UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Sections 13 and 15(d) of
the Securities Exchange Act of 1934
March 4, 1998
Date of Report (Date of earliest event reported)
SA TELECOMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-18048 75-228519
(State Of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
1600 Promenade Center, 15th Floor
Richardson, TX 75080
(Address of Principal Executive Office)
(972) 690-5888
(Registrant's Telephone Number, Including Area Code)
(Not Applicable)
(Former Name or Former Address,
if Changed Since Last Report)
<PAGE>
Item 5. Other Events
As previously reported, SA Telecommunications, Inc. and its
subsidiaries (collectively, the "Company") entered into a purchase agreement
(the "Purchase Agreement") with EqualNet Corporation (the "Buyer") and EqualNet
Holding Corp. ("EqualNet" and, collectively with the Buyer, the "EqualNet
Parties") which contemplates a sale of substantially all of the Company's assets
(the "Assets") to the Buyer (the "Sale"). Also as previously reported, the
closing of the Sale is subject to the satisfaction of a number of conditions
precedent, several of which have now been satisfied.
First, on March 4, 1998, the Company held an auction at which
interested parties were able to make higher and better offers for the Assets. At
the auction, the Company received offers from two bidders other than the
EqualNet Parties. In response to these other bids, the EqualNet Parties enhanced
their offer contained in the Purchase Agreement. As a result, the Company and
the Official Committee of Unsecured Creditors jointly determined that the
EqualNet Parties' enhanced offer was the highest and best offer for the Assets.
A copy of the Amendment to the Purchase Agreement, which Amendment reflects the
terms of the EqualNet Parties' enhanced offer, is attached hereto as Exhibit
2.1, and incorporated herein by reference.
Second, on March 6, 1998, a hearing to approve the Sale was held in
the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). On March 9, 1998, the Bankruptcy Court entered an order approving the
Sale (the "Sale Approval Order"). A copy of the Sale Approval Order is attached
hereto as Exhibit 99.1, and incorporated herein by reference.
Closing of the Sale remains contingent upon the receipt by EqualNet of
shareholder approval and several other conditions. However, the holders of at
least 51% of the common stock of EqualNet have agreed to vote their shares in
favor of the purchase by the Buyer of the Company's Assets.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits:
2.1 Amendment dated as of March 10, 1998 to Purchase Agreement dated
as of January 15, 1998.
99.1 Order (i) Authorizing the Sale of Substantially All Assets of the
Debtors Free and Clear of Liens, Claims and Encumbrances, Subject
to the Terms of a Purchase Agreement and Subject to Higher and
Better Offers; (ii) Approving a Purchase Agreement and; (iii)
Approving the Assumption and Assignment of Certain Executory
Contracts and Unexpired Leases in Connection with the Sale of the
Debtors' Assets.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SA TELECOMMUNICATIONS, INC.
DATE: March 13, 1998 By: /s/ Albert B. Gordon, Jr.
------------------------
Albert B. Gordon, Jr.
Chief Executive Officer
AMENDMENT
dated as of March 10, 1998
to
PURCHASE AGREEMENT
dated as of January 15, 1998
WHEREAS, EqualNet Corporation, a Delaware corporation ("Buyer"),
EqualNet Holding Corp., a Texas Corporation ("EqualNet"), and SA
Telecommunications, Inc., a Delaware corporation ("SA Telecom"), and its
subsidiaries named as Sellers on the signature pages hereto (SA Telecom and such
subsidiaries collectively, "Sellers") are parties to a Purchase Agreement dated
as of January 15, 1998 (the "Purchase Agreement," capitalized terms used but not
defined herein having the meaning specified in the Purchase Agreement) pursuant
to which Buyer agreed to purchase from Sellers, and Sellers agreed to sell to
Buyer, on the terms and conditions set forth therein, the assets of Sellers
specified therein (the "Assets");
WHEREAS, on March 4, 1998, Sellers conducted an auction of their
assets (the "Auction") pursuant to a Second Amended Order (i) Authorizing and
Scheduling Auction at Which the Sellers May Sell Substantially All Their Assets
Free And Clean Of All Liens, Claims, and Encumbrances; (ii) Approving Proposed
Auction Procedures; (iii) Scheduling Hearing and Objections Deadline on Motion
of Debtors to Sell Assets; and (iv) Approving Notice and Service of the Sale
approval Motion (the "Amended Scheduling Order"), which Amended Scheduling Order
was entered by the Bankruptcy Court on February 23, 1998;
WHEREAS, at the Auction Buyer enhanced its offer contained in the
Purchase Agreement for the Assets;
WHEREAS, the Buyer's offer, as so enhanced, was determined by Sellers
and the Creditors' Committee to be the highest and best offer for the Assets;
and
WHEREAS, Buyer has agreed to provide Sellers with a
debtor-in-possession financing in the amount of $1,500,000, available commencing
no later than March 10, 1998, on the terms and conditions set forth in the
Stipulation dated as of March 10, 1998, among Sellers, Buyer and Greyrock,
subject to the approval by the Bankruptcy Court of the sale of the Assets to
Buyer pursuant to the Purchase Agreement as modified hereby;
WHERAS, Sellers, Buyer and EqualNet wish to Amend the Purchase
Agreement to reflect said enhancement of Buyer's offer and to clarify other
matters;
NOW, THEREFORE, Buyer, EqualNet and Sellers hereby agree as follows:
1. The definitions of the terms "Adjusted Pre-Closing Monthly Minute",
"Pre-Closing Monthly Minutes", "Post-Closing Monthly Minutes", "Closing Date
Market Value", "Billable Minute" "Escrow Agreement", "Escrowed Shares", and
"Willis Group" contained in Section 1 of the Purchase Agreement are hereby
deleted.
