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EXHIBIT 1
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STOCK AND WARRANT PURCHASE AGREEMENT
By and Among
XXXXX X. XXXXX
and
EQUALNET HOLDING CORP.
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Dated as of April 24, 1998
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TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Common Stock and Warrants; Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.A. Purchase and Sale of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.B. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Purchaser's Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.A. Opinion of the Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.B. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.C. Charter Documents and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.D. Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.E. Letter of Accountants; Accompanying Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 6
3.F. Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.G. No Adverse U.S. Legislation, Action or Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.H. Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.I. Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.K. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Company's Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.A. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.B. Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.C. No Adverse Action or Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.D. Quotation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.A. Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.B. Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.C. Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.D. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.E. Corporate Existence; Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.F. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.G. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.H. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.I. Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.J. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.K. Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.L. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.M. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.N. Certain Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.O. Quotation of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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6. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.A. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.B. Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.C. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.D. Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.E. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.F. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.G. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.H. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.I. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.J. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.K. Taxes; Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.L. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.M. Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.N. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.O. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.P. Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.Q. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.R. Structure; Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.S. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.T. Intellectual Property and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.U. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.A. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.B. Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8. Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.A. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.B. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.A. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.B. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.C. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.D. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.E. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.F. Successors and Assigns; No Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.G. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.H. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.I. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.J. Governing Law; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.K. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.L. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.M. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.N. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.O. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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STOCK AND WARRANT PURCHASE AGREEMENT
This STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made
as of April 24, 1998, by and among XXXXX X. XXXXX (the "Purchaser"), and
EQUALNET HOLDING CORP., a Texas corporation (the "Company").
RECITALS
Purchaser desires to purchase from the Company, and the Company
desires to issue and sell to Purchaser, subject to the terms and conditions set
forth herein, 3,400,000 shares of Common Stock (as hereinafter defined) of the
Company and warrants for the purchase of 170,000 shares of Common Stock.
AGREEMENTS
In consideration of the recitals and the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions. For the purpose of this Agreement, and in
addition to terms defined elsewhere in this Agreement, the following terms
shall have the following meanings. In addition, all terms of an accounting
character not specifically defined herein shall have the meanings assigned
thereto by accounting principles generally accepted in the United States of
America.
"Affiliate" shall mean, with respect to any Person, a Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person, except a Subsidiary of such Person. A Person shall
be deemed to control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Business Day" shall mean any day which is not a Saturday, Sunday or
day on which banks are authorized by law to close in the States of New York and
Texas.
"Capitalized Lease Obligations" shall mean all rental obligations
which, under GAAP in effect on the day such obligation is incurred, are
required to be capitalized on the books of the Company or any Subsidiary, in
each case taken at the amount thereof accounted for as indebtedness (net of
interest expense) in accordance with such principles.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commission" shall mean the United States Securities and Exchange
Commission.
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"Current Indebtedness" shall mean any obligation for borrowed money
(including notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money) payable on demand
or within a period of one year from the date of creation thereof; provided that
any obligation shall be treated as Funded Indebtedness, regardless of its term,
if such obligation is renewable pursuant to the terms thereof or of a revolving
credit or similar agreement effective for more than one year after the date of
the creation of such obligation, or may be payable out of the proceeds of a
similar obligation pursuant to the terms of such obligation or of any such
agreement. Any obligation secured by a Lien on, or payable out of the proceeds
of production from, property of the Company or any Subsidiary shall be deemed
to be Funded or Current Indebtedness, as the case may be, of the Company or
such Subsidiary even though such obligation shall not be assumed by the Company
or such Subsidiary.
"Environmental Law" shall mean any judgment, decree, order, law,
license, rule, regulation or private agreement (such as covenants, conditions,
and restrictions), of any federal, state or local executive, legislative,
judicial, regulatory or administrative agency, board, or authority designed to
protect the environment, air, surface, water, groundwater or soil, control
pollution, or regulate the exploration, manufacturing, processing,
distributing, use, storage, transport or handling of Hazardous Materials,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"),
the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) ("OPA"), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA"), and
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.)
("CWA"), as such laws have been or hereafter may be amended or supplemented,
and any and all analogous present and future federal, state, and local laws in
jurisdictions where the Company and its Subsidiaries do business.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to ERISA
as in effect at the date of this Agreement and any subsequent provisions of
ERISA amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company or a Subsidiary of the Company
would be deemed to be a "single employer" within the meaning of Section 4001 of
ERISA immediately following the acquisition.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Funded Indebtedness" shall mean and include without duplication any
obligation payable more than one year from the date of the creation thereof
(including the current portion of Funded Indebtedness), which under GAAP is
shown on the balance sheet as a liability (including, without limitation,
Capitalized Lease Obligations and excluding reserves for deferred income taxes
and other reserves to the extent that such reserves do not constitute an
obligation).
"GAAP" shall mean generally accepted accounting principles
consistently applied throughout the period or periods in question.
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"Governmental Authority" shall mean any foreign or domestic federal,
state, county, municipal, or other governmental or regulatory authority,
agency, board, body, commission, instrumentality, court, or any political
subdivision thereof.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization, or other direction or requirement
(including but not limited to any of the foregoing which relate to
Environmental Laws, energy regulations and occupational, safety and health
standards or controls) of any Governmental Authority.
"Hazardous Materials" shall mean, collectively, (i) those substances
included within the definition of or identified as "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in or pursuant to,
without limitation, CERCLA, OPA, RCRA, and the Occupational Health and Safety
Act, and in the regulations promulgated pursuant to said laws, all as amended;
(ii) any material, waste or substance which is or contains (A) petroleum,
including crude oil or any fraction thereof, natural gas, or synthetic gas
usable for fuel or any mixture thereof; (B) asbestos; (C) polychlorinated
biphenyls; (D) designated as a "hazardous substance" pursuant to Section 307
or 311 of the CWA; (E) flammable explosives; or (F) radioactive materials; and
(iii) any such other substances, materials and wastes which are or become
regulated as hazardous or toxic under applicable local, state or federal law,
or which are currently classified as hazardous or toxic under local, state or
federal laws or regulations.
"Indebtedness" shall mean Funded Indebtedness and/or Current
Indebtedness.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement or like instrument under the laws of any jurisdiction).
"Material Adverse Effect" or "Material Adverse Change" means any
material and adverse effect on, or change to, (i) the assets, liabilities,
financial condition, business, or operations of the Company and its
Subsidiaries on a Consolidated basis, or (ii) the ability of the Company and
its Subsidiaries on a Consolidated basis to carry out their business as at the
date of this Agreement.
