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EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), effective
as of the 27th day of May, 1999, by and among World Access, Inc., a Delaware
corporation ("WAXS"), WA Telcom Products Co., Inc., a Delaware corporation and
wholly-owned subsidiary of WAXS ("Buyer"), Comm/Net Holding Corporation, a
Texas corporation ("Comm/Net Holding"), Enhanced Communications Corporation, a
Texas corporation ("Encom"), Long Distance Exchange Corporation, a Texas
corporation ("LDEC"), Comm/Net Services Corporation, a Texas corporation
("Comm/Net Services" and collectively with Comm/Net Holding, Encom and LDEC,
the "Companies"), Gregory A. Somers, Kelli J. Somers, R. Scott Birdwell,
Teleplus Telecommunications, Inc., an Iowa corporation ("Teleplus"), Jeff
Becker, Michael Billingsly and Chris Johns (each, a "Shareholder" and
collectively, the "Shareholders"), and Denny D. Somers ("D. Somers").
W I T N E S S E T H:
WHEREAS, the Companies are in the business of providing a variety of
telecommunications services (the "Business");
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of Comm/Net Holding;
WHEREAS, Encom, LDEC and Comm/Net Services are wholly-owned, directly
or indirectly, by Comm/Net Holding;
WHEREAS, the Companies desire to transfer substantially all of their
assets to Buyer solely in exchange for voting convertible preferred stock of
WAXS and the assumption by Buyer of certain of the liabilities of the
Companies, as more specifically provided herein;
WHEREAS, WAXS desires that Buyer acquire the Business and substantially
all of the assets of the Companies on the terms and conditions set forth
herein;
WHEREAS, in order to facilitate the transactions contemplated by this
Agreement, each of Encom, LDEC and Comm/Net Services shall be liquidated
immediately prior to the Closing (as defined in Section 1.5) so that, upon such
liquidation, Comm/Net Holding will directly hold all of the assets and
liabilities comprising the Companies; and
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WHEREAS, the parties expressly intend that the transactions
contemplated by this Agreement shall qualify as a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"), and accordingly, as an integral part of such
reorganization, Comm/Net Holding shall promptly after the Closing distribute
the voting convertible preferred stock of WAXS (and any remaining assets other
than those retained to pay liabilities) to the Shareholders in complete
liquidation of Comm/Net Holding and dissolve;
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and upon and subject to the terms
and the conditions hereinafter set forth, the parties do hereby agree as
follows:
ARTICLE I
THE EXCHANGE
1.1 Transfer of the Assets. Subject to the terms and conditions set
forth in this Agreement, on and as of the Closing Date, Comm/Net Holding agrees
to convey, assign, and transfer to Buyer, and Buyer agrees to acquire, accept
and take from Comm/Net Holding all of the assets, properties and rights of
every kind, nature, character and description, whether real, personal or mixed,
whether tangible or intangible, whether accrued, contingent or otherwise
relating to or utilized by the Companies, directly or indirectly, in whole or
in part, in existence on the date hereof and any additions thereto on or before
the Closing Date, whether or not carried on the books and records of the
Companies and wherever located, including, without limitation, the assets,
properties and rights set forth on SCHEDULE 1.1(A) (the "Assets"), except for
those assets, properties and rights set forth on SCHEDULE 1.1(B) (the "Excluded
Assets").
1.2 Exchange Consideration. Subject to the terms and conditions set
forth in this Agreement, and in exchange for the transfer of the Assets to
Buyer as described in Section 1.1, on and as of the Closing Date, WAXS shall
cause Buyer to deliver to Comm/Net Holding a certificate or certificates
representing 23,174 shares of WAXS's 4.25% Cumulative Junior Convertible
Preferred Stock, Series B (the "Preferred Shares"), having such powers,
preferences, rights, qualifications, limitations and restrictions as set forth
in the Certificate of Designation therefor attached hereto as EXHIBIT A.
1.3 Manner of Effecting Exchange. The conveyance, transfer,
assignment and delivery of the Assets by Comm/Net Holding to Buyer shall be
effected by such deeds, bills of sale, endorsements, assignments, transfers and
other instruments of transfer and conveyance in such form, including, without
limitation, warranties of title, as Buyer or Buyer's attorney shall reasonably
request (the "Conveyance Documents").
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1.4 Liabilities. It is understood and agreed that Buyer shall not
assume or become liable for the payment of any debts, liabilities, losses,
accounts payable, bank indebtedness, mortgages, or other obligations of the
Companies, whether the same are known or unknown, now existing or hereafter
arising, of whatever nature or character, whether absolute or contingent,
liquidated or disputed, except as expressly set forth on SCHEDULE 1.4 hereto
(the "Assumed Liabilities"). Effective upon the Closing, Buyer shall, by
written instrument in form and substance reasonably satisfactory to Comm/Net
Holding, assume and agree to pay, perform and discharge, and to indemnify
Comm/Net Holding against and hold it harmless from all obligations and
liabilities of Comm/Net Holding relating to the Assumed Liabilities. WAXS shall
not assume or become liable for the payment of any debts, liabilities, losses,
accounts payable, bank indebtedness, mortgages or other obligations of the
Companies including, without limitation, the Assumed Liabilities; provided
however, that, effective upon the Closing and subject to any and all defenses
and rights of offset against claims or actions by the Shareholders, D. Somers
or Comm/Net Holding which Buyer would have if such claims or actions were made
or brought against Buyer, WAXS shall, by written instrument in form and
substance reasonably satisfactory to Comm/Net Holding, guarantee the
obligations of Buyer set forth in this Section 1.4.
1.5 Closing. Subject to the satisfaction or waiver of the conditions
set forth herein, the consummation of the transfer of the Assets (the
"Closing") shall take place at 9:00 a.m. on June 30, 1999 in the offices of
Long Aldridge & Norman LLP, Suite 5300, 303 Peachtree Street, Atlanta, Georgia,
or on such other date at such other time and place as the parties shall agree
in writing (the "Closing Date").
1.6 Deliveries at Closing. Subject to satisfaction or waiver of the
conditions set forth herein, the parties shall take the following actions at
the Closing:
(a) Comm/Net Holding and the Shareholders shall deliver, or
cause to be delivered, (i) the Registration Rights Agreement substantially in
the form of EXHIBIT B hereto; (ii) the Conveyance Documents; (iii) the
certificate more fully described in Section 8.1 hereof; (iv) a certificate,
executed by a duly authorized officer of Comm/Net Holding and dated the Closing
Date, to the effect that the 1998 Audited Financial Statements (as defined in
Section 5.10) have been prepared in accordance with GAAP, are true, correct and
complete in all material respects and present fairly the financial position of
Encom, LDEC and Comm/Net Services as of December 31, 1998, and the related
results of their operations for the periods then ended; (v) the opinion more
fully described in Section 8.6 hereof; and (vi) any other documents or
agreements contemplated hereunder.
(b) The Shareholders and D. Somers shall deliver (i) the
non-competition agreements substantially in the form of EXHIBIT C hereto; and
(ii) any other documents or agreements contemplated hereunder.
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(c) Buyer and WAXS shall deliver, or cause to be delivered, (i)
the Registration Rights Agreement substantially in the form of EXHIBIT B; (ii)
the certificate more fully described in Section 7.1; and (iii) any other
documents or agreements contemplated hereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER AND D. SOMERS
Each Shareholder and D. Somers jointly and severally represent and
warrant to Buyer and WAXS as follows:
2.1 Organization. Teleplus is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Iowa and has all
requisite power and authority, corporate or otherwise, to carry on and conduct
its business as it is now being conducted and to own or lease its properties
and assets, and is duly qualified and in good standing in every state or other
jurisdiction (within or outside of the United States of America (the "US")) in
which its conduct of business or ownership of property requires it to be so
qualified.
2.2 Capitalization of Teleplus. D. Somers and Gregory A. Somers own
all of the issued and outstanding capital stock of Teleplus. All of the issued
and outstanding shares of capital stock of Teleplus are validly issued, fully
paid and non-assessable. There is not outstanding, nor is Teleplus bound by,
any subscriptions, options, preemptive rights, warrants, calls, commitments or
agreements or rights of any character requiring Teleplus to issue or entitling
any person or entity to acquire any additional share of capital stock or any
other equity security of Teleplus. Teleplus is not obligated to issue or
transfer any shares of its capital stock for any purpose.
2.3 Power and Authority. The Shareholders and D. Somers have the
right, power and capacity to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by all necessary
action, corporate or otherwise, on the part of the Shareholders and D. Somers.
This Agreement has been duly and validly executed and delivered by the
Shareholders and D. Somers and constitutes their legal, valid and binding
obligation, enforceable in accordance with its terms. The execution and
delivery of this Agreement by the Shareholders and D. Somers, the consummation
of the transactions contemplated herein by the Shareholders and D. Somers, and
the performance of the covenants and agreements of the Shareholders and D.
Somers will not, with or without the giving of notice or the lapse of time, or
both, (i) violate or conflict with any of the provisions of any charter
document or bylaw of any Shareholder; (ii) violate, conflict with or result in
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a breach or default under or cause termination of any term or condition of any
mortgage, indenture, contract, license, permit, instrument, trust document, or
other agreement, document or instrument to which any Shareholder or D. Somers
is a party or by which any Shareholder or D. Somers or any of its or their
properties may be bound; or (iii) violate any provision of law, statute, rule,
regulation, court order, judgment or decree, or ruling of any governmental
authority, to which any Shareholder or D. Somers is a party or by which any
Shareholder or D. Somers or its or their properties may be bound.
2.4 Securities Law Representations of the Shareholders.
(a) The Preferred Shares to be received by the Shareholders
upon consummation of the transactions contemplated hereby are being acquired
for the Shareholders' own account; not as a nominee or agent, and not with a
view to the direct or indirect sale or distribution of any part thereof and the
Shareholders have no present intention of selling, granting any participation
in, or otherwise distributing the same, except in compliance with the
Securities Act of 1933, as amended (the "Securities Act").
(b) The Shareholders understand and acknowledge that (i) the
Preferred Shares (X) have not been registered under the Securities Act or any
state securities laws, (Y) are being sold in reliance upon an exemption or
exemptions from the registration and prospectus delivery requirements of the
Securities Act and applicable state securities laws, and (Z) must be held by
the Shareholders indefinitely unless a subsequent disposition thereof is
registered under the Securities Act and applicable state securities laws or is
exempt therefrom, and (ii) there is not currently a trading market for the
Preferred Shares and there can be no assurances that the Preferred Shares will
be listed on any exchange or quoted on any quotation system.
(c) The Shareholders, together with their advisors, have
knowledge, skill and experience in financial, business and investment matters
relating to an investment of this type and are capable of evaluating the merits
and risks of such investment and protecting their interests in connection with
the acquisition of the Preferred Shares. The Shareholders understand that the
acquisition of the Preferred Shares is a speculative investment and involves
substantial risks and that each Shareholder could lose its entire investment in
the Preferred Shares. To the extent deemed necessary by a Shareholder, such
Shareholder has retained, at its own expense, and has relied upon appropriate
professional advice regarding the investment, tax and legal merits and
consequences of purchasing and owning the Preferred Shares. Each Shareholder
has the ability to bear the economic risk of investment in WAXS, including a
complete loss of investment, and such Shareholder has no need for liquidity in
such investment.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER, D. SOMERS
AND THE COMPANIES REGARDING THE COMPANIES
The Shareholders, D. Somers and the Companies hereby, jointly and
severally, represent and warrant to Buyer as set forth below. For purposes of
the following representations and warranties, the term the "Company" shall
refer to Comm/Net Holding, Encom, LDEC and/or Comm/Net Services, and any
Subsidiary (as defined below) of Comm/Net Holding, Encom, LDEC and/or Comm/Net
Services.
3.1 Organization and Authorization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
requisite power and authority, corporate or otherwise, to carry on and conduct
its business as it is now being conducted and to own or lease its properties
and assets, and is duly qualified and in good standing in the states or other
jurisdictions (within or outside of the US) set forth on SCHEDULE 3.1(A). The
Company is duly qualified and in good standing in every state of the US and in
such other jurisdictions (within or outside of the US) in which the conduct of
the Business or the ownership of the Company's properties and assets requires
it to be so qualified, except where the failure to be so qualified would not
have a material adverse effect on the Company.