2. The definition of the term "Conversion Rate" set forth in Section 1
of the Purchase Agreement is amended to read in its entirety as follows:
"'Conversion Rate' shall mean the number of shares of Common Stock
that the holder of Preferred Shares shall receive upon conversion of one
Preferred Share. Subject to adjustment as set forth in the Preferred Stock
Provisions for the effect of dilutive and concentrative events affecting
the Common Stock, one Preferred Share shall be convertible into ten shares
of Common Stock."
3. There is inserted the following new definitions in Section 1 of the
Purchase Agreement, in appropriate alphabetical sequence:
"'EqualNet DIP Financing' shall mean the debtor-in-possession
financing in the principal amount of $1,500,000 provided or to be provided
by EqualNet to Sellers."
All references in the Purchase Agreement to the "Willis Group DIP Financing"
shall be to the EqualNet DIP Financing and all references in the Purchase
Agreement to the "Willis Group" shall be to EqualNet.
4. The definition of the term "Revenue Amount" set forth in Section 1
of the Purchase Agreement is amended to read it its entirety as follows:
"Revenue Amount" shall mean the gross revenue of Sellers, determined
in accordance with GAAP, during the months of December 1997 and January
1998; provided, however, that if the gross revenue of Sellers during the
month of February 1998 is less than 92% of the average monthly gross
revenue of Sellers during the months of December 1997 and January 1998,
then "Revenue Amount" shall mean the gross revenue of Sellers, determined
in accordance with GAAP, during the months of January and February 1998."
5. Section 3(d) of the Purchase Agreement is amended by adding the
following new sentence at the end thereof:
"If on the Closing Date the amount of principal and interest owing by
Sellers in respect of the EqualNet DIP Financing is less than $1,500,000
(the amount by which it is less herein called the "Available EqualNet DIP
Amount") , then (i) an amount equal to the lesser of (x) $300,000 or (y)
the Available EqualNet DIP Amount shall be applied by Sellers to the
repayment of the Greyrock Financing and (ii) EqualNet shall issue to SA
Telecom, as agent for Sellers, a promissory note in an amount equal to the
amount specified in clause (i) above, which promissory note (x) shall bear
interest at the rate of 10% per annum, payable quarterly on the last day of
each calender quarter and at maturity, (y) shall mature on the first
anniversary of the issuance thereof and (z) after the payment in full of
the Greyrock Financing, shall be prepaid on the last day of each calender
quarter by an amount equal to 25% of the original principal amount of such
promissory note (but the entire outstanding balance of such promissory note
and all accrued interest thereon shall, in any event, be due and payable on
the first anniversary of the issuance date thereof). The amount applied to
the payment of the Greyrock Financing pursuant to clause (i) of the
preceding sentence shall be in addition to the payment required to be made
by Sellers to Greyrock pursuant to Section 9(n)."
6. All references in the Purchase Agreement to "Scheduling Order"
shall be to the Amended Scheduling Order.
7. Clause (i) of Section 4(b) of the Purchase Agreement is amended to
read in its entirety as follows:
"(i) Buyer shall pay the cash portion of the Consideration by a wire
transfer in immediately available funds to such account or accounts as SA
Telecom, as agent for Sellers, shall specify by a notice in writing to
Buyer at least two business days prior to the Closing Date;"
8. Sections 4(d) and 5(b) and the last sentence of Section 5(a)(v) of
the Purchase Agreement are hereby deleted.
9. Section 5(a) of the Purchase Agreement is amended by deleting the
words "fifteen days after the Closing Date" set forth therein and substituting
therefor the words "April 1, 1998."
10. The third sentence of Section 8(b) of the Purchase Agreement is
amended to read as follows:
"No other corporate proceedings on the part of any EqualNet Party, other
than the approval of the shareholders of EqualNet, are necessary to
authorize this Agreement, the other Transaction Documents, the issuance of
the Preferred Shares to Sellers pursuant hereto or the transactions
contemplated herein or therein."
11. Section 9 of the Purchase Agreement is amended by adding the
following new paragraph (n) at the end thereof:
"(n) Greyrock Overadvances. On the Closing Date the Sellers shall pay
to Greyrock, for application to the Greyrock Financing, an amount equal to
the lesser of (i) the Post-Petition Overadvances or (ii) $73,969. Such
payment shall be in addition to the payment, if any, on the Greyrock
Financing required to be made pursuant to the penultimate sentence of
Section 3(d)."
12. Sections 10(e), 11(g), 11(i) and 12(e) of the Purchase Agreement
are hereby deleted.
13. Section 11 of the Purchase Agreement is hereby amended by adding
the following new paragraph (n) at the end thereof:
"(n) Shareholder Approval The shareholders of EqualNet shall have
approved the transactions contemplated by this Agreement."
14. Section 12 of the Purchase Agreement is amended by adding at the
end thereof the following new paragraph (k):
"(k) EqualNet DIP Financing. Buyer shall have provided to Sellers the
EqualNet DIP Financing."
15. Clause (v) of Section 13(a) is amended to read as follows:
"(v) by any party (unless such party is in default under this
Agreement) if the Sale Order is not entered on or before March 13, 1998 or
if the Closing does not occur on or before May 31, 1998."