"NASDAQ" shall mean the Nasdaq Stock Market, Inc., National Market
System.
"Officer's Certificate" shall mean a certificate signed in the name of
the delivering party, by its President, one of its Vice Presidents, its
Treasurer or other authorized officer so designated by the receiving party.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor entity thereto.
"Pension Plan" shall mean any multiemployer plan or single-employer
plan, as defined in Section 4001 of ERISA and subject to Title IV of ERISA,
which is maintained after the Acquisition for employees of the Company, any of
its Subsidiaries or any ERISA Affiliates.
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"Permits" shall mean all licenses, permits, exceptions, franchises,
accreditations, privileges, rights, variances, waivers, approvals and other
authorizations (including, without limitation, those relating to environmental
matters) of, by or from Governmental Authorities necessary for the conduct of
the business of the Company and its Subsidiaries immediately prior to the
Closing and as proposed to be conducted by the Company and its Subsidiaries
after the Closing.
"Registration Rights Agreement" means the Registration Rights
Agreement, substantially in the form of Exhibit A hereto, as the same may be
amended, supplemented or otherwise modified from time to time.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a limited
liability company and a government or any department or agency thereof.
"Release" shall mean release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment or into or out of any property, including the movement of
Hazardous Materials through or in the air, surface water, or groundwater.
"Remedial Action" shall mean any action required by any federal, state
or judicial body or administration or agency acting under an Environmental Law
to (i) clean up, remove or treat Hazardous Materials in the environment; (ii)
prevent a Release or threat of Release or minimize the further Release of
Hazardous Materials so they do not migrate or endanger or threaten to endanger
public health or the environment; (iii) perform post-remedial monitoring and
care; or (iv) cure a violation of any Environmental Law.
"Reportable Event" shall mean an event described in Section 4043(b) of
ERISA with respect to which the 30-day notice requirement has not been waived
by the PBGC.
"Responsible Officer" shall mean the President, any Vice President (of
whatever designation), the Treasurer or the Secretary or any officers
performing functions similar to those performed by the persons who at the time
shall be such officers.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Single-Employer Pension Plan" shall mean a Pension Plan which is a
"single-employer plan" as defined in Section 4001 of ERISA.
"Subsidiary" shall mean any corporation or similar entity a majority
of the stock of every class of which, except directors' qualifying shares,
shall, at the time as of which any determination is being made, be owned by the
Company, either directly or indirectly.
"Warrant Agreement" means the Warrant Agreement to be executed by the
Company, substantially in the form of Exhibit B hereto, as the name may be
amended, supplemented, or otherwise modified from time to time.
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"Warrant Certificate" means the certificate evidencing Warrants,
substantially in the form of Exhibit A to the Warrant Agreement, as the same
may be amended, supplemented, or otherwise modified from time to time.
"Warrant Holder" means any holder of the Warrants.
"Warrant Shares" means the shares of common stock issued or issuable
upon the exercise of the Warrants.
"Warrants" means warrants to purchase shares of common stock of the
Company issued to Purchaser pursuant to this Agreement and the Warrant
Agreement and evidenced by the Warrant Certificate.
2. Purchase and Sale of Common Stock and Warrants; Closing.
2.A. Purchase and Sale of Common Stock and Warrants. The
Company, subject to the terms and conditions herein set forth, hereby agrees to
sell to the Purchaser and, subject to the terms and conditions herein set
forth, the Purchaser agrees to purchase from the Company, 3,400,000 shares (the
"Shares") of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), which, if issued as of the date hereof, would constitute approximately
15.9% of the outstanding Common Stock as of the date hereof, and the Warrants.
The aggregate purchase price for the Shares and the Warrants shall be
$3,400,000.
2.B. Closing. The purchase and delivery of the Shares and the
Warrants shall take place at a closing (the "Closing") at the offices of
Fulbright & Xxxxxxxx L.L.P., Houston, Texas, at 10:00 a.m., local time, on
April 24, 1998, or at such other time and place or on such other business day
thereafter as the parties hereto may agree (herein called the "Closing Date").
On the Closing Date, the Company will deliver the Shares and the Warrants in
definitive form, and in such authorized denominations as the Purchaser may
request (such request to be in writing and delivered to the Company at least
forty-eight hours prior to the Closing), against receipt of the purchase price
therefor by wire transfer of immediately available funds, to the Company, or by
such other payment method as is mutually agreed to by the Purchaser and the
Company.
3. Purchaser's Conditions of Closing. The Purchasers'
obligation to purchase and pay for the Shares and the Warrants is subject to
the satisfaction or waiver, on or before the Closing Date, of the conditions
contained in Paragraphs 3A through 3K.
3.A. Opinion of the Company's Counsel. The Purchaser shall have
received from Fulbright & Xxxxxxxx L.L.P., special counsel for the Company, a
legal opinion addressed to the Purchaser and dated the Closing Date
substantially in the form attached hereto as Exhibit C.
3.B. Representations and Warranties. The representations and
warranties contained in Paragraph 6 hereof shall be true in all material
respects on and as of the Closing Date, except to the extent of changes caused
by the transactions herein contemplated; and the Company shall have delivered
to the Purchaser an Officer's Certificate, dated the Closing Date, to such
effect.
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3.C. Charter Documents and By-Laws. The Purchaser shall have
received a certificate, dated the Closing Date, of the Secretary of the Company
attaching (i) a true and complete copy of the Company's Articles of
Incorporation with all amendments thereto, as filed with the Secretary of State
of the State of Texas, (ii) a true and complete copy of the Company's By-Laws
in effect as of such date, (iii) certificates of good standing of the
appropriate officials of the jurisdiction of incorporation of the Company, and
(iv) resolutions of the Board of Directors of the Company authorizing the
execution and delivery of this Agreement and the issuance of the Shares and the
Warrant Shares.
3.D. Purchase Permitted by Applicable Laws. The purchase of and
payment for the Shares and the Warrants shall not be prohibited by any
applicable law or governmental regulation (including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve System)
and such purchase and payment shall not in and of themselves subject the
Purchaser to any material tax, penalty, liability or other materially onerous
condition under or pursuant to any applicable law or governmental regulation.
3.E. Letter of Accountants; Accompanying Officer's Certificate.
