EXHIBIT 10.2--SWITCH AGREEMENT
SWITCH AGREEMENT
BETWEEN
EQUALNET HOLDING CORP.,
EQ ACQUISITION SUB, INC.
AND
XXXXXX GROUP, LLC
December 2, 1997
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TABLE OF CONTENTS
1. Definitions............................................................1
2. The Acquisition........................................................5
(a) Basic Transaction................................................5
(b) Acquisition Consideration........................................6
(c) The Closing......................................................6
(d) Deliveries at the Closing........................................6
3. Representations and Warranties of EqualNet and Sub.....................6
(a) Organization, Qualification, and Corporate Power.................6
(b) Authorization of Transaction.....................................7
(c) Brokers' Fees....................................................7
(d) No Violation.....................................................7
(e) Consents.........................................................7
(f) Financial Information............................................7
(g) Liabilities......................................................8
(h) Litigation.......................................................8
(i) Compliance with ERISA............................................8
(j) Taxes; Governmental Charges......................................8
(k) Defaults.........................................................9
(l) Compliance with the Law..........................................9
(m) Investment Company Act...........................................9
(n) Public Utility Holding Company Act...............................9
(o) Disclosure.......................................................9
(p) Structure; Capitalization........................................9
(q) Environmental Matters...........................................10
(r) Intellectual Property and Other Intangible Assets...............11
(s) Insurance Coverage..............................................12
4. Representations and Warranties of TWG.................................12
(a) Company Existence...............................................12
(b) Corporate Power and Authorization...............................12
(c) Binding Obligations.............................................12
(d) Brokers' Fees...................................................13
(e) Investment......................................................13
(f) Title...........................................................13
5. Pre-Closing Covenants.................................................13
(a) General.........................................................13
(b) Inspection......................................................13
(c) Notices and Consents............................................13
(d) Notice of Developments..........................................14
(e) Ordinary Course.................................................14
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(f) Changes in Employment Arrangements..............................16
(g) Severance.......................................................16
(h) Other Actions...................................................16
(i) Valid Issuance..................................................16
(j) Government Regulations..........................................16
(k) ERISA...........................................................17
(l) Corporate Existence; Maintenance of Properties..................17
(m) Insurance.......................................................17
(n) Further Assurances..............................................17
(o) Notices of Certain Events.......................................17
(p) Environmental Laws..............................................18
(q) Registration Rights.............................................18
(r) Shareholder Approval; Preparation of Proxy Statements...........18
(s) No Solicitation.................................................19
(t) Listing of Common Stock.........................................20
(u) Acquisition Loan................................................21
6. Conditions to Obligation to Close.....................................21
(a) Conditions to Obligation of TWG.................................21
(b) Conditions to Obligation of EqualNet and Sub....................22
7. Termination...........................................................23
(a) Termination of Agreement........................................23
(b) Effect of Termination...........................................24
8. Remedies for Breaches of This Agreement...............................24
(a) Survival of Representations and Warranties......................24
(b) Indemnification Provisions for Benefit of TWG...................24
(c) Indemnification Provisions for Benefit of EqualNet..............24
(d) Matters Involving Third Parties.................................24
(e) Claims for Indemnification......................................25
(f) Determination of Adverse Consequences...........................26
(g) Other Indemnification Provisions................................26
9. Miscellaneous.........................................................26
(a) Press Releases and Public Announcements.........................26
(b) No Third-Party Beneficiaries....................................26
(c) Succession and Assignment.......................................26
(d) Counterparts....................................................26
(e) Notices.........................................................27
(f) Governing Law...................................................27
(g) Amendments and Waivers..........................................27
(h) Severability....................................................28
(i) Expenses........................................................28
(j) Construction....................................................28
(k) Incorporation of Exhibits, Annexes, and Schedules...............28
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SWITCH AGREEMENT
This Switch Agreement is entered into as of December 2, 1997, by and
between EqualNet Holding Corp., a Texas corporation ("EqualNet"), EQ Acquisition
Sub, Inc., a Delaware corporation and a wholly owned subsidiary of EqualNet
("Sub"), and Xxxxxx Group, LLC, a Texas limited liability company ("TWG").
EqualNet, Sub and TWG are referred to collectively herein as the "PARTIES."
RECITALS
This Agreement contemplates a transaction in which the Sub will purchase
the Switches (the "Acquisition").
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"ACQUISITION LOAN" has the meaning set forth in Section 5(v).
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses and fees, including court
costs and reasonable attorneys' fees and expenses.
"APPLICABLE RATE" means the corporate base rate or prime rate of
interest publicly announced from time to time by Texas Commerce Bank,
National Association, Houston, Texas plus 5.0% per annum.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequences.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday, or a
day that is a banking holiday under United States or Texas Law.
"CAPITALIZED LEASE OBLIGATIONS" shall mean all rental obligations
which, under GAAP in effect on the day such obligation is incurred, are
required to be capitalized on the books of EqualNet or any Subsidiary, in
each case taken at the amount thereof accounted for as indebtedness (net
of interest expense) in accordance with such principles.
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"CLOSING" has the meaning set forth in Section 2(c).
"CLOSING DATE" has the meaning set forth in Section 2(c).
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"CURRENT INDEBTEDNESS" shall mean any obligation for borrowed money
(including notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money) payable
on demand or within a period of one year from the date of creation
thereof; provided, any obligation shall be treated as Funded Indebtedness,
regardless of its term, if such obligation is renewable pursuant to the
terms thereof or of a revolving credit or similar agreement effective for
more than one year after the date of the creation of such obligation, or
may be payable out of the proceeds of a similar obligation pursuant to the
terms of such obligation or of any such agreement. Any obligation secured
by a Lien on, or payable out of the proceeds of production from, property
of EqualNet or any Subsidiary shall be deemed to be Funded or Current
Indebtedness, as the case may be, of EqualNet or such Subsidiary even
though such obligation shall not be assumed by EqualNet or such
Subsidiary.
"EQUALNET COMMON SHARE" means any share of the common stock of
EqualNet, $.01 par value per share.
"ENVIRONMENTAL LAW" shall mean any judgment, decree, order, law,
license, rule, regulation or private agreement (such as covenants,
conditions, and restrictions), of any federal, state or local executive,
legislative, judicial, regulatory or administrative agency, board, or
authority designed to protect the environment, air, surface, water,
groundwater or soil, control pollution, or regulate the exploration,
manufacturing, processing, distributing, use, storage, transport or
handling of Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. ss. 9601 ET SEQ.) ("CERCLA"), the Oil Pollution Act (33 U.S.C. ss.
2701 ET SEQ.) ("OPA"), the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 ET SEQ.) ("RCRA"), and the Federal Water Pollution Control
Act (33 U.S.C. ss. 1251 ET SEQ.) ("CWA"), as such laws have been or
hereafter may be amended or supplemented, and any and all analogous
present and future federal, state, and local laws in jurisdictions where
EqualNet and its Subsidiaries do business.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to
ERISA as in effect at the date of this Agreement and any subsequent
provisions of ERISA amendatory thereof, supplemental thereto or
substituted therefor.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with EqualNet or a Subsidiary of EqualNet
would be deemed to be a "single employer" within the meaning of Section
4001 of ERISA immediately following the acquisition.
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"FUNDED INDEBTEDNESS" shall mean and include without duplication any
obligation payable more than one year from the date of the creation
thereof (including the current portion of Funded Indebtedness), which
under generally accepted accounting principles is shown on the balance
sheet as a liability (including, without limitation, Capitalized Lease
Obligations and excluding reserves for deferred income taxes and other
reserves to the extent that such reserves do not constitute an
obligation).
"GAAP" shall mean generally accepted accounting principles
consistently applied throughout the period or periods in question.
"GOVERNMENTAL AUTHORITY" shall mean any foreign or domestic federal,
state, county, municipal, or other governmental or regulatory authority,
agency, board, body, commission, instrumentality, court, or any political
subdivision thereof.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization, or other direction
or requirement (including but not limited to any of the foregoing which
relate to Environmental Laws, energy regulations and occupational, safety
and health standards or controls) of any Governmental Authority.
"HAZARDOUS MATERIALS" shall mean, collectively, (i) those substances
included within the definition of or identified as "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in or pursuant
to, without limitation, CERCLA, OPA, RCRA, and the Occupational Health and
Safety Act, and in the regulations promulgated pursuant to said laws, all
as amended; (ii) any material, waste or substance which is or contains (A)
petroleum, including crude oil or any fraction thereof, natural gas, or
synthetic gas usable for fuel or any mixture thereof; (B) asbestos; (C)
polychlorinated biphenyls; (D) designated as a "hazardous substance"
pursuant to Section 307 or 311 of the CWA; (E) flammable explosives; or
(F) radioactive materials; and (iii) any such other substances, materials
and wastes which are or become regulated as hazardous or toxic under
applicable local, state or federal law, or which are currently classified
as hazardous or toxic under local, state or federal laws or regulations.