16. Section 14(b) of the Purchase Agreement is amended by (a) changing
the dates "February 13, 1998" and "March 31, 1998" set forth therein to,
respectively, "March 13, 1998" and "May 31, 1998"; and (b) adding the following
new clause (iv) to the proviso at the end of said paragraph 14(b):
"or (iv) if Buyer fails to purchase the Assets because the conditions
specified in Sections 10(d) or 11(n) are not satisfied or Sellers refuse to
sell the Assets to Buyer because the condition specified in Section 12(k)
is not satisfied."
17. Exhibit B to the Purchase Agreement is hereby deleted.
18. Provided that Sellers turn over to the EqualNet Parties
operational control of Sellers' business on or before March 17, 1998 pursuant to
a Management and Services Agreement to be entered into by Sellers and the
EqualNet Parties, all Operating Losses and Operating Income (as such terms are
defined in such Management and Services Agreement) of Sellers accruing on or
after April 1, 1998, and until the Closing Date, shall be for the account of
Buyer. Buyer shall pay to Sellers or shall reimburse Sellers for the amount of
any such Operating Losses, and Sellers shall pay to Buyer the amount of any such
Operating Income, all in accordance with the terms of said Management and
Services Agreement. Any such payment by Buyer shall be in addition to the
Consideration to be paid by Buyer for the Assets pursuant to Section 3(d) of the
Purchase Agreement.
19. The Sellers have been advised by the EqualNet Parties that in
connection with the solicitation of the consent of EqualNet's shareholders to
the transactions contemplated by the Purchase Agreement, an audit of Sellers'
financial statements may be required. In the event such audit is required,
Sellers shall permit an accounting firm selected by the EqualNet Parties to
conduct such audit, at the sole cost and expense of the EqualNet Parties, and
shall cooperate fully with such accounting firm in its performance of such
audit.
20. Except as amended hereby, the Purchase agreement and the
respective rights and obligations of the parties thereunder, shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
Buyer:
EQUALNET CORPORATION
By: /s/ Michael L. Hlinak
----------------------------
Name: Michael L. Hlinak
Title: COO
EqualNet:
EQUALNET HOLDING CORP.
By: /s/ Michael L. Hlinak
----------------------------
Name: Michael L. Hlinak
Title: COO
<PAGE>
Sellers:
SA TELECOMMUNICATIONS, INC.
ADDTEL COMMUNICATIONS, INC.
LONG DISTANCE NETWORK, INC.
NORTH AMERICAN TELECOMMUNICATIONS CORPORATION
U.S. COMMUNICATIONS, INC.
SOUTHWEST LONG DISTANCE NETWORK, INC.
UNIQUEST COMMUNICATION, INC.
Debtors and Debtors-in-possession
By: /s/ A.B. Gordon, Jr.
----------------------------
Name: A.B. Gordon, Jr.
Title: CEO
Willis Group LLC and Mr. Zane Russell (collectively, the
"Shareholders"), being the holders, collectively, of not less than 51% of the
outstanding shares of the common stock of EqualNet Holding Corp., hereby confirm
to the Sellers referred to in the foregoing Amendment that the Shareholders will
vote their respective shares of EqualNet Holding Corp. stock in favor of the
transactions contemplated by the Purchase Agreement referred to in, and as
amended by, the foregoing Amendment.
WILLIS GROUP LLC
By: /s/ Mark Willis
----------------------------
Name: Mark Willis
Title: President
/s/ Zane Russell
---------------------------
Zane Russell
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: )
)
SA TELECOMMUNICATIONS, INC., ) Chapter 11
ADDTEL COMMUNICATIONS, INC., )
LONG DISTANCE NETWORK, INC., )
NORTH AMERICAN ) Case Nos. 97-2395 (PJW)
TELECOMMUNICATIONS ) through 97-2401 (PJW)
CORPORATION, )
UNIQUEST COMMUNICATIONS, INC., )
U.S. COMMUNICATIONS, INC., ) Jointly Administered
and SOUTHWEST LONG DISTANCE )
NETWORK, INC., )
)
Debtors. )
ORDER (i) AUTHORIZING THE SALE OF SUBSTANTIALLY
ALL ASSETS OF THE DEBTORS FREE AND CLEAR OF LIENS,
CLAIMS, AND ENCUMBRANCES, SUBJECT TO THE TERMS OF
A PURCHASE AGREEMENT AND SUBJECT TO HIGHER AND
BETTER OFFERS; (ii) APPROVING A PURCHASE AGREEMENT
AND; (iii) APPROVING THE ASSUMPTION AND ASSIGNMENT OF
CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES
IN CONNECTION WITH THE SALE OF THE DEBTORS' ASSETS
--------------------------------------------------
Upon consideration of the Motion for an Order (i) Authorizing the Sale
of Substantially All Assets of the Debtors Free and Clear of Liens, Claims, and
Encumbrances, Subject to the Terms of a Purchase Agreement and an Escrow
Agreement and Subject to Higher and Better Offers; (ii) Approving a Purchase
Agreement and an Escrow Agreement; and (iii) Approving the Assumption and
Assignment of Certain Executory Contracts and Unexpired Leases in Connection
With the Sale of the Debtors' Assets (the "Sale Approval Motion") filed by SA
Telecommunications, Inc., and certain of its directly and indirectly
wholly-owned subsidiaries, AddTel Communications, Inc., Long Distance Network,
Inc., North American Telecommunications Corporation, Uniquest Communications,
Inc., U.S. Communications, Inc. and Southwest Long Distance Network, Inc.,
debtors and debtors in possession (collectively, the "Debtors" or the
"Sellers"); and a final hearing on the Sale Approval Motion having been held
before this Court on March 6, 1998 (the "Sale Approval Hearing"); and upon the
record made at the Sale Approval Hearing; and it appearing that the relief
requested in the Sale Approval Motion is in the best interests of the Debtors
and their estates; and after due deliberation; and capitalized terms not defined
herein having the same meaning as ascribed to them in the Sale Approval Motion;
and sufficient cause appearing therefor; and sufficient notice having been
given; and no adverse interest being represented, the Court makes the following
findings of fact and conclusions of law:
Findings of Fact and Conclusions of Law<F1.