The Purchaser shall have received a certificate from the chief financial
officer or chief executive officer of the Company, dated the Closing Date, to
the effect that the interim financial statements at or for the period ended
December 31, 1997, have been prepared using the same accounting policies as
those used in preparing the financial statements for the year ended June 30,
1997 (except as such policies were otherwise required to be changed or modified
by the Company during the interim period by an appropriate Governmental
Authority or the American Institute of Certified Public Accountants ("AICPA")
or similar accounting boards or bodies), and that since June 30, 1997, such
policies have been used in maintaining the Company's accounting books and
records.
3.F. Compliance with Securities Laws. The offering and sale of
the Shares and the Warrants under this Agreement shall have complied with all
applicable requirements of federal and state securities laws.
3.G. No Adverse U.S. Legislation, Action or Decision. Subsequent
to the date hereof, no legislation, order, rule, ruling or regulation shall
have been enacted or made by or on behalf of any governmental body, department
or agency of the United States, nor shall any legislation have been introduced
and favorably reported for passage to either House of Congress by any committee
of either such House to which such legislation has been referred for
consideration, nor shall any decision of any court of competent jurisdiction
within the United States have been rendered which would materially and
adversely affect an investment in the Shares or the Warrants. There shall be
no action, suit, investigation or proceeding pending, or to the Company's
knowledge, threatened, against or affecting the Company or any of its
Subsidiaries or the Purchaser, or any of their respective properties or rights,
or any of their affiliates, associates, officers or directors, before any
court, arbitrator or administrative or governmental body which (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise adversely affect the
transactions contemplated by this Agreement or (ii) questions the validity or
legality of any such transaction or seeks to recover damages or to obtain other
relief in connection with any such transaction, and to the Company's knowledge
there shall be no valid basis for any such action, proceeding or investigation.
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3.H. Approvals and Consents. The Company shall have duly
received all authorizations, consents, approvals, licenses, franchises, permits
and certificates by or of all federal, state and local governmental
authorities, by any third parties pursuant to the terms of any agreement to
which the Company is a party or by the National Association of Securities
Dealers, Inc. or any other body or agency with jurisdiction, by contract or
otherwise, over the Company, necessary for the issuance of the Shares and the
Warrants by the Company and the consummation of the transactions contemplated
hereby, and all thereof shall be in full force and effect at the time of the
Closing. The Company shall have delivered to the Purchaser an Officer's
Certificate, dated the Closing Date, to such effect.
3.I. Registration Rights Agreement. The Company shall have
executed and delivered to the Purchaser the Registration Rights Agreement.
3.X. Xxxxxx Group Waiver. With respect to all securities
convertible into Common Stock, the conversion price of which would otherwise be
adjusted as a result of the transactions contemplated by this Agreement, the
Company shall have received a waiver (the "Xxxxxx Group Waiver") of such
adjustment as it applies to the transactions contemplated by this Agreement
from the holder of such securities and Crane shall have received a copy of such
waiver.
3.K. No Material Adverse Change. There shall not have occurred
any Material Adverse Change with respect to the Company since the date hereof.
4. Company's Conditions of Closing. The Company's obligations
to sell the Shares and the Warrants hereunder is subject to the satisfaction or
waiver, on or before the Closing Date, of the conditions contained in
Paragraphs 4A through 4F.
4.A. Representations and Warranties. The representations and
warranties contained in Paragraph 7 hereof shall be true in all material
respects on and as of the Closing Date; and the Purchaser shall have delivered
to the Company an Officer's Certificate, dated the Closing Date, to such
effect.
4.B. Purchase of Shares. The Purchaser shall have purchased and
paid for the Shares and the Warrants.
4.C. No Adverse Action or Decision. There shall be no action,
suit, investigation or proceeding pending, or to the Company's knowledge,
threatened, against or affecting the Company or any of its Subsidiaries, or any
of their respective properties or rights, or any of their affiliates,
associates, officers or directors, before any court, arbitrator or
administrative or governmental body which (i) seeks to restrain, enjoin,
prevent the consummation of or otherwise adversely affect the transactions
contemplated by this Agreement or (ii) questions the validity or legality of
any such transaction or seeks to recover damages or to obtain other relief in
connection with any such transaction.
4.D. Quotation. The Shares and Warrant Shares shall have been
approved for quotation, subject to official notice of issuance, on the NASDAQ
National Market as of the Closing Date.
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5. Affirmative Covenants. All covenants contained herein shall
be given independent effect.
5.A. Conduct of Business of the Company.
(a) Ordinary Course. Except as set forth in Schedule 5(A)(a),
during the period from the date of this Agreement to the Closing Date, the
Company shall and shall cause its Subsidiaries to carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent therewith, use
commercially reasonable efforts to preserve intact their current officers and
employees and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them, in each case consistent with past practice, to the end that their
goodwill and ongoing businesses shall be unimpaired to the fullest extent
possible at the Closing Date. Without limiting the generality of the
foregoing, except as otherwise expressly contemplated by this Agreement and the
Schedules hereto, without the prior written consent of the Purchaser, the
Company shall not, and shall not permit any of its Subsidiaries to:
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock,
other than dividends and distributions by any direct or indirect
wholly owned Subsidiary of the Company to the Company or a wholly
owned Subsidiary of the Company, (B) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities other than in connection
with the exercise of outstanding stock options and warrants and
satisfaction of withholding obligations under outstanding stock
options and restricted stock;
(ii) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
other than, in the case of the Company, the issuance of shares of
Common Stock upon the exercise of stock options and warrants
outstanding on the date of this Agreement in accordance with their
current terms;
(iii) amend its Articles of Incorporation, By-laws or other
comparable charter or organizational document;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any
corporation, partnership, association, joint venture, limited
liability company or other entity or division thereof or (B) any
assets that, in each case, would be material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a whole,
except purchases in the ordinary course of business consistent with
past practice;
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(v) sell, lease, mortgage, pledge, xxxxx x Xxxx on or
otherwise encumber or dispose of any of its properties or assets,
except (A) sales or leases in the ordinary course of business
consistent with past practice and (B) other immaterial transactions
not in excess of $250,000 in the aggregate;
(vi) (A) incur indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any
debt securities of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
Person or enter into any arrangement having the economic effect of any
of the foregoing, except for working capital borrowings under
currently existing revolving credit facilities incurred in the
ordinary course of business, or (B) make any loans, advances or
capital contributions to, or investments in, any other Person that
would be material, individually or in the aggregate, to the Company
and its Subsidiaries taken as a whole, other than to the Company or
any direct or indirect wholly owned Subsidiary of the Company;
(vii) make or incur any new capital expenditure (other than
purchases in the ordinary course of business), which, singly or in the
aggregate with all other expenditures, would exceed $100,000;
(viii) make any material election relating to Taxes or
settle or compromise any material Tax liability;
(ix) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in the
Commission Documents or incurred in the ordinary course of business
consistent with past practice;
(x) waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which
the Company or any of its Subsidiaries is a party;
(xi) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(xii) enter into any new collective bargaining agreement;
(xiii) change any material accounting principle used by it,
except as required by regulations promulgated by the Commission or as
mandated by AICPA or similar accounting boards or bodies;
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(xiv) settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) other than settlements
or compromises: (A) of litigation where the amount paid in settlement
or compromise does not exceed $100,000, or (B) in consultation and
cooperation with the Purchaser, and, with respect to any such
settlement, with the prior written consent of the Purchaser, which
shall not be unreasonably withheld or delayed;
(xv) except for those contracts and agreements entered
into in the ordinary course of business with the consent of the
Purchaser, which consent shall not be unreasonably withheld or
delayed, enter into any joint venture or partnership contract or
agreement; or
(xvi) authorize any of, or commit or agree to take any of,
the foregoing actions.