"INDEBTEDNESS" shall mean Funded Indebtedness and/or Current
Indebtedness.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9(d).
"INDEMNIFYING PARTY" has the meaning set forth in Section 9(d).
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to
become due).
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means any
material and adverse effect on, or change to, (i) the assets, liabilities,
financial condition, business, or operations of EqualNet and its
Subsidiaries on a consolidated basis, or (ii) the ability of
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EqualNet and its Subsidiaries on a consolidated basis to carry out their
business as of September 30, 1997.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations system.
"NOTE AND WARRANT PURCHASE AGREEMENT" shall mean that certain
agreement by and among TWG, EqualNet and its Subsidiaries dated as of
October 1, 1997.
"PARTY" has the meaning set forth in the preface above.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor entity
thereto.
"PENSION PLAN" shall mean any multiemployer plan or single-employer
plan, as defined in Section 4001 of ERISA and subject to Title IV of
ERISA, which is maintained after the Acquisition for employees of
EqualNet, any of its Subsidiaries or any ERISA Affiliates.
"PERMITS" shall mean all licenses, permits, exceptions, franchises,
accreditations, privileges, rights, variances, waivers, approvals and
other authorizations (including, without limitation, those relating to
environmental matters) of, by or from Governmental Authorities necessary
for the conduct of the business of EqualNet and its Subsidiaries
immediately prior to the Closing and as proposed to be conducted by
EqualNet and its Subsidiaries after the Closing.
"PERSON" shall mean and include an individual, a partnership, a
joint venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"RELEASE" shall mean release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the environment or into or out of any property, including the
movement of Hazardous Materials through or in the air, surface water, or
groundwater.
"REMEDIAL ACTION" shall mean any action required by any federal,
state or judicial body or administration or agency acting under an
Environmental Law to (i) clean up, remove or treat Hazardous Materials in
the environment; (ii) prevent a Release or threat of Release or minimize
the further Release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or the environment; (iii)
perform post-remedial monitoring and care; or (iv) cure a violation of any
Environmental Law.
"REORGANIZATION AGREEMENT" means the Agreement and Plan of
Reorganization of even date herewith among EqualNet, Sub, Netco
Acquisition, LLC and Netco Acquisition Corp.
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"REPORTABLE EVENT" shall mean an event described in Section 4043(b)
of ERISA with respect to which the 30-day notice requirement has not been
waived by the PBGC.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and
payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings diligently conducted and with respect to which
adequate reserves have been set aside on the books of the taxpayer, and
(c) purchase money liens and liens securing rental payments under capital
lease arrangements.
"SHARES" means the EqualNet Common Shares to be issued by EqualNet
pursuant to Section 2.
"SINGLE-EMPLOYER PENSION PLAN" shall mean a Pension Plan which is a
"single-employer plan" as defined in Section 4001 of ERISA.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement of
even date herewith between EqualNet and TWG.
"SUBSIDIARY" shall mean any corporation or similar entity a majority
of the stock of every class of which, except directors' qualifying shares,
shall, at the time as of which any determination is being made, be owned
by EqualNet, either directly or indirectly.
"SWITCHES" means the telecommunications equipment described in
Exhibit A attached hereto.
"THIRD PARTY CLAIM" has the meaning set forth in Section 9(d).
"WARRANT" has the meaning set forth in Section 2(d).
2. THE ACQUISITION.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of this
Agreement, at the Closing TWG will sell to Sub and Sub will purchase from TWG
the Switches. EXCEPT FOR THE REPRESENTATIONS SET FORTH IN SECTION 4, THE
SWITCHES SHALL BE SOLD TO SUB AS-IS, WHERE-IS AND WITHOUT REPRESENTATION OR
WARRANTY BY TWG AND TWG HEREBY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND
WARRANTIES REGARDING THE SWITCHES INCLUDING, WITHOUT LIMITATION, REGARDING THE
MERCHANTABILITY OF THE SWITCHES OR THE FITNESS OF THE SWITCHES FOR ANY
PARTICULAR PURPOSE.
(b) ACQUISITION CONSIDERATION. The consideration payable to TWG for the
sale of the Switches shall consist of the following:
(i) if the Acquisition Loan has not been obtained pursuant to
Section 5(v), $5,850,000 in cash;
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(ii) if the Acquisition Loan has been obtained, the assumption of
the Acquisition Loan and a cash amount equal to $5,850,000 less the
original principal amount of plus accrued and unpaid interest on the
Acquisition Loan;
(iii) 400,000 shares of EqualNet Common Shares; and
(iv) A warrant issued by EqualNet to TWG for 400,000 EqualNet Common
Shares exercisable at $1.50 per share, such warrant to be in the form of
Exhibit B (the "Warrant").
The purchase price for the Switches does not includes sales taxes that may
be triggered by the sale of the Switches, and any such taxes shall be paid by
Sub or EqualNet.
(c) THE CLOSING. Subject to the satisfaction of the conditions set forth
herein, the closing of the transaction contemplated by this Agreement (the
"CLOSING") shall take place on a Business Day mutually agreeable to EqualNet and
TWG within ten Business Days following the satisfaction of the conditions set
forth in Section 6(a)(iii) (the actual date on which the Closing occurs being
referred to herein as the "Closing Date").
(d) DELIVERIES AT THE CLOSING. At the Closing, (i) EqualNet and Sub will
deliver to TWG the various certificates, instruments and documents referred to
in Section 6(a), (ii) TWG will deliver to EqualNet the various certificates,
instruments and documents referred to in Section 6(b), (iii) EqualNet will
deliver to TWG the stock certificates for the Shares, the Warrant, any cash
consideration required pursuant to Section 2(b), and (if applicable) assumption
documents whereby EqualNet and Sub assume the Acquisition Loan (such documents
to be in form and content satisfactory to the lender of the Acquisition Loan and
TWG); and (iv) TWG will execute and deliver to Sub a xxxx of sale covering the
Switches.
3. REPRESENTATIONS AND WARRANTIES OF EQUALNET AND SUB. EqualNet and Sub
represent and warrant to TWG that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made throughout this Section 3),
except as set forth in the disclosure schedule delivered by EqualNet to TWG on
the date hereof and initialed by authorized representatives of EqualNet, Sub and
TWG (the "Disclosure Schedule").
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. EqualNet and Sub are
corporations duly organized, validly existing, and in good standing under the
laws of the states of Texas and Delaware, respectively. Each of EqualNet and Sub
has the requisite corporate power and authority and all licenses, permit and
authorizations necessary to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it except where the failure to
do so would not have a Material Adverse Effect.
(b) AUTHORIZATION OF TRANSACTION. The boards of directors of EqualNet and
Sub have duly approved this Agreement and the transactions contemplated hereby,
and each of EqualNet and the Sub has requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of EqualNet
and Sub, enforceable in accordance with its terms and conditions except to the
extent
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that enforceability may be limited by bankruptcy, insolvency and other similar
laws affecting the enforcement of creditors' rights generally and except for the
application of general principles of equity. Except as disclosed in Schedule
3(b) of the Disclosure Schedule, neither EqualNet nor the Sub needs to give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any Governmental Authority or any other Person in order to
consummate the transactions contemplated by this Agreement.
(c) BROKERS' FEES. Neither EqualNet nor Sub has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which TWG could
become liable or obligated, and neither EqualNet nor Sub has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(d) NO VIOLATION. Except as disclosed in Schedule 3(d) of the Disclosure
Schedule, neither the execution and delivery of this Agreement, the consummation
of the transactions provided for herein or contemplated hereby nor the
fulfillment by EqualNet or Sub of the terms hereof will (i) violate any
provision of the Articles of Incorporation or the by-laws of EqualNet or the
Certificate of Incorporation of bylaws of Sub, (ii) result in a default, give
rise to any right of termination, cancellation, acceleration or imposition of
any Indebtedness or Security Interest, or require any consent or approval (other
than any consent or approval that has previously been obtained), under any of
the terms, conditions or provisions of any of the Permits or any note, bond,
mortgage, indenture, loan, distribution agreement, license, agreement, lease or
instrument or obligation to which EqualNet or Sub is a party or by which
EqualNet or Sub may be bound (except where the failure to obtain such consent or
approval will not have a Material Adverse Effect), or (iii) violate any law,
judgment, order, writ, injunction, decree, statute, rule, or regulation of any
Governmental Authority applicable to EqualNet or Sub (except where such
violation will not have a Material Adverse Effect).
(e) CONSENTS. Except as disclosed in Section 3(e) of the Disclosure
Schedule, all consents, approvals, qualifications, orders, or authorizations of,
or filings with, any Governmental Authority, and all consents under any material
contracts, agreements, or instruments by which EqualNet or Sub is bound or to
which it is subject, which are required in connection with EqualNet's or Sub's
valid execution, delivery, or performance of this Agreement and the offer, sale
and delivery of the Shares have been obtained or made.
(f) FINANCIAL INFORMATION.
