or the other Transaction Documents to which an EqualNet Party is a party nor the
issuance to Sellers of the Preferred Shares, nor the consummation by the
EqualNet Parties of the transactions contemplated herein and therein nor the
compliance by the EqualNet Parties with any of the provisions hereof or thereof
will (with or without the giving of notice or the passage of time) (i) violate,
conflict with, result in a breach of, or constitute a default under (x) the
certificate or articles of incorporation or by-laws of any EqualNet Party or (y)
any contract, agreement, instrument, security, lease or license to which any
EqualNet Party is a party or by which it or any of its assets or properties may
be bound, or (ii) violate any law, regulation or any order of any Governmental
Entity applicable to any EqualNet Party or any of its assets other than, in the
case of clause (i), any violation, conflict, breach or default which,
individually or in the aggregate, would not materially impair or delay the
ability of the EqualNet Parties to perform their respective obligations
hereunder or impair the validity or value of the Preferred Shares.
(d) Governmental Approvals. The only approvals, licenses, permits or
authorizations of, or filings or qualifications with, any Governmental Entity
required to be obtained or made by any EqualNet Party to consummate the
transactions contemplated by this Agreement and the other Transaction Documents
to which any EqualNet Party is a party (other than the Sale Order and other
required Bankruptcy Court orders) are those specified in Schedule 8(d) hereto.
(e) Preferred Shares. Upon the delivery thereof to Sellers or the Escrow
Agent pursuant to Sections 3(d) or 5(b), the Preferred Shares will be duly
authorized, fully paid and non-assessable and will not be issued in violation of
any preemptive rights. Subject to the escrow of the Escrowed Shares in
accordance with Section 4(d) and the Escrow Agreement and the security interest
thereon in favor of Greyrock in respect of the Greyrock Financing, the Preferred
Shares will be delivered to Sellers free from any Liens.
(f) Legal Proceedings. Except for the Bankruptcy Cases and as set forth in
EqualNet's Report on Form 10-K for the fiscal year ended June 30, 1997,
EqualNet's Report on Form 10-Q for the quarterly period ended September 30, 1997
or in Schedule 8(f), there are no Legal Proceedings pending or, to the knowledge
of any EqualNet Party, threatened that question the validity of this Agreement
or any other Transaction Document to which any EqualNet Party is a party or any
action taken or to be taken by any EqualNet Party in connection with the
consummation of the transactions contemplated hereby or thereby or which, if
adversely determined, would have a material adverse effect on the financial
condition, business or operations of any EqualNet Party.
(g) Financing. On the Closing Date, Buyer will have sufficient funds to
effect the Closing and consummate the transactions contemplated by this
Agreement.
(h) Financial Statements and Reports. EqualNet's financial statements for
its fiscal year ended June 30, 1997 and for its fiscal quarter ended September
30, 1997 contained in EqualNet's Reports on Form 10-K and 10-Q filed with the
Securities and Exchange Commission, copies of which have heretofore been
delivered by EqualNet to Sellers, have been, and EqualNet's financial statements
in all such Reports delivered to Sellers on or before the Closing Date pursuant
to Section 9(b) will be, prepared in accordance with GAAP applied consistently
with past practice and present and will present fairly, in all materials
respects, the consolidated financial position and results of operations of
EqualNet at and for the fiscal periods specified therein, subject (in the case
of unaudited interim financial statements) to normal year end audit adjustments.
Said Reports do not and will not contain any untrue statement of a material
fact, and do not and will not omit to state any material fact necessary to make
the statements contained therein not misleading.
(i) No Brokers. Neither EqualNet Party has entered into any agreement,
arrangement or understanding with any Person which will result in the obligation
of Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
Section 9. CERTAIN COVENANTS AND AGREEMENTS.
(a) Access to Facilities of Sellers. From and after the date hereof, each
EqualNet Party and its employees, agents and representatives, upon reasonable
notice to Sellers, shall have full access to all books, records, facilities and
personnel of Sellers. Each Seller shall make available to each EqualNet Party,
upon reasonable prior notice for examinations and reproduction (at Buyer's
expense), all documents and data of every kind and character relating to the
Assets in possession or control of, or subject to reasonable access by, such
Seller, including, without limitation, all files, records, data and information
relating to the Assets (whether stored in paper, magnetic or other storage
media) and all agreements, instruments, contracts, assignments, certificates,
orders, and amendments thereto. Each Seller shall also allow each EqualNet Party
reasonable access to, and the right to inspect, the Assets of such Seller during
normal business hours and upon reasonable prior notice.
(b) Access to Information and Reports of EqualNet Parties. If so requested
by Sellers, upon reasonable prior notice, each EqualNet Party shall cause its
officers, directors and representatives to meet with Sellers' officers,
directors or representatives at EqualNet's offices for the purpose of permitting
such officers, directors and representatives of Sellers to ask questions of, and
receive answers to such questions from, such officers and representatives of
such EqualNet Party concerning the business and operations of such EqualNet
Party and to obtain any additional information regarding EqualNet to the extent
reasonably available. EqualNet shall deliver to Sellers copies of all final
reports and final proxy statements filed by EqualNet under the Securities
Exchange Act of 1934, as amended, at any time after September 30, 1997 and prior
to the Closing Date.