(b) Changes in Employment Arrangements. During the period from
the date of this Agreement to the Closing Date, neither the Company nor any of
its Subsidiaries shall adopt or amend (except as may be required by law) any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any employee,
director or former director or employee, increase the compensation or fringe
benefits of any officer of the Company or any of its Subsidiaries, or, except
as provided in an existing benefit plan or in the ordinary course of business
consistent with past practice, increase the compensation or fringe benefits of
any employee or former employee or pay any benefit not required by any existing
plan, arrangement or agreement.
(c) Severance. During the period from the date of this
Agreement to the Closing Date, neither the Company nor any of its Subsidiaries
shall grant any new or modified severance or termination arrangement or
increase or accelerate any benefits payable under its severance or termination
pay policies in effect on the date hereof.
(d) Other Actions. During the period from the date of this
Agreement to the Closing Date, the Company shall not, and shall not permit any
of its Subsidiaries to, take any action that would, or that could reasonably be
expected to, result (i) in any of the representations and warranties of the
Company set forth in this Agreement becoming untrue or (ii) in any of the
covenants contained in this Agreement becoming unperformable. Pending the
Closing, the Company will promptly advise the Purchaser of any action or event
of which they become aware which has the effect of making incorrect any of such
representations or warranties or which has the effect of rendering
unperformable any of such covenants.
5.B. Valid Issuance. The Company covenants that the Shares and
Warrant Shares, will, upon issuance and upon full payment therefor in
accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
5.C. Government Regulations. The Company covenants that it will
comply, and will cause each of its Subsidiaries to comply, with all applicable
governmental restrictions and regulations, the failure to comply with which
would have a material adverse effect on the business or financial condition of
the Company and its Subsidiaries taken as a whole, and obtain and maintain
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in good standing all licenses, permits and approvals from any and all
governments, governmental commissions, boards or agencies of jurisdictions in
which it or any of its Subsidiaries carries on business required in respect of
the operations of the Company or any of its Subsidiaries, the failure to comply
with which would have a material adverse effect on the business or financial
condition of the Company and its Subsidiaries taken as a whole.
5.D. ERISA. Promptly (and in any event within 30 days) after the
Company or any of its Subsidiaries knows or has reason to know that a
Reportable Event with respect to any Pension Plan has occurred, that any
Pension Plan is or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA or that the Company or any of its
Subsidiaries will or may incur any liability to or on account of a Pension Plan
under Sections 4062, 4063, 4064, 4201 or 4204 of ERISA, the Company will
deliver to the Purchaser a certificate of the chief financial officer of the
Company setting forth information as to such occurrence and what action, if
any, the Company is required or proposes to take with respect thereto, together
with any notices concerning such occurrences which are (a) required to be filed
by the Company or the plan administrator of any such Pension Plan controlled by
the Company or its Subsidiaries, with the PBGC or (b) received by the Company
or its Subsidiaries from any plan administrator of a multiemployer or other
Pension Plan not under their control. The Company shall furnish to the
Purchaser a copy of each annual report (Form 5500 Series) of any Pension Plan
received or prepared by the Company or any of its Subsidiaries. Each annual
report and any notice required to be delivered hereunder shall be delivered no
later than 10 days after the later of the date such report or notice is filed
with the Internal Revenue Service or the PBGC or the date such report or notice
is received by the Company or any of its Subsidiaries, as the case may be.
5.E. Corporate Existence; Maintenance of Properties. The Company
covenants that it (i) will do or cause to be done all things reasonably
necessary to preserve and keep in full force and effect the corporate existence
and material rights of the Company and all of its Subsidiaries, (ii) will cause
its properties and the properties of its Subsidiaries used or useful in the
conduct of their respective businesses to be maintained and kept in good
condition, repair and working order and will use commercially reasonable
efforts to cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereto, and (iii) will, and will cause each of
its Subsidiaries to, qualify and remain qualified to conduct business in each
jurisdiction where the nature of the business or the ownership of property by
the Company or such Subsidiary may require such qualification and where the
failure to so qualify would have a material adverse effect on the business or
financial condition of the Company and its Subsidiaries taken as a whole.
5.F. Insurance. The Company covenants that it will maintain, and
will cause each of its Subsidiaries to maintain, with financially sound and
reputable insurance companies, funds or underwriters, insurance for the Company
and its Subsidiaries of the kinds, covering the risks and in the relative
proportionate amounts usually carried by companies conducting business
activities similar to those of the Company and its Subsidiaries.
5.G. Further Assurances. The Company covenants that it shall
cooperate with the Purchaser and execute such further instruments and documents
as the Purchaser shall reasonably request to carry out to the satisfaction of
the Purchaser the transactions contemplated by this Agreement.
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5.H. Reserved.
5.I. Notices of Certain Events. The Company shall promptly give
notice to the Purchaser (i) of any default or event of default that has not
been cured within any applicable grace period under any (y) Indebtedness of the
Company or any of its Subsidiaries, and (z) contractual obligation of the
Company or any of its Subsidiaries or (ii) of any pending or threatened
litigation, investigation or proceeding to which the Company or any of its
Subsidiaries is or is threatened to be a party and of which the Company has
been given notice; provided that any such default as specified in (z) above,
litigation, investigation or proceeding would have a material adverse effect on
the business or financial condition of the Company and its Subsidiaries taken
as a whole. Any notice delivered pursuant to this Paragraph 5I shall be
accompanied by an Officer's Certificate specifying the details of the
occurrence referred to therein and stating what action the Company proposes to
take with respect thereto.