(i) The audited consolidated balance sheet of EqualNet and its
Subsidiaries as at June 30, 1997, and the related consolidated statements
of operations, shareholders' equity and cash flows for the 12-month period
then ended, including in each case the related schedules and notes,
reported on by Ernst & Young LLP, are complete and correct and fairly
present in all material respects the consolidated financial position of
EqualNet and its Subsidiaries as at the date thereof and the consolidated
results of operations and changes in cash flows for such period, in
accordance with GAAP.
(ii) The unaudited consolidated balance sheet of EqualNet and its
Subsidiaries as at September 30, 1997, and the related unaudited
consolidated statements of operations,
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shareholders' equity and cash flows for the three-month period then ended,
as included in EqualNet's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997, true copies of which have been previously
delivered to TWG, are complete and correct and fairly present in all
material respects the consolidated financial position of EqualNet and its
Subsidiaries as at the date thereof and the consolidated results of
operations and changes in cash flows for such period in conformity with
GAAP, subject only to normal year-end audit adjustments.
(iii) Since September 30, 1997, there has been no Material Adverse
Effect.
(g) LIABILITIES. Except for liabilities incurred in the ordinary course of
business, none of EqualNet or any of its Subsidiaries has any material
(individually or in the aggregate) liabilities, direct or contingent (including
but not limited to liability with respect to any Plan) except as disclosed or
referred to in Section 3(g) of the Disclosure Schedule or in the financial
statements referred to in Section 3(f). Neither EqualNet nor any of its
Subsidiaries has any Funded Indebtedness other than Indebtedness disclosed in
Section 3(g) of the Disclosure Schedule.
(h) LITIGATION. Except as disclosed in Section 3(h) of the Disclosure
Schedule or as described in any report filed by EqualNet with the Commission and
delivered to TWG, there is no action, suit, or proceeding, or any governmental
investigation or any arbitration, in each case pending or, to the knowledge of
EqualNet, threatened against EqualNet or any of its Subsidiaries or any material
property of any thereof before any court or arbitrator or any governmental or
administrative body, agency or official (i) which challenges the validity of
this Agreement; or (ii) which, if adversely determined, would have a Material
Adverse Effect.
(i) COMPLIANCE WITH ERISA. Each Plan is in substantial compliance with
ERISA, no Plan has an accumulated or waived funding deficiency within the
meaning of Section 412 or Section 418(B) of the Code, no proceedings have been
instituted to terminate any Plan, and except as disclosed in Section 3(i) of the
Disclosure Schedule, none of EqualNet or any of its Subsidiaries nor any ERISA
Affiliate has incurred any material liability to or on account of a Plan under
ERISA, and except as disclosed in Section 3(i) of the Disclosure Schedule, no
condition exists which presents a material risk to EqualNet or any of its
Subsidiaries of incurring such a liability.
(j) TAXES; GOVERNMENTAL CHARGES. Each of EqualNet and its Subsidiaries has
filed all tax returns and reports required to be filed and has paid all taxes,
assessments, fees, and other governmental charges levied upon any of them or
upon any of their respective properties or income which are due and payable,
including interest and penalties, or has provided adequate reserves for the
payment thereof, except where the failure to so file, pay, or reserve would not
have a Material Adverse Effect.
(k) DEFAULTS. Except as disclosed in Section 3(k) of the Disclosure
Schedule, none of EqualNet or any of its Subsidiaries is in default, nor has any
event or circumstance occurred which, but for the passage of time or the giving
of notice, or both, would constitute a default (in any respect which may have a
Material Adverse Effect) under any loan or credit agreement, indenture,
mortgage, deed of trust, security agreement, or other instrument or agreement
evidencing or pertaining to any Indebtedness of EqualNet or any Subsidiary, or
under any material agreement or instrument to which
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EqualNet or any Subsidiary is a party or by which EqualNet or any Subsidiary is
bound. No default hereunder has occurred and is continuing.
(l) COMPLIANCE WITH THE LAW. None of EqualNet or any of its Subsidiaries
(i) is in violation of any Governmental Requirement or (ii) has failed to obtain
any license, permit, franchise or other governmental authorization necessary to
the ownership of any of their respective properties or the conduct of their
respective business, which violation or failure would have (in the event that
such a violation or failure were asserted by any Person through appropriate
action) a Material Adverse Effect.
(m) INVESTMENT COMPANY ACT. None of EqualNet or any of its Subsidiaries is
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(n) PUBLIC UTILITY HOLDING COMPANY ACT. None of EqualNet or any of its
Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(o) DISCLOSURE. EqualNet's filings made pursuant to the Securities
Exchange Act of 1934, as amended and listed on Section 3(o) of the Disclosure
Schedule hereto as of their respective dates, did not contain any untrue
statement of a material fact and did not omit to state any material fact
necessary in order to make the statements contained therein not misleading in
the light of the circumstances under which they were made.
(p) STRUCTURE; CAPITALIZATION.
(i) Section 3(p) of the Disclosure Schedule contains (except as
noted therein) a complete and correct list of EqualNet's Subsidiaries,
showing, as to each Subsidiary, the correct name thereof, the jurisdiction
of its organization, and the percentage of shares of each class of its
capital stock or similar equity interests outstanding owned by EqualNet
and each other Subsidiary.
(ii) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Section 3(p) of the
Disclosure Schedule as being owned by EqualNet and its Subsidiaries have
been validly issued, are fully paid and nonassessable, and are owned by
EqualNet or such other Subsidiaries free and clear of any Security
Interest (except as otherwise disclosed in Section 3(p) of the Disclosure
Schedule).
(iii) No Subsidiary of EqualNet is a party to, or otherwise subject
to any legal restriction of any agreement (other than this Agreement and
customary limitations imposed by corporate law statutes) restricting the
ability of such Subsidiary to pay dividends out of profits or make any
other similar distributions of profits to EqualNet or any of its
Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.
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(iv) As of the Closing Date and after giving effect to the
transactions contemplated in this Agreement, the Stock Purchase Agreement
and the Reorganization Agreement (i) EqualNet's authorized capital stock
will consist of 55,000,000 shares, of which 50,000,000 will be designated
EqualNet Common Shares and 5,000,000 shares are designated as preferred
stock (2,000 of which will be designated as Series A Convertible Preferred
Stock, $.01 par value per share); (ii) 14,269,357 of EqualNet Common
Shares, issued and outstanding and 5,450,677 shares are or will be
reserved for issuance in connection with EqualNet's outstanding warrants
and stock options all of which, when issued in accordance with the terms
of such warrants and stock options, will be validly issued, fully paid,
and non-assessable; (iii) no shares are owned or held by or for the
account of EqualNet or any of its Subsidiaries (except as disclosed in the
financial statements described in Section 3(f)); (iv) except as disclosed
on Section 3(p) of the Disclosure Schedule, neither EqualNet nor any of
its Subsidiaries has outstanding any stock or other securities convertible
into or exchangeable for any shares of capital stock, any rights to
subscribe for or to purchase or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the
issuance of, any capital stock, or any stock or securities convertible
into or exchangeable for any capital stock which have not been waived
(other than as contemplated by this Agreement); and (v) except as
disclosed in Section 3(p) of the Disclosure Schedule, neither EqualNet nor
any of its Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
capital stock.
(q) ENVIRONMENTAL MATTERS.
(i) Neither any property of any of EqualNet or any of its
Subsidiaries nor the operations conducted thereon violate any order of any
court or Governmental Authority or Environmental Laws which violations
could reasonably be expected to result in liability in excess of $250,000
or which could reasonably be expected to result in obligations in excess
of $250,000 for required Remedial Action, assuming disclosure to the
applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to the relevant property.
(ii) Without limitation of clause (i) above, no property of any of
EqualNet or any of its Subsidiaries nor the operations currently conducted
thereon or by any prior owner or operator of such property or operation,
are in violation of or subject to any existing, pending or, to the
knowledge of EqualNet, threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority or to any
obligations for required Remedial Action under Environmental Laws which
could reasonably be expected to result in liability in excess of $250,000,
or which could reasonably be expected to result in obligations for
required Remedial Action in excess of $250,000 assuming disclosure to the
applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to the relevant property.
(iii) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed in connection with the operation or
use of any and all property of EqualNet and its Subsidiaries, including
but not limited to past or present treatment, storage, disposal
10
or release of Hazardous Materials into the environment, have been duly
obtained or filed, except where the failure to so obtain or file would not
have a Material Adverse Effect.
(r) INTELLECTUAL PROPERTY AND OTHER INTANGIBLE ASSETS.
