STOCK PURCHASE AGREEMENT
BY AND BETWEEN
COMMUNICATION TELESYSTEMS INTERNATIONAL D.B.A. WORLDXCHANGE COMMUNICATIONS
AND
GOLD & APPEL TRANSFER S.A.
August 16, 1999
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. PURCHASE AND SALE OF THE SHARES . . . . . . . . . . . . . . . . . . . . . . . .4
2.1 Purchase and Sale of the Shares . . . . . . . . . . . . . . . . . . . . .4
2.2 Conditions Precedent to Sale of the Shares. . . . . . . . . . . . . . . .4
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . .5
3.1 Organization and Corporate Power. . . . . . . . . . . . . . . . . . . . .5
3.2 Capital Stock and Related Matters . . . . . . . . . . . . . . . . . . . .5
3.3 Authorization; No Conflicts . . . . . . . . . . . . . . . . . . . . . . .5
3.4 Governmental Consent. . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.6 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.7 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . .7
3.8 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . .7
3.9 Conformity with Law; Litigation . . . . . . . . . . . . . . . . . . . . .7
3.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.12 Government Authorizations . . . . . . . . . . . . . . . . . . . . . . . .7
3.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . . . . . .7
4.1 Organization and Corporate Power. . . . . . . . . . . . . . . . . . . . .7
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.3 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.4 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.5 Investment Representations. . . . . . . . . . . . . . . . . . . . . . . .8
5. TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
5.1 Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . .9
5.2 Notice of Proposed Transfers. . . . . . . . . . . . . . . . . . . . . . 10
5.3 Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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PAGE
6. CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Rule 144 Filing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Changes in Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 HSR Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.1 Obligations of the Company. . . . . . . . . . . . . . . . . . . . . . . 12
7.2 Obligations of the Purchaser. . . . . . . . . . . . . . . . . . . . . . 12
7.3 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.1 Amendments;Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Prior Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Survival of Representations and Warranties. . . . . . . . . . . . . . . 13
8.4 Schedules; Exhibits; Integration. . . . . . . . . . . . . . . . . . . . 13
8.5 Best Efforts; Further Assurances. . . . . . . . . . . . . . . . . . . . 13
8.6 Governing Law and Forum Selection . . . . . . . . . . . . . . . . . . . 14
8.7 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.10 Publicity and Reports . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.12 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.14 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.15 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.16 Representation By Counsel; Interpretation . . . . . . . . . . . . . . . 16
8.17 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.18 No Consequential Damages. . . . . . . . . . . . . . . . . . . . . . . . 16
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SCHEDULES AND EXHIBITS
Schedule 3.2 Equity Securities
Schedule 3.14 Directors and Officers Liability Insurance
Exhibit A Certificate of Determination
Exhibit B Prospectus
Exhibit C Registration Rights Agreement
Exhibit D Form of Opinion of O'Melveny & Myers LLP
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is dated August
16, 1999, by and between COMMUNICATION TELESYSTEMS INTERNATIONAL D.B.A.
WORLDXCHANGE COMMUNICATIONS, a California corporation (the "COMPANY"), and GOLD
& APPEL TRANSFER S.A., a British Virgin Islands corporation (the "PURCHASER").
The parties hereby agree as follows:
1. DEFINITIONS.
1.1 Definitions.
1.1.1 For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires,
(a) the terms defined in this SECTION 1
have the meanings assigned to them in this SECTION 1 and include
the plural as well as the singular,
(b) the words "herein," "hereof," "hereto"
and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Section, Subsection
or other subdivision, unless the context otherwise requires, and
(c) all accounting terms not otherwise
defined herein have the meanings assigned under generally accepted
accounting principles.
1.2 As used in this Agreement, the following definitions shall
apply.
"AFFILIATE" means a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with, a specified Person.
"AGREEMENT" means this Agreement by and between the Company and
the Purchaser as amended or supplemented together with the Exhibits and all
Schedules attached or incorporated by reference.
"APPROVAL" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental Entity or any other Person.
"ATOCHA" means Atocha, L.P., a Texas limited partnership.
"AUDITORS" means Ernst & Young LLP, independent public accountants
to the Company.
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"CERTIFICATE OF DETERMINATION" means the certificate of
determination in the form attached hereto as EXHIBIT A.
"CLOSING" has the meaning specified in SECTION 2.1.
"CLOSING DATE" has the meaning specified in SECTION 2.2.
"COMPANY" means Communication TeleSystems International d.b.a.
WorldxChange Communications, a California corporation.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance,
lease, covenant, security interest, lien, option, pledge, rights of others or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law.