5.J. Reserved.
5.K. Environmental Laws. The Company and its Subsidiaries shall
comply with all applicable Environmental Laws the failure to comply with which
would have a material adverse effect on the business or financial condition of
the Company and its Subsidiaries taken as a whole. If the Company or any
Subsidiary shall receive written notice that there exists a violation of
Environmental Law with respect to its operations or any real property owned,
formerly owned, used, or leased thereby, which violation could have a material
adverse effect on the business or financial condition of the Company and its
Subsidiaries taken as a whole, the Company shall immediately notify in writing
the Purchaser. Furthermore, if the Company or any Subsidiary shall receive
written notice that there exists a violation of Environmental Law with respect
to its operations or any real property owned, formerly owned, used or leased
thereby, which violation could have a material adverse effect on the business
or financial condition of the Company and its Subsidiaries taken as a whole,
the Company shall within the time period permitted by the applicable
governmental authority (unless otherwise contested by the Company in good
faith) remove or remedy such violation in accordance with all applicable
Environmental Laws unless the Board of Directors of the Company determines that
it would be in the best interest of the Company to delay the remedy of such
violation, so long as no material adverse effect is suffered by the Company
during such delay.
5.L. Reserved.
5.M. Reserved.
5.N. Certain Information. To the extent reasonably requested by
Buyer, and at the expense of Buyer, subject to appropriate confidentiality
agreements by Buyer, the Company shall provide such financial information to
the Buyer as may enable the Buyer to determine whether or not the Company is a
Qualified Small Business within the meaning of Section 1202(d) of the Internal
Revenue Code.
5.O. Quotation of Common Stock. The Company warrants and agrees
for the benefit of the Purchaser that it will use commercially reasonable
efforts to cause the Shares and Warrant Shares
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to be approved for quotation, subject to official notice of issuance, on the
NASDAQ National Market as of the Closing Date.
6. Representations and Warranties of the Company. The Company
represents and warrants to the Purchaser as of the date hereof and as of the
Closing Date that:
6.A. Corporate Existence. The Company is a corporation duly
organized, legally existing, and in good standing under the laws of the State
of Texas.
6.B. Corporate Power and Authorization. The Company has the
requisite corporate power and authority to issue the Shares, the Warrants and
the Warrant Shares, to execute, deliver, and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. All action
on the Company's part requisite for the due issuance of the Shares, Warrants
and the Warrant Shares and for the due execution, delivery, and performance of
this Agreement has been duly and effectively taken.
6.C. Reserved.
6.D. Binding Obligations. This Agreement is enforceable in
accordance with its terms (except that enforcement may be subject to (i) any
applicable bankruptcy, insolvency or similar laws generally affecting the
enforcement of creditors' rights (ii) general principles in equity regardless
of whether such enforcement is sought in a proceeding in equity or at law, and
except to the extent enforceability of the indemnification provisions may be
limited under applicable securities laws).
6.E. No Violation. Except as disclosed in Schedule 6E, neither
the execution and delivery of this Agreement, the consummation of the
transactions provided for herein or contemplated hereby nor the fulfillment by
the Company of the terms hereof will (a) violate any provision of the Articles
of Incorporation or the by-laws of the Company, (b) result in a default or
breach, give rise to any right of termination, cancellation, acceleration or
imposition of any Indebtedness or Lien, conflict with or require any consent or
approval (other than any consent or approval that has previously been obtained)
under any of the terms, conditions or provisions of any of the Permits or any
note, bond, mortgage, indenture, loan, distribution agreement, license,
agreement, lease, or instrument or obligation to which the Company is a party
or by which the Company may be bound (except where the failure to obtain such
consent or approval will not have a Material Adverse Effect), or (c) violate
any law, judgment, order, writ, injunction, decree, statute, rule, or
regulation of any Governmental Authority applicable to the Company (except
where such violation will not have a Material Adverse Effect). Subject to the
receipt by the Company of the Xxxxxx Group Waiver, the sale of Shares, the
Warrants and the Warrant Shares will not result in any change in any exercise
price, conversion rate or similar change in price of any convertible or
exchangeable security, option, warrant, right or other derivative security
issued by the Company.
6.F. Consents. Except as disclosed in Schedule 6F, all consents,
approvals, qualifications, orders, or authorizations of, or filings with, any
Governmental Authority, and all consents under any material contracts,
agreements, or instruments by which the Company is bound or to which it is
subject, and required in connection with the Company's valid execution,
delivery, or performance of this Agreement and the offer, sale, and delivery of
the Shares and the consummation of any other transaction contemplated on the
part of the Company have been obtained or made.
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6.G. Financial Information.
(a) The Consolidated balance sheet of the Company and its
Subsidiaries as at June 30, 1997, and the related Consolidated
statements of operations, shareholders' equity and cash flows for the
12-month period then ended, including in each case the related
schedules and notes, reported on by Ernst & Young LLP, are complete
and correct and fairly present in all material respects the
Consolidated financial position of the Company and its Subsidiaries as
at the date thereof and the Consolidated results of operations and
changes in cash flows for such period, in accordance with GAAP.
(b) The unaudited Consolidated balance sheet of the
Company and its Subsidiaries as at December 31, 1997, and the related
unaudited Consolidated statements of operations, shareholders' equity
and cash flows for the three-month period then ended, as included in
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 1997, true copies of which have been previously
delivered to Purchaser, are complete and correct and fairly present in
all material respects the Consolidated financial position of the
Company and its Subsidiaries as at the date thereof and the
Consolidated results of operations and changes in cash flows for such
period in conformity with GAAP, subject only to normal year-end audit
adjustments.
(c) Since June 30, 1997, there has been no Material
Adverse Effect.
6.H. Liabilities. Except for liabilities incurred in the
ordinary course of business, none of the Company or any of its Subsidiaries has
any material (individually or in the aggregate) liabilities, direct or
contingent (including but not limited to liability with respect to any Plan)
except as disclosed or referred to in Schedule 6H or in the financial
statements referred to in Paragraph 6G. Neither the Company nor any of its
Subsidiaries has any Indebtedness other than Indebtedness disclosed in Schedule
6H.