(c) Confidentiality. The parties hereto have heretofore entered into a
Confidentiality Agreement in connection with the transactions contemplated
hereby (as from time to time amended, the "Confidentiality Agreement"). During
the period through the Closing Date and (in the event for any reason the Closing
under this Agreement does not occur) thereafter each party shall keep, and cause
its affiliates, employees and representatives to keep, strictly confidential in
accordance with the terms of the Confidentiality Agreement, all information of
any kind relating to the other parties, their business, assets or operations
obtained by such party in connection with this transaction and not otherwise
publicly available or learned through third-parties under no confidentiality
obligation, whether learned before or after the date hereof, and shall not use
any such information for any purposes whatsoever nor disclose any such
information to any third party. If this Agreement shall terminate for any
reason, each party shall immediately return all documents or other writings
received from any other party or copied by such party and shall destroy any
other writings containing any of such information.
(d) Conduct of Sellers' Business. Subject to (i) orders of the Bankruptcy
Court, (ii) the DIP Financing Documents, (iii) applicable duties, obligations
and limitations of a debtor in bankruptcy proceedings under the Bankruptcy Code
and (iv) Sellers' financial condition and cash availability, from the date
hereof up to and including the earlier of the Closing Date or the termination of
this Agreement, Sellers will use their reasonable good faith efforts to (x)
cause their business to be conducted only in the ordinary course (except that
Sellers will have no obligation to solicit or obtain new customers or (except
when necessary to operate the Business in the ordinary course) retain personnel)
and (y) do, or as the case may be not do the following:
(1) maintain in full force and effect Sellers' insurance policies
insofar as they cover any of the Assets;
(2) maintain Sellers' books and records in the manner consistent with
past practices and in any event in a commercially reasonable manner;
(3) preserve the Assets intact as well as the present relationships of
Sellers with persons having significant relationships therewith;
(4) not sell, lease, transfer or dispose of any Assets (other than the
transfers to the SPC specified in Section 9(j));
(5) not terminate any contract, agreement, license or other instrument
to which such Seller is a party constituting or relating to the Assets,
other than for any such termination in the ordinary course which would not
have a material adverse effect on the Assets;
(6) to the extent that failure to do so would have a material adverse
effect on the Assets, pay or cause to be paid all post-petition costs and
expenses incurred in connection with the operation of Sellers' assets or
their bankruptcy proceedings in a timely manner and, to the extent
permitted by the Bankruptcy Code, keep all material contracts in full force
and effect;
(7) comply with all applicable Legal Requirements except when failure
to do so would not have a material adverse effect on the Business or the
Assets;
(8) retain all Subscribers in existence on the date of this Agreement;
and
(9) not compromise or discount any account receivable except for
compromises of billing disputes with Subscribers in the ordinary course of
business.
(e) Mutual Cooperation. The parties hereto will cooperate with each other,
and will use all reasonable efforts to cause the fulfillment of the conditions
to the parties' obligations hereunder (including, without limitation, the
entering of the Sale Order), to assume and assign all agreements necessary for
the transfer to Buyer of the Assets, and to obtain as promptly as possible all
consents, authorizations, orders or approvals from each and every third party,
whether private or governmental, required in connection with the transactions
contemplated by this Agreement.
(f) Consents and Permits. Sellers and the EqualNet Parties shall use all
reasonable efforts to obtain any consents, approval, permit, order or
authorization of any Governmental Entities and other third parties required for
the purchase and sale of the Assets and the other transactions contemplated
hereby, including all approvals, authorizations, permits and consents specified
in Schedules 7(e) and 8(d).
(g) Information. From and after the date hereof until the Closing Date, (x)
Sellers shall keep the EqualNet Parties fully informed with respect to all
material developments relating to the Assets and shall promptly comply with any
reasonable requests of any EqualNet Party for Sellers to provide it with
information with respect to the Assets and (y) the EqualNet Parties shall keep
Sellers fully informed with respect to all material developments affecting the
EqualNet Parties, their business, assets and or capital stock. Any such
information provided by Sellers or the EqualNet Parties shall be true and
correct to the best knowledge of the party providing such information.
(h) Non-Solicitation. If the Closing does not take place, no EqualNet Party
will (i) prior to December 31, 1999, solicit any subscribers of any Seller who
were such subscribers on the date hereof or any day prior to the termination of
this Agreement, except for solicitations directed to the public at large and not
to specific subscribers of Sellers and (ii) prior to February 28, 1998, solicit
for employment, consulting or other relevant services any officers or employees
of any Seller except with the consent of SA Telecom or solicitations directed to
the public at large and not to specific officers or employees of any Seller.
(i) Evidence of Buyer's Ability to Close. If so requested by Sellers, Buyer
shall promptly furnish to Sellers evidence reasonably satisfactory to Sellers
that Buyer has, or on the Closing Date will have, sufficient funds to consummate
the transactions contemplated hereby.
(j) Establishment of SPC. Prior to the Closing Date, if so requested by
Buyer (and provided the same can be effected without a material disruption of
Sellers' Business and at no material cost to Sellers), Sellers shall, subject to
the approval of the Bankruptcy Court, establish a Delaware corporation (the
"SPC") to which all Sellers will transfer all carrier identification codes,
their Subscriber accounts and all other Assets reasonably specified by Buyer
which are necessary to provide services to such Subscribers in connection with
such transfer of such carrier identification codes. The shares of the SPC's
capital stock shall be allocated among Sellers as agreed to by Sellers so as to
reflect their respective contribution of assets to the SPC. Promptly after such
transfer to the SPC, each transferor shall give notice thereof to BELLCORE. The
SPC shall engage in no business other than holding the carrier identification
codes and the Subscriber accounts transferred to it and activities directly
incidental thereto and shall incur no indebtedness or liabilities to any Person.