(b) SCHEDULE 3.1(B) sets forth (i) every entity in which the
Company owns, or will own prior to the Closing, fifty percent (50%) or more of
the outstanding equity, directly or indirectly (each a "Subsidiary" and
collectively, the "Subsidiaries"), and (ii) the equity interest in such entity
that is owned by the Company. Except as noted on SCHEDULE 3.1(B), all
outstanding shares of capital stock of the Subsidiaries (the "Subsidiary
Shares") are owned by the Company, directly or indirectly, free and clear of
all liens, restrictions, claims, equities, charges, options, rights of first
refusal or encumbrances, with no defects of title whatsoever. The Company has
full power, right and authority to vote all of the outstanding shares of
capital stock of each Subsidiary. The Company is not a party to or bound by any
agreement affecting or relating to its right to transfer or vote the
outstanding shares of capital stock of any Subsidiary.
(c) The copies of the charter documents and bylaws of the
Company that have been previously delivered to Buyer are the complete, true and
correct charter documents and bylaws of the Company in effect as of the date
hereof. The minutes of directors' and shareholders' meetings and the stock
books of the Company that have previously been delivered to Buyer are the
complete, true and correct records of directors' and shareholders' meetings and
stock issuances through and including the date hereof and reflect all
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transactions and other matters required to be reflected in such records, as
well as such other matters customarily contained in records of such type.
(d) The current officers and directors of the Company are
listed on SCHEDULE 3.1(D).
(e) The Company has the right, power and capacity to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, have been duly
and validly authorized by all necessary action, corporate or otherwise, on the
part of the Company. This Agreement has been duly and validly executed and
delivered by the Company and constitutes the Company's legal, valid and binding
obligation, enforceable in accordance with its terms.
3.2 Authorized and Outstanding Stock. The authorized capital stock of
the Company, the number of issued and outstanding shares thereof and the record
holders of such issued and outstanding shares of the Company's capital stock
are set forth in SCHEDULE 3.2. All of such issued and outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable.
3.3 Absence of Other Claims. There is not outstanding, nor is the
Company bound by, any subscriptions, options, preemptive rights, warrants,
calls, commitments or agreements or rights of any character requiring the
Company to issue or entitling any person or entity to acquire any additional
shares of capital stock or any other equity security of the Company, including
any right of conversion or exchange under any outstanding security or other
instrument, and the Company is not obligated to issue or transfer any shares of
its capital stock for any purpose. There are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any outstanding shares of
capital stock of the Company.
3.4 Financial Statements. SCHEDULE 3.4 contains (i) the unaudited
balance sheet of each of Encom, LDEC and Comm/Net Services as of December 31,
1996, and the related unaudited statements of income, retained earnings, and
cash flows for the year then ended, and the related notes thereto; (ii) the
audited balance sheet of each of Encom, LDEC and Comm/Net Services as of
December 31, 1997, and the related audited statements of income, retained
earnings, and cash flows for the year then ended, and the related notes
thereto; (iii) the unaudited balance sheet of each of Encom, LDEC and Comm/Net
Services as of December 31,1998, and the related unaudited statements of
income, retained earnings, and cash flows for the year then ended, and the
related notes thereto; and (iv) the unaudited balance sheet of each of Encom,
LDEC, Comm/Net Services and Comm/Net Holding as of April 30, 1999, and the
related unaudited profit and loss statements for the four-month period then
ended, and the related notes thereto (the "Interim Financial Statements")
(collectively, the "Financial Statements"). The Financial Statements are true,
correct and complete in all
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material respects and present fairly the financial position of Encom, LDEC,
Comm/Net Services and Comm/Net Holding, as the case may be, as of the dates
thereof, and the related results of their operations for the periods then
ended. The Financial Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") on a basis consistent with prior
periods subject, in the case of the Interim Financial Statements, to normal and
recurring year-end audit adjustments, which adjustments will not, individually
or in the aggregate, be material in amount. All adjustments (including, without
limitation, all adjustments related to billing services provided on behalf of
the Company), consisting of normal, recurring accruals necessary for a fair
presentation, have been made in the Financial Statements.
3.5 No Undisclosed Liabilities. Except as and to the extent reflected
and adequately reserved against in the Financial Statements or as shown on
SCHEDULE 3.5, as of December 31, 1998, the Company had no material liabilities
or obligations whatsoever, whether accrued, absolute, contingent or otherwise.
Since December 31, 1998, the Company has not incurred any liability or
obligation whatsoever, except for (i) liabilities and obligations incurred in
the ordinary course of business consistent with past practice which do not in
any event exceed $50,000 in the aggregate or (ii) as reflected on SCHEDULE 3.5
(which Schedule shall describe the character and amount of such liability and
obligation).
3.6 No Violation of Law. The Company is not, has not been and will
not be (by virtue of any past or present action, omission to act, contract to
which it is a party or any occurrence or state of facts whatsoever) in
violation of any applicable local, state, federal or international law,
ordinance, regulation, order, injunction or decree, or any other requirement of
any governmental body, agency or authority or court binding on it, or relating
to its property or the Business or its advertising, sales or pricing practices
(including, without limitation, any antitrust laws and regulations), nor will
the Company hereafter suffer or incur any loss, liability, penalty or expense
(including, without limitation, attorneys' fees) by virtue of any such
violation.
3.7 Property.
(a) SCHEDULE 3.7(A) sets forth a complete and accurate list and
description of all the real and personal property that the Company owns or
leases, has agreed (or has an option) to purchase, sell or lease, or may be
obligated to purchase, sell or lease, and with respect to personal property the
net book value of which, as properly reflected in the books and records of the
Company, on an individual item-by-item basis, exceeds $25,000. The Company has
made available to Buyer true, correct, and complete copies of, with respect to
each parcel of real property listed or described in SCHEDULE 3.7 (A), the deed
evidencing the Company's ownership of such property, each mortgage or other
encumbrance thereon reflected in a written instrument, each instrument (if any)
evidencing a grant by or to the Company of an option to purchase or lease such
property, each lease and leasehold
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mortgage (if any) with respect to such property, and any title policies or
commitments and surveys with respect to such property.
(b) Subject to Section 3.7(c) hereof, the Company (i) has good
and marketable fee simple title to all of its real property and has good and
valid title to all the personal and mixed, tangible and intangible properties
and assets which it purports to own, including all the real and personal
properties and assets reflected, but not shown as leased or encumbered, in the
Financial Statements (except for inventory and assets sold in the ordinary
course of business consistent with past practice and supplies consumed in the
ordinary course of business consistent with past practice); and (ii) except for
Permitted Liens (as defined hereafter), owns such real and personal property
free and clear of all title defects or objections, liens, restrictions, claims,
charges, security interests, easements or other encumbrances of any nature
whatsoever, including any mortgages, leases, chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements. "Permitted Liens" shall mean (x) the security
interests, easements or other encumbrances described in SCHEDULE 3.7(B)(1); and
(y) liens for Taxes not yet due and payable. All properties and assets of the
Company are in the possession or control of the Company. SCHEDULE 3.7(B)(2)
sets forth a general description and the location of any personal property
(including all improvements on any real property owned by the Company) and
leasehold improvements which are not located on the premises of the principal
business operations of the Company.
(c) Except for Permitted Liens and other matters set forth in
SCHEDULE 3.7(C), no real property owned or leased by the Company is subject to
(i) any governmental decree or order (or threatened or proposed order known to
the Company) to be sold or taken by public authority; or (ii) any rights of
way, building use restrictions, exceptions, variances, reservations or
limitations of any nature whatsoever.
(d) The plants, structures and equipment owned or leased by the
Company are structurally sound with no known material defects, are in good and
safe operating condition and repair and are adequate for the uses to which they
are being put.
(e) The rights, properties and other assets presently owned,
leased or licensed by the Company and described in SCHEDULE 3.7(A) include all
rights, properties and other assets necessary to permit the Company to conduct
its business in the same manner as its business has been conducted in prior
periods, without any need for replacement, refurbishment or extraordinary
repair.
(f) All of the inventory is merchantable and of a quality and
quantity usable and saleable in the ordinary and usual course of the business
of the Company, and the quantities of each type of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable, adequate and appropriate in the present
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circumstances of the Company. All of the inventory included on the Financial
Statements are valued for the purposes thereof at the lower of cost or market.
3.8 Leases. SCHEDULE 3.8 contains a complete and accurate list of
all leases (including any capital leases) and lease-purchase arrangements
pursuant to which the Company leases real or personal property from others.
SCHEDULE 3.8 specifies which of such leases, if any, are capital leases. All
leases that are required to be capitalized by GAAP have been so accounted for
in the Financial Statements. The Company has provided to Buyer a true, correct,
and complete copy of each of the items listed on SCHEDULE 3.8.
3.9 Indebtedness. SCHEDULE 3.9 sets forth a complete and accurate
list and description of all instruments or other documents relating to any
direct or indirect indebtedness for borrowed money of the Company, as well as
indebtedness by way of lease-purchase arrangements, guarantees, undertakings on
which others rely in extending credit and all conditional sales contracts,
chattel mortgages and other security arrangements with respect to personal
property used or owned by the Company. The Company has provided to Buyer a
true, correct, and complete copy of each of the items listed on SCHEDULE 3.9.
3.10 Intellectual Property.
(a) Generally. SCHEDULE 3.10(A) sets forth a complete and
accurate list and description of (i) all patents, trademarks, service marks,
trademark and service mark registrations, trademark and service mark
registration applications, label filings, copyrights, inventions, patents and
patent applications owned or used by the Company and all agreements with
respect thereto, and the jurisdiction (within or outside of the US) in or by
which such trademarks, service marks, trademark and service mark registrations,
trademark and service mark registration applications, label filings,
copyrights, patents and patent applications have been registered, filed or
issued; (ii) all trade names owned or used by the Company, and, in the case of
each trade name owned by the Company, the jurisdiction (within or outside of
the US) in which such trade name has been registered or filed; and (iii) all
contracts, agreements or understandings pursuant to which the Company has
authorized any person to use or any person has the right to use, in any
business or commercial activity, any of the items listed in clauses (i) and
(ii) above that are owned or used by the Company. The Company has not
heretofore infringed upon, and it is not now infringing upon, any patent,
service mark, trade name, trademark, copyright, trade secret, or other
intellectual property belonging to any other person. The Company does not know
of any person infringing upon any of the Company's patents, service marks,
trademarks, copyrights, trade secrets, or other intellectual property. The
Company has provided to Buyer true, correct and complete copies of each
trademark and service mark registration or application therefor, patent or
patent application or other item listed in SCHEDULE 3.10(A) and each assignment
or license with respect to any thereof.
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(b) Computer Software and Databases. SCHEDULE 3.10(B)
accurately identifies, and describes the functions of, all computer software
and databases owned, licensed, leased, internally developed or otherwise used
in connection with the Business. The Company has, and upon consummation of the
transactions contemplated by this Agreement, Buyer will have, all computer
software and databases that are necessary to conduct the Business as presently
conducted by the Company and all documentation relating to all such computer
software and databases. The computer software and databases perform in
accordance with the documentation related thereto or used in connection
therewith and are free of defects in programming and operation. SCHEDULE
3.10(B) identifies each person to whom the Company, in the last two (2) years,
has sold, licensed, leased or otherwise transferred or granted any interest or
rights to any of the computer software and databases and the date of each such
sale, license, lease or other transfer or grant. The Company has previously
delivered to Buyer complete and accurate copies of all documents relating to
each such sale, license, lease or other transfer or grant. Except as set forth
in SCHEDULE 3.10(B), to the best of the Company's knowledge (after reasonable
inquiry), all computer hardware and software (including all computer hardware
and software contained in imbedded systems) used in the Business or included in
products previously or currently manufactured by the Company (whether such
hardware and software is owned by the Company or is licensed from third
parties) (collectively, the "Technology Systems") is designed to be used prior
to, during and after the calendar year 2000 and such hardware and software will
continue to operate during each such time period to accurately process date
data (including, but not limited to calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first centuries, including leap
year calculations ("Year 2000 Compliance"). To the best of the Company's
knowledge (after reasonable inquiry), the occurrence of the calendar year 2000
will not adversely affect the Technology Systems of the Company or of third
parties using products manufactured, or services provided, by the Company. To
the best of the Company's knowledge (after reasonable inquiry), no expenditures
in excess of currently budgeted items is necessary to cause Technology Systems
to operate properly prior to, during and after the calendar year 2000. The
Company has taken reasonable steps to determine whether the failure of any
third parties with which the Company has a material relationship to achieve
Year 2000 Compliance could have a material adverse effect on the Company. To
the best of the Company's knowledge (after reasonable inquiry), all computer
hardware and software embedded in products manufactured, or services provided,
by the Company, when used in combination with, or interfacing with computer
hardware and software of any other person, shall accurately accept, release and
exchange date data, and shall continue to function in the same manner as it
performs today and shall not otherwise impair the accuracy or function ability
of such person's computer hardware or software.