6.I. Litigation. Except as disclosed in Schedule 6I or as
described in any report filed by the Company with the Commission and delivered
to Purchaser, there is no action, suit, or proceeding, or any governmental
investigation or any arbitration, in each case pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries or any
material property of any thereof before any court or arbitrator or any
governmental or administrative body, agency or official (i) which challenges
the validity of this Agreement; or (ii) which, if adversely determined, would
have a Material Adverse Effect.
6.J. Compliance with ERISA. Each Plan is in substantial
compliance with ERISA, no Plan has an accumulated or waived funding deficiency
within the meaning of Section 412 or Section 418(B) of the Code, no proceedings
have been instituted to terminate any Plan, and except as disclosed in Schedule
6J, none of the Company or any of its Subsidiaries nor any ERISA Affiliate has
incurred any material liability to or on account of a Plan under ERISA, and
except as disclosed
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in Schedule 6J, no condition exists which presents a material risk to the
Company or any of its Subsidiaries of incurring such a liability.
6.K. Taxes; Governmental Charges. Each of the Company and its
Subsidiaries has filed all tax returns and reports required to be filed and has
paid all taxes, assessments, fees, and other governmental charges levied upon
any of them or upon any of their respective properties or income which are due
and payable, including interest and penalties, or has provided adequate
reserves for the payment thereof, except where the failure to so file, pay, or
reserve would not have a Material Adverse Effect.
6.L. Defaults. Except as disclosed in Schedule 6L, none of the
Company or any of its Subsidiaries is in default, nor has any event or
circumstance occurred which, but for the passage of time or the giving of
notice, or both, would constitute a default (in any respect which may have a
Material Adverse Effect) under any loan or credit agreement, indenture,
mortgage, deed of trust, security agreement, or other instrument or agreement
evidencing or pertaining to any Indebtedness of the Company or any Subsidiary,
or under any material agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound. No
default hereunder has occurred and is continuing.
6.M. Compliance with the Law. None of the Company or any of its
Subsidiaries (a) is in violation of any Governmental Requirement or (b) has
failed to obtain any license, permit, franchise, or other governmental
authorization necessary to the ownership of any of their respective properties
or the conduct of their respective business, which violation or failure would
have (in the event that such a violation or failure were asserted by any Person
through appropriate action) a Material Adverse Effect.
6.N. Investment Company Act. None of the Company or any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.O. Public Utility Holding Company Act. None of the Company or
any of its Subsidiaries is a "holding company," or a "Subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "Subsidiary
company" of a "holding company," or a "public utility" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
6.P. Fees and Commissions. None of the Company or any of its
Subsidiaries nor, to the knowledge of any of the Company, their Affiliates has
retained a finder, broker, agent, financial advisor, or other intermediary
(collectively, an "Intermediary") in connection with the transactions
contemplated by this Agreement, and the Company agrees to pay and to indemnify
and hold harmless Purchaser from and against liability for any compensation to
any Intermediary and the fees and expenses of defending against such liability
or alleged liability.
6.Q. Disclosure. The Company's filings made pursuant to the
Exchange Act and listed on Schedule 6Q hereto as of their respective dates, did
not contain any untrue statement of a material fact and did not omit to state
any material fact necessary in order to make the statements contained therein
or herein not misleading in the light of the circumstances under which they
were made.
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6.R. Structure; Capitalization.
(a) Schedule 6R contains (except has noted therein) a
complete and correct list of the Company's Subsidiaries, showing, as
to each Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its
capital stock or similar equity interests outstanding owned by the
Company and each other Subsidiary.
(b) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary shown in Schedule 6R as
being owned by the Company and its Subsidiaries have been validly
issued, are fully paid and nonassessable, and are owned by the Company
or such other Subsidiaries free and clear of any Lien (except as
otherwise disclosed in Schedule 6R.
(c) No Subsidiary of the Company is a party to, or
otherwise subject to any legal restriction of any agreement (other
than this Agreement and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends
out of profits or make any other similar distributions of profits to
the Company or any of its Subsidiaries that owns outstanding shares of
capital stock or similar equity interests of such Subsidiary.
(d) As of the Closing Date, immediately after giving
effect to the transactions contemplated in this Agreement (i) the
Company's authorized capital stock will consist of 55,000,000 shares,
of which 50,000,000 are designated Common Stock and 5,000,000 shares
are designated preferred stock (2,000 of which will be designated as
Series A Convertible Preferred Stock, $.01 par value per share and
3,000 of which will be designated as Series B Convertible Preferred
Stock, $.01 par value per share); (ii) the number of Shares of Common
Stock outstanding will be as set forth on Schedule 6R all of which
will be validly issued, fully paid, and non-assessable; (iii) the only
outstanding warrants, options or other securities convertible into
Common Stock will be those set forth (and exercisable on the dates and
at the amounts per share set forth) in Schedule 6R; (iv) no shares of
Common Stock will be owned or held by or for the account of the
Company or any of its Subsidiaries (except as disclosed in the
financial statements described in Xxxxxxxxx 0X); (v) except as
disclosed on Schedule 6R, neither the Company nor any of its
Subsidiaries will have outstanding any stock or other securities
convertible into or exchangeable for any shares of capital stock, any
rights to subscribe for or to purchase or any options for the purchase
of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any other
character relating to the issuance of, any capital stock, or any stock
or securities convertible into or exchangeable for any capital stock
which have not been waived (other than as contemplated by this
Agreement); and (vi) except as disclosed in Schedule 6R, neither the
Company nor any of its Subsidiaries will be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of capital stock.
6.S. Environmental Matters.
(a) Neither any property of any of the Company or any of
its Subsidiaries nor the operations conducted thereon violate any
order of any court or Governmental Authority or
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Environmental Laws which violations could reasonably be expected to
result in liability in excess of $250,000 or which could reasonably be
expected to result in remedial obligations in excess of $250,000,
assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any, pertaining to
the relevant property.
(b) Without limitation of clause (a) above, no property
of any of the Company or any of its Subsidiaries nor the operations
currently conducted thereon or by any prior owner or operator of such
property or operation, are in violation of or subject to any existing,
pending or, to the knowledge of the Company, threatened action, suit,
investigation, inquiry or proceeding by or before any court or
Governmental Authority or to any remedial obligations under
Environmental Laws which could reasonably be expected to result in
liability in excess of $250,000, or which could reasonably be expected
to result in remedial obligations in excess of $250,000 assuming
disclosure to the applicable Governmental Authority of all relevant
facts, conditions and circumstances, if any, pertaining to the
relevant property.