----------------------------------------
- ------------------------
<F1> Findings of fact shall be construed as conclusions of law and conclusions
of law shall be construed as findings of fact when appropriate. See Bankruptcy
Rule 7052.
------------------------
A. This Court has jurisdiction over this matter pursuant to 28 U.S.C.
ss.ss. 157 and 1334. Venue is proper in this district pursuant to 28 U.S.C.
ss.ss. 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. ss.
157(b)(2).
B. On November 19, 1997 (the "Petition Date"), the Debtors filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with the
United States Bankruptcy Court for the District of Delaware (the "Court").
Pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code, the Debtors
continue to operate their business and manage their affairs as debtors in
possession.
C. In recognition of the need to effect a prompt sale process and to
fund any required deposits and/or expedited payment terms, the Debtors have had
negotiations with a number of interested parties in order to solicit offers for
the purchase of the Debtors' business and for the additional financing in order
to fund any necessary deposits and/or expedited payments to the third party
carriers.
D. Based upon these negotiations, on January 15, 1998, the Debtors
entered into a purchase agreement (as amended from time to time, the "Purchase
Agreement") with the EqualNet Corporation (the "Buyer") and EqualNet Holding
Corp. ("EqualNet" and, collectively with the Buyer, the "EqualNet Parties")
which contemplates a sale of substantially all of the Debtors' assets to the
Buyer (the "Proposed Sale"), subject to appropriate auction procedures.
E. On December 24, 1997, Sellers filed a motion with the Court to
approve (a) the Break-Up Fee, Expense Reimbursement and Minimum Overbid
provisions of the Purchase Agreement and (b) debtor-in-possession financing to
be provided by The Willis Group LLC (the "Payment Motion"). On January 8, 1998,
the Court entered an order approving the Break-Up Fee, Expense Reimbursement,
and Minimum Overbid portions of the Payment Motion (the "Partial Payment
Order").
F. On December 24, 1997, Sellers filed a motion (the "Scheduling
Motion") with the Court for an order scheduling an auction sale of the Assets
(the "Auction"), setting forth the procedures for the Auction (the "Auction
Procedures"), and scheduling a hearing to approve the Proposed Sale (the "Sale
Approval Hearing") and on January 9, 1998 the Court entered an order granting
the Scheduling Motion (the "Scheduling Order").
G. On or about January 14, 1998, the Sellers served the Notice of
Hearing to Consider Motion for an Order (i) Approving Purchase Agreement Among
the Debtors, EqualNet Corporation and EqualNet Holding Corp. that Provides for
the Sale of Substantially All Assets of the Debtors Free and Clear of Liens,
Claims and Encumbrances; and (ii) Assuming and Assigning Certain Executory
Contracts and Unexpired Leases in Connection with Sale (the "Sale Approval
Hearing Notice") on (i) the Office of the United States Trustee, (ii) counsel to
the Committee, (iii) counsel to Greyrock, (iv) counsel to the EqualNet Parties
and The Willis Group LLC, (v) all known creditors, including the record holders
as of November 19, 1997 of any unsecured notes, (vi) all persons filing a notice
of appearance and requesting notice in these Chapter 11 cases, (vii) all bidders
and others expressing interest in purchasing the Assets, (viii) all other
secured parties, (ix) all parties to executory contracts or unexpired leases,
(x) all governmental agencies having an interest, (xi) all other parties in
interest required to be served by the Bankruptcy Rules and (xii) the beneficial
owners who are also record holders of outstanding preferred and common stock of
SA Telecommunications, Inc. (the "Equity Securities") and each broker, bank and
other institution or nominee who is the record holder as of January 5, 1998 of
the Equity Securities but who is not the beneficial owner of such securities.
H. On January 16, 1998, Sellers filed the Sale Approval Motion
requesting approval of the sale of the Assets to the Buyer pursuant to the
Purchase Agreement, a form of escrow agreement among the Debtors, the EqualNet
Parties and an escrow agent (the "Escrow Agreement"), and the transactions
contemplated thereby.
I. On or about February 20, 1998, the Debtors filed the Second Amended
Order (i) Authorizing and Scheduling Auction at Which the Debtors May Sell
Substantially All Their Assets Fee and Clear of Liens, Claims, and Encumbrances;
(ii) Approving Proposed Auction Procedures; (iii) Scheduling Hearing and
Objection Deadline on Motion of Debtors to Sell Assets; and (iv) Approving
Notice and Service of the Sale Approval Motion (the "Second Amended Scheduling
Order") with the Court and on February 23, 1998 the Court entered the Second
Amended Scheduling Order.
J. Pursuant to the Auction Procedures, the Debtors distributed bid
solicitation packages to potential purchasers. On March 4, 1998, the Debtors
conducted an auction pursuant to the Second Amended Scheduling Order.
K. At the Auction, Buyer enhanced its offer contained in the Purchase
Agreement, including the removal of the escrow arrangement provided for in the
Purchase Agreement. A summary of the revised offer of the Buyer is set forth on
Exhibit A attached hereto.