3.11 Litigation. Schedule 3.11 sets forth all litigation, claims,
suits, actions, investigations, indictments or informations, proceedings or
arbitrations, grievances or other procedures (including grand jury
investigations, actions or proceedings, and product liability and workers'
compensation suits, actions or proceedings) pending, or to the knowledge of the
Shareholders or the Company, threatened, before any court, commission,
arbitration tribunal,
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or judicial, governmental or administrative department, body, agency,
administrator or official, grand jury, or any other forum for the resolution of
grievances, against the Company or involving any of the Assets or the Business,
and (ii) indicates which of such matters are being defended by an insurance
carrier, and which of the matters being so defended are being defended under a
reservation of rights. Further, except as set forth in SCHEDULE 3.11, there are
no judgments, orders, writs, injunctions, decrees, indictments or informations,
grand jury subpoenas or civil investigative demands, plea agreements,
stipulations or awards (whether rendered by a court, commission, arbitration
tribunal, or judicial, governmental or administrative department, body, agency,
administrator or official, grand jury or any other forum for the resolution of
grievances) against or relating to the Company or involving any of the Assets
or the Business. The Company has provided to Buyer true, correct, and complete
copies of pleadings, briefs and other documents filed in each pending
litigation, claim, suit, action, investigation, indictment or information,
proceeding, arbitration, grievance or other procedure listed in SCHEDULE 3.11,
and the judgements and informations, grand jury subpoenas and civil
investigative demands, plea agreements, stipulations and awards listed in said
Schedule.
3.12 Salaried Employees. SCHEDULE 3.12 sets forth the names, titles and
current compensation (broken down by category, e.g., salary, bonus, commission)
of all employees of the Company, together with the date and amount of the last
increase in compensation for each such person.
3.13 Employee Benefit Plans. Except as described on SCHEDULE 3.13, the
Company does not now have, maintain or contribute (and has not previously had,
maintained or contributed to) any employee benefit plans, as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any other type of retirement, deferred compensation, insurance,
bonus, medical, stock option or other plan to benefit any employees or former
employees of the Company (collectively, "Employee Benefit Plans"). The Company
warrants and represents that neither it nor any member of its controlled group
of corporations (as defined in Code Section 414) contributes or has contributed
to a pension plan (as defined in Section 3(2) of ERISA) or a multiemployer plan
(as defined in Section 3(37) of ERISA) which is subject to Title IV of ERISA.
The Company warrants and represents that the Employee Benefit Plans have been
maintained in material compliance with all applicable laws and regulations
(including ERISA and the Code). The Company has received no notice that any of
the Assets are currently subject to a lien or other process under Title IV of
ERISA and knows of no threatened or pending action related to the Employee
Benefit Plans by an employee or former employee, a plan participant, the
Department of Labor, Internal Revenue Service or Pension Benefit Guaranty
Corporation.
3.14 Collective Bargaining. Except as set forth on SCHEDULE 3.14, there
are no labor contracts, collective bargaining agreements, letters of
understanding or other arrangements, formal or informal, with any union or
labor organization covering any of the Company's employees and none of said
employees are represented by any union or labor
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organization. The Company has made available to Buyer a true, correct, and
complete copy of each agreement listed on SCHEDULE 3.14.
3.15 Labor Disputes. The Company is in compliance with all federal
and state laws respecting employment and employment practices, terms and
conditions of employment, wages and hours. The Company is not and has not been
engaged in any unfair labor practice, and no unfair labor practice complaint
against the Company is pending before the National Labor Relations Board.
Neither the Company nor the Shareholders know or have reason to know of any
labor strike or other labor trouble actually pending, being threatened against,
or affecting the Company. Relations between management and labor are amicable
and there have not been, nor are there presently, any attempts to organize
non-union employees, nor are there plans for any such attempts.
3.16 Bank Accounts. SCHEDULE 3.16 sets forth a complete and accurate
list of each bank or financial institution in which the Company has an account
or safe deposit box (giving the address and account numbers) and the names of
the persons authorized to draw thereon or to have access thereto.
3.17 Investments. Except for the Subsidiary Shares and as disclosed
on SCHEDULE 3.17, the Company does not own any capital stock or other
securities or have any other investment in any person or other entity.
3.18 Tax Matters. Except as set forth on SCHEDULE 3.18:
(a) The Company has timely filed all Tax Returns or extensions
that it was required to file. All such Tax Returns were true, correct and
complete in all material respects. Except for those Taxes which constitute
Assumed Liabilities, all Taxes (including penalties and interest in respect
thereof, if any) owed by the Company (whether or not shown on any Tax Return)
have been or will be by the Closing Date timely paid. The Company is not the
beneficiary of any extension of time within which to file any Tax Return. The
Company has not been notified by any taxing authority in a jurisdiction where
it did file any Tax Returns that it is or may be subject to Taxation by that
jurisdiction. There are no security interests on any of the Assets that arose
in connection with any failure (or alleged failure) to pay any Tax.
(b) All Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party for income, social security,
payroll or other Taxes have been properly withheld and, if required prior to
the Closing Date, have been deposited with the appropriate taxing authority.
(c) The Company and the Shareholders do not expect any taxing
authority to assess any additional Taxes for any period for which Tax Returns
have been
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filed. There is no dispute or claim concerning any Tax liability of the Company
either (i) claimed, threatened or raised by any authority in writing or (ii) as
to which either the Company or any Shareholder has knowledge. SCHEDULE 3.18
lists with respect to the Company all currently pending Tax audits or other Tax
examinations, all completed audits or Tax examinations for periods ending on or
after December 31, 1994, and all jurisdictions in which the Company has filed
Tax Returns for any period ending on or after December 31, 1994. The Company
has delivered to Buyer correct and complete copies of all federal and state
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company for Taxable periods ended on or
after December 31, 1994.
(d) The Company has not waived any statute of limitations in
respect to Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Company has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
Neither the Company nor any of its Subsidiaries (i) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than
the affiliated group the common parent of which is Comm/Net Holding that was
created as of January 27, 1999), or (ii) has any liability for the Taxes of any
individual, trust, corporation, partnership or any other entity under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise. The
Company has not agreed to, nor is it required to make, any adjustment under
Code Section 481(a) by reason of a change in accounting method or otherwise.
(f) The unpaid Taxes of the Company (i) did not, as of the most
recent fiscal month end, exceed the reserve for Tax liability (exclusive of any
reserve for deferred Taxes) set forth in the Financial Statements (rather than
in any notes thereto), and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company in filing its Tax Returns.
(g) For purposes of this Agreement, "Tax" means any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including Taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use transfer,
registration, value added, alternative or add-on minimum, estimated, or other
Tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not. "Tax Returns" means any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
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3.19 Environmental, Health and Safety Matters. No claims have been
made by any governmental authority, and to the knowledge of the Company and the
Shareholders, no such claim is anticipated, to the effect that the Company
fails or may fail to comply with any applicable governmental, public utility,
health, safety and environmental laws, regulations, orders, permits, licenses,
approvals, ordinances and directives.
3.20 Required Licenses and Permits. The Company has all licenses,
tariffs, permits or other authorizations of governmental authorities necessary
for the production and sale of its products and provision of its services and
all other licenses, tariffs, permits or other authorizations of governmental
authorities necessary for the conduct of the Business. A correct and complete
list of all such licenses, tariffs, permits and other authorizations is set
forth on Schedule 3.20. The Company has provided to Buyer true, correct, and
complete copies of all written licenses, tariffs, permits and other
authorizations listed on SCHEDULE 3.20.
3.21 Insurance Policies. SCHEDULE 3.21 sets forth a complete and
accurate list and description of all insurance policies in force naming the
Company, or any employees thereof in their capacity as such, as an insured or
beneficiary or as a loss payable payee, or for which the Company has paid or is
obligated to pay all or part of the premiums. The Company has not received
notice of any pending or threatened termination or premium increase
(retroactive or otherwise) with respect thereto, and the Company is in
compliance with all conditions contained therein. There have been no lapses
(whether cured or not) in the coverage provided under the insurance policies,
referenced herein and as set forth on SCHEDULE 3.21, during the term of such
policies, as extended or renewed. The Company has provided to Buyer true,
correct, and complete copies of each of the policies listed on SCHEDULE 3.21.
3.22 Major Suppliers and Customers. SCHEDULE 3.22 sets forth a list of
each supplier of goods or services to, and each customer of, the Company, to
whom the Company paid or billed in the aggregate more than $100,000 during the
12-month period ended March 31, 1999, together, in each case, with the amount
paid or billed during such period. The Company is not engaged in any dispute
with any of such suppliers or customers. Neither the Company nor any
Shareholder knows or has any reason to believe that the consummation of the
transactions contemplated hereunder will have any adverse effect on the
business relationship of the Company with any such supplier or customer.
3.23 Contracts and Commitments. Except as set forth in SCHEDULES 3.8,
3.9, 3.13, 3.14, 3.21, and 3.23:
(a) The Company does not have any agreement or contract that is
material to its business, operations or prospects;
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(b) No contracts or commitments of the Company continue for
a period of more than six (6) months from the date hereof or may require
payments, in the aggregate, in excess of $10,000;
(c) The Company does not have any outstanding contract, written
or oral, with any officer, employee, agent, consultant, advisor, salesman,
manufacturer's representative, distributor, dealer, subcontractor, or broker
that is not cancelable by the Company, on notice of not longer than thirty (30)
days and without liability, penalty or premium of any kind, except liabilities
which arise as a matter of law upon termination of employment, or any agreement
or arrangement providing for the payment of any bonus or commission based on
sales or earnings;
(d) The Company is not under any liability or obligation under
any agreement pursuant to which third parties have been provided with products
that can be returned to the Company or a Subsidiary in the event they are not
sold and which could involve a liability of the Company of $10,000 or more in
the aggregate;
(e) The Company does not have (i) any outstanding loan or loan
commitment (excluding credit extended in the ordinary course of business
consistent with past practice to purchasers of inventory) to any person, or
(ii) any factoring, credit line or subordination agreement;
(f) Except as noted on SCHEDULE 3.9 and except for negotiable
instruments in the process of collection, the Company does not have any power
of attorney outstanding or any contract, commitment or liability (whether
absolute, accrued, contingent or otherwise), as guarantor, surety, co-signer,
endorser, co-maker, indemnitor in respect of the contract or commitment of any
other person, corporation, partnership, joint venture, association,
organization or other entity;
(g) There are no contracts or agreements with any director,
officer or shareholder of the Company, or with any person related to any such
person or with any company or other organization in which any director,
officer, or shareholder of the Company, or anyone related to any such person,
has a direct or indirect financial interest;
(h) The Company is not subject to any contract or agreement
containing covenants limiting the freedom of the Company to compete in any line
of business in any geographic area or requiring the Company to share any
profits;
(i) To the knowledge of the Shareholders and the Company, the
Company is not a party to or bound by any presently existing contract,
agreement or other arrangement that has had or may in the future have a
material adverse effect upon the business, earnings, prospects or financial
condition of the Company;
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(j) There is no contract, agreement or other arrangement
entitling any person or other entity to any profits, revenues or cash flows of
the Company or requiring any payments or other distributions based on such
profits, revenues, or cash flows; and
(k) The Company has provided to Buyer true, correct and
complete copies of each of the agreements listed on SCHEDULE 3.23.
3.24 No Conflict. The execution and delivery of this Agreement by the
Company, the consummation of the transactions contemplated herein by the
Company, and the performance of the covenants and agreements of the Company
will not, with or without the giving of notice or the lapse of time, or both,
(i) violate or conflict with any of the provisions of any charter document or
bylaw of the Company; or (ii) except as set forth in SCHEDULE 3.24, violate,
conflict with or result in a breach or default under or cause termination of
any term or condition of any mortgage, indenture, contract, license, permit,
instrument, trust document, will, or other agreement, document or instrument to
which the Company is a party or by which the Company or its properties may be
bound; or (iii) violate any provision of law, statute, regulation, court order
or ruling of any governmental authority, to which the Company is a party or by
which it or its properties may be bound; or (iv) result in the creation or
imposition of any lien, claim, charge, restriction, security interest or
encumbrance of any kind whatsoever upon any Asset.