(k) Liens in favor of Greyrock. Buyer acknowledges that the Assets will be
transferred to it subject to the Liens thereon in favor of Greyrock, and Buyer
agrees that the Assets will remain subject to such Liens after the Closing Date
until payment of the Greyrock Facility assumed by Buyer. Without limiting the
generality of the foregoing, Buyer agrees that stock of the SPC, if required to
be delivered to Buyer on the Closing Date, will be pledged by it to Greyrock to
secure the Greyrock Facility. Buyer further agrees to grant to Greyrock a
perfected senior Lien on all accounts receivable arising after the Closing Date
generated from Subscribers acquired by Buyer from Sellers, which Lien shall
secure all amounts of the Greyrock Facility assumed by Buyer and shall be
evidenced by a UCC-1 Financing Statement and Security Agreement containing
provisions identical to the Greyrock Facility.
(l) Designated Contracts. Promptly upon Buyer's request, Sellers shall
provide Buyer with true and correct copies of the Designated Contracts.
(m) Schedules. Sellers shall, as soon as practicable but in any event no
later than January 23, 1998 deliver to Buyer all Schedules specified in Section
7 or Sections 3(a) and 3(b) to the extent not attached hereto on the date
hereof. Buyer shall, within five (5) business days after the delivery of any
such Schedule to it, notify Sellers whether Buyer is satisfied with the terms
thereof or the information contained therein. The EqualNet Parties shall deliver
to Sellers as soon as practicable but in any event no later than January 20,
1998 the schedule of Designated Contracts specified in clause (iv) of Section
3(a). Buyer and Sellers shall co-operate to complete all other Schedules hereto
on or before January 23, 1998 (or such later date as shall be agreed to by all
parties), which other Schedules shall be satisfactory to all parties hereto. All
Schedules attached hereto or delivered by any party pursuant hereto are an
integral part of this Agreement.
Section 10. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment on or prior to the Closing Date of
the following conditions:
(a) Bankruptcy Court Approval. The Payment Order and the Scheduling Order
shall have been entered by the Bankruptcy Court and shall contain terms and
conditions reasonably satisfactory to Buyer and Sellers. The Bankruptcy Court
shall have entered an order (the "Sale Order") approving the transactions
contemplated by this Agreement, any motion for rehearing or reconsideration of
the Sale Order shall have been denied, the time allowed for appeals of the Sale
Order shall have expired without appeals being taken or if the Sale Order shall
have been appealed, no stay thereof shall be in effect. The Sale Order shall
provide that (i) this Agreement and the transactions contemplated herein are
approved; (ii) the transfer of the Assets by Sellers to Buyer will be a legal,
valid and effective transfer of the Assets notwithstanding any requirement for
approval or consent by any Person; (iii) the Sellers have good and valid title
to the Assets and such title shall be transferred to Buyer or its designees free
of (x) all Liens and claims, other than Permitted Liens, and (y) all rights or
options to effect any forfeiture, modification or termination of Sellers' or
Buyer's interest in the Assets by reason of such transfer, and any such Liens or
claims which existed prior to the sale of the Assets shall attach to the
Consideration paid to the Sellers; (iv) Buyer is purchasing the Assets in good
faith within the meaning of ss. 363(m) of the Bankruptcy Code; (v) the
consideration to be paid by Buyer for the Assets is fair and reasonable; (vi)
there exist exigent business reasons for the sale of the Assets contemplated
hereby; (vii) such sale is in the best interests of the Sellers' estates, their
creditors and equity security holders; (viii) there has been proper and adequate
notice given to all parties required by law to receive notice of the sale; (ix)
the Assets have been adequately marketed and will lose value absent a sale; (x)
the requirements of ss. 363 of the Bankruptcy Code have been met; (xi) provided
a plan of reorganization for Sellers is confirmed in the Bankruptcy Cases, the
issuance and sale of the Preferred Shares is exempt from registration under the
Securities Act and all applicable state securities laws pursuant to Section 1145
of the Bankruptcy Code and neither Buyer nor EqualNet shall be deemed to be a
successor to the Sellers for any purpose, including claims arising out of the
Employee Benefit Plans, other than ss.1145 of the Bankruptcy Code; and (xii) in
accordance with Sections 1146(c) and 105(a) of the Bankruptcy Code, the transfer
of the Assets to Buyer is not subject to taxation under any state or local law
imposing a stamp or similar tax on such transfer. The Sale Order shall not
impose any material obligations on the EqualNet Parties or Sellers not
contemplated herein. Nothing in this Agreement shall preclude Sellers or Buyer
from consummating the transactions contemplated herein if Buyer, in its sole
discretion, waives the requirement that the Sale Order or any other order shall
have become final orders. No notice of such waiver of this or any other
condition to Closing need be given except to Sellers, as explicitly required in
this Agreement, it being the intention of the parties hereto that Buyer shall be
entitled to, and is not waiving, the protection of Section 363(m) of the
Bankruptcy Code, the mootness doctrine and any similar statute or body of law if
the Closing occurs in the absence of final orders.
(b) No Adverse Proceedings. There shall not be outstanding any injunction,
decree or order of any court or Governmental Entity prohibiting the consummation
of the transactions contemplated by this Agreement that remains in effect
following entry of the Sale Order.
(c) No Change in Law. There shall not have been any action taken or any
statute enacted by any Governmental Entity that would render the parties unable
to consummate the transactions contemplated hereby or make the transactions
contemplated hereby illegal or prohibit the consummation of the transactions
contemplated hereby.
(d) Governmental Approvals and Consents. Sellers and the EqualNet Parties
shall have obtained all approvals and consents from all Governmental Entities
specified in Schedule 10(d).
(e) Escrow Agreement. The Escrow Agent shall have executed the Escrow
Agreement.