L. The Debtors and the Committee jointly determined in the reasonable
exercise of their business judgment that the revised offer of the Buyer
submitted at the Auction is the highest and best offer for the purchase of the
Debtors' Assets.
M. The Sale Approval Hearing Notice constituted good, proper and
sufficient notice and was given in accordance with the requirements of the
Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy
Rules for the District of Delaware to all parties required to receive notice of
the sale, and no other or further notice is required.
N. Approval of the Purchase Agreement and the consummation of the sale
of the Assets contemplated thereby is in the best interests of the Debtors'
estates and their creditors. The Court finds that the Debtors have articulated
good and sufficient business reasons justifying the sale of the Assets pursuant
to section 363 of the Bankruptcy Code and have met the requirements of section
363 of the Bankruptcy Code. Such business reasons include, but are not limited
to, the facts that (a) there are exigent business reasons for the Proposed Sale
and (b) the Assets have been adequately marketed and will lose value absent a
sale.
O. The Debtors and Committee both agree, in the exercise of their
respective sound business judgment, that the Purchase Agreement represents the
highest and best offer for the Assets received following a fair and equitable
auction process in accordance with the Scheduling Order and that the
consideration to be paid by Buyer to the Debtors pursuant to the terms of the
Purchase Agreement is fair and reasonable and constitutes reasonably equivalent
value under the Bankruptcy Code and under the laws of the United States, any
State, territory or possession, or the District of Columbia.
P. The transfer of the Assets by Sellers to the Buyer is a legal,
valid and effective transfer of the Assets notwithstanding any requirement for
approval or consent by any Person.
Q. The decision to assume and assign the executory contracts and
unexpired leases listed on Schedule 3(a)(iv) to the Purchase Agreement, which is
attached hereto as Exhibit B (the "Designated Contracts"), is based on the
reasonable exercise of the Debtors' business judgment and the needs of the Buyer
and is in the best interests of the Debtors' estates. The Buyer has demonstrated
adequate assurance of future performance with respect to the Designated
Contracts.
R. All requirements of Bankruptcy Code section 363(b) and (f) and any
other applicable federal or state law relating to the sale of the Assets
contemplated by the Purchase Agreement have been satisfied (or the Buyer has
affirmatively waived the requirement for such satisfaction). The Sellers have
good and valid title to the Assets and have the authority to enter into the
Purchase Agreement and all other documents necessary to carry out the transfer
of the Assets. As such, the title to the Assets shall be transferred to the
Buyer or its designees free and clear of (x) all liens, claims and encumbrances
of any kind, other than Permitted Liens (as defined in the Purchase Agreement),
and (y) all rights or options to effect any forfeiture, modification or
termination of Sellers' or Buyer's interest in the Assets by reason of such
transfer and any such Liens and claims which existed prior to the sale of the
Assets shall attach to the Consideration paid to the Sellers. All such liens,
claims and encumbrances (other than Permitted Liens) shall attach to the
proceeds of the sale.
S. The Purchase Agreement and the transactions contemplated thereby
are the product of substantial, extensive and good faith arm's length
negotiations that were conducted at all times by the EqualNet Parties and the
Debtors at arm's length, without collusion, and in good faith within the meaning
of section 363(m) of the Bankruptcy Code. None of the conduct of the EqualNet
Parties or the Sellers shall cause the application of Section 363(n) of the
Bankruptcy Code to these transactions. As such, the EqualNet Parties and the
Debtors are entitled to the protections afforded by section 363(m) of the
Bankruptcy Code.
T. Payments of the Debtors' obligations under the Purchase Agreement
and as set forth in the record of the Sale Approval Hearing constitute
administrative expenses under sections 503(b) and 507(a)(1) of the Bankruptcy
Code and are immediately payable if and when the obligations of the Debtors
arise under the Purchase Agreement, and other related agreements and as set
forth in the record of the Sale Approval Hearing, without further order of the
Court.
U. The Debtors and the EqualNet Parties intend that if the Preferred
Stock being issued to the Debtors under the Purchase Agreement is distributed to
the Debtors' creditors and/or equity security holders in exchange for claims
against, or interests in, or administrative expenses in these Chapter 11 cases,
the EqualNet Parties shall be deemed to be persons that participate in good
faith in the offer, issuance or sale of a security offered or sold under the
plan or plans of the Debtors within the meaning of section 1125(e) of the
Bankruptcy Code.
V. The Debtors and the EqualNet Parties intend that (i) the Preferred
Stock shall be offered and sold under a plan of reorganization in accordance
with Section 1145(a)(1) of the Bankruptcy Code, (ii) the EqualNet Parties shall
be deemed "successors to" the Debtors solely for purposes of and within the
meaning of section 1145(a)(1) of the Bankruptcy Code, and (iii) the offer and
sale of the Preferred Stock shall be exempt from the registration requirements
of all applicable securities laws pursuant to section 1145 of the Bankruptcy
Code.
W. Section 1146(c) of the Bankruptcy Code shall apply to (i) the sale
of the Assets pursuant to the Purchase Agreement, (ii) the issuance of the
Preferred Stock to the Sellers and (iii) any distribution of the Preferred Stock
pursuant to a Chapter 11 plan of reorganization.
X. All conclusions of law made or announced by the Court in connection
with the Scheduling Order are incorporated herein.
IT IS THEREFORE ORDERED THAT:
1. Pursuant to sections 105, 363 and 365 of the Bankruptcy Code and
Bankruptcy Rules 2002, 6004, 6006, 9007 and 9008, the relief requested in the
Sale Approval Motion, as modified by the Purchase Agreement and the
announcements in open court, is granted.