"EQUITY SECURITIES" means any capital stock of the Company
(including, without limitation, common stock and preferred stock) or other
equity interest in the Company or any securities convertible into or
exchangeable for capital stock of or an equity interest in, the Company or any
other rights (statutory, contractual or otherwise), warrants or options to
acquire any of the foregoing securities.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FIRST ATOCHA AGREEMENT" means that certain Stock Purchase
Agreement, dated September 29, 1998, by and among the Company, Atocha, Roger B.
Abbott, Rosalind Abbott and Edward S. Soren.
"FIRST GOLD & APPEL AGREEMENT" means that certain Stock Purchase
Agreement dated September 29, 1998 by and among the Company, Gold & Appel, Roger
B. Abbott, Rosalind Abbott and Edward S. Soren.
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time.
"GOLD & APPEL" means Gold & Appel Transfer S.A., a British Virgin
Islands corporation.
"GOVERNMENTAL ENTITY" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the related regulations and published interpretations.
"HSR FILINGS" means the filing of a premerger notification and
report form by each of the Company and the Purchaser (with respect to the
transactions contemplated by this
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Agreement) with the Federal Trade Commission and the Antitrust Division of
the Department of Justice.
"INDEMNIFIABLE CLAIM" means any Loss for or against which any
party is entitled to indemnification under this Agreement; "INDEMNIFIED PARTY"
means the party entitled to indemnity hereunder; and "INDEMNIFYING PARTY" means
the party obligated to provide indemnification hereunder.
"LAW" means any constitutional provision, statute or other law,
rule, regulation, or interpretation of any Governmental Entity and any Order.
"LOSS" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including but not limited to, interest or other carrying costs, penalties,
legal, accounting and other professional fees and expenses incurred in the
investigation, collection, prosecution and defense of claims and amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by the
specified Person, but excluding any consequential damages.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition and business operations of the Company and its Subsidiaries
taken as a whole.
"MATERIAL CONTRACT" means any Contract material to the business of
the subject Person as of the date hereof.
"ORDER" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"PERSON" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
any Governmental Entity or arbitrator.
"PROSPECTUS" means the prospectus relating to the Company in the
form attached hereto as EXHIBIT B.
"PURCHASER" means Gold & Appel Transfer S.A., a British Virgin
Islands corporation.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and Gold &
Appel and in the form attached hereto as EXHIBIT C.
"SEC" means the Securities and Exchange Commission or any
successor entity.
"SECOND ATOCHA AGREEMENT" means that certain Stock Purchase
Agreement dated February 3, 1999, by and between the Company and Atocha.
3
"SECOND GOLD & APPEL AGREEMENT" means that certain Stock Purchase
Agreement dated May 10, 1999, by and between the Company and Gold & Appel.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the 30,000 shares of Series A Preferred Stock to be
issued to Gold & Appel pursuant to the terms of this Agreement.
"STOCK" means the common stock of the Company, no par value.
"SUBSIDIARY" means any Person in which the Company has a direct or
indirect equity or ownership interest in excess of 50%.
"TAX" or "TAXES" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, AD VALOREM, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatsoever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
2. PURCHASE AND SALE OF THE SHARES.
2.1 PURCHASE AND SALE OF THE SHARES. Subject to SECTION 2.2,
on or before the first business day after the date that all of the conditions
set forth in SECTION 2.2 have been satisfied or waived by the parties hereto,
the Purchaser shall deliver by wire transfer of immediately available funds in
the amount of $30,000,000 to the Company against the delivery by the Company to
the Purchaser of a certificate, issued in the name of the Purchaser, evidencing
the Shares (the "CLOSING"). The date on which the Closing occurs shall be the
"CLOSING DATE."
2.2 CONDITIONS PRECEDENT TO SALE OF THE SHARES. The
obligations of the Company and the Purchaser to sell and purchase the Shares,
respectively, are subject to the satisfaction, at or prior to the Closing Date,
of each of the following conditions (which shall be the only conditions to the
Closing and any of which may be waived by the agreement of both parties, in
whole or in part):
2.2.1 NO PROHIBITION. Neither the consummation nor the
performance of any of the transactions contemplated by this
Agreement at the Closing will, directly or indirectly (with or
without notice or lapse of time), materially contravene or
conflict with, or result in a material violation of, any
applicable Law or Order.
2.2.2 BRING-DOWN OF SELECTED REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in the
following portions of the indicated Sections of this Agreement
shall be true and correct as of the Closing Date: (1) the first
two sentences of Section 3.1; (2) the last sentence of Section
3.2; (3) the first sentence of Section 3.3; and (4) the third
sentence of Section 3.3, except as to clause (ii) thereof.
2.2.3 CERTIFICATE OF DETERMINATION. The Certificate of
Determination shall have been accepted for filing by the
California Secretary of State.
4
2.2.4 OPINION. The Company shall have delivered to Purchaser an
opinion of O'Melveny & Myers LLP, dated the Closing Date, in the
form attached hereto as EXHIBIT D.