3.25 Agreements in Full Force and Effect. Except as expressly set
forth in SCHEDULE 3.25, all contracts, agreements, plans, leases, policies,
licenses, permits, tariffs, or other authorizations referred to, or required to
be referred to, in any Schedule delivered hereunder are valid and binding, and
are in full force and effect and are enforceable in accordance with their
terms, except to the extent that the validity or enforceability thereof may be
limited by bankruptcy, insolvency, reorganization and other similar laws
affecting creditors' rights generally. Neither the Shareholders nor the Company
has any knowledge of any pending or threatened bankruptcy, insolvency or
similar proceeding with respect to any party to such agreements, and no event
has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
thereunder by the Company or to the knowledge of the Shareholders and the
Company any other party thereto.
3.26 Required Consents and Approvals. Except as set forth in SCHEDULE
3.26, no consent or approval is required by virtue of the execution hereof by
the Company or the consummation of any of the transactions contemplated herein
by the Company to avoid the violation or breach of, or the default under, or
the creation of a lien on any Asset of the Company pursuant to the terms of,
any regulation, order, decree or award of any court or governmental agency or
any lease, agreement, contract, mortgage, note, license, permit, tariff,
authorization or any other instrument to which the Company is a party or to
which it or any of its property or any of its capital stock is subject.
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3.27 Absence of Certain Changes and Events. Except as set forth in
SCHEDULE 3.27, since December 31, 1998, the Company has conducted its business
only in the ordinary course, and has not:
(a) suffered any damage or destruction adversely affecting the
Assets or the Business;
(b) made any declaration, setting aside or payment of any
dividend or other distribution of assets (whether in cash, stock or property)
with respect to the capital stock of the Company, or any direct or indirect
redemption, purchase or other acquisition of such stock, or otherwise made any
payment of cash or any transfer of other assets, to any shareholder or
affiliate thereof (including, without limitation, the repayment of or on any
indebtedness or other obligation); or transferred any assets from a Subsidiary
to the Company;
(c) suffered any material adverse change in its working
capital, assets, liabilities, financial condition, business prospects, or
relationships with any suppliers or customers listed on SCHEDULE 3.22;
(d) except for customary increases based on term of service or
regular promotion of non-officer employees, increased (or announced any
increase in) the compensation payable or to become payable to any employee, or
increased (or announced any increase in) any bonus, insurance, pension or other
employee benefit plan, payment or arrangement for such employees, or entered
into or amended any employment, consulting, severance or similar agreement;
(e) incurred, assumed or guaranteed any liability or obligation
(absolute, accrued, contingent or otherwise) other than in the ordinary course
of business consistent with past practice;
(f) paid, discharged, satisfied or renewed any claim, liability
or obligation other than payment in the ordinary course of business and
consistent with past practice;
(g) permitted any Asset to be subjected to any mortgage, lien,
security interest, restriction, charge or other encumbrance of any kind except
for Permitted Liens;
(h) waived any material claims or rights;
(i) sold, transferred or otherwise disposed of any Asset, except
in the ordinary course of business consistent with past practice;
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(j) made any single capital expenditure or investment in excess
of $10,000;
(k) made any change in any method, practice or principle of
financial or tax accounting;
(l) managed working capital components, including cash,
receivables, other current assets, trade payables and other current liabilities
in a fashion inconsistent with past practice, including failing to sell
inventory and other property in an orderly and prudent manner or failing to
make all budgeted and other normal capital expenditures, repairs, improvements
and dispositions;
(m) paid, loaned, advanced, sold, transferred or leased any Asset
to any employee, except for normal compensation involving salary and benefits;
(n) issued or sold any of its capital stock or issued any
warrant, option or other right to purchase shares of its capital stock, or any
security convertible into its capital stock;
(o) entered into any material commitment or transaction, other
than in the ordinary course of business consistent with past practice,
affecting the Business; or
(p) agreed in writing, or otherwise, to take any action described
in this Section 3.27.
3.28 Accounts Receivable.
(a) All accounts receivable owed to the Company by any
director, officer, shareholder or employee of the Company or any relative of
any such person (including those accounts receivable reflected on the Financial
Statements and incurred since the dates thereof ) have been paid in full prior
to the date hereof or shall have been paid in full prior to the Closing Date.
(b) All accounts receivable of the Company (i) are valid,
existing and fully collectible (subject to an allowance for doubtful accounts
in the amount of $76,000 (in the case of LDEC); $126,282.86 (in the case of
Encom); and $701,162.61 (in the case of Comm/Net Services)) without resort to
legal proceedings or collection agencies, (ii) represent monies due for goods
sold or services rendered in the ordinary course of business, and (iii) are not
subject to any defenses, rights of set-off, assignment, restrictions, security
interests or other encumbrances. Except as shown on SCHEDULE 3.28, as of the
date of such Schedule, all such accounts receivable were less than ninety (90)
days past due from the date the customer therefor was billed, and neither the
Company nor any Shareholder is aware of any dispute regarding the
collectibility of any such accounts receivable. All reserves shown on
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the Financial Statements were adequate as of such dates calculated consistent
with past practice.
3.29 Disclosure. No representations, warranties, assurances or
statements by any Shareholder or the Company in this Agreement and no statement
contained in any document (including the Financial Statements and the
Schedules), certificates or other writings furnished or to be furnished by any
Shareholder or the Company (or caused to be furnished by any Shareholder or the
Company) to Buyer or any of its representatives pursuant to the provisions
hereof contains or will contain any untrue statement of material fact, or omits
or will omit to state any fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND WAXS
Buyer and WAXS hereby represent and warrant to the Companies, D. Somers
and the Shareholders as follows:
4.1 Organization. Buyer and WAXS are corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware
and have all requisite corporate power and authority to effect the transactions
contemplated hereunder.
4.2 Authorization. Buyer and WAXS have the right, power and capacity
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate action on the
part of Buyer and WAXS. This Agreement has been duly and validly executed and
delivered by Buyer and WAXS and constitutes a legal, valid and binding
obligation of Buyer and WAXS, enforceable in accordance with its terms.
4.3 No Conflict. The execution and delivery of this Agreement by
Buyer and WAXS, the consummation of the transactions contemplated herein by
Buyer and WAXS, and the performance of the covenants and agreements of Buyer or
WAXS will not, with or without the giving of notice or the lapse of time, or
both, (i) violate or conflict with any of the provisions of any charter
document or bylaw of Buyer or WAXS; (ii) subject to obtaining the consents set
forth on SCHEDULE 4.3, violate, conflict with or result in a breach or default
under or cause termination of any term or condition of any mortgage, indenture,
contract, license, permit, instrument, trust document, or other agreement,
document or instrument to which Buyer or WAXS is a party or by which Buyer or
WAXS or any of its or their properties may be bound; or (iii) violate any
provision of law, statute, rule, regulation,
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court order, judgment or decree, or ruling of any governmental authority, to
which Buyer or WAXS is a party or by which Buyer or WAXS or any of its or their
properties may be bound.
4.4 Validity of Issuance. The Preferred Shares, when issued in
accordance with Section 1.2 hereof, will be duly authorized, validity issued,
fully paid and nonassessable.
4.5 Capitalization. As of the date hereof, the authorized capital
stock of WAXS consists of 150,000,000 shares of common stock, par value $0.01
per share ("Common Stock"), and 10,000,000 shares of preferred stock, par value
$.01 per share ("Preferred Stock"), of which as of the date hereof, 44,802,809
shares of Common Stock and 50,000 shares of Preferred Stock are issued and
outstanding. Except as set forth on SCHEDULE 4.5, there is not outstanding, nor
is WAXS bound by, any subscriptions, options, preemptive rights, warrants,
calls, commitments or agreements or rights of any character requiring WAXS to
issue or entitling any person or entity to acquire any additional shares of
capital stock or any other equity security of WAXS, including any right of
conversion or exchange under any outstanding security or other instrument, and
WAXS is not obligated to issue or transfer any shares of its capital stock for
any purpose.
4.6 Reports and Financial Statements.
(a) WAXS has filed all reports required to be filed by it with
the SEC since December 31, 1998 pursuant to Sections 13, 14 and 15 of the
Securities Exchange Act of 1934, as amended. None of the WAXS SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. For purposes of this Section 4.6, "WAXS SEC Reports"
means, with respect to WAXS, its (i) Annual Report on Form 10-K for the year
ended December 31, 1998, filed with the Securities and Exchange Commission
("SEC"), (ii) proxy statement relating to a meeting of stockholders scheduled
to occur on June 15, 1999, as filed with the SEC on April 30, 1999, (iii)
Quarterly Reports on Form 10-Q filed by WAXS with the SEC since December 31,
1998, and (iv) Current Reports on Form 8-K filed by WAXS with the SEC since
December 31, 1998.
(b) Except as disclosed in the WAXS SEC Reports filed prior to
the date hereof, since March 31, 1999, WAXS has not incurred any liabilities
that are of a nature that would be required to be disclosed on a balance sheet
of WAXS, other than (i) liabilities incurred in the ordinary course of
business, or (ii) liabilities that would not have a material adverse effect on
WAXS.
4.7 Employee Benefit Plans. The WAXS Employee Benefit Plans have been
maintained in material compliance with all applicable laws and regulations
(including ERISA and the Code). For purposes of this Section 4.7, "WAXS
Employee Benefit Plans" shall mean any employee benefit plans, as defined in
Section 3(3) of ERISA, or any other type of
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retirement, deferred compensation, insurance, bonus, medical, stock option or
other plan to benefit any employees or former employees of WAXS.
ARTICLE V
COVENANTS OF THE SHAREHOLDERS AND THE COMPANIES
5.1 Pre-Closing Operations of the Companies. The Shareholders and the
Companies hereby covenant and agree that, except as consented to in writing by
Buyer, pending the Closing, the Companies will operate and conduct the
Business, and the Shareholders shall cause the Companies to conduct the
Business, only in the ordinary course in accordance with prior practice, and
carry on the Business diligently and substantially in the manner as heretofore
conducted and not make or institute any methods of manufacture, purchase, sale,
lease, management, accounting or operation except in the ordinary course of
business consistent with past practice. Pursuant thereto and not in limitation
of the foregoing (for purposes of this Section 5.1, the term the "Company"
shall refer to Comm/Net Holding, Encom, LDEC, Comm/Net Services and/or any
Subsidiary thereof):
(a) The Company shall manage its working capital, including
cash, receivables, other current assets, trade payables and other current
liabilities, in a fashion consistent with past practice, including by selling
inventory and other property in an orderly and prudent manner and paying
outstanding obligations, trade accounts and other indebtedness as they come
due.
(b) No material contract or commitment of any kind relating to
the Company or the Business shall be entered into without the prior written
consent of Buyer (for purposes hereof, the word "material" shall refer to any
contract or commitment which, if it had been entered into prior to execution of
this Agreement, would have been disclosed in Schedules 3.8, 3.9, 3.13, 3.14,
3.21 or 3.23). Any such contract, entered into with the prior written consent
of the Buyer, shall be deemed to have been disclosed in the appropriate
schedule.
(c) The Company shall maintain the Assets in their present
state of repair (ordinary wear and tear excepted), shall use its best efforts
to keep available the services of its employees, and preserve the goodwill of
its business and relationships with the customers, licensors, suppliers,
distributors and brokers with whom it has business relations.