2. The Debtors are hereby authorized and directed to sell and to
transfer the Assets to the Buyer upon consummation and closing of the sale upon
the terms and subject to the conditions set forth in the Purchase Agreement and
this Order.
3. All objections, responses, and requests for continuance concerning
the Sale Approval Motion are resolved in accordance with the terms of this Order
and as set forth in the record of the Sale Approval Hearing and to the extent
any such objection response or request for continuance was not otherwise
withdrawn, waived, or settled, they and all reservations and rights therein, are
overruled and denied.
4. The terms and conditions of the Purchase Agreement are approved and
the sale of the Assets pursuant to the Purchase Agreement, and the transactions
contemplated therein, have met the requirements of, and are, therefore,
authorized under, section 363(b) of the Bankruptcy Code.
5. The transfer of the Assets by Sellers to Buyer is a legal, valid
and effective transfer of the Assets notwithstanding any requirement for
approval or consent by any Person.
6. The EqualNet Parties and the Debtors are entitled to the
protections afforded by section 363(m) of the Bankruptcy Code.
7. The Debtors are authorized and directed to execute and deliver the
Purchase Agreement and to consummate the sale of the Assets to the Buyer
pursuant to the terms and subject to the conditions of the Purchase Agreement
and the related transactions in connection therewith and the form and content of
the Purchase Agreement and the exhibits attached thereto are approved. The
Debtors are authorized and directed to negotiate, execute and deliver such other
and further documents as may be necessary or appropriate to implement and
consummate the Purchase Agreement. The Debtors are further authorized and
directed to perform their respective obligations under the Purchase Agreement
(including, without limitation, the payment of "cure payments" to landlords,
lessors or other parties under the Designated Contracts assumed by the Debtors),
and other related agreements and otherwise to consummate all of the transactions
contemplated thereby and to take all further actions as may reasonably be
requested by the Buyer for the purpose of assembling, transferring, granting or
conveying to the Buyer, or reducing to possession, any and all of the Assets, or
as may be necessary to the performance of the obligations contemplated by the
Purchase Agreement.
8. The Debtors and each other Person having duties or responsibilities
under the Purchase Agreement, the related agreements, or this Order, and their
respective directors, officers, general partners, agents, representatives, and
attorneys, are authorized and empowered -- subject to the terms and conditions
contained in the Purchase Agreement and the schedules annexed thereto -- to
carry out all of the provisions of the Purchase Agreement, and other related
agreements; to issue, execute, deliver, file, and record, as appropriate, the
documents evidencing and consummating the Purchase Agreement, and other related
agreements; and to take any and all actions contemplated by the Purchase
Agreement, the related agreements, or this Order, and to issue, execute,
deliver, file, and record, as appropriate, such other contracts, instruments,
releases, indentures, mortgages, deeds, bills of sale, assignments, leases, or
other agreements or documents and to perform such other acts and execute and
deliver such other documents, as are consistent with, and necessary or
appropriate to implement, effectuate, and consummate, the Purchase Agreement,
the related agreements, and this Order and the transactions contemplated thereby
and hereby, all without further application to, or order of, the Court or
further action by their respective directors, stockholders, or partners, and
with like effect as if such actions had been taken by unanimous action of the
respective directors, stockholders, and partners of such entities. All such
additional agreements, documents, and instruments shall be deemed to be "related
agreements" for purposes of this Order. The Secretary or any Assistant Secretary
of each of the Debtors shall be, and hereby is, authorized to certify or attest
to any of the foregoing actions (but no such certification or attestation shall
be required to make any such action valid, binding, and enforceable). The
Debtors are further authorized and empowered to cause to be filed with the
secretary of state of any state or other applicable officials of any applicable
governmental units any and all certificates, agreements, or amendments necessary
or appropriate to effectuate the transactions contemplated by the Purchase
Agreement, the related agreements, and this Order, including amended and
restated certificates or articles of incorporation and by-laws or certificates
or articles of amendment, and all such other actions, filings, or recordings as
may be required under appropriate provisions of the applicable laws of all
applicable governmental units, or as any of the officers of the Debtors may
determine are necessary or appropriate. The execution of any such document, or
the taking of any such action shall be, and hereby is, deemed conclusive
evidence of the authority of such Person to so act. Without limiting the
generality of the foregoing, this Order shall constitute all approvals and
consents, if any, required by the corporation laws of the States of Arkansas,
California, Delaware and Texas and all other applicable business corporation,
trust, and other laws of the applicable governmental units with respect to the
implementation and consummation of the Purchase Agreement, the related
agreements, and this Order and the transactions contemplated thereby and hereby.
9. Nothing in this Order purports to excuse the Buyer or any other
person or entity from compliance with all applicable state and federal
regulatory law.
10. The transfer of the Assets by Sellers to Buyer vests the Purchaser
with good and indefeasible title to the Assets free and clear of (x) all liens,
claims or encumbrances of any kind, other than Permitted Liens (as defined in
the Purchase Agreement), including, without limitation, any security interest
held by the parties to the DIP Financing, pursuant to section 363(b) and (f) of
the Bankruptcy Code and (y) all rights or options to effect any forfeiture,
modification or termination of Sellers' or Buyer's interest in the Assets by
reason of such transfer. Any such liens, claims or encumbrances on the Assets
which existed prior to the sale of the Assets shall attach to the Consideration
paid to the Sellers.
11. The sale of the Assets outside of a plan of reorganization
pursuant to the Purchase Agreement neither impermissibly restructures the rights
of the Debtors' creditors nor impermissibly dictates the terms of a liquidating
plan of reorganization for the Debtors.