(i) EqualNet and its Subsidiaries (i) own or have the right to use,
free and clear of all liens, claims, and restrictions, all patents,
trademarks, service marks, trade names, and copyrights, and all
applications, licenses, and rights with respect to the foregoing, and all
trade secrets, including know-how, inventions, designs, processes, works
of authorship, computer programs, and technical data and information
(collectively, "Intellectual Property") used and sufficient for use in the
conduct of its business as now conducted and/or as presently proposed to
be conducted (including, without limitation, the development, manufacture,
operation, and sale of all products and services sold or proposed to be
sold by EqualNet and its Subsidiaries during the next 24 months following
the date of this Agreement) without infringing upon or violating any
right, lien, or claim of others, including, without limitation, former
employees and former employers of its past and present employees, and (ii)
except as described in Section 3(r) of the Disclosure Schedule, is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees, or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service xxxx, trade name, copyright,
or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
(ii) Any and all Intellectual Property of any kind, relating to the
business of EqualNet and its Subsidiaries currently being developed, or
developed in the future, by any employee of EqualNet and its Subsidiaries
while in the employ of EqualNet and its Subsidiaries shall be the property
solely of EqualNet and its Subsidiaries. EqualNet and its Subsidiaries
have taken security measures to protect the secrecy, confidentiality, and
value of all Intellectual Property, which measures are reasonable and
customary in the industry in which EqualNet and its Subsidiaries operate.
EqualNet and its Subsidiaries' employees and other persons who, either
alone or in concert with others, developed, invented, discovered, derived,
programmed, or designed the Intellectual Property (the "Technical
Employees"), or who have knowledge of or access to information about the
Intellectual Property, have entered into a written agreement with EqualNet
or its Subsidiaries, in form and substance satisfactory to EqualNet's
management (the "Proprietary Information Agreement") regarding ownership
and treatment of the Intellectual Property.
(iii) Except as described in Section 3(r) of the Disclosure
Schedule, none of EqualNet or its Subsidiaries has received any
communications alleging that EqualNet or such Subsidiary has violated, or
by conducting its business as proposed would violate, any of the patents,
trademarks, service marks, trade names, copyrights, or trade secrets or
other proprietary rights of any other Person or entity. None of EqualNet's
and its Subsidiaries' employees is obligated under any contract (including
licenses, covenants, or commitments of any nature) or other agreement, or
subject to any judgment, decree, or order of any court or administrative
agency, that would interfere with the use of such employee's best efforts
to promote the interests of EqualNet or its Subsidiaries or that would
conflict with EqualNet's or its Subsidiaries' business as presently
conducted and as proposed to be conducted. Neither
11
the execution nor delivery of this Agreement, nor the carrying on of
EqualNet's or its Subsidiaries' business by the employees of EqualNet and
its Subsidiaries, nor the conduct of EqualNet's or its Subsidiaries'
business as proposed to be conducted, will conflict with or result in a
breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant, or instrument under which any of such
employees is now obligated. It is not, and will not become, necessary to
utilize any inventions of any of EqualNet's or its Subsidiaries' employees
(or people EqualNet and its Subsidiaries currently intends to hire) made
prior to their employment by EqualNet and its Subsidiaries other than
those that have been assigned to EqualNet and its Subsidiaries pursuant to
the Proprietary Information Agreement signed by such employee.
(s) INSURANCE COVERAGE. The properties of EqualNet and its Subsidiaries
are insured in amounts deemed adequate by EqualNet's management against risks
usually insured against by Persons operating businesses similar to those of
EqualNet and its Subsidiaries in the localities where such properties are
located.
4. REPRESENTATIONS AND WARRANTIES OF TWG.
TWG represents and warrants to EqualNet that the statements contained in
this Section 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date was substituted for the date of this Agreement
throughout this Section 4).
(a) COMPANY EXISTENCE. TWG is a limited liability company duly organized,
legally existing, and in good standing under the laws of the State of Texas. TWG
is duly qualified as a limited liability company (or other legal entity) in all
jurisdictions in which the nature of its business activities or its ownership or
leasing of property makes such qualification necessary, except where the failure
to so qualify will not have a Material Adverse Effect.
(b) CORPORATE POWER AND AUTHORIZATION. TWG has the requisite corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. All action on
TWG's part requisite for the due execution, delivery, and performance of this
Agreement has been duly and effectively taken.
(c) BINDING OBLIGATIONS. This Agreement is enforceable in accordance with
its terms (except that enforcement may be subject to (i) any applicable
bankruptcy, insolvency or similar laws generally affecting the enforcement of
creditors' rights and (ii) general principles in equity regardless of whether
such enforcement is sought in a proceeding in equity or at law).
(d) BROKERS' FEES. TWG has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which EqualNet or Sub could become liable or
obligated, and TWG has no any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
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(e) INVESTMENT. TWG (i) understands that the Shares when issued at the
Closing and the shares issued in connection with an exercise of the Warrant will
not be registered under the Securities Act, or under any state securities laws,
and are being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring the Shares and
Warrant when issued at the Closing solely for its own account for investment
purposes and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in business and financial
matters, (iv) has received certain information concerning EqualNet and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Shares and the Warrant, (v) is
able to bear the economic risk and lack of liquidity inherent in holding the
Shares and the Warrant, and (vi) is an Accredited Investor.
(f) TITLE. TWG owns the Switches free and clear of any Security Interest
other than any Security Interest (if any) that encumbered the Switches at the
time the same were sold to TWG pursuant to the instrument attached as Exhibit A.
5. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement (or such earlier time as may be indicated) and the
earlier to occur of the Closing or the termination of this Agreement pursuant to
Section 7:
(a) GENERAL. Each of the Parties will use commercially reasonable best
efforts to take all actions and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 6).
(b) INSPECTION. EqualNet and TWG each agree to permit the other, and its
officers, directors, employees, accountants, counsel and other authorized
representatives, during normal business hours, to inspect its records and to
consult with its officers, employees, attorneys, and agents for the purpose of
determining the accuracy of the representations and warranties hereinabove made
and the compliance with covenants contained in this Agreement. EqualNet and TWG
each agrees that it and its officers and representatives shall hold all data and
information obtained with respect to the other party hereto in confidence and
each further agrees that it will not use such data or information or disclose
the same to others, except to the extent such data or information either are, or
become, published or a matter of public knowledge.
(c) NOTICES AND CONSENTS. To the extent, if any, noted in Section 3(c) of
the Disclosure Schedule as being required, EqualNet will give any notices to
third parties, and will use and cause EqualNet to use all reasonable efforts to
obtain the required consent of its shareholders and any third-parties.
(d) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice to
the other of any material adverse development causing a breach of or
constituting an intervening event with respect to any of its own representations
and warranties in Sections 3 and 4. No disclosure by any Party pursuant to this
Section 5(d), however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
13
(e) ORDINARY COURSE. Except for transactions to which TWG is a party or as
otherwise specifically contemplated by the terms of this Agreement, EqualNet
shall and shall cause its Subsidiaries to carry on their respective businesses
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them, in each case
consistent with past practice, to the end that their goodwill and ongoing
businesses shall be unimpaired to the fullest extent possible at the Closing
Date. Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated by this Agreement, EqualNet shall not, and shall not
permit any of its Subsidiaries to:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned
Subsidiary of EqualNet to EqualNet or to another direct or indirect wholly
owned Subsidiary of EqualNet, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock or (C) purchase, redeem or otherwise acquire any shares of capital
stock of EqualNet or any of its Subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities other than in connection with the exercise of outstanding
stock options and satisfaction of withholding obligations under
outstanding stock options and restricted stock;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities other than, in the
case of EqualNet, the issuance of EqualNet Common Shares upon the exercise
of stock options outstanding on the date of this Agreement in accordance
with their current terms;
(iii) amend its Articles of Incorporation, By-laws or other
comparable charter or organizational document;
(iv) acquire or agree to acquire (A) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or
by any other manner, any business or any corporation, partnership,
association, joint venture, limited liability company or other entity or
division thereof or (B) any assets that, in each case, would be material,
individually or in the aggregate, to EqualNet and its Subsidiaries taken
as a whole, except purchases in the ordinary course of business consistent
with past practice;
(v) sell, lease, mortgage, pledge, grant a Security Interest in or
otherwise encumber or dispose of any of its properties or assets, except
(A) sales or leases in the ordinary course of business consistent with
past practice and (B) other immaterial transactions not in excess of
$250,000 in the aggregate;
(vi) (A) incur indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of EqualNet or any
of its Subsidiaries, guarantee any debt
14
securities of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another Person
or enter into any arrangement having the economic effect of any of the
foregoing, except for working capital borrowings under currently existing
revolving credit facilities incurred in the ordinary course of business,
or (B) make any loans, advances or capital contributions to, or
investments in, any other Person that would be material, individually or
in the aggregate, to EqualNet and its Subsidiaries taken as a whole, other
than by EqualNet to any direct or indirect wholly owned Subsidiary of
EqualNet;
(vii) make or incur any new capital expenditure, which, singly or in
the aggregate with all other capital expenditures, would exceed $100,000;
(viii) make any material election relating to Taxes or settle or
compromise any material tax liability;
(ix) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of EqualNet included in the Commission Documents or
incurred in the ordinary course of business consistent with past practice;
(x) waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which EqualNet or any
of its Subsidiaries is a party;
(xi) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(xii) enter into any new collective bargaining agreement;
(xiii) change any material accounting principle used by it, except
as required by regulations promulgated by the Commission;
(xiv) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement) other than settlements or
compromises: (A) of litigation where the amount paid in settlement or
compromise does not exceed $100,000, or (B) in consultation and
cooperation with TWG, and, with respect to any such settlement, with the
prior written consent of TWG, which consent shall not be unreasonably
withheld;
(xv) except for those contracts and agreements entered into in the
ordinary course of business or with the prior written consent of TWG,
which consent shall not be unreasonably withheld, enter into any joint
venture or partnership contract or agreement; or
(xvi) authorize any of, or commit or agree to take any of, the
foregoing actions.