(d) Except as otherwise provided for herein, the Company shall
not take any of the following actions after the date of this Agreement without
the prior written consent of Buyer:
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(i) Dispose of any Assets other than in the ordinary
course of business consistent with past practice;
(ii) Mortgage, pledge or subject to liens or other
encumbrances any Assets, except by incurring Permitted Liens;
(iii) Purchase or commit to purchase any capital asset
for a price exceeding $10,000;
(iv) Increase (or announce any increase of) any
salaries, wages or employee benefits or hire or commit to hire any employee for
a salary or wage or with benefits in excess of those paid or provided by the
Company in the ordinary course of business;
(v) Amend any charter document or bylaw;
(vi) Issue, sell or repurchase any of its capital stock,
or make any change in its issued and outstanding capital stock, or issue any
warrant, option or other right to purchase shares of its capital stock or any
security convertible into its capital stock, or redeem, purchase or otherwise
acquire any shares of its capital stock, or declare any dividends or make any
other distribution with respect to its stock;
(vii) Incur, assume or guarantee any obligation or
liability for borrowed money, or exchange, refund or renew any outstanding
indebtedness in such a manner as to reduce the principal amount of such
indebtedness and increase the interest rate or balance outstanding;
(viii) Cancel any debts;
(ix) Amend or terminate any material agreement (except
as otherwise contemplated by this Agreement) or any insurance policy, in force
on the date hereof;
(x) Make any changes in accounting methods, principles
or practices;
(xi) Do any act, omit to do any act or permit any act
within the Shareholders' or the Company's control which will cause a breach of
any representation, warranty or obligation contained in this Agreement or any
obligations contained in any contract; or
(xii) Issue substitute stock certificates to replace
certificates which have been lost, misplaced, destroyed, stolen or are
otherwise irretrievable, unless an adequate
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bond or indemnity agreement approved by Buyer has been duly executed and
delivered to the Company.
5.2 Access. From the date of this Agreement through the Closing Date,
the Companies shall (i) provide Buyer and its designees (i.e., officers,
counsel, accountants, actuaries, and other authorized representatives) with
such information as Buyer may from time to time reasonably request with respect
to the Companies and the transactions contemplated by this Agreement; (ii)
provide Buyer and its designees, access during regular business hours and upon
reasonable notice to the books, records, offices, personnel, counsel,
accountants and actuaries of the Companies, as Buyer or its designees may from
time to time reasonably request; and (iii) permit Buyer and its designees to
make such inspections thereof as Buyer and its designees may reasonably
request. Any investigation shall be conducted in such a manner so as not to
interfere unreasonably with the operation of the business of the Companies. No
such investigation shall limit or modify in any way the Shareholders' or the
Companies' obligations with respect to any breach of their representations,
warranties, covenants or agreements contained herein.
5.3 Interim Financials. As promptly as practicable after each regular
accounting period subsequent to April 30, 1999, and prior to the Closing Date,
each Company will deliver to Buyer periodic financial reports in the form which
it customarily prepares for its internal purposes concerning the Company and,
if available, unaudited statements of the financial position of the Company as
of the last day of each accounting period and statements of income and changes
in financial position of the Company for the period then ended.
5.4 Taxes. Except to the extent that Taxes of the Companies
constitute Assumed Liabilities, Comm/Net Holding and the Shareholders shall be
severally responsible for all Taxes imposed separately on each of them,
including but not limited to, document recording fees, real property transfer
taxes, sales and excise taxes, arising out of or in connection with the
consummation of the transactions contemplated hereby.
5.5 Exclusivity. Pending the Closing, the Companies, D. Somers and
the Shareholders (including their respective representatives, agents and/or
advisors) will not, and the Shareholders will not cause or permit the Companies
(including their respective representatives, agents and/or advisors) to, (i)
solicit, initiate, or encourage the submission of any proposal or offer from
any person relating to the acquisition of any capital stock or other voting
securities of the Companies, or any substantial portion of the Assets
(including, any acquisition structured as a merger, consolidation,
reorganization or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person to do or seek any of the foregoing. The Companies, D. Somers and the
Shareholders, as applicable, will notify Buyer immediately if any person makes
any proposal, offer, inquiry or contact with respect to any of the foregoing.
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5.6 Termination of Employee Benefit Plans. As soon as practical
following the Closing Date, Comm/Net Holding shall terminate, or cause to be
terminated, each Employee Benefit Plan listed on SCHEDULE 3.13. Neither Buyer
nor WAXS shall adopt, assume or otherwise become responsible for, either
primarily or as a successor employer, any assets or liabilities of any employee
benefit plans, arrangements, commitments or policies currently provided by any
of the Companies (including but not limited to those identified on SCHEDULE
3.13); and if and to the extent that Buyer or WAXS is deemed by law or
otherwise to be liable as a successor employer for such purposes, Comm/Net
Holding and the Shareholders shall jointly and severally indemnify Buyer and
WAXS for the full and complete costs, fees and other liabilities which result
therefrom.
5.7 Liquidation of Encom, LDEC, and Comm/Net Services. Unless this
Agreement is earlier terminated pursuant to Article XI hereof, on or before the
Closing Date, Comm/Net Holding shall cause each of Encom, LDEC and Comm/Net
Services to be completely liquidated into Comm/Net Holding pursuant to their
respective articles of incorporation, bylaws, and the applicable provisions of
the Texas Business Corporation Act (including, without limitation, Sections
6.02 or 6.03, 6.04, 6.06, 6.07 and 7.12 thereof), intending in each case that
such liquidations shall constitute a "complete liquidation" by Comm/Net Holding
of Encom, LDEC and Comm/Net Services within the meaning of Section 332 of the
Code.
5.8 Tax-Free Reorganization. The parties hereto have structured the
transactions contemplated in this Agreement intending that such transactions
qualify as a "reorganization" within the meaning of Section 368(a)(1)(C) of the
Code and hereby agree not to take any action with the intention of causing the
transactions contemplated hereunder to fail to so qualify; provided however,
that the foregoing is not intended in any way to limit a party's exercise of
its rights under this Agreement. From and after the Closing and as required by
Section 368(a)(2)(G) of the Code, Comm/Net Holding shall cease to engage in any
business and, in accordance with its articles of incorporation, bylaws, the
Texas Business Corporation Act and other applicable Texas statutes, shall
promptly liquidate and dissolve as a corporation and shall distribute to the
Shareholders in complete liquidation all of its remaining assets (including the
Preferred Shares received by it pursuant to the terms and conditions hereof),
other than assets retained to satisfy its liabilities. Comm/Net Holding shall
not transfer any of the Preferred Shares (or any interest or right therein),
except to the Shareholders as part of the liquidation described in this Section
5.8; provided, however, that Comm/Net Holding may transfer such number of
Preferred Shares to Buis & Co. as are necessary to compensate Buis & Co. for
services provided to Comm/Net Holding in connection with the transactions
contemplated hereby. The Companies shall timely file all remaining unfiled Tax
Returns required to be filed by them, including the final Tax Returns
reflecting their complete liquidation, and shall pay all Taxes reflected on all
such Tax Returns, except for those Taxes which constitute Assumed Liabilities.
All of the parties hereto agree that the books and records of Comm/Net Holding,
Buyer, WAXS and the Shareholders shall be maintained and their respective Tax
Returns filed in a manner
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consistent with qualification as a "reorganization," and each party shall
provide to each other party such tax information, reports or schedules as may
be reasonably required to assist such party in accounting for and reporting the
transactions contemplated in this Agreement as so qualified. Comm/Net Holding
and the Shareholders expressly acknowledge and agree that WAXS and Buyer shall
have no liability whatsoever to any party or taxing authority in the event that
the transactions contemplated by this Agreement do not qualify as a
"reorganization" under the Code, and Comm/Net Holding and the Shareholders
hereby jointly and severally indemnify and agree to hold WAXS and Buyer
harmless with respect to any such claim or assertion; provided, however, that
Comm/Net Holding and the Shareholders shall have no obligation to jointly and
severally indemnify WAXS and Buyer with respect to any such claim or assertion
where the failure of the transactions contemplated by this Agreement to qualify
as a "reorganization" under the Code is expressly identified as having been
caused by a breach by WAXS or Buyer of their respective obligations under this
Agreement.
5.9 Post-Closing Drop-Down of Assets. After the Closing and pursuant
to the plan of reorganization set forth in this Agreement, Buyer intends to
transfer the Assets (and some or all of the Assumed Liabilities) to World
Access Telecommunications Group, Inc. and shall effectuate any such transfer in
a manner permitted under Section 368(a)(2)(C) of the Code and Treasury
Regulation Section 1.368-2(k). WAXS shall continue the historic business of
Comm/Net Holding or use a significant portion of Comm/Net Holding's historic
business assets in a business, in each case, within the meaning of Treasury
Regulation Section 1.368-1(d).
5.10 Preparation of Financial Statements. Comm/Net Holding shall
prepare, or cause to be prepared, the audited balance sheet of each of Encom,
LDEC and Comm/Net Services as of December 31, 1998, and the related audited
statements of income, retained earnings, and cash flows for the year then
ended, and the related notes thereto (the "1998 Audited Financial Statements").
5.11 Preparation of Supporting Documents. In addition to such actions
as the Companies may otherwise be required to take under this Agreement or
applicable law in order to consummate this Agreement and the transactions
contemplated hereby, the Shareholders and the Companies shall take such action,
shall furnish such information, and shall prepare, or cooperate in preparing,
and execute and deliver such certificates, agreements and other instruments as
Buyer may reasonably request from time to time, before, at or after the
Closing, with respect to compliance with the obligations of Buyer, the
Shareholders or the Companies in connection with the transactions contemplated
herein. Any information furnished by the Shareholders or the Companies before
or at the Closing shall be true, current and complete in all material respects
and shall not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading.
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5.12 Notification. Between the date hereof and the Closing Date, the
Shareholders, the Companies and D. Somers shall promptly notify Buyer in
writing if any of the Shareholders, the Companies or D. Somers become aware of
any fact, matter or condition that causes or constitutes a breach of any
representation or warranty contained in this Agreement, or if the Shareholders,
the Companies or D. Somers become aware of the occurrence after the date hereof
of any fact, matter or condition that, had it existed on the date hereof, would
cause or constitute a breach of any representation or warranty had such
representation or warranty been made as of the time of the occurrence or
discovery of such fact, matter or condition. If any such fact, matter or
condition would require a change in a Schedule if such Schedule were dated as
of the occurrence or discovery of such fact, matter or condition, the
Shareholders, the Companies and D. Somers shall promptly deliver to Buyer a
supplemented Schedule specifying such change. During the same period, the
Shareholders, the Companies and D. Somers shall promptly notify Buyer of any
breach of any covenant or agreement in this Agreement or of the occurrence of
any event that may make the satisfaction of the conditions in Section 8
impossible or unlikely. Except with respect to the disclosure on a supplemental
Schedule of actions taken after the date hereof by the Shareholders, the
Companies and/or D. Somers which are expressly permitted under Sections 5.1(b)
or (d) of this Agreement, no disclosure or supplement pursuant to this Section
5.12 shall be deemed to prevent or cure any breach of representation or
warranty or failure to perform any covenant or agreement hereunder for purposes
of Section 8.1.
ARTICLE VI
COVENANTS OF THE PARTIES
The Companies, the Shareholders and Buyer, respectively, hereby
covenant to and agree with one another as follows:
6.1 Approvals of Third Parties; Satisfaction of Conditions to
Closing. The Companies, the Shareholders and Buyer will use their reasonable,
good faith efforts, and will cooperate with one another, to secure all
necessary consents, approvals, authorizations and exemptions from governmental
agencies and other third parties, including, without limitation, all consents
required by Sections 8.4 and 8.5. If any consent or approval is not obtained
prior to or on the Closing Date, and such consent or approval relates to the
transfer or assignment to Buyer of a lease, contract, mortgage, note, Remaining
License (as defined in Section 6.6) or other agreement or arrangement to which
one or more of the Companies is a party (a "Company Instrument"), Comm/Net
Holding shall hold such Company Instrument in trust for the use and benefit of
Buyer, and shall take such other action as may be reasonably requested by Buyer
in order to place Buyer in the same position as if such consents or approvals
had been obtained. The Companies and the Shareholders will use their
reasonable, good faith efforts to obtain the satisfaction of the conditions
specified in Article
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VIII. Buyer will use its reasonable, good faith efforts to cause or obtain the
satisfaction of the conditions specified in Article VII.