(c) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the operation or use of any and all property of the Company and
its Subsidiaries, including but not limited to past or present
treatment, storage, disposal or release of Hazardous Materials into
the environment, have been duly obtained or filed, except where the
failure to so obtain or file would not have a Material Adverse Effect.
6.T. Intellectual Property and Other Intangible Assets.
(a) The Company and its Subsidiaries (i) own or have the
right to use, free and clear of all liens, claims, and restrictions,
all patents, trademarks, service marks, trade names, and copyrights,
and all applications, licenses, and rights with respect to the
foregoing, and all trade secrets, including know-how, inventions,
designs, processes, works of authorship, computer programs, and
technical data and information (collectively, "Intellectual Property")
used and sufficient for use in the conduct of its business as now
conducted and/or as presently proposed to be conducted (including,
without limitation, the development, manufacture, operation, and sale
of all products and services sold or proposed to be sold by the
Company and its Subsidiaries during the next 24 months following the
date of this Agreement) without infringing upon or violating any
right, lien, or claim of others, including, without limitation, former
employees and former employers of its past and present employees, and
(ii) except described in Schedule 6T, is not obligated or under any
liability whatsoever to make any payments by way of royalties, fees,
or otherwise to any owner or licensee of, or other claimant to, any
patent, trademark, service 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.
(b) Any and all Intellectual Property of any kind,
relating to the business of the Company and its Subsidiaries currently
being developed, or developed in the future, by any employee of the
Company and its Subsidiaries while in the employ of the Company and
its Subsidiaries shall be the property solely of the Company and its
Subsidiaries. The Company
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and its Subsidiaries have taken security measures to protect the
secrecy, confidentiality, and value of all Intellectual Property,
which measures are reasonable and customary in the industry in which
the Company and its Subsidiaries operate. The Company and its
Subsidiaries' employees and other persons who, either alone or in
concert with others, developed, invented, discovered, derived,
programmed, or designed the Intellectual Property (the "Technical
Employees"), or who have knowledge of or access to information about
the Intellectual Property, have entered into a written agreement with
the Company or its Subsidiaries, in form and substance satisfactory to
the Company's management (the "Proprietary Information Agreement")
regarding ownership and treatment of the Intellectual Property.
(c) Except as described in Schedule 6T, none of the
Company or its Subsidiaries has received any communications alleging
that the Company or such Subsidiary has violated, or by conducting its
business as proposed would violate, any of the patents, trademarks,
service marks, trade names, copyrights, or trade secrets or other
proprietary rights of any other Person or entity. None of the
Company's and its Subsidiaries' employees is obligated under any
contract (including licenses, covenants, or commitments of any nature)
or other agreement, or subject to any judgment, decree, or order of
any court or administrative agency, that would interfere with the use
of such employee's best efforts to promote the interests of the
Company or its Subsidiaries or that would conflict with the Company's
or its Subsidiaries' business as presently conducted and as proposed
to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's or its Subsidiaries'
business by the employees of the Company and its Subsidiaries, nor the
conduct of the Company's or its Subsidiaries' business as proposed to
be conducted, will conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is
now obligated. It is not, and will not become, necessary to utilize
any inventions of any of the Company's or its Subsidiaries' employees
(or people the Company and its Subsidiaries currently intends to hire)
made prior to their employment by the Company and its Subsidiaries
other than those that have been assigned to the Company and its
Subsidiaries pursuant to the Proprietary Information Agreement signed
by such employee.
6.U. Insurance Coverage. The properties of the Company and its
Subsidiaries are insured in amounts deemed adequate by the Company's management
against risks usually insured against by Persons operating businesses similar
to those of the Company and its Subsidiaries in the localities where such
properties are located.
7. Representations and Warranties of Purchaser. To induce the
Company to enter into this Agreement, Purchaser represents and warrants to the
Company that:
7.A. Purchase for Investment.
(a) Purchaser is acquiring the Shares and the Warrants
(and the Warrant Shares) for his own account and not with a view to
the public resale or distribution of all or any part thereof in any
transaction which would constitute a "distribution" within the meaning
of the
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Securities Act. Purchaser acknowledges that he does not currently
intend to assign its rights under this Agreement to any third party
prior to the Closing.
(b) Purchaser acknowledges that the Shares and the
Warrants (and the Warrant Shares) have not been registered under the
Securities Act.
(c) Purchaser is an "accredited investor" within the
meaning of Rule 501 under Regulation D promulgated under the
Securities Act, is experienced in evaluating investments in companies
such as the Company, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of his investment and has the ability to bear the entire
economic risk of his investment. Purchaser has made his own
evaluation of his investment in the Common Stock, based upon such
information as is available to him and without reliance upon the
Company or any other person or entity, and Purchaser agrees that
neither the Company nor any other person or entity has any obligation
to furnish any additional information to Purchaser except as expressly
set forth herein.
(d) Purchaser acknowledges that the Shares and the
Warrants (and the Warrant Shares) may not be sold, transferred,
pledged, hypothecated, or otherwise disposed of without registration
under the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Shares the
Warrants or the Warrant Shares, as applicable, or an available
exemption from registration under the Securities Act, the Shares and
the Warrants (and the Warrant Shares) must be held indefinitely.
(e) Purchaser agrees that the Shares and the Warrants
(and the Warrant Shares) shall bear legends in substantially the
following form:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (ii) AN
APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION
WITH SUCH SALE."
7.B. Authorization; No Conflict. Purchaser has all requisite
capacity and authority to enter into this Agreement and to carry out and
perform his obligations under the terms of this Agreement. This Agreement is a
legal, valid, and binding obligation of Purchaser. The execution, delivery,
and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby will not conflict with or
result in a default under the terms of any material contract, agreement,
obligation or commitment applicable to Purchaser.
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8. Termination, Amendment and Waiver.
8.A. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of Purchaser and the
Company;
(b) by either Purchaser or the Company;
(i) if the transaction contemplated by this
Agreement shall not have been consummated on or before May
31, 1998, unless the failure to consummate the transaction
contemplated by this Agreement is the result of a material
breach of this Agreement by the party seeking to terminate
this Agreement; or
(ii) if any permanent injunction or other order of
a court or other competent authority preventing the
consummation of the transactions contemplated by this
Agreement shall have become final and nonappealable.