Section 11. CONDITIONS TO OBLIGATIONS OF BUYER. In addition to the
conditions set forth in Section 10, the obligation of the EqualNet Parties to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, or the waiver by the EqualNet Parties, on or prior to the
Closing Date, of the following conditions:
(a) Bankruptcy Court Orders; Evidence of Service. Sellers shall have
delivered to Buyer copies of the Payment Order, the Scheduling Order and the
Sale Order and appropriate proof of service demonstrating service of the
Scheduling Order in accordance with the terms thereof.
(b) Representations and Warranties of Sellers. The representations and
warranties of Sellers contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as though made on such date,
and Sellers shall have delivered to Buyer a certificate dated the Closing Date
to such effect, signed by an officer of SA Telecom.
(c) Corporate Action. At the Closing Sellers shall deliver to Buyer
certified copies of board of directors resolutions approving the execution,
delivery and performance of this Agreement and the other Transaction Documents
and the transactions contemplated hereunder and thereunder.
(d) Sellers' Performance. Each of the obligations of Sellers to be
performed on or before the Closing Date, pursuant to the terms of this Agreement
shall have been duly performed in all material respects by the Closing Date.
(e) Instruments of Conveyance and Transfer. At the Closing, each Seller
shall have delivered to Buyer a ▇▇▇▇ of sale in form and substance reasonably
satisfactory to Buyer and consistent with the terms hereof, as well as such
other instruments of assignment, conveyance and transfer as Buyer shall
reasonably require.
(f) Material Consents. The EqualNet Parties shall have obtained the
third-party consents listed on Schedule 11(f) hereto.
(g) Escrow Agreement. Sellers shall have executed the Escrow Agreement.
(h) Sellers' Revenue Amount Certificate. SA Telecom shall have delivered
the Sellers' Revenue Amount Certificate to Buyer.
(i) Pre-Closing Monthly Minutes Certificate. SA Telecom shall have
delivered to Buyer a certificate as to the Adjusted Pre-Closing Monthly Minutes.
(j) Additional Matters. Buyer shall have received such additional
documents, instruments or items of information reasonably requested by it from
Sellers in respect of any aspect of the transactions contemplated hereby. All
corporate and other proceedings, and all documents, instruments and other legal
matters in connection with the transactions contemplated by this Agreement or by
the other agreements referred to herein shall be reasonably satisfactory in form
and substance to Buyer and its counsel.
(k) Buyer shall have received all Schedules to this Agreement and shall be
satisfied with the information set forth therein.
(l) SPC. If so requested by Buyer at least ten days prior to the Closing
Date, the SPC shall have been established and all assets required to be
transferred thereto pursuant to Section 9(j), to the extent assignable, shall
have been so transferred, and Buyer shall have received stock certificates, duly
endorsed by the registered owners thereof, representing all shares of the
capital stock of the SPC.
(m) No Material Adverse Change. There shall have occurred no material
adverse change after the date hereof in the Assets, Business or operations of
Sellers, taken as a whole, and Sellers shall have delivered to Buyer a
certificate dated the Closing Date and signed by an officer of SA Telecom to
such effect and further certifying that since the date of this Agreement Sellers
have caused their business to be conducted only in the ordinary course (which
certificate may be qualified as being to the best knowledge and belief of such
officer).
Section 12. CONDITIONS TO OBLIGATIONS OF SELLERS. In addition to the
conditions set forth in Section 10, the obligations of Sellers to consummate the
transactions contemplated hereby shall be subject to the fulfillment, or the
waiver by Sellers, on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties True at the Closing Date. The
representations and warranties of each EqualNet Party contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though made on such date, and the EqualNet Parties shall have
delivered to Sellers a certificate dated the Closing Date to such effect, signed
by an officer of Buyer.
(b) Corporate Action. At the Closing the EqualNet Parties shall deliver to
Sellers certified copies of board of director resolutions approving the
execution, delivery and performance of this Agreement and the other Transaction
Documents, the issuance of the Preferred Shares to Sellers and the transactions
contemplated hereunder and thereunder.
(c) EqualNet Parties' Performance. Each of the obligations of the EqualNet
Parties to be performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly performed in all material respects by the
Closing Date.
(d) Material Consents. Sellers shall have obtained the third-party consents
listed on Schedule 12(d) hereto.
(e) Escrow Agreement. The EqualNet Parties shall have executed the Escrow
Agreement.
(f) Preferred Stock Provisions. The terms of the Preferred Stock Provisions
shall be consistent with the terms of Section 3(d) and Exhibit A and shall
otherwise be reasonably acceptable to Sellers.
(g) Consideration. The EqualNet Parties shall have paid and delivered the
Consideration (other than the Escrowed Shares) to or for the account of Sellers
and shall have delivered the Escrowed Shares to the Escrow Agent.
(h) Discharge of ▇▇▇▇▇▇ Group DIP Financing. To the extent that the ▇▇▇▇▇▇
Group DIP Financing exists, the ▇▇▇▇▇▇ Group shall have delivered to Sellers
written confirmation that Buyer has paid and discharged all obligations of
Sellers in respect of the ▇▇▇▇▇▇ Group DIP Financing.
(i) Additional Matters. Sellers shall have received such additional
documents, instruments or items of information reasonably requested by them in
respect of any aspect of the transactions contemplated hereby. All corporate and
other proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement or by the other
agreements referred to herein shall be reasonably satisfactory in form and
substance to Sellers and their counsel.
(j) No Material Adverse Change. There shall have occurred no material
adverse change in the financial condition or results of operations of EqualNet
from that reflected in its financial statements at and for the period ending
September 30, 1997.