6.2 Confidentiality. In connection with this Agreement the parties
may have access to information which is nonpublic, confidential or proprietary
in nature. All of such information, in whole or in part, together with any
analyses, compilations, studies or other documents prepared by any party, which
contain or otherwise reflect any such information is hereinafter referred to as
the "Information". Each party hereby agrees that the Information will be kept
confidential and shall not, without the prior mutual written consent of the
parties, be disclosed, in any manner whatsoever, in whole or in part, and shall
not be used by any party following the termination of this Agreement. Each
party agrees to transmit the Information only to its respective employees and
representatives who need to know the Information and who shall agree to be
bound by the terms and conditions of this Agreement. In any event, each party
shall be responsible for any breach of this Agreement by its respective
employees or representatives. If the transactions contemplated hereunder are
not consummated, the Information, except for that portion of the Information
which consists of analyses, compilations, studies or other documents prepared
by each party's respective employees and representatives, will be returned to
the other promptly upon request and no party shall retain any copies. That
portion of the Information, and all copies thereof, which consists of analyses,
compilations, studies or other documents prepared by each party's respective
employees and representatives will be kept confidential and subject to the
terms of this Agreement or destroyed. In the event any party becomes legally
compelled to disclose any of the Information, such party will provide to the
other parties prompt notice so that each other party may seek a protective
order or other appropriate remedy and/or waive compliance with the provisions
of this Agreement. In the event that such protective order or other remedy is
not obtained, or compliance with the provisions of this Agreement is waived, a
party will furnish only that portion of the Information which is legally
required, and to the extent requested by the other parties, will exercise its
best efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded the Information. The term "Information"
does not include information which (i) was known to any party about another
party prior to its disclosure, provided that such information was lawfully
obtained or developed, (ii) becomes generally available to the public other
than as a result of a disclosure by a party in violation of this Agreement, or
(iii) becomes available from a source other than a party to this Agreement, if
the source is not bound by a confidentiality agreement and such source lawfully
obtained such information.
6.3 Casualty. The Companies shall bear the risk of any loss or damage
or destruction to any of the Assets from fire or other casualty or cause at all
times prior to the Closing. Upon the occurrence of any loss or damage to any
portion of the Assets as a result of fire, casualty, or other cause prior to
the Closing, the Companies shall immediately notify Buyer of the same in
writing, stating with particularly the extent of loss or damage incurred, the
cause thereof, if known, and the extent to which restoration, replacement, and
repair of the Assets lost or destroyed will be reimbursed under any insurance
policy with respect
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thereto. Buyer shall have the option, but not the obligation, exercisable
within ten (10) days after receipt of such notice from the Company to:
(a) Elect to consummate the Closing and accept the Assets in
their "then" condition, in which event the Companies shall assign to Buyer all
rights under any insurance claim covering the loss and pay over to Buyer any
proceeds under any such insurance policy theretofore received by the Companies
with respect thereto; or
(b) Terminate this Agreement, whereupon this Agreement shall be
of no further force or effect and neither the Companies nor Buyer shall have
any further rights, duties, or obligations hereunder.
6.4 Hart-Scott-Rodino Notifications. The parties shall promptly
prepare and file any required notifications with the United States Justice
Department (the "Justice Department") and the Federal Trade Commission (the
"FTC") as required by the Hart-Scott- Rodino Antitrust Improvements Act of
1976, as amended ("H-S-R"). The parties shall cooperate with each other in
connection with the preparation of such notifications, including sharing
information concerning sales and ownership and such other information as may be
needed to complete such notification, and providing a copy of such
notifications to the other prior to filing; provided, that Buyer and WAXS shall
have the right to redact any dollar revenue information from the copies of such
notifications provided to the other parties. The parties shall keep all
information about the other obtained in connection with the preparation of such
notification confidential pursuant to the terms of Section 6.2. Each party
shall pay the filing fee required by the regulations promulgated pursuant to
H-S-R with respect to the notification for which such party is the "Acquiring
Person" (as defined in the regulations promulgated pursuant to H-S-R). In the
event that any party shall receive any request for additional information or
documentary material from the Justice Department or the FTC (i) Buyer shall be
primarily responsible for responding to such request, (ii) the other parties
shall provide Buyer with all information, documents and other assistance as
Buyer may request in connection with responding to such request, and (iii)
Comm/Net Holding shall not respond to such request or furnish any additional
information or documentary material except as consented to or requested by
Buyer or as required by applicable law.
6.5 Shareholder Promissory Notes.
(a) As of the date hereof, the aggregate outstanding amount owed
under (i) that certain Promissory Note, dated January 27, 1999, by Comm/Net
Holding, as maker, in favor of R. Scott Birdwell, as holder, (ii) that certain
Promissory Note, dated January 27, 1999, by Comm/Net Holding, as maker, in
favor of Gregory A. Somers, as holder, (iii) that certain Promissory Note,
dated January 27, 1999, by Comm/Net Holding, as maker, in favor of Teleplus, as
holder, and (iv) that certain Promissory Note, dated January 27, 1999, by
Comm/Net Holding, as maker, in favor of Kelli J. Somers, as holder, is
$3,478,670.90, of which $78,670.90 represents accrued but unpaid interest and
$3,400,000 represents the
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outstanding principal amount (collectively, the "Notes"; individually, a
"Note"). Prior to the Closing, (a) interest shall accrue under the Notes in
accordance with their terms and (b) no amendment or modification shall be made
to the Notes and no payments shall be made under or with respect thereto.
(b) Pursuant to Section 1.4, at the Closing, Buyer shall assume
the outstanding balance due under each Note. Immediately following the Closing,
Buyer shall pay off the outstanding balance due under each Note pursuant to
written instructions delivered by R. Scott Birdwell, Gregory A. Somers,
Teleplus and Kelli J. Somers at least three (3) business days prior to the
Closing. Immediately upon receipt of such payment, the original Notes marked
"Paid in Full" shall be delivered to Buyer and all obligations thereunder or
with respect thereto shall be satisfied.
6.6 Governmental Authorizations.
(a) Upon execution of this Agreement, the Companies shall, and
the Shareholders shall cause the Companies to, take all reasonable actions to
secure any and all necessary consents or approvals required to transfer to
Buyer or its ultimate designee, World Access Telecommunications Group, Inc., as
well as one or more controlled subsidiaries in order to effectuate the
post-Closing drop-down of the Assets contemplated by Section 5.9 hereof
(hereinafter, "Buyer or its designee"), the licenses, permits or other
authorizations of governmental authorities which regulate the conduct of
business within the telecommunications industry (the "Licenses"), including,
without limitation, those Licenses set forth on SCHEDULE 3.20, except for those
Licenses which are set forth on SCHEDULE 1.1(B); provided, however, that
neither the Companies nor the Shareholders shall be required to make any
expenditure of funds in connection therewith.
(b) If all of the conditions to Buyer's obligations to
consummate the transactions contemplated hereunder have been satisfied (or
waived by Buyer) except that all consents or approvals required to transfer any
License have not been obtained (the "Remaining Licenses"), Buyer may, in its
sole discretion, waive any relevant closing condition and proceed to consummate
the transactions contemplated hereunder; provided however, that:
(i) Comm/Net Holding shall, and the Shareholders shall
cause Comm/Net Holding to, continue to take all reasonable actions to secure
any and all consents or approvals required to transfer the Remaining Licenses
to Buyer or its designee; provided, however, that neither Comm/Net Holding nor
the Shareholders shall be required to make any expenditure of funds in
connection therewith;
(ii) Until such consents or approvals have been
obtained, Comm/Net Holding shall grant to Buyer or its designee an irrevocable,
non-royalty bearing
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license and right to use the Remaining Licenses in connection with the
operation of the Business, subject to obtaining any applicable regulatory
approval;
(iii) Pending the receipt of such consents or approvals,
Comm/Net Holding shall, and the Shareholders shall cause Comm/Net Holding to,
maintain the Remaining Licenses in full force and effect; provided, however,
that neither Comm/Net Holding nor the Shareholders shall be required to make
any expenditure of funds in connection therewith; and
(iv) If, after six (6) months from the Closing Date, all
of the Remaining Licenses which are legally transferrable have not been
transferred to Buyer or its designee, the parties shall, in good faith,
determine the value of the Remaining Licenses which have not been transferred
to Buyer or its designee as of such time, and Comm/Net Holding or the
Shareholders, as applicable, shall deliver to Buyer an appropriate number of
Preferred Shares based upon such valuation; provided, however, that Comm/Net
Holding or the Shareholders, as appropriate, shall not be required to deliver
to Buyer more than 50 Preferred Shares. If the parties are unable to agree on
the value of the Remaining Licenses not transferred to Buyer or its designee in
accordance with this Section 6.6 or the number of Preferred Shares to be
delivered to Buyer, if any, the parties shall resolve such dispute by
arbitration.
6.7 Schedules. The parties acknowledge that the Shareholders, D.
Somers and the Companies have not delivered to Buyer, as of the date hereof,
the following Schedules (the "Post-Signing Schedules"): 1.1(b); 1.4; 3.1(a);
3.4; 3.7(a); 3.8; 3.9; 3.18; 3.20; 3.23; 3.24; 3.26; 3.28; and 11.11(a). The
Shareholders, D. Somers and the Companies shall deliver all of the Post-Signing
Schedules to Buyer not later than June 4, 1999. If all of the Post-Signing
Schedules (i) are not delivered to Buyer by June 4, 1999, or (ii) are not
satisfactory to Buyer (in its sole discretion) in form and substance, then
Buyer shall have the right to terminate this Agreement, without liability, by
written notice to the Shareholders, D. Somers and the Companies on or before
June 18, 1999.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF COMM/NET HOLDING
AND THE SHAREHOLDERS
The obligations of Comm/Net Holding and the Shareholders to consummate
the transactions to be performed by them in connection with the Closing shall
be subject to the satisfaction (or waiver by Comm/Net Holding or the
Shareholders) at or prior to the Closing Date of each of the following
conditions:
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7.1 Representations and Warranties True at Closing Date. Each of
Buyer's representations and warranties contained in this Agreement which are
qualified by materiality shall be true in all respects and each of Buyer's
representations and warranties which are not qualified by materiality shall be
true in all material respects, in each case, on and as of the Closing Date with
the same force and effect as though made on and as of such date; Buyer shall
have complied in all material respects with the covenants and agreements set
forth herein to be performed or complied with by it on or before the Closing
Date; and Buyer shall have delivered to Comm/Net Holding and the Shareholders a
certificate dated the Closing Date and signed by its duly authorized officer to
all such effects, and confirming such other matters as may be reasonably
requested by Comm/Net Holding and the Shareholders.
7.2 Litigation. No suit, investigation, action or other proceeding
shall be pending or overtly threatened against the Companies before any court
or governmental agency which has resulted in the restraint or prohibition of
Comm/Net Holding, or, could in the reasonable opinion of counsel for Comm/Net
Holding, result in the obtaining of material damages or other relief from
Comm/Net Holding, in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7.3 Registration Rights Agreement. WAXS shall have executed and
delivered to Comm/Net Holding and the Shareholders a Registration Rights
Agreement in the form of Exhibit B attached hereto.
7.4 Required Governmental Approvals. All governmental authorizations,
consents and approvals necessary for the valid consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect. All applicable governmental pre-acquisition filing, information
furnishing and waiting period requirements, including expiration of all
applicable waiting periods pursuant to H-S-R, shall have been met or such
compliance shall have been waived by the governmental authority having
authority to grant such waivers.
7.5 Other Necessary Consents. Either (i) all consents and approvals
listed on SCHEDULE 3.26 shall have been obtained, or (ii) Buyer shall have
agreed to defend, indemnify and hold harmless the Companies and the
Shareholders from and against any Losses (as defined in Section 9.1) suffered
or incurred by the Companies with respect to each Company Instrument, except
Losses related to claims, obligations and liabilities, actual or contingent,
arising out of (A) events prior to the Closing, (B) any Company's default or
breach of a Company Instrument prior to the Closing, or (C) any act or omission
of a Company after the Closing which results in a default or breach of a
Company Instrument.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer and WAXS to consummate the transactions to be
performed by them in connection with the Closing shall be subject to the
satisfaction (or waiver by Buyer or WAXS) on or before the Closing Date of each
of the following conditions:
8.1 Representations and Warranties True at Closing Date. Each of the
representations and warranties of the Shareholders, D. Somers and the Companies
contained in this Agreement which are qualified by materiality shall be true in
all respects and each of the representations and warranties of the
Shareholders, D. Somers and the Companies which are not qualified by
materiality shall be true in all material respects, in each case, on and as of
the Closing Date with the same force and effect as though made on and as of
such date (provided that, solely for the purpose of determining the foregoing,
any representation or warranty contained herein and otherwise limited to the
Shareholders', D. Somers' or the Companies' knowledge shall not be limited to
such knowledge); the Shareholders, D. Somers and the Companies shall have
performed and complied in all material respects with the respective covenants
and agreements set forth herein to be performed or complied with by each of
them on or before the Closing Date; and the Shareholders, D. Somers and
Comm/Net Holding shall have delivered to Buyer a certificate signed by D.