(c) by Purchaser, if the Company breaches any of its
representations or warranties herein or fails to perform in any
material respect any of its covenants, agreements or obligations under
this Agreement; and
(d) by the Company, if Purchaser breaches any of its
representations or warranties herein or fails to perform in any
material respect any of its covenants, agreements or obligations under
this Agreement.
8.B. Effect of Termination. In the event of termination of this
Agreement by either the Company or Purchaser as provided in Section 8A, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Purchaser or the Company, other than the
provisions of Section 9A.
9. Miscellaneous.
9.A. Fees and Expenses.
(a) Reserved.
(b) The Company agrees, in the event that the
transactions hereby contemplated shall be consummated, to pay all
reasonable out-of-pocket expenses of the Purchaser arising in
connection with the transactions and other agreements and instruments
contemplated by this Agreement, including reasonable fees and expenses
of counsel incurred in connection with the preparation and negotiation
of this Agreement, any other agreement or instrument to be executed
and delivered in connection with this Agreement. The Company agrees
to pay the Purchaser and/or their counsel, as appropriate, all such
fees and expenses incurred up to and including the Closing, at the
Closing.
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9.B. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
9.C. Extension; Waiver. At any time prior to the Closing Date,
the parties may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or the other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) subject to the
proviso of Section 9B, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
9.D. Assignment. This Agreement shall not be assigned by
operation of law or otherwise before the Closing Date, and any attempt at
assignment shall be void; provided, however, that the Purchaser shall be
permitted to assign its rights under this Agreement to a third party
("Purchaser Assignee") before the Closing Date so long as (i) Purchaser retains
its obligations under this Agreement, (ii) such third party becomes a party to
this Agreement and joins Purchaser in the representations and warranties in
Paragraph 7 of this Agreement, and (iii) Purchaser first offers to assign its
rights under this Agreement to a third party designated by the Company
("Company Designee") on substantially similar terms as offered by Purchaser
Assignee and the Company Designee shall fail to respond or purchase such rights
during the offer period (the term of which period the Parties hereto shall
mutually agree).
9.E. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement in connection herewith shall survive the
execution and delivery of this Agreement, regardless of any investigation made
by the Purchaser or on their behalf, and shall terminate on the fourth
anniversary of the Closing Date.
9.F. Successors and Assigns; No Third Party. All covenants and
agreements in this Agreement contained by or on behalf of the parties hereto
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto and, to the extent provided in this Agreement, to the
benefit of any future holders of any Common Stock. Subject to the foregoing,
nothing in this Agreement shall confer upon any person or entity not a party to
this Agreement, or the legal representatives of such person or entity, any
rights or remedies of any nature or kind whatsoever under or by reason of this
Agreement.
9.G. Notices. All communications provided for hereunder shall be
sent by registered or certified mail and, if to the Purchaser, to the
following: Xxxxx X. Xxxxx, 00000 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxx 00000, with a
copy to Xxxx X. Xxxxxx, at Xxxxx & Xxxxx, L.L.P., 0000 Xxx Xxxxx Xxxxx, 000
Xxxxxxxxx, Xxxxxxx, Xxxxx 00000; if to the Company addressed to it at EqualNet
Holding Corp., 0000 Xxxx Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxx 00000-0000, Attn:
General Counsel, with a copy to Fulbright & Xxxxxxxx L.L.P., 0000 XxXxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000, Attn: Xxxxxx X. Xxxx, Xx., or to such other
address with respect to any party as such party shall notify the other in
writing; provided, however, that any such communication to the Company may
also, at the option of the Purchaser, be either delivered to the Company at the
Company's address set forth above
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or to any officer of the Company. Within 5 Business Days after the date of
such mailing (save for any postal interruption) such communication shall be
deemed to have been received.
9.H. Descriptive Headings. The descriptive headings of the
several Paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
9.I. Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Purchaser, the determination of
such satisfaction shall be made by the Purchaser in its sole and exclusive
reasonable judgment exercised in good faith.
9.J. Governing Law; Consent to Jurisdiction. This Agreement
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the law of the State of Texas without giving
effect to the choice of law or conflicts principles thereof. Any legal action
or proceeding with respect to this Agreement may be brought in the courts of
the State of Texas or of the United States of America for the Southern District
of Texas, and, by execution and delivery of this Agreement, the Company hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Company
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Company at its address
set forth in Section 9G, such service to become effect 30 days after such
mailing. Nothing herein shall affect the right of the Purchaser to serve
process in any other manner permitted by law or to commence legal proceedings
or otherwise proceed against the Company in any other jurisdiction.
9.K. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Company
or the Purchaser, the Company or the Purchaser, as applicable, may proceed to
protect and enforce its or their rights either by suit in equity and/or by
action at law.
9.L. Entire Agreement. This Agreement, including the Schedules
hereto, and the other writings referred to herein or delivered pursuant hereto
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
9.M. Severability. Any provisions of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.N. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
which together shall constitute a single agreement.
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9.O. Brokerage. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
9.P Indemnification. The Company hereby agrees to indemnify and
defend the Purchaser and his agents and representatives ("Indemnified Persons")
from and hold each of them harmless against any and all losses, liabilities,
claims or damages, arising from any investigation, litigation or other
proceeding related primarily to this Agreement and brought or threatened by any
third-party that is wholly unaffiliated with such Indemnified Person including,
without limitation, amounts paid in settlement, court costs and the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the negligence,
gross negligence or willful misconduct of the Indemnified Persons). All
obligations provided for in this Paragraph 9P shall survive any termination of
this Agreement. Promptly after receipt by an Indemnified Person of notice of
any claim or the commencement of any action, such Indemnified Person shall, if
any claim in respect there is to be made against the Company under this
Paragraph 9P, notify the Company in writing of the claim or the commencement of
that action. The Company shall not be liable for any settlement of any such
claim or action involving the payment of monetary damages effected without its
prior written consent, which consent the Company may grant or withhold in its
sole and absolute discretion. If any such claim or action shall be brought
against an Indemnified Person and it shall notify the Company thereof and the
Company acknowledges its liability in writing pursuant to this paragraph, the
Company shall be entitled to assume and control the defense thereof, subject to
the right of the Indemnified Person to participate in the defense at its own
cost.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
duly executed and delivered as of the date first above written.
EQUALNET HOLDING CORP.
By: /s/ XXXXXX X. XXXXXX
----------------------------------------
Xxxxxx X. Xxxxxx, President and
Chief Executive Officer
/s/ XXXXX X. XXXXX
-------------------------------------------
XXXXX X. XXXXX
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