Section 13. TERMINATION.
(a) Termination. This Agreement may be terminated by written notice at any
time:
(i) by mutual consent of the EqualNet Parties and Sellers;
(ii) by either the EqualNet Parties or Sellers if there shall be in
effect a final nonappealable order of a court of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby;
(iii) by either the EqualNet Parties or Sellers (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the representations or warranties set
forth in this Agreement on the part of the other party, which breach is not
cured within fifteen (15) days following written notice (which shall state
that it is a "Notice of Default") to the party committing such breach or
which breach, by its nature, cannot be cured prior to the Closing, and
which breach, individually or together with all other such breaches, would
have a material adverse effect on the Assets or Sellers' ability to
consummate the transactions contemplated hereby, in the case of breaches by
Sellers, or a material adverse effect on the EqualNet Parties' ability to
consummate the transactions contemplated hereby or the value of the
Preferred Shares, in the case of breaches by an EqualNet Party;
(iv) by either the EqualNet Parties or Sellers (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or the agreement contained herein) if there shall have
been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of the other party, which breach shall not have
been cured within fifteen (15) days following receipt by the breaching
party of written notice of such breach from the other party hereto, which
notice shall state that it is a "Notice of Default";
(v) by any party (unless such party is in default under this
Agreement) if the Sale Order is not entered on or before February 16, 1998
or if the Closing does not occur on or before February 28, 1998;
(vi) upon entry of an order of the Bankruptcy Court approving the sale
of all or a material portion of the Assets to a Person other than Buyer or
its Designees; or
(vii) pursuant to an order of the Bankruptcy Court.
(b) Effect of Termination. In the event of the termination of this
Agreement as provided in Section 13(a), this Agreement, other than the
provisions of this Section 13 and Sections 9(c), 9(h), 14(b), 17 and 18 and, to
the extent applicable, Section 16, shall forthwith become wholly void and of no
further force and effect; provided, however, that the termination of this
Agreement shall not relieve any party hereto from any liability hereunder which
accrued prior to such termination.
(c) Remedies Cumulative. The remedies provided herein shall be cumulative
and shall not preclude assertion by any party hereto of any other right or the
seeking of any other remedies against any other party hereto.
(d) Specific Performance. Each of the parties hereto acknowledges and
agrees that the EqualNet Parties on the one hand, and the Sellers on the other,
would be irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, each of the parties hereto agrees that each
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions hereof and/or the remedy of specific performance hereof in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction, in addition to any other remedy to which such party may be
entitled, at law or in equity.
Section 14. BREAK-UP PROVISIONS AND BIDDING PROCEDURE.
(a) Upset Price. Sellers shall be entitled to solicit higher and better
offers for the Business and the Assets from third parties, provided that (i)
Sellers shall require that any such offer for the Assets have a fair market
value (including the amount of Sellers' liabilities to be assumed) at least
$500,000 greater than the fair market value of the sum of the Consideration and
the Assumed Liabilities (the "Upset Price") and (ii) Sellers shall not sell the
Assets to any Person whose offer, as determined jointly by Sellers and the
Creditors' Committee, with the approval of the Bankruptcy Court, does not have a
fair market value at least equal to the Upset Price.
(b) Payment of Break-Up Fee and Reimbursement of Expenses. If, following
the execution of this Agreement by all parties hereto, any third party or
parties (other than Buyer or its affiliates) acquire, for consideration other
than the cancellation of indebtedness or the extension of trade credit terms by
vendors, 50% or more of, or 50% or more of an interest in, the Assets or equity
in Sellers (the "Other Acquisition"), whether such Other Acquisition is
accomplished by means of an asset sale, stock sale, merger, consolidation,
reorganization or other business combination, and regardless of whether such
Other Acquisition is accomplished pursuant to a plan of reorganization in the
Bankruptcy Cases or a sale pursuant to section 363(b) of the Bankruptcy Code,
then upon the closing of such Other Acquisition (or upon the effective date of a
plan of reorganization for Sellers in the Bankruptcy Cases accomplishing the
same), Sellers shall (i) reimburse the EqualNet Parties for up to $100,000 of
the EqualNet Parties' aggregate expenses (including reasonable attorneys' fees)
incurred by them in connection with the transactions contemplated hereby (the
"Sale Expense Reimbursement"), and (ii) pay to Buyer a fee of $300,000 (the
"Break-up Fee"). If by February 13, 1998, a sale hearing pursuant to section
363(b) of the Bankruptcy Code has not been held and concluded by the Bankruptcy
Court, then Sellers shall reimburse the EqualNet Parties for up to $100,000 of
the aggregate expenses (including reasonable attorneys' fees) incurred by them
in connection with the transactions contemplated hereby (the "Restructuring
Expense Reimbursement", and collectively with the Sale Expense Reimbursement,
the "Expense Reimbursements"). If due and payable in accordance with the terms
hereof, Sellers shall pay the EqualNet Parties the approved Restructuring
Expense Reimbursement on March 31, 1998. To the extent of any inconsistency
between the foregoing provisions of this Section 14(b) and the Payment Order,
the Payment Order shall prevail; provided, however, that notwithstanding the
foregoing provisions of this Section 14(b), Buyer shall not be entitled to the
Break-Up Fee or Expense Reimbursement (i) if this Agreement is terminated by
Sellers pursuant to clause (iii) or (iv) of Section 13(a) prior to the approval
by the Bankruptcy Court of an Other Transaction, (ii) if Buyer breaches its
covenants contained in Section 9(i) or (iii) if Buyer fails to purchase the
Assets on the Closing Date notwithstanding the satisfaction of all conditions
specified in Sections 10, 11 and 12 to Buyer's obligation to do so.