Somers, on behalf of Comm/Net Holding by its President and on behalf of the
Shareholders by a duly authorized representative to all such effects, and
confirming such other matters as may be reasonably requested by Buyer or WAXS.
8.2 No Material Change. The Companies shall not have suffered any
material adverse change since December 31, 1998 in their business, prospects,
financial condition, working capital, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves or operations.
8.3 Litigation. No suit, investigation, action or other proceeding
shall be pending or overtly threatened against Buyer, WAXS, any Shareholder, D.
Somers or the Companies before any court or governmental agency, which has
resulted in the restraint or prohibition of any such party, or, in the
reasonable opinion of counsel for Buyer and WAXS, could result in the obtaining
of material damages or other relief from any such party, in connection with
this Agreement or the consummation of the transactions contemplated hereby.
8.4 Required Governmental Approvals. All governmental authorizations,
consents and approvals necessary for the valid consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect. Buyer or its designee shall have obtained all governmental
authorizations, consents and approvals necessary for the conduct of the
Business in the State of Texas by Buyer or its designee and
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such authorizations, consents and approvals shall be in full force and effect;
provided however, that Buyer or its designee shall have taken commercially
reasonable efforts to apply for such authorizations, consents and approvals, or
the transfer or assignment thereof to Buyer or its designee, by June 18, 1999.
All applicable governmental pre-acquisition filing, information furnishing and
waiting period requirements, including expiration of all applicable waiting
periods pursuant to H-S-R, shall have been met or such compliance shall have
been waived by the governmental authority having authority to grant such
waivers.
8.5 Other Necessary Consents. All consents and approvals listed on
SCHEDULES 3.26 AND 4.3 shall have been obtained. With respect to each such
consent or approval, Buyer shall have received written evidence, satisfactory
to it, that such consent or approval has been duly and lawfully filed, given,
obtained or taken and is effective, valid and subsisting.
8.6 Opinion of Counsel to the Shareholders, D. Somers and the
Companies. Buyer shall have received from counsel to the Shareholders, D.
Somers and the Companies an opinion, dated the Closing Date, in a form
reasonably satisfactory to Buyer.
8.7 Shareholder Approval. The transactions contemplated by this
Agreement, including, without limitation, the ultimate liquidation and
dissolution of Comm/Net Holding pursuant to the terms hereof, shall have
received the requisite Shareholders' approval under Texas law and there shall
not be any dissenters.
8.8 Due Diligence Review. Representatives of Buyer shall have
completed the due diligence review of the operations, condition (financial and
other), prospects, assets and liabilities of, and other matters related to, the
Companies, the Assets and the Business and the results of such due diligence
shall have been satisfactory to Buyer.
8.9 Financial Statements. Buyer shall have received the 1998 Audited
Financial Statements, which statements shall be satisfactory to Buyer in its
reasonable judgment.
8.10 Non-competition Agreements. Each of the Shareholders and D.
Somers shall have executed and delivered to Buyer a non-competition agreement
in the form of EXHIBIT C hereto.
8.11 Liquidation of Comm/Net Subsidiaries. Buyer shall have received
such documentary evidence as is satisfactory to it that the liquidation of
Encom, LDEC and Comm/Net Services pursuant to Section 5.7 hereof has been duly
and validly authorized and that each of Encom, LDEC and Comm/Net Services has
been validly dissolved under Texas law.
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ARTICLE IX
INDEMNIFICATION
9.1 Remedies.
(a) Except as otherwise limited by this Article IX, Comm/Net
Holding, D. Somers and each Shareholder shall jointly and severally indemnify
and reimburse Buyer and WAXS for any and all claims, losses, liabilities,
damages, costs (including court costs) and expenses (including reasonable
attorneys' and accountants' fees) suffered or incurred by Buyer or WAXS, its
successors or assigns, and their respective officers, employees, consultants
and agents (the "Buyer Protected Parties") (hereinafter "Loss" or "Losses"), as
a result of, or with respect to, (i) any breach or inaccuracy of any
representation or warranty of the Companies, D. Somers or any Shareholder set
forth in this Agreement or in any certificate or other document delivered
pursuant hereto or in connection herewith, whether such breach or inaccuracy
exists or is made on the date of this Agreement or as of the Closing Date; (ii)
any breach or inaccuracy of any representation or warranty of the Companies, D.
Somers or any Shareholder set forth in the certificate to be provided to Buyer
pursuant to Section 8.1 hereof, without regard to the materiality qualification
contained in such certificate; (iii) any breach of or noncompliance by the
Companies, D. Somers or any Shareholder with any covenant or agreement of the
Companies, D. Somers or any Shareholder contained in this Agreement; (iv) any
and all liabilities and obligations of the Companies other than the Assumed
Liabilities; (v) any and all liabilities and obligations arising out of any
breach by the Companies of any agreement assumed by Buyer at the Closing by
written instrument executed by Buyer pursuant to this Agreement; and (vi) any
and all claims asserted by the Companies' creditors, except where such claims
are in connection with the Assumed Liabilities (for the purposes of this
Agreement, "creditors" shall mean (1) all persons or entities who are known by
the Companies, D. Somers or the Shareholders to assert claims against the
Companies even though such claims are disputed, as well as (2) all general
creditors, all secured creditors, all lien creditors, and all representatives
of creditors).
(b) Except as otherwise limited by this Article IX, WAXS and
Buyer shall jointly and severally indemnify and reimburse Comm/Net Holding, D.
Somers and each Shareholder for any and all Losses suffered or incurred by
Comm/Net Holding, D. Somers and each Shareholder, its or their successors or
assigns, and their respective officers, employees, consultants and agents (the
"Seller Protected Parties") as a result of, or with respect to (i) any breach
or inaccuracy of any representation or warranty of WAXS or Buyer set forth in
this Agreement or in any certificate or other document delivered pursuant
hereto or in connection herewith, whether such breach or inaccuracy exists or
is made on the date of this Agreement or as of the Closing Date; (ii) any
breach or inaccuracy of any representation or warranty of WAXS or Buyer set
forth in the certificate to be provided to Comm/Net Holding and the
Shareholders pursuant to Section 7.1 hereof, without regard to
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the materiality qualification contained in such certificate; and (iii) any
breach of or noncompliance by WAXS or Buyer with any covenant or agreement of
WAXS or Buyer contained in this Agreement.
9.2 Indemnity Claims.
(a) Survival. The representations and warranties of the parties
hereto contained herein or in any certificate or other document delivered
pursuant hereto or in connection herewith shall not be extinguished by the
Closing but shall survive the Closing, subject to the limitations set forth in
Section 9.2(b) hereof with respect to the time periods within which claims for
indemnity must be asserted, and the covenants and agreements of the parties
contained herein shall survive without limitation as to time except as may be
otherwise specified herein. No investigation or other examination of the
Companies by Buyer, its designees or representatives or of WAXS or Buyer by
Comm/Net Holding, the Shareholders or D. Somers, or their designees or
representatives, shall affect the term of survival of any representation or
warranty contained herein or in any certificate or other document delivered
pursuant hereto or in connection herewith, or the term of the right of the
Buyer Protected Parties or the Seller Protected Parties, as applicable, to seek
indemnification with respect to any of the Surviving Matters (as defined in
subsection 9.2(b) hereof).
(b) Time to Assert Claims. All claims for indemnification
hereunder shall be asserted no later than two (2) years after the Closing Date,
except as follows:
(i) claims by a Buyer Protected Party with respect to
Losses arising out of or related in any way to the matters described in
Sections 9.1(a) (iii), (iv), (v) and (vi) may be made without limitation,
except as limited by law;
(ii) claims by a Buyer Protected Party with respect to
Losses arising out of or related in any way to any breach of or inaccuracy in
the representations and warranties contained in Sections 3.7(b), 3.18 or 3.19
hereof may be made until, and shall be made no later than, thirty (30) days
after the expiration of the applicable statute of limitations relative to the
liability relating to such representation or warranty; and
(iii) claims by a Seller Protected Party with respect to
Losses arising out of or related in any way to the matters described in Section
9(b)(iii) may be made without limitation, except as limited by law.
(The matters cited in clauses (i), (ii) and (iii) above being hereinafter
collectively referred to as the "Surviving Matters").
Nothing herein shall be deemed to prevent Buyer, Comm/Net Holding, the
Shareholders or D. Somers from making a claim for a Loss hereunder for
potential or contingent claims or demands provided the notice of Loss sets
forth the specific basis for any such potential or
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contingent claim or demand to the extent then feasible and the party making the
claim has reasonable grounds to believe that such a claim or demand may become
actual.
9.3 Deductible.
(a) Except for claims made in connection with a breach of the
provisions of Section 11.11 hereof, the Buyer Protected Parties shall make no
claim against Comm/Net Holding, D. Somers or the Shareholders for
indemnification under Section 9.1(a)(i) or (ii) hereof for a breach of
representation or warranty contained herein unless and until the aggregate
amount of such claims exceeds $100,000 (the "Deductible Amount"), in which
event the Buyer Protected Parties may claim indemnification for the amount of
such claims in excess of the Deductible Amount.
(b) Except for claims made in connection with a breach of the
provisions of Section 11.11 hereof, none of the Seller Protected Parties shall
make any claim against Buyer of WAXS for indemnification under Section
9.1(b)(i) or (ii) hereof for a breach of representation or warranty contained
herein unless and until the aggregate amount of such claims exceeds the
Deductible Amount, in which event the Seller Protected Parties may claim
indemnification for the amount of claims in excess of the Deductible Amount.
9.4 Notice of Claim. Buyer, WAXS, Comm/Net Holding, the Shareholders
or D. Somers, as applicable (the "Indemnified Party"), shall notify Comm/Net
Holding, D. Somers, the Shareholders, Buyer or WAXS, as applicable (the
"Indemnifying Party"), in writing, of any claim for indemnification, specifying
in reasonable detail the nature of the Loss, and, if known, the amount, or an
estimate of the amount, of the liability arising therefrom. The Indemnified
Party shall provide to the Indemnifying Party as promptly as practicable
thereafter such information and documentation as may be reasonably requested to
support and verify the claim asserted, so long as such disclosure would not
violate the attorney-client privilege of the Indemnified Party.
9.5 Defense. For purposes of this Section 9.5, a "Protected Party"
shall refer to a Buyer Protected Party or a Seller Protected Party, as
appropriate. If the facts pertaining to a Loss arise out of the claim of any
third party, or if there is any claim against a third party (other than an
Indemnified Party or a Protected Party) available by virtue of the
circumstances of the Loss, the Indemnifying Party may assume the defense or the
prosecution thereof by prompt written notice to the Indemnified Party and the
affected Protected Party, including the employment of counsel or accountants,
at its cost and expense. The Indemnified Party and the affected Protected Party
shall have the right to employ counsel separate from counsel employed by the
Indemnifying Party in any such action and to participate therein, but the fees
and expenses of such counsel employed by the Indemnified Party and the affected
Protected Party shall be at their expense. The Indemnifying Party shall not be
liable for any settlement of any such claim effected without its prior written
consent, which shall not be unreasonably withheld; provided that if the
Indemnifying Party does not
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assume the defense or prosecution of a claim as provided above within thirty
(30) days after notice thereof from any Protected Party, the Indemnified Party
and the affected Protected Party may settle such claim without the Indemnifying
Party's consent. The Indemnifying Party shall not agree to a settlement of any
claim which provides for any relief other than the payment of monetary damages
or which could have a material precedential impact or effect on the business or
financial condition of any Protected Party without the Indemnified Party's and
the affected Protected Party's prior written consent. Whether or not the
Indemnifying Party chooses to so defend or prosecute such claim, all the
parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals, as may be reasonably
requested in connection therewith. The Indemnifying Party shall be subrogated
to all rights and remedies of any Protected Party.