12. All entities, presently or on the Closing Date, in possession of
some or all of the Assets are directed to surrender possession of the Assets to
the Buyer on such Closing Date or at such time thereafter as Buyer may request;
provided that the holder of any Permitted Lien may retain any collateral subject
to such Permitted Lien.
13. On the Closing Date, each of the Debtors' creditors is authorized
and directed to execute such documents and take all other actions as may be
necessary to release its liens, claims or encumbrances of any kind against the
Assets (other than Permitted Liens or Assumed Liabilities), if any, as such
liens, claims or encumbrances may have been recorded or may otherwise exist.
14. This Order is and shall be binding upon and govern the acts of all
entities including, without limitation, all filing agents, filing officers,
title agents, title companies, recorders of mortgages, recorders of deeds,
registrars of deeds, administrative agencies, governmental departments,
secretaries of state, federal, state, and local officials, and all other persons
and entities who may be required by operation of law, the duties of their
office, or contract, to accept, file, register or otherwise record or release
any documents or instruments, or who may be required to report or insure any
title or state of title in or to any of the Assets.
15. Each and every federal, state, and local governmental agency or
department is hereby directed to accept any and all documents and instruments
necessary and appropriate to consummate the transactions contemplated by the
Purchase Agreement, the related agreements and this Order.
16. If any person or entity (other than Greyrock or any other holder
of Permitted Liens) that has filed financing statements or other documents or
agreements evidencing liens on or interests in the Assets shall not have
delivered to the Debtors prior to the Closing, in proper form for filing and
executed by the appropriate parties, termination statements, instruments of
satisfaction, releases of all liens or other interests which the person or
entity has with respect to the Assets, the Debtors are hereby authorized and
directed to execute and file such statements, instruments, releases and other
documents on behalf of the person or entity (other than Greyrock) with respect
to the Assets immediately prior to the Closing.
17. Upon the closing of the Purchase Agreement, the proceeds of the
sale of the Assets shall be held by the Debtors in accordance with the terms of
the Purchase Agreement and, except as specifically provided for herein or in the
record of the Sale Approval Hearing, pending further orders of this Court.
18. Nothing herein or in the Purchase Agreement shall be deemed or
construed to be a determination as to any allocation among the Chapter 11
Debtors of the purchase price and other consideration contemplated hereby or
thereby or a determination of whether or not the Chapter 11 Debtors' respective
estates, or any of them, should be substantively consolidated.
19. Payment of the Debtors' obligations to the Buyer pursuant to the
Purchase Agreement including the indemnification amounts to be paid in
accordance with the Purchase Agreement constitute administrative expenses under
sections 503(b) and 507(a)(1) of the Bankruptcy Code and are immediately payable
if and when the obligations of the Debtors arise under such agreements, without
any further order of the Court.
20. All persons are enjoined from in any way pursuing the Buyer or its
affiliates to recover any claim which such Person has against the Debtors (as
the term claim is defined under section 101(5) of the Bankruptcy Code), except
with respect to (i) Assumed Liabilities and (ii) any claim which is
independently assertable against the Buyer or its affiliates and does not arise
directly or indirectly from their dealings with the Debtors or the assignments
and transfers contemplated by this Order.
21. If the Preferred Stock to be issued to the Debtors under the
Purchase Agreement is subsequently distributed to the creditors and/or equity
security holders of the Debtors in exchange for a claim against, or interest in,
or an administrative expense in these Chapter 11 cases, the EqualNet Parties
shall be deemed to be persons that participate in good faith in the offer,
issuance or sale of a security offered or sold under the plan or plans of the
Debtors within the meaning of section 1125(e) of the Bankruptcy Code.
22. If the Preferred Stock to be issued in connection with the
Proposed Sale is hereafter offered and sold under a plan of reorganization in
accordance with Section 1145(a)(1) of the Bankruptcy Code, the EqualNet Parties
shall be deemed "successors to" the Debtors solely for purposes of and within
the meaning of section 1145(a)(1) of the Bankruptcy Code, and the offer and sale
of the Preferred Stock shall be exempt from the registration requirements of all
applicable securities laws pursuant to section 1145 of the Bankruptcy Code.
23. The execution and delivery by the Debtors, and the performance by
each of them of their respective obligations under, each of the related
agreements to which they are party is approved.
24. The Purchase Agreement, the related agreements, and all other
documents, agreements, and instruments necessary to effectuate and consummate
the transactions contemplated by the Purchase Agreement, together with the terms
and provisions of this Order, shall be binding upon and shall inure to the
benefit of the Debtors, the EqualNet Parties, and their respective successors
and assigns, notwithstanding any subsequent appointment of a trustee for one or
more of the Debtors, under any chapter of the Bankruptcy Code, as to which
trustee such documents, agreements, and instruments (and the terms and
provisions thereof) otherwise shall be binding.
25. The Purchase Agreement, and any related agreement may be modified,
amended, or supplemented by agreement of the Debtors and the EqualNet Parties
without further action of the Court; provided that any such modification,
amendment, or supplement is not material and substantially conforms to and
effectuates the Purchase Agreement.