Section 15. ADDITIONAL POST-CLOSING COVENANTS.
(a) Further Assurances. From and after the Closing Date, from time to time,
at Buyer's request and expense, Sellers will execute and deliver such other
instruments and take such other action as Buyer may reasonably request to more
effectively put Buyer in possession and control of all or any part of the Assets
and confirm its title thereto.
(b) Benefits under Unassignable Contracts. If a consent of a third party
which is required in order to assign any Asset (or claim, right or benefit
arising thereunder or resulting therefrom) is not obtained prior to the Closing
Date, or if an attempted assignment would be ineffective or would adversely
affect the ability of Sellers to convey their interest in question to Buyer,
Sellers will cooperate with Buyer and use reasonable efforts in any lawful
arrangement to provide that Buyer shall receive Sellers' interest in the
benefits of such Asset. If any consent or waiver is not obtained before the
Closing Date and the Closing is nevertheless consummated, Sellers agree to
continue to use their reasonable efforts for a period of 90 days after the
Closing to obtain all such consents as have not been obtained prior to such
date.
(c) Use of Sellers' Premises. Buyer shall remove all Assets at its sole
expense as soon after the Closing as possible but shall have the option to use
all or some of the premises under lease to Sellers for a period of up to 60 days
after the Closing in order to facilitate the sale and transfer of the Assets
(the "Designated Premises"). At least three (3) days prior to Closing, Buyer
shall notify Sellers in writing of those premises it intends to utilize
subsequent to the Closing and for what period of time. Buyer shall pay to
Sellers use and occupancy, calculated on a per diem basis, so as to pay those
monetary obligations Sellers may incur under Section 365(d)(3) of the Bankruptcy
Code in respect of such Designated Premises. Sellers agree to timely move to
extend their time to assume or reject the leases for the Designated Premises
upon timely request of Buyer and to use reasonable good faith efforts to obtain
an extension of its time to assume or reject said leases. In no event will
Sellers be required by this Section to assume any lease. To the extent Sellers'
ability to comply with this Section 15(a) is conditioned by the Bankruptcy Court
upon assumption of one or more leases, then Sellers shall be excused from
complying with this Section unless such leases constitute Designated Contracts.
(d) Records. Buyer covenants and agrees that following the Closing it shall
(i) hold, maintain and preserve for a period of at least four (4) years all
books and records and other documents and materials relating to the assets,
properties, business and operations of Sellers included in the Assets and
transferred to Buyer pursuant hereto and shall not destroy or discard any such
books, records, documents or materials without at least thirty (30) days prior
notice to the Sellers and in no event until the Bankruptcy Cases are concluded
and (ii) allow Sellers and their employees, accountants and agents access to
such books, records, documents, material and personnel, and (at Sellers'
expense) permit Sellers to make copies of or extracts from such books, records
and documents, for valid purposes, upon reasonable advance notice during normal
business hours and (iii) direct Buyer's employees to assist Sellers in obtaining
access to or copies of such books, records and documents. Such access shall
include the right to examine and make extracts or copies of any such books,
records, documents or materials and, if deemed necessary by counsel for Sellers,
the right to have the originals thereof delivered to and held by such counsel
during the pendency of the Bankruptcy proceedings.
(e) Sellers' Employees. Buyer may, but shall not be required to, offer
employment to or employ any employees or officers of Sellers as Buyer shall
determine in its sole discretion on such terms and conditions as Buyer shall
determine in its sole discretion. Sellers agree to use their reasonable efforts
to cause their employees and officers who have received offers of employment
from Buyer to accept such offers of employment. In the event that Buyer employs
any officer or employee of Sellers, Sellers shall provide Buyer with such
information in respect of such individuals as Buyer reasonably may request,
including, without limitation, personnel files and other records. Buyer shall
not have any liability in respect of any officers or employees of Sellers,
whether employed by Buyer or not, resulting from such officers' and employees'
termination of employment with Sellers, including, without limitation, any
liability under the Worker Adjustment and Retraining Notification Act, on
account of severance benefits, bonuses, vacation time or pay or incentive
programs of any type, nor shall Buyer acquire any obligation under any contract,
Employee Benefit Plan or other agreement or arrangement of Sellers with respect
to any officer or employee or former officer employee of Sellers, except to the
extent such liability is an Assumed Liability.
Section 16. INDEMNIFICATION AND RELATED MATTERS.
(a) Indemnification by Sellers. Subject to the provisions of this Section
16 and if (but only if) the Closing is consummated, Sellers agree, jointly and
severally, to indemnify and hold each EqualNet Party and its officers,
directors, employees and agents (collectively, the "Buyer Indemnified Parties")
harmless from and against all Damages resulting from or arising out of:
(i) any breach of Sellers' representations and warranties set forth in
Sections 7(a), 7(b), 7(c), 7(f), 7(h), 7(i), 7(j), 7(m), 7(o), 7(p) and
7(q); and/or
(ii) the Excluded Liabilities.
(b) Indemnification by EqualNet Parties. Subject to the provisions of this
Section 16 and if (but only if) the Closing is consummated, the EqualNet Parties
agree, jointly and severally, to indemnify and hold Sellers and their respective
officers, directors, employees and agents (collectively, the "Seller Indemnified
Parties") harmless from and against all Damages resulting from or arising out
of:
(i) a breach of any EqualNet Party's representations and warranties
set forth in sections 8(a), 8(b), 8(e), 8(g), 8(h) and 8(i); and/or
(ii) the Assumed Liabilities.