9.6 Satisfaction of Obligations. Subject to the provisions of this
Section 9.6, WAXS shall, at the request of Buyer, pay directly to Buyer the
amounts or obligations otherwise payable or owed with respect to the Preferred
Shares under the Certificate of Designation attached hereto as EXHIBIT A, in
satisfaction of any and all obligations of Comm/Net Holding, D. Somers or the
Shareholders arising under or related to this Agreement (each, a "Seller
Obligation"), including but not limited to, the indemnification obligations set
forth in this Article IX, until such obligations are fully satisfied or
resolved through negotiations between Buyer and the Obligor (as defined
herein). Buyer agrees that any exercise of its rights under this Section 9.6
must be made in good faith. If a Seller Obligation is not fully satisfied or
resolved through negotiations between Buyer and the Obligor within six (6)
months of the date Comm/Net Holding, D. Somers and/or the Shareholders, as
applicable (the "Obligor"), received notice from Buyer of its or their
non-compliance with such obligation (or in the case of a Loss, within six (6)
months of the date the Indemnifying Party was provided notice of such Loss
pursuant to Section 9.4), Buyer shall offer to resolve by arbitration any
disputes between Buyer and the Obligor related to such Seller Obligation. If
the Obligor rejects such offer, Buyer shall continue to hold the applicable
amounts or obligations otherwise payable or owed with respect to the Preferred
Shares until the Seller Obligation is fully satisfied or resolved through
negotiations between Buyer and the Obligor. All arbitration pursuant to this
Section 9.6 shall be before the American Arbitration Association ("AAA") in
accordance with the Commercial Arbitration Rules of the AAA as in effect from
time to time.
ARTICLE X
TERMINATION PRIOR TO CLOSING
10.1 Termination of Agreement. This Agreement may be terminated at any
time prior to the Closing:
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(a) By the mutual written consent of Buyer, WAXS, the
Companies, D. Somers and the Shareholders;
(b) By the Companies, D. Somers and the Shareholders in
writing, without liability, if Buyer or WAXS shall (i) fail to perform in any
material respect its agreements contained herein required to be performed by it
on or prior to the Closing Date, or (ii) materially breach any of its
representations, warranties or covenants contained herein, which failure or
breach is not cured within ten (10) days after the Companies, D. Somers and the
Shareholders have notified Buyer of their intent to terminate this Agreement
pursuant to this subparagraph (b);
(c) By Buyer or WAXS in writing, without liability, if any of
the Companies, D. Somers or any Shareholder shall (i) fail to perform in any
material respect their agreements contained herein required to be performed by
them on or prior to the Closing Date, or (ii) materially breach any of their
representations, warranties or covenants contained herein, which failure or
breach is not cured within ten (10) days after Buyer has notified the
Companies, D. Somers and the Shareholders of its intent to terminate this
Agreement pursuant to this subparagraph (c);
(d) By either the Companies, D. Somers, the Shareholders, Buyer
or WAXS in writing, without liability, if there shall be any order, writ,
injunction or decree of any court or governmental or regulatory agency binding
on Buyer, WAXS, the Shareholders, D. Somers or the Companies, which prohibits
or restrains Buyer, WAXS, the Shareholders, D. Somers or the Company from
consummating the transactions contemplated hereby, provided that Buyer, WAXS,
the Shareholders, D. Somers and the Companies shall have used their reasonable,
good faith efforts to have any such order, writ, injunction or decree lifted
and the same shall not have been lifted within 30 days after entry, by any such
court or governmental or regulatory agency;
(e) By either the Companies, the Shareholders, D. Somers, Buyer
or WAXS in writing, without liability, if for any reason the Closing has not
occurred by August 31, 1999, other than as a result of the breach of this
Agreement by the party attempting to terminate the Agreement; or
(f) By Buyer or WAXS in writing, without liability, pursuant to
Section 6.7 hereof.
10.2 Termination of Obligations. Termination of this Agreement
pursuant to this Article X shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 6.2, 10.2, 11.9 and 11.13
hereof; provided, however, that termination pursuant to subparagraphs (b), (c),
(e) or (f) of Section 10.1 hereof shall not relieve a defaulting or breaching
party from any liability to the other party hereto.
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ARTICLE XI
MISCELLANEOUS
11.1 Bulk Sales Law. Buyer hereby waives compliance by Comm/Net
Holding with the provisions of the bulk sales law of any state, and Comm/Net
Holding covenants and agrees to pay and discharge when due all claims of
creditors which could be asserted against Buyer or WAXS by reason of such
non-compliance to the extent such liabilities are not assumed by Buyer under
this Agreement.
11.2 No Liens Created. This Agreement shall not be construed to create
any lien or encumbrance on any of the Assets, or to create any rights in any
third persons.
11.3 Entire Agreement. This Agreement (including the Schedules and
Exhibits) constitutes the sole understanding of the parties with respect to the
subject matter hereof; provided, however, that this provision is not intended
to abrogate any other written agreement between the parties executed with or
after this Agreement.
11.4 Amendment. No amendment, modification or alteration of the terms
or provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
11.5 Parties Bound by Agreement; Successors and Assigns. The terms,
conditions and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. Without the prior written consent of Buyer, neither the Shareholders
nor D. Somers nor the Companies may assign their rights, duties or obligations
hereunder or any part thereof to any other person or entity. Buyer may assign
its rights and duties hereunder in whole or in part (before or after the
Closing) to one or more affiliates but if it does so, it shall remain liable
for all Buyer's obligations hereunder.
11.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
11.7 Headings. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
11.8 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled
to the benefits thereof.
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No waiver of any of the provisions of this Agreement shall be deemed to or
shall constitute a waiver of any other provision hereof (whether or not
similar).
11.9 Expenses. Except as otherwise provided herein, (a) the
Shareholders, on their behalf and on behalf of the Companies, shall pay all
costs and expenses incurred by each of them or the Companies, or on their
behalf, and (b) WAXS and Buyer shall pay all costs and expenses incurred by
each of them or on their behalf, in each case in connection with this Agreement
and the transactions contemplated hereby, including fees and expenses of their
own brokers, financial consultants, accountants and counsel. Furthermore, the
Shareholders agree that any cost or expense which they have agreed to pay (on
their behalf or on behalf of the Companies) or which has been allocated to them
under this Agreement shall be paid using personal funds and not the funds of
the Companies; provided, however, that the Shareholders shall be entitled to
use Company funds for the payment of all reasonable accountants' expenses
incurred in connection with the preparation of the 1998 Audited Financial
Statements.
11.10 Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally (including by overnight courier or express
mail service) or sent by registered or certified mail, postage or fees prepaid,
if to the Shareholders, D. Somers or the Companies to:
Comm/Net Holding Corporation
2301 Ohio Drive, Suite 285
Plano, Texas 75093
Attention: Gregory A. Somers
with a copy to:
B. Bruce Johnson, Esq.
5550 LBJ Freeway, Suite 550
Dallas, Texas 75240
if to Buyer or WAXS to:
World Access, Inc.
945 E. Paces Ferry Road, Suite 2200
Atlanta, Georgia 30326
Attention: W. Tod Chmar
with a copy to:
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Long Aldridge & Norman LLP
Suite 5300
303 Peachtree Street
Atlanta, Georgia 30308
Attention: H. Franklin Layson, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day
after the day it is so placed in the mail or, if earlier, the time of actual
receipt.
11.11 Brokerage. Except as set forth on SCHEDULE 11.11(A) (in the case
of the Companies, the Shareholders and D. Somers) or SCHEDULE 11.11(B) (in the
case of WAXS and Buyer), the Companies, the Shareholders, D. Somers, WAXS and
Buyer do hereby expressly warrant and represent, each to the other, that no
broker, agent, or finder has rendered services in connection with the
transactions contemplated under this Agreement. D. Somers, the Companies and
the Shareholders hereby jointly and severally indemnify and agree to hold
harmless Buyer and WAXS from and against any and all losses, costs, damages,
and expenses (including reasonable attorneys' fees) arising or resulting, or
sustained or incurred by Buyer or WAXS, by reason of any claim by any broker,
agent, finder, or other person or entity based upon any arrangement or
agreement made or alleged to have been made by the Companies, the Shareholders
and D. Somers in connection with the transactions contemplated under this
Agreement. WAXS and Buyer do hereby jointly and severally indemnify and agree
to hold harmless the Companies, D. Somers and the Shareholders from and against
any and all losses, costs, damages, and expenses (including reasonable
attorneys' fees) arising or resulting, or sustained or incurred by the
Companies, D. Somers and the Shareholders, by reason of any claim by any
broker, agent, finder, or other person or entity based upon any arrangement or
agreement made or alleged to have been made by Buyer in connection with the
transactions contemplated under this Agreement.
11.12 Governing Law. This Agreement is executed by Buyer in, and shall
be construed in accordance with and governed by the laws of the State of
Georgia without giving effect to the principles of conflicts of law thereof.
11.13 Public Announcements. No public announcement shall be made by any
person with regard to the transactions contemplated by this Agreement without
the prior consent of the parties hereto; provided that any party may make such
disclosure if advised by counsel that it is legally required to do so. The
parties will discuss any public announcements or disclosures concerning the
transactions contemplated by this Agreement with the other parties prior to
making such announcements or disclosures.
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11.14 Shareholders' and the Company's Knowledge. As used herein, the
terms "the Shareholders' knowledge" and "to the knowledge of the Shareholders"
with respect to Shareholders shall mean the knowledge of any Shareholder (and
where Shareholder is a corporation any director or officer of Shareholder), and
the terms "the Companies' knowledge" or "to the knowledge of the Company" shall
mean the knowledge of any Shareholder, director or officer of Comm/Net Holding,
Encom, LDEC or Comm/Net Services, as the case may be, or any Subsidiary
thereof.
11.15 No Third-Party Beneficiaries. With the exception of the parties
to this Agreement, the Buyer Protected Parties and the Seller Protected
Parties, there shall exist no right of any person to claim a beneficial
interest in this Agreement or any rights occurring by virtue of this Agreement.
11.16 "Including." Words of inclusion shall not be construed as terms
of limitation herein, so that references to "included" matters shall be
regarded as non-exclusive, non-characterizing illustrations.
11.17 Schedules and Exhibits. Each of the Schedules and Exhibits
referred to in this Agreement are and shall be incorporated herein and made a
part hereof.
11.18 Buyer's Receipt of Preferred Shares. Pursuant to the plan of
reorganization set forth in this Agreement, and in a transfer by WAXS to Buyer
intended by WAXS to come under Section 351 of the Code, WAXS shall transfer to
Buyer a certificate or certificates representing the requisite number of
Preferred Shares needed by Buyer which upon such receipt from WAXS, Buyer shall
immediately deliver to Comm/Net Holding to satisfy its obligations under this
Agreement.
(Signatures appear on following pages)
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date indicated on the
first page hereof.
BUYER:
WA Telcom Products Co., Inc.
By: /s/ A. Lindsay Wallace
---------------------------------------
Name: A. Lindsay Wallace
----------------------------------
Title:
---------------------------------
WAXS:
World Access, Inc.
By: /s/ W. Tod Chmar
---------------------------------------
Name: W. Tod Chmar
----------------------------------
Title: Executive V.P.
---------------------------------
SHAREHOLDERS:
/s/ Gregory A. Somers
------------------------------------------
Gregory A. Somers
/s/ Kelli J. Somers
------------------------------------------
Kelli J. Somers
/s/ R. Scott Birdwell
------------------------------------------
R. Scott Birdwell
/s/ Jeff Becker
------------------------------------------
Jeff Becker
/s/ Michael Billingsley
------------------------------------------
Michael Billingsley
/s/ Chris Johns
------------------------------------------
Chris Johns
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Teleplus Telecommunications, Inc.
By: /s/ Denny Somers
---------------------------------------
Name: Denny Somers
----------------------------------
Title: President
---------------------------------
THE COMPANIES:
Comm/Net Holding Corporation
By: /s/ Gregory A. Somers
---------------------------------------
Name: Gregory A. Somers
----------------------------------
Title: President
---------------------------------
Long Distance Exchange Corporation
By: /s/ Gregory A. Somers
---------------------------------------
Name: Gregory A. Somers
----------------------------------
Title: President
---------------------------------
Enhanced Communications Corporation
By: /s/ R. Scott Birdwell
---------------------------------------
Name: R. Scott Birdwell
----------------------------------
Title: President
---------------------------------
Comm/Net Services Corporation
By: /s/ Gregory A. Somers
---------------------------------------
Name: Gregory A. Somers
----------------------------------
Title: President
---------------------------------
D. SOMERS:
/s/ Denny D. Somers
-------------------------------------
Denny D. Somers
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