15
(f) CHANGES IN EMPLOYMENT ARRANGEMENTS. Neither EqualNet nor any of its
Subsidiaries shall adopt or amend (except as may be required by law) any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund
or other arrangement for the benefit or welfare of any employee, director or
former director or employee, increase the compensation or fringe benefits of any
officer of EqualNet or any of its Subsidiaries, or, except as provided in an
existing benefit plan or in the ordinary course of business consistent with past
practice, increase the compensation or fringe benefits of any employee or former
employee or pay any benefit not required by any existing plan, arrangement or
agreement.
(g) SEVERANCE. Neither EqualNet nor any of its Subsidiaries shall grant
any new or modified severance or termination arrangement or increase or
accelerate any benefits payable under its severance or termination pay policies
in effect on the date hereof.
(h) OTHER ACTIONS. EqualNet shall not, and shall not permit any of its
Subsidiaries to, take any action that would, or that could reasonably be
expected to, result (i) in any of the representations and warranties of EqualNet
set forth in this Agreement becoming untrue or (ii) in any of the covenants
contained in this Agreement becoming unperformable. Pending the Closing,
EqualNet will promptly advise TWG of any action or event of which it becomes
aware which has the effect of making incorrect any of such representations or
warranties or which has the effect of rendering unperformable any of such
covenants.
(i) VALID ISSUANCE. EqualNet covenants that the EqualNet Common Shares to
be issued by EqualNet pursuant to Section 2(b) and by EqualNet pursuant to an
exercise of the Warrant will, upon issuance and upon delivery of certificates
representing such shares, be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof.
(j) GOVERNMENT REGULATIONS. EqualNet covenants that it will comply, and
will cause each of its Subsidiaries to comply, with all applicable governmental
restrictions and regulations, the failure to comply with which would have a
material adverse effect on the business or financial condition of EqualNet and
its Subsidiaries taken as a whole, and obtain and maintain in good standing all
licenses, permits and approvals from any and all governments, governmental
commissions, boards or agencies of jurisdictions in which it or any of its
Subsidiaries carries on business required in respect of the operations of
EqualNet or any of its Subsidiaries, the failure to comply with which would have
a Material Adverse Effect.
(k) ERISA. Promptly (and in any event within 30 days) after EqualNet or
any of its Subsidiaries knows or has reason to know that a Reportable Event with
respect to any Pension Plan has occurred, that any Pension Plan is or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA or that EqualNet or any of its Subsidiaries will or may incur any
liability to or on account of a Pension Plan under Sections 4062, 4063, 4064,
4201 or 4204 of ERISA, EqualNet will deliver to TWG a certificate of the chief
financial officer of EqualNet setting forth information as to such occurrence
and what action, if any, EqualNet is required or proposes to take with respect
thereto, together with any notices concerning such occurrences which are (a)
required to be filed by EqualNet or the plan administrator of any such Pension
Plan controlled by EqualNet or its Subsidiaries, with the PBGC or (b) received
by EqualNet or its Subsidiaries from any
16
plan administrator of a multiemployer or other Pension Plan not under their
control. EqualNet shall furnish to TWG a copy of each annual report (Form 5500
Series) of any Pension Plan received or prepared by EqualNet or any of its
Subsidiaries. Each annual report and any notice required to be delivered
hereunder shall be delivered no later than 10 days after the later of the date
such report or notice is filed with the Internal Revenue Service or the PBGC or
the date such report or notice is received by EqualNet or any of its
Subsidiaries, as the case may be.
(l) CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. EqualNet covenants
that it (i) will do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect the corporate existence and material
rights of EqualNet and all of its Subsidiaries, (ii) will cause its properties
and the properties of its Subsidiaries used or useful in the conduct of their
respective businesses to be maintained and kept in good condition, repair and
working order and will use commercially reasonable efforts to cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereto, and (iii) will, and will cause each of its Subsidiaries to, qualify and
remain qualified to conduct business in each jurisdiction where the nature of
the business or the ownership of property by EqualNet or such Subsidiary may
require such qualification and where the failure to so qualify would have a
Material Adverse Effect.
(m) INSURANCE. EqualNet covenants that it will maintain, and will cause
each of its Subsidiaries to maintain, with financially sound and reputable
insurance companies, funds or underwriters, insurance for EqualNet and its
Subsidiaries of the kinds, covering the risks and in the relative proportionate
amounts usually carried by companies conducting business activities similar to
those of EqualNet and its Subsidiaries.
(n) FURTHER ASSURANCES. EqualNet covenants that it shall cooperate with
TWG and execute such further instruments and documents as TWG shall reasonably
request to carry out to the satisfaction of TWG the transactions contemplated by
this Agreement.
(o) NOTICES OF CERTAIN EVENTS. EqualNet shall promptly give notice to TWG
(i) of any default or event of default that has not been cured within any
applicable grace period under any (y) Indebtedness of EqualNet or any of its
Subsidiaries, or (z) contractual obligation of EqualNet or any of its
Subsidiaries or (ii) of any pending or threatened litigation, investigation or
proceeding to which EqualNet or any of its Subsidiaries is or is threatened to
be a party and of which EqualNet has been given notice; provided that any such
default as specified in clause (z) above, litigation, investigation or
proceeding would have a Material Adverse Effect. Any notice delivered pursuant
to this Section 5(o) shall be accompanied by an officer's certificate specifying
the details of the occurrence referred to therein and stating what action
EqualNet proposes to take with respect thereto.
(p) ENVIRONMENTAL LAWS. EqualNet and its Subsidiaries shall comply with
all applicable Environmental Laws the failure to comply with which would have a
Material Adverse Effect. If EqualNet or any Subsidiary shall receive written
notice that there exists a violation of Environmental Law with respect to its
operations or any real property owned, formerly owned, used, or leased thereby,
which violation could have a Material Adverse Effect, EqualNet shall immediately
notify in writing TWG. Furthermore, if EqualNet or any Subsidiary shall receive
written notice that there exists a violation of Environmental Law with respect
to its operations or any real property owned, formerly owned, used or leased
thereby, which violation could have a Material Adverse Effect,
17
EqualNet shall within the time period permitted by the applicable governmental
authority (unless otherwise contested by EqualNet in good faith) remove or
remedy such violation in accordance with all applicable Environmental Laws
unless the Board of Directors of EqualNet makes a good faith determination that
it would be in the best interest of EqualNet to delay the remedy of such
violation, so long as no Material Adverse Effect is suffered by EqualNet or its
Subsidiaries during such delay.
(q) REGISTRATION RIGHTS. EqualNet hereby grants to TWG the same rights to
cause EqualNet to register the EqualNet Common Shares to be issued pursuant to
Section 2(b) and pursuant to an exercise of the Warrant under state and federal
securities laws and all such other rights as set forth in Section 4.1.11 of the
Note and Warrant Purchase Agreement at any time from and after the Closing Date;
provided, such registration rights shall be effective immediately upon the
Closing Date notwithstanding whether or not the Note or Warrants under the Note
and Warrant Purchase Agreement have been converted or exercised, as the case may
be.
(r) SHAREHOLDER APPROVAL; PREPARATION OF PROXY STATEMENTS.
(i) EqualNet shall, as soon as practicable following the execution
and delivery of this Agreement duly call, give notice of, convene and hold
a meeting of EqualNet's shareholders (the "Shareholders Meeting") for the
following purposes: (i) approving this Agreement, the issuance of the
Shares and the transactions contemplated hereby, (ii) ratifying the Note
and Warrant Purchase Agreement and the transactions contemplated thereby,
(iii) approving the Stock Purchase Agreement and the issuance of EqualNet
Common Shares thereunder, (iv) approving Reorganization Agreement, (v)
approving the increase in authorized shares of EqualNet Common Shares to
55,000,000 and (vi) approving the other related transactions. EqualNet
will, through its officers and its Board of Directors, unanimously
recommend to its shareholders the approval and adoption of the foregoing
transactions.
(ii) Promptly following the date of this Agreement, EqualNet shall
prepare and file with the Commission a proxy statement relating to the
Shareholders Meeting (such proxy statement as amended or supplemented from
time to time, the "Proxy Statement"). TWG shall have the right to review
and approve the Proxy Statement prior to EqualNet filing the Proxy
Statement with the Commission. EqualNet will use all commercially
reasonable efforts to cause the Proxy Statement to be mailed to EqualNet's
shareholders as promptly as practicable. EqualNet will notify TWG promptly
of the receipt of any written or oral comments from the Commission or its
staff and of any request by the Commission or its staff for amendments or
supplements to the Proxy Statement or for additional information and will
supply TWG with copies of all correspondence between EqualNet or any of
its representatives, on the one hand, and the Commission or its staff, on
the other hand, with respect to the Proxy Statement.