(c) Determination of Damages and Related Matters. In calculating any
amounts payable pursuant to paragraphs (a) and (b) above, Sellers or the
EqualNet Parties, as the case may be, shall receive credit for (a) any tax
benefit allowable as a result of the facts giving rise to the claim for
indemnification, and (b) any insurance recoveries, and no amount shall be
included for the EqualNet Parties' or Sellers', as the case may be, special,
consequential or punitive damages. Sellers and the EqualNet Parties agree that,
except as specifically set forth in this Agreement (including the Schedules and
Exhibits hereto), no party to this Agreement (including its respective
representatives) has made or shall have liability for any representation or
warranty, express or implied, in connection with the transactions contemplated
by this Agreement, including in the case of Sellers and their respective
representatives, any representation or warranty, express or implied (written or
oral), as to the accuracy or completeness of any information regarding the
Business.
(d) Termination of Representations and Warranties. The parties hereto agree
that the representations and warranties made in this Agreement (other than the
representations and warranties set forth in Sections 7(a), 7(b), 7(c), 7(f),
7(h), 7(i), 7(j), 7(m), 7(o), 7(p), 7(q), 8(a), 8(b), 8(e), 8(g), 8(h) and 8(i))
shall terminate immediately upon consummation of the Closing or upon the
termination of this Agreement pursuant to Section 13, as the case may be, and
that Sellers' representations and warranties contained in Sections 7(f), 7(h),
7(i), 7(j), 7(o), 7(p) and 7(q) shall terminate on the earlier of (i) the
confirmation of plans of reorganization for Sellers and (ii) the 120th day
following the Closing Date. No claim in respect of a breach of any
representation or warranty may be made after the termination thereof. However,
each party hereto shall remain liable for any breach by such party of any
covenant or agreement of such party contained herein.
(e) Notice of Indemnification. In the event any Legal Proceeding shall be
threatened or instituted or any claim or demand shall be asserted by any Buyer
Indemnified Party entitled to indemnification or any Seller Indemnified Party
entitled to indemnification in respect of which payment may be sought under the
provisions of this Section 16 or for breach of any of the representations and
warranties set forth herein, the Buyer Indemnified Party entitled to
indemnification or the Seller Indemnified Party entitled to indemnification
seeking indemnification (the "Indemnitee") shall promptly cause written notice
of the assertion of any such claim of which it has knowledge and which it
reasonably believes to be covered by this indemnity to be forwarded to Sellers
or Buyer, as the case may be (the "Indemnitor"); provided, however, that the
failure to give such notice shall not affect the indemnification provided
hereunder except to the extent the Indemnitor has actually been prejudiced as a
result of such failure. Subject to the foregoing, any notice of a claim by
reason of any of the covenants contained in this Agreement shall state
specifically the covenant with respect to which the claim is made, the facts
giving rise to an alleged basis for the claim, and the amount of the liability
asserted against the Indemnitor by reason of the claim.
(f) Indemnification Procedure for Third Party Claims. Except as otherwise
provided herein, in the event of the initiation of any Legal Proceeding against
an Indemnitee by a third party, the Indemnitor shall have the right after the
receipt of notice, at its option and at its own expense, to be represented by
counsel (which counsel shall be reasonably satisfactory to the Indemnitee) and
to defend against, negotiate, settle or otherwise deal with any proceeding,
claim or demand which relates to any Damages indemnified against hereunder;
provided, however, (i) that the Indemnitor exercises such option in writing
within 30 days of receipt of notice; and (ii) that the Indemnitee may
participate in any such proceeding with counsel of its choice and at its
expense. The parties hereto agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any such Legal
Proceeding, claim or demand. To the extent the Indemnitor elects not to defend
such proceeding, claim or demand, and the Indemnitee defends against or
otherwise deals with any such proceeding, claim or demand, the Indemnitee may
retain counsel (reasonably satisfactory to Indemnitor) at the expense of the
Indemnitor and control the defense of and settlement of such proceeding;
provided, that the Indemnitor shall nevertheless indemnify the Indemnitee for
the full amount of the Damages relating to such proceeding, claim or demand; and
provided, further, that the Indemnitee shall give the Indemnitor twenty (20)
days written notice prior to entering into any such settlement and shall not
settle any such claim without the consent of the Indemnitor, which consent shall
not be unreasonably withheld and which consent shall be deemed to have been
granted if the Indemnitor fails to respond to the Indemnitee's properly noticed
request for such consent. If the Indemnitee shall settle any such proceeding
without the consent of the Indemnitor, the Indemnitee shall thereafter have no
claim against the Indemnitor under this Section 16 with respect to any Damages
occasioned by such settlement.
(g) Notwithstanding anything to the contrary contained herein, no
Indemnitee shall be entitled to recover any amount from any Indemnitor for
breach of such Indemnitor's representations and warranties contained herein
(other than the representations and warranties contained in Section 7(m) and
8(i)) unless the aggregate Damages incurred by the Indemnitee for breach of the
Indemnitor's representations and warranties contained herein exceed $75,000, and
then the Indemnitee shall only be entitled to recover the amount of such excess.
The foregoing limitation shall not apply to a breach of the representations and
warranties contained in Section 7(m) or 8(i) or to a claim for breach of any
covenant or agreement of any party contained herein, for failure by Buyer to pay
any Assumed Liabilities or for any Damages incurred by the EqualNet Parties in
respect of Excluded Liabilities.
(h) Exclusive Remedy. The exclusive remedy available to a party hereto in
respect of the matters covered by Section 16(a) or 16(b) shall be to proceed in
the manner and subject to the limitations contained in this Section 16.