26. The Court retains jurisdiction to interpret and enforce the
provisions of the Purchase Agreement, any related agreement to which one or more
of the Debtors is party, and this Order, including, without limitation,
exclusive jurisdiction to (a) protect the Buyer against any liabilities related
to the Excluded Assets or otherwise in accordance with the provisions of the
Purchase Agreement, (b) determine or resolve any and all objections to or
disputes among the parties to the Purchase Agreement, and (c) determine any and
all issues relating to the assumption and assignment by the Debtors of the
Designated Contracts to Buyer pursuant to section 365 or 1123 of the Bankruptcy
Code; provided, however, that in the event the Court abstains from exercising,
or declines to exercise, jurisdiction with respect to any matter referred to in
this Paragraph or is without jurisdiction, such abstention, refusal, or lack of
jurisdiction shall have no effect upon and shall not control, prohibit, or limit
the exercise of jurisdiction of any other court or arbitral body having
competent jurisdiction with respect to any such matter.
27. Except as may be otherwise agreed to by the Debtors and the other
parties to the Designated Contracts, upon the closing of the Purchase Agreement,
the Debtors shall cure any and all undisputed defaults under the Designated
Contracts assumed hereunder, or to be assumed hereafter, and pay all other
undisputed amounts required to be paid in accordance with section 365(b) of the
Bankruptcy Code. The Buyer will have no obligation to cure any pre-Closing
defaults under the Designated Contracts. 28. The failure specifically to include
any particular provisions of the Purchase Agreement, or the related agreements
in this Order shall not diminish or impair the effectiveness of such provision,
it being the intent of the Court, the Debtors and the EqualNet Parties that the
Purchase Agreement, and related agreements are authorized and approved in their
entirety with such amendments thereto as may be made by the parties in
accordance with this Order prior to Closing.
29. The transfer of the Assets to the Buyer (including the making,
execution, delivery or recordation of any deed, termination, modification or
assignment of any lease or other instrument of transfer) is not subject to
taxation under any state or local law imposing a stamp or similar tax in
accordance with sections 1146(c) and 105 of the Bankruptcy Code.
30. As provided by Rule 7062 of the Federal Rules of Bankruptcy
Procedure, this Order shall be effective and enforceable immediately upon entry.
31. Nothing contained in any chapter 11 plan confirmed in these cases
or the order confirming such plan shall conflict with or derogate from the
provisions of the Purchase Agreement, the related agreements, or the terms of
this Order.
32. Pursuant to section 365 of the Bankruptcy Code and Rule 6006 of
the Federal Rules of Bankruptcy Procedure and subject to and conditioned upon
closing of the sale of the Assets pursuant to the Purchase Agreement and Buyer's
purchase of the Designated Contracts at Closing, the Debtors' assumption of the
Designated Contracts and the assignment of such Designated Contracts to the
Buyer is approved as of the Closing as set forth in this Order.
33. The Designated Contracts will be transferred to, and remain in
full force and effect for the benefit of the Buyer in accordance with their
respective terms notwithstanding any provision in any such Designated Contract
(including those described in sections 365(b)(2) and (f) of the Bankruptcy Code)
that prohibits, restricts or conditions such assignment or transfer; provided
that such prohibition, restriction or condition of assignment on transfer shall
be negated only with respect to transfers and assignments effected pursuant to
the Purchase Agreement and that such prohibitions, restrictions and conditions
of assignment shall otherwise remain in full force and effect and a part of the
Designated Contract so assigned or transferred.
34. Subject to the occurrence of the Closing, all of the Designated
Contracts are fully assumed by the Buyer, including, without limitation, all
monetary and nonmonetary terms of the Designated Contracts, and the Debtors
shall not be liable or responsible in any way for such Designated Contracts.
35. To the extent a Designated Contract has expired or is otherwise
unenforceable, neither the Buyer nor the Debtors shall be liable or in any way
responsible to the other party to such an Designated Contract for any
obligations under such Designated Contract. This Order shall not make such
Designated Contracts enforceable.
36. The failure of the Debtors or the Buyer to enforce at any time one
or more terms or conditions of the Designated Contracts shall not be a waiver of
such terms or conditions or of the Debtors' and the Buyer's right to enforce
every condition to the Designated Contracts.
37. To the extent that any claim may be brought by any person or
entity against the Debtors (i) concerning or arising from the Designated
Contracts that are purchased by the Buyer and which claims arise or are incurred
from and after the Closing, or (ii) concerning or arising from any Assumed
Liability, the Buyer shall indemnify, defend, and hold harmless the Debtors for
any such claim.
38. Nothing in this Order shall constitute an assumption or rejection
of any executory contract or unexpired lease except as specifically provided in
this Order and no Designated Contract shall be deemed assumed unless such
Designated Contract is specifically purchased by Buyer at Closing. Debtors'
ability to assume or reject any such executory contract or unexpired leases
shall not be affected by this Order.
39. Prior to the Closing Date, without the prior written consent of
the Buyer, the Debtors will not seek authority to reject, will not consent to
the rejection of, and will use their best efforts, including, but not limited
to, filing any appropriate pleading to prevent the deemed rejection of the
Designated Contracts. Until assumption and assignment or rejection of the
Designated Contracts, the Debtors will comply with the provisions of section
365(d)(3) or 365(d)(10) of the Bankruptcy Code, as applicable, with respect to
each Designated Contract. As soon as practicable after Closing, the Debtors will
provide to the Buyer a schedule of regular, ongoing obligations to become due
under the Designated Contracts with respect to obligations arising or incurred
after the Closing and the Debtors will provide as promptly as practicable to the
Buyer any other invoices, bills and other requests for payment under the
Designated Contracts received with respect to obligations arising or incurred
after the Closing.
DATED: Wilmington, Delaware
March 9, 1998
/s/ Peter J. Walsh
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UNITED STATES BANKRUPTCY JUDGE