(iii) EqualNet agrees to cause all shares of capital stock, if any,
owned by it or any other Subsidiary or its officers and directors to be
voted in favor of the approval and adoption of this Agreement, the Note
and Warrant Purchase Agreement, the Stock Purchase Agreement, the
Reorganization Agreement and the other related transactions.
18
(iv) EqualNet will cause its transfer agent to make stock transfer
records relating to EqualNet available to the extent reasonably necessary
to effectuate the intent of this Agreement.
(s) NO SOLICITATION. (i) EqualNet shall not, nor shall it permit any of
its Subsidiaries to, nor shall it authorize or permit any officer, director or
employee of EqualNet or any investment banker, attorney or other advisor, agent
or representative of EqualNet or any of its Subsidiaries to, directly or
indirectly, (1) solicit, initiate or encourage the submission of any takeover
proposal, (2) enter into any agreement (other than confidentiality and
standstill agreements in accordance with the immediately following proviso) with
respect to any takeover proposal, or (3) participate in any discussions or
negotiations regarding, or furnish to any Person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may be reasonably be expected to lead to, any
takeover proposal; provided, in the case of this clause (3), that prior to the
vote of shareholders of EqualNet for approval of the matters referred to in
Section 5(s) (and not thereafter if such matters are approved thereby) to the
extent required by the fiduciary obligations of the Board of Directors of
EqualNet, determined in good faith by a majority of the disinterested members
thereof based on the advice of outside counsel, EqualNet, in response to an
unsolicited superior proposal and a request for information pursuant thereto,
may furnish information to any person or "group" within the meaning of Section
13(d)(3) of the Exchange Act pursuant to a confidentiality agreement. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any officer, director or employee of
EqualNet or any of its Subsidiaries or any investment banker, attorney or other
advisor, agent or representative of EqualNet, whether or not such Person is
purporting to act on behalf of EqualNet or otherwise, shall be deemed to be a
material breach of this Agreement by EqualNet. For purposes of this Section
5(t), "takeover proposal" means (x) any proposal, other than a proposal by TWG
or any of its Affiliates, for a merger or other business combination involving
EqualNet, (y) any proposal or offer, other than a proposal or offer by TWG or
any of its Affiliates, to acquire from EqualNet or any of its Affiliates in any
manner, directly or indirectly, an equity interest in EqualNet or any
Subsidiary, any voting securities of EqualNet or any Subsidiary or a material
amount of the assets of EqualNet and its Subsidiaries, taken as a whole, or (z)
any proposal or offer, other than a proposal or offer by TWG or any of its
Affiliates, to acquire from the shareholders of EqualNet by tender offer,
exchange offer or otherwise more than 20% of the outstanding shares of Common
Shares.
(ii) Neither the Board of Directors of EqualNet nor any committee
thereof shall, except in connection with the termination of this Agreement
pursuant to Section 7, (1) withdraw or modify, or propose to withdraw or modify,
in a manner adverse to TWG the approval or recommendation by the Board of
Directors of EqualNet or any such committee thereof of this Agreement or take
any action having such effect; provided, a statement by the Board of Directors
of EqualNet to its shareholders as contemplated by Rule 14e-2(a) of the Exchange
Act following TWG's receipt of a Notice of Superior Proposal (defined below)
shall not be deemed to constitute a withdrawal or modification of its
recommendation of this Agreement, or (2) approve or recommend, or propose to
approve or recommend, any takeover proposal. Notwithstanding the foregoing, in
the event that the Board of Directors of EqualNet receives a takeover proposal
that, in the exercise of its fiduciary obligations (as determined in good faith
by a majority of the disinterested members thereof based on the advice of
outside counsel), it determines to be a superior proposal, the Board of
Directors of EqualNet may withdraw or modify its approval or recommendation of
this
19
Agreement and may (subject to the following sentence) terminate this Agreement,
in each case at any time after midnight on the fifth Business Day following
TWG's receipt of written notice (a "Notice of Superior Proposal") advising TWG
that the Board of Directors of EqualNet has received a takeover proposal that it
has determined to be a superior proposal, specifying the material terms and
conditions of such superior proposal (including the proposed financing for such
proposal and a copy of any documents conveying such proposal) and identifying
the Person making such superior proposal. EqualNet may terminate this Agreement
pursuant to the preceding sentence only if the shareholders of EqualNet have not
yet voted upon the matters set forth in Section 5(s). Any of the foregoing to
the contrary notwithstanding, EqualNet may engage in discussions with any Person
or group that has made an unsolicited takeover proposal for the limited purpose
of determining whether such proposal is a superior proposal. Nothing contained
herein shall prohibit EqualNet from taking and disclosing to its shareholders a
position contemplated by Rule 14e-2(a) following TWG's receipt of a Notice of
Superior Proposal.
(iii) For purposes of this Section 5(t), a "superior proposal" means
any BONA FIDE takeover proposal to acquire, directly or indirectly, for
consideration consisting of cash, securities or a combination thereof, all of
the EqualNet Common Shares then outstanding or all or substantially all of the
assets of EqualNet and its Subsidiaries, and otherwise on terms that a majority
of the disinterested members of the Board of Directors of EqualNet determines in
its good faith reasonable judgment (based on the advice of a financial advisor
of nationally recognized reputation, a copy of which shall be provided to TWG)
to be more favorable to EqualNet's shareholders than the transactions
contemplated by this Agreement, the Stock Purchase Agreement and the
Reorganization Agreement.
(iv) In addition to the obligations of EqualNet set forth in clause
(ii) above, EqualNet shall promptly advise TWG orally and in writing of any
takeover proposal or any inquiry with respect to or which could lead to any
takeover proposal, the material terms and conditions of such inquiry or takeover
proposal (including the financing for such proposal and a copy of such documents
conveying such proposal), and the identity of the Person making any such
takeover proposal or inquiry.
(t) LISTING OF COMMON STOCK. EqualNet warrants and agrees for the benefit
of the TWG that it will use commercially reasonable efforts to cause the
EqualNet Common Shares to be issued pursuant to Section 2 and pursuant to the
Warrant to be approved for listing, subject to official notice of issuance, on
the NASDAQ National Market as of the Closing Date.
(u) ACQUISITION LOAN. TWG may elect to obtain financing for the Switches
from a bank or other third party lender, such financing to be in a principal
amount not to exceed the $5,850,000 purchase price paid by TWG for the Switches.
Any such financing shall be secured by a first priority lien and security
interest on the Switches and otherwise on terms satisfactory to TWG and EqualNet
(the "Acquisition Loan"). If a guarantee is required to obtain such loan, then
such guarantee shall be satisfactory to TWG in its sole discretion. Among other
conditions that may be applicable, any such guarantee provided by or arranged
for by TWG shall be conditioned upon EqualNet agreeing to pay TWG a guarantee
fee on the outstanding balance of the Acquisition Loan. The loan documents shall
provide that if the closing of the transaction contemplated by this Agreement
occurs,
20
then the Sub and EqualNet shall assume (or otherwise become liable on) the
Acquisition Loan and TWG shall be released from any liability on the Acquisition
Loan effective as of such closing.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF TWG. The obligation of TWG to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:
(i) The representations and warranties set forth in Section 3 shall
be true and correct in all material respects at and as of the Closing
Date.
(ii) EqualNet and Sub shall have performed and complied with all of
their respective covenants hereunder in all material respects through the
Closing.
(iii) EqualNet shall have procured all of the consents of third
parties required in connection with the consummation of the transactions
contemplated by this Agreement, and EqualNet shall have procured the
approval of its shareholders at the Shareholders Meeting for the matters
set forth in Section 5(r).
(iv) The closing under that certain Stock Purchase Agreement dated
November 21, 1997, between EqualNet and TWG and under the Reorganization
Agreement shall have occurred or be occurring simultaneous with the
Closing hereunder.
(v) The issuance of the EqualNet Common Shares and Warrant under
this Agreement shall have complied with all applicable requirements of
federal and state securities laws.
(vi) Subsequent to the date hereof, no legislation, order, rule,
ruling or regulation shall have been enacted or made by or on behalf of
any governmental body, department or agency of the United States, nor
shall any legislation have been introduced and favorably reported for
passage to either House of Congress by any committee of either such House
to which such legislation has been referred for consideration, nor shall
any decision of any court of competent jurisdiction within the United
States have been rendered which would materially and adversely affect an
investment in the EqualNet Common Shares. There shall be no action, suit,
investigation or proceeding pending, or to EqualNet's knowledge,
threatened, against or affecting EqualNet or any of its Subsidiaries, or
any of their respective properties or rights, or any of their affiliates,
associates, officers or directors, before any court, arbitrator or
administrative or governmental body which (i) seeks to restrain, enjoin,
prevent the consummation of or otherwise adversely affect the transactions
contemplated by this Agreement or (ii) questions the validity or legality
of any such transaction or seeks to recover damages or to obtain other
relief in connection with any such transaction, and to EqualNet's
knowledge there shall be no valid basis for any such action, proceeding or
investigation.