Section 17. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES
THEREOF WHICH WOULD MAKE THE LAWS OF ANY OTHER JURISDICTION APPLICABLE TO THIS
AGREEMENT.
(b) ANY LEGAL ACTION OR PROCEEDING RELATING TO OR ARISING UNDER THIS
AGREEMENT SHALL BE BROUGHT IN THE BANKRUPTCY COURT AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH SELLER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, AND EACH EQUALNET PARTY HEREBY ACCEPTS FOR ITSELF, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE BANKRUPTCY COURT WITH REGARD TO ALL
SUCH ACTIONS OR PROCEEDINGS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH ANY OF THEM MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN THE
BANKRUPTCY COURT.
Section 18. MISCELLANEOUS.
(a) Notices. All notices, requests, demands and other communications
hereunder shall be in writing (including facsimile transmission) and shall be
deemed to have been duly given when received if delivered in person or by
courier, or facsimile transmission or mailed by certified or registered mail,
postage prepaid:
If to any Seller:
c/o SA Telecommunications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
with copies to:
White & Case LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to any EqualNet Party:
c/o EqualNet Holding Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copies to:
▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Copies of all notices given by any party hereunder shall be sent to counsel
for the Creditors' Committee, addressed as follows (but failure to send such
copy shall not affect the validity of any such notices):
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Any party may, by written notice to the other parties, change the address
to which notices to such party are to be delivered or mailed.
(b) Entire Agreement; Amendments. This Agreement, the Confidentiality
Agreement, the Escrow Agreement, the other Transaction Documents and the other
agreements referred to herein and entered into in connection herewith set forth
the entire agreement and understanding of the parties in respect of the
transactions contemplated hereby and supersede all prior agreements,
arrangements and understandings relating to the subject matter hereof between
Sellers and the EqualNet Parties, including the Letter of Intent. No
representation, promise, inducement or statement of intention has been made by
Sellers or the EqualNet Parties that is not embodied in this Agreement or any of
the other agreements referred to herein and entered into in connection herewith,
the Exhibits or Schedules hereto, or the written statements, certificates or
other documents delivered pursuant hereto, and neither Sellers nor the EqualNet
Parties shall be bound by or liable for any alleged representation, promise,
inducement or statement of intention not set forth herein. This Agreement may be
amended or modified only by a written instrument executed by the EqualNet
Parties and Sellers or by their successors and assigns.
(c) Press Releases. Neither Sellers nor the EqualNet Parties shall issue
any press releases or make any public announcements of any of the transactions
contemplated by this Agreement except as may be mutually agreed to in writing by
Sellers and the EqualNet Parties; provided, however, that notwithstanding the
foregoing, Sellers and the EqualNet Parties shall be permitted, upon prior
notice to the other party, to make such disclosures to the public, customers,
employees, carriers or other providers of wholesale telephone services or
Governmental Entities, including filings with the Bankruptcy Court, as they or
their respective counsel shall deem necessary to maintain existing commercial
relationships or comply with, or prevent violation of, applicable laws.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of Sellers and the EqualNet
Parties. Except as provided in Section 3(l), neither party hereto may assign its
rights or obligations hereunder without the prior written consent of the other
party hereto.
(e) No Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended to confer upon any other person or entity other than the
parties hereto and their successors and assigns, any rights or remedies
hereunder and all third-party beneficiary rights are hereby expressly
disclaimed.
(f) Waivers. Any of the terms or conditions of this Agreement may be waived
at any time and from time to time in writing by the party entitled to the
benefits thereof without affecting any other terms or conditions of this
Agreement.
(g) Severability. To the extent that any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
(h) Expenses. Except as otherwise expressly provided in this Agreement or
the Escrow Agreement and regardless of whether the actions contemplated in this
Agreement are consummated, each of the parties hereto shall bear its own
expenses (including, without limitation, fees and disbursements of its counsel,
accountants, financial advisors and other experts), incurred by it in connection
with the preparation, negotiation, execution, delivery and performance of this
Agreement, each of the other documents and instruments executed in connection
with or contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby; provided, however, that in any litigation to
enforce the terms of this Agreement the prevailing party shall be entitled to
recover from the losing party the legal fees and expenses incurred by the
prevailing party in such litigation.
(i) No Recourse. Notwithstanding any provision of this Agreement, each of
the EqualNet Parties, on the one hand, and the Sellers, on the other hand, agree
that neither it nor any person acting on its behalf may assert any claims or
cause of action against any officer or director of the other party or parties or
(except as provided in Section 18(j)) stockholder of such other party or parties
in connection with or arising out of this Agreement or the transactions
contemplated hereby.
(j) Guaranty by EqualNet. EqualNet hereby guaranties the due and punctual
payment and performance by Buyer of all Buyer's obligations hereunder and under
any Transaction Document to which Buyer is a party.
(k) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
Buyer:
EQUALNET CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: COO
EqualNet:
EQUALNET HOLDING CORP.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: COO
Sellers:
SA TELECOMMUNICATIONS, INC.
ADDTEL COMMUNICATIONS, INC.
LONG DISTANCE NETWORK, INC.
NORTH AMERICAN TELECOMMUNICATIONS CORPORATION
U.S. COMMUNICATIONS, INC.
SOUTHWEST LONG DISTANCE NETWORK, INC.
UNIQUEST COMMUNICATIONS, INC.,
Debtors and Debtors-in-possession
By /s/ ▇. ▇. ▇▇▇▇▇▇, ▇▇.
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Name: ▇. ▇. ▇▇▇▇▇▇, ▇▇.
Title: CEO