(vii) EqualNet shall have duly received all authorizations,
consents, approvals, licenses, franchises, permits and certificates by or
of all federal, state and local governmental
21
authorities, by any third parties pursuant to the terms of any agreement
to which EqualNet is a party or by the National Association of Securities
Dealers, Inc. or any other body or agency with jurisdiction, by contract
or otherwise, over EqualNet, necessary for the issuance of the Shares and
the Warrant by EqualNet and the consummation of the transactions
contemplated hereby, and all thereof shall be in full force and effect at
the time of the Closing.
(viii)There shall not have occurred any Material Adverse Change with
respect to EqualNet and its Subsidiaries since the date hereof.
(ix) EqualNet shall have delivered to TWG a certificate to the
effect that each of the conditions specified above in Section 6(a)(i)-(ix)
is satisfied in all respects.
(x) TWG shall have received from Fulbright & Xxxxxxxx, L.L.P.,
counsel to EqualNet and Sub, an opinion in form and substance as set forth
in Exhibit C attached hereto, addressed to TWG and dated as of Closing
Date.
(xi) EqualNet shall have delivered to TWG the original stock
certificates specified in Section 2(b) representing the Shares and the
original Warrant.
(xii) The EqualNet Common Shares issued pursuant to Section 2 and to
be issued pursuant to the Warrant shall have been approved for listing,
subject to official notice, on the NASDAQ National Market as of the
Closing Date.
All actions to be taken by EqualNet in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to TWG. TWG may waive any
condition specified in this Section 6(a) if it executes a writing so stating at
or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF EQUALNET AND SUB. The obligations of
EqualNet and Sub to consummate the transactions to be performed by it in
connection with the Closing are subject to satisfaction of the following
conditions:
(i) The representations and warranties set forth in Section 4 shall
be true and correct in all material respects at and as of the Closing
Date.
(ii) TWG shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing.
(iii) EqualNet shall have obtained the approval of its shareholders
at the Shareholders Meeting for the matters set forth in Section 5(s).
(iv) There shall be no action, suit, investigation or proceeding
pending, or to EqualNet's knowledge, threatened, against or affecting
EqualNet or any of its Subsidiaries, or any of their respective properties
or rights, or any of their affiliates, associates, officers or directors,
before any court, arbitrator or administrative or governmental body which
(i) seeks
22
to restrain, enjoin, prevent the consummation of or otherwise adversely
affect the transactions contemplated by this Agreement or (ii) questions
the validity or legality of any such transaction or seeks to recover
damages or to obtain other relief in connection with any such transaction.
(v) TWG shall have delivered to EqualNet a certificate to the effect
that each of the conditions specified above in Section 6(b)(i)-(ii) is
satisfied in all respects.
(vi) EqualNet shall have received from Xxxxxx & Xxxxxx L.L.P.,
counsel to TWG, an opinion in form and substance as set forth in Exhibit D
attached hereto, addressed to EqualNet and dated as of the Closing Date.
All actions to be taken by TWG in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to EqualNet. EqualNet may waive
any condition specified in this Section 6(b) if it executes a writing so stating
at or prior to the Closing.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. This Agreement may be terminated only as
provided below:
(i) EqualNet, Sub and TWG may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) Either EqualNet, Sub and TWG may terminate this Agreement by
giving written notice to the other parties prior to the Closing if the
shareholders of EqualNet fail to give any required approval of this
Agreement and the transactions contemplated hereby upon a vote at the
Shareholders meeting or at any adjournment thereof;
(iii) TWG may terminate this Agreement by giving written notice to
EqualNet and Sub at any time prior to the Closing (A) in the event
EqualNet or Sub has breached any representation, warranty or covenant on
their part contained in this Agreement in any material respect, TWG
notified EqualNet or Sub of the breach or occurrence, and the breach or
occurrence has continued without cure for a period until the earlier of 15
days after the notice of breach or the scheduled Closing Date or (B) if
the Closing shall not have occurred on or before February 1, 1998, by
reason of the failure of any condition precedent under Section 6(a)
(unless the failure results primarily from TWG breaching any
representation, warranty or covenant on its part contained in this
Agreement); and
(iv) EqualNet and Sub may terminate this Agreement by giving written
notice to TWG at any time prior to the Closing (A) in the event TWG has
breached any representation, warranty or covenant on its part contained in
this Agreement in any material respect, EqualNet has notified TWG of the
breach, and the breach has continued without cure for a period until the
earlier of 15 days after the notice of breach or the scheduled Closing
Date or
23
(B) if the Closing shall not have occurred on or before February 1, 1998,
by reason of the failure of any condition precedent under Section 6(b)
(unless the failure results primarily from EqualNet or Sub breaching any
representation, warranty or covenant on his part contained in this
Agreement).
(b) EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 7(a), all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party for any breach of a covenant or for any knowing and
willful breach of any representation or warranty).
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Parties contained in Sections 3 and 4 shall survive the
Closing hereunder.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF TWG. If any representation
or warranty set forth in Section 3 or any covenant or agreement set forth herein
made by EqualNet or Sub is breached, then EqualNet agrees to indemnify TWG from
and against any Adverse Consequences that TWG may suffer through and after the
date of the claim for indemnification to the extent resulting from, arising out
of, relating to, or caused by such breach. In addition, Sub assumes and Equal
and Sub agree to indemnify TWG from and against any and all sales taxes due in
connection with the sale and transfer of the Switches from TWG to the Sub.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF EQUALNET. If TWG breaches
any of its representations and warranties in Section 4 or any covenant or
agreement set forth herein made by TWG, then TWG agree to indemnify EqualNet
from and against any Adverse Consequences EqualNet may suffer through and after
the date of the claim for indemnification to the extent resulting from, arising
out of, relating to, or caused by such breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") that may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party
shall promptly notify the Indemnifying Party thereof in writing; provided,
no delay on the part of the Indemnified Party in notifying the
Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of the
former's choice reasonably satisfactory to the Indemnified Party so long
as (1) the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has give notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim, (2) the Indemnifying
Party
24
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (3) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable
relief, (4) settlement of, or an adverse judgment with respect to, the
Third Party Claim is not in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice materially
adverse to the continuing business interests of the Indemnified Party, and
(5) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8(d)(ii), (1) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (2) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (3) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(d)(ii) is or
becomes unsatisfied, however, (1) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, the Indemnifying Party in
connection therewith), (2) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (3) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Section 8.
(e) CLAIMS FOR INDEMNIFICATION.
(i) Whenever any claim shall arise for indemnification under Section
8(b) or 8(c), the Indemnified Party shall describe such claim in a written
notice ("Notice of Claim") to the Indemnifying Party (and for purposes of
this Section 9(e), a notice given pursuant to Section 9(d) shall
constitute a "Notice of Claim") and, when known, specify the facts
constituting the basis for such claim and the amount or an estimate of the
amount of such claim.
(ii) Following the receipt by the Indemnifying Party of each Notice
of Claim, the Indemnifying Party may give the Indemnified Party written
notice ("Notice of Objection") (1) attaching a copy of such Notice of
Claim, (2) stating that, in the opinion of the Indemnifying Party, the
claim described in such Notice of Claim is invalid (either in whole or in
specified part), (3) giving the reasons for the alleged invalidity, and
(4) stating that, based on such alleged invalidity, the Indemnifying Party
objects to the payment of any portion of the amount claimed pursuant to
such Notice of Claim. If a Notice of Objection alleges that
25
a Notice of Claim is only partially invalid, the Indemnifying Party within
30 days of the receipt of such Notice of Claim, agrees to deliver to the
Indemnified Party that portion of the amount claimed pursuant to such
Notice of Claim as to which no objection is made.
(f) DETERMINATION OF ADVERSE CONSEQUENCES. There shall be taken into
account the time cost of money (using the Applicable Rate as the discount rate)
and appropriate adjustments shall be made for tax consequences and insurance in
determining Adverse Consequences for purposes of this Section 8.
(g) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of this Agreement.
9. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of TWG
and EqualNet; provided, either Party may make any public disclosure it believes
in good faith is required by applicable law or the requirements of NASDAQ.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of other Parties.
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be sent by (i) personal delivery
(including courier service), (ii) telecopier during normal business hours to the
number indicated, or (iii) registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below (any communication shall be deemed given upon receipt):
26
IF TO EQUALNET OR SUB:
0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000-0000
Attention: General Counsel
Telecopier No.: 000-000-0000
WITH A COPY TO:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx, Xx.
Telecopier No.: 000-000-0000
IF TO TWG:
0000 Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx and Xxx Xxxxxx
Telecopier No.: 000-000-0000
WITH A COPY TO:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Rell Xxxxxx
Telecopier No.: 000-000-0000
Any Party may change its telecopier number or its address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(f) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
(g) AMENDMENTS AND WAIVERS. No amendments of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(h) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms
27
and provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(i) EXPENSES. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
(j) CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties, and no presumption or burden of proof shall arise
favoring or disfavoring either Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance.
(k) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
28
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
EQUALNET HOLDING CORP.
By: /s/ XXXX XXXXXXX
Name: XXXX XXXXXXX
Title: CEO
EQ ACQUISITION SUB, INC.
By: /s/ XXXXXXX XXXXXX
Name: XXXXXXX XXXXXX
Title: COO
XXXXXX GROUP, LLC
By: /s/ XXXX XXXXXX
Name: XXXX XXXXXX
Title: PRES.
[signature page to Switch Agreement]
29
AMENDMENT TO
SWITCH AGREEMENT
This Amendment to that certain Switch Agreement (the "Agreement") dated
December 2, 1997 by and among EqualNet Holding Corp., EQ Acquisition Sub, Inc.
and Xxxxxx Group, LLC, is entered into as of December 19, 1997 for the following
purposes:
Whereas, subparagraphs 7.(a)(iii) and 7.(a)(iv) of the Agreement allow
each party certain rights to terminate the Agreement of the conditions for
closing of the transactions contemplated in such agreement are not completed by
February 1, 1998; and
Whereas the parties hereto desire to change such date,
Whereas the parties hereto agree as follows: the date "February 1, 1998"
contained in subparagraphs 7.(a)(iii) and 7.(a)(iv) of the Agreement is hereby
changed and amended in each instance to "March 31, 1998".
No other change, amendment or modification of the Agreement is hereby
made. This Amendment is signed effective December 19, 1997. This Amendment may
be executed in multiple counterpart originals, all of which taken together shall
constitute one document. A facsimilie signature of any of the undersigned shall
have the same force and effect as an original signature.
EqualNet Holding Corp. EQ Acquisitions Sub, Inc.
By:/s/ XXXXXXX X. XXXXXX By:/s/ XXXXXXX XXXXXX
Xxxxxxx X. Xxxxxx, C.O.O. Xxxxxxx Xxxxxx, President
Xxxxxx Group, LLC
By:/s/ XXXX XXXXXX
Xxxx Xxxxxx, President
AMENDMENT TO SWITCH AGREEMENT
This Amendment to Switch Agreement ("Amendment") is entered into
between EQUALNET HOLDING CORP. ("EqualNet"), EQ ACQUISITION SUB, INC.
("Sub"), and XXXXXX GROUP, LLC ("TWG") effective as of February 12, 1998.
RECITALS
Each of the entities described in the preamble are parties to a Switch
Agreement dated December 2, 1997 (the "Agreement"). The parties desire to amend
the Agreement in accordance with the terms of this Amendment. Any capitalized
term used but not defined herein shall have the meaning ascribed to such term in
the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the Parties agree as follows:
1. Section 2(b) of the Agreement is amended as follows:
(a) Deletion of the word "and" at the end of clause (iii)
thereof;
(b) Insertion of the following as a new clause (iv):
(iv) subject to the terms of Section 2(e), 1,000,000 of
EqualNet Common Shares; and,
(c) Renumbering the existing clause (iv) to "(v)" and amending
such clause by replacing the reference therein to "$1.50
per share" with "$1.00 per share".
2. Section 2 of the Agreement is amended by adding the following as
subsection (e):
(E) AUTHORIZED SHARES. (i) If the Closing occurs and as of the
Closing Date the number of EqualNet Common Shares authorized under
EqualNet's Articles of Incorporation is not sufficient to permit the
issuance of all or any part of the 1,000,000 shares referred to in Section
2(b)(iv) (the "Unauthorized Shares"), then at the Closing in lieu of
issuing such Unauthorized Shares EqualNet shall execute and deliver to TWG
a warrant the ("Unauthorized Shares Warrant") for the number of shares
constituting the Unauthorized Shares, such warrant to have a term of ten
years, to have an exercise price of $0.01 per share, and to be otherwise
substantially similar to the form of Warrant attached as Exhibit B;
provided, the Unauthorized Share Warrant shall contain a covenant on the
part of EqualNet that it will use its best efforts to cause the unreserved
authorized number of EqualNet Common Shares to be increased to permit the
full exercise of the Unauthorized Share Warrant and a limitation on the
holder of the Unauthorized Share Warrant to the effect that the obligation
of EqualNet to issue shares upon an exercise of
the Unauthorized Share Warrant in whole or in part shall be conditioned
upon EqualNet having a number of unreserved authorized EqualNet Common
Shares at such time sufficient to cover the number of shares relating to
the exercise.
(ii) If by May 31, 1998, the number of EqualNet Common Shares
authorized under EqualNet's Articles of Incorporation has not been
increased to permit a full exercise of the Unauthorized Share Warrant,
then TWG shall have the right and option to repurchase the Switches from
Sub for $5,850,000 in cash by giving written notice of such exercise to
EqualNet and Sub. If such notice is given, then EqualNet and Sub agree
that Sub will convey good title to the Switches to TWG free and clear of
any liens or security interests (other than liens and security interests,
if any, that may encumber the Switches immediately prior to the Closing),
and contemporaneous with such conveyance TWG (x) shall return the
Unauthorized Share Warrant to EqualNet which shall be cancelled and (y)
TWG shall return any shares issued to TWG pursuant to Section 2(b)(iv). In
connection with any such repurchase, TWG shall retain the EqualNet Common
Shares issued to it pursuant to Section 2(b)(iii). During the period from
the Closing Date until the aforementioned May 31, 1998 date, EqualNet and
Sub agree that Sub shall not convey or encumber the Switches, or grant any
options or rights to purchase the Switches, except for liens and security
interests securing any financing used by Sub to acquire the Switches.
(iii) TWG agrees to affirmatively vote all EqualNet Common
Shares issued to TWG pursuant to this Agreement or any other agreement for
such increase in the authorized number of EqualNet Common Shares.
3. Section 5(u) of the Agreement is amended by adding the following
paragraph at the end of such Section:
If the Closing occurs and if necessary for EqualNet to obtain
financing for the acquisition of the Switches, TWG will guarantee
not more than 40% of the principal amount of such financing. No such
guaranty shall impose any obligation or liability on the part of any
member of TWG and TWG shall not be required to pledge any collateral
or provide any other credit enhancement with respect to such
guaranty. The terms of any such guaranty shall be satisfactory to
TWG. If the Closing occurs and TWG gives such guaranty, as
consideration for such guaranty EqualNet shall issue to TWG at the
Closing a warrant (the "Guaranty Warrant") for 500,000 EqualNet
Common Shares exercisable at $1.00 per share, such warrant to have a
term of ten years and to be otherwise substantially similar to the
form of warrant attached as Exhibit B; provided, if at the Closing
the number of EqualNet Common Shares that are authorized under
EqualNet's Articles of Incorporation is not sufficient to permit a
full exercise of the Guaranty Warrant, then the Guaranty Warrant
shall contain a covenant on the part of EqualNet that it will use
its best efforts to cause
2
such unreserved authorized number of shares to be increased to
permit the full exercise of the Guaranty Warrant and a limitation on
the holder of the Guaranty Warrant to the effect that the obligation
of EqualNet to issue shares upon an exercise of the Guaranty Warrant
in whole or in part shall be conditioned upon EqualNet having a
number of unreserved authorized EqualNet Common Shares at such time
sufficient to cover the number of shares relating to the exercise.
4. If the Closing occurs and as of the Closing Date the number of EqualNet
Common Shares authorized under EqualNet's Articles of Incorporation is not
sufficient to permit the issuance of all or any part of the EqualNet Common
Shares covered by the Warrant attached as Exhibit B to the Agreement, then as of
the Closing such Warrant shall be amended to include a covenant on the part of
EqualNet that it will use its best efforts to cause such unreserved authorized
number of shares to be increased to permit the full exercise of the Warrant and
a limitation on the holder of the Warrant to the effect that the obligation of
EqualNet to issue shares upon an exercise of the Warrant in whole or in part
shall be conditioned upon EqualNet having a number of unreserved authorized
EqualNet Common Shares at such time sufficient to cover the number of shares
relating to the exercise.
By entering into this Amendment, TWG does not waive by implication or
otherwise any of the conditions set forth in Section 6.1(a) of the Agreement.
This Amendment contains the entire understanding and agreement between the
Parties with respect to the subject matter of this Amendment and supersedes any
prior or contemporaneous statements, understandings or agreements with respect
to such subject matter.
EQUALNET HOLDING CORP.
By: /s/ XXXXXXX X. XXXXXX
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
EQ ACQUISITION SUB, INC.
By: /s/ XXXXXXX X. XXXXXX
Name: Xxxxxxx X. Xxxxxx
Title: President
XXXXXX GROUP, LLC
By: /s/ XXXX X. XXXXXX
Name: Xxxx X. Xxxxxx
Title: President
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