2.2.5 REGISTRATION RIGHTS AGREEMENT. The Company shall have
signed and delivered to Purchaser the Registration Rights
Agreement, in the form attached hereto as EXHIBIT C.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as otherwise disclosed in the Prospectus or as set forth in the
attached Schedules, the Company represents and warrants that as of the date
hereof:
3.1 ORGANIZATION AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company has all requisite corporate power and
corporate authority necessary to (i) execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby and (ii) own and operate
its properties and to carry on its business as now conducted and as presently
proposed to be conducted. The copies of the Company's charter documents and
bylaws furnished to the Purchaser's counsel reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete.
The Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect.
3.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital
stock of the Company is as set forth in its articles of incorporation and the
outstanding capital stock, options and other rights to acquire capital stock and
shares reserved for issuance as of the date of this Agreement are as set forth
in SCHEDULE 3.2. Except as set forth in SCHEDULE 3.2 and as contemplated by
this Agreement, as of the date of this Agreement: (i) the Company does not have
outstanding any stock or securities convertible or exchangeable for any shares
of capital stock, nor are there outstanding any rights or options to subscribe
for or to purchase any capital stock or any stock or securities convertible into
or exchangeable for any capital stock of the Company, and (ii) the Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock. All of the
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. The Shares, when issued
and sold in accordance with the terms of this Agreement, will be duly authorized
and validly issued, fully paid and nonassessable.
3.3 AUTHORIZATION; NO CONFLICTS. The execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement constitutes the
legally valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. The execution, delivery and performance
of this Agreement, and the consummation of the transactions contemplated hereby,
by the Company will not violate or constitute a breach or default whether upon
lapse of time and/or the occurrence of any act or event or otherwise under
(i) the charter documents or bylaws of the Company, (ii) any Material Contract
to which the Company is a party, or (iii) any material Law
5
or Order to which the Company is subject. Notwithstanding the foregoing, the
Purchaser acknowledges and agrees that pursuant to that certain Amendment
Number 8, dated August 16, 1999, to the Company's Loan and Security Agreement
with Foothill Capital Corporation, the Company will not be permitted to make
any dividend payments on the Shares if either (a) at the time of such
proposed dividend payment, the Company is not in compliance with the
financial covenants of the Loan and Security Agreement and/or there exists an
event of default thereunder, or (b) giving effect to the proposed dividend
payment, the Company would not be in compliance with the financial covenants
of the Loan and Security Agreement. The purpose of the foregoing sentence is
solely to modify the representations and warranties made by the Company under
this Section 3.3 and shall in no way limit the Purchaser's right to receive
dividends on the Shares under the terms of the Certificate of Determination.
3.4 GOVERNMENTAL CONSENT. Except for the HSR Filings, no
further permit, consent, Approval, authorization of, declaration to or filing
with any Governmental Entity is required in connection with the execution,
delivery and performance of this Agreement by the Company or the consummation by
the Company of any transactions contemplated hereby, except as have already been
obtained or accomplished.
3.5 FINANCIAL STATEMENTS.
3.5.1 AUDITED FINANCIAL STATEMENTS. The Company has delivered to
the Purchaser consolidated balance sheets for the Company and its
Subsidiaries at September 30, 1998, 1997 and 1996 and the related
consolidated statements of operations, changes in stockholders'
equity and changes in financial position or cash flow for the
periods then ended. All such financial statements have been
examined by the Auditors whose reports thereon are included with
such financial statements. All such financial statements have
been prepared in conformity with GAAP. Such statements of
operations and cash flow present fairly in all material respects
the results of operations and cash flows of the Company and its
Subsidiaries for the respective periods covered, and the balance
sheets present fairly in all material respects the financial
condition of the Company and its Subsidiaries as of their
respective dates.
3.5.2 UNAUDITED INTERIM FINANCIAL STATEMENTS. The Company has
delivered to the Purchaser an unaudited consolidated balance sheet
for the Company and its Subsidiaries at June 30, 1999, and the
related unaudited consolidated statement of operations and cash
flows and changes in stockholder's equity for the nine (9) months
ending June 30, 1999 (the "INTERIM STATEMENTS"). The Interim
Statements have been prepared in conformity with GAAP applied on a
consistent basis except for (i) changes, if any, disclosed therein
(except for the absence of notes and normal year-end adjustments
consistent with past practices) and (ii) information in the
Interim Statements concerning EBITDA, which is not determined in
accordance with GAAP. The statement of operations presents fairly
the results of operations of the Company and its Subsidiaries for
the period covered, and the balance sheet presents fairly in all
material respects the financial condition of the Company as of the
respective date of such balance sheet.
3.6 NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firm engaged by or acting on
behalf of the Company or its
6
Affiliates in connection with the negotiation, execution or performance of
this Agreement or the transactions contemplated by this Agreement, is or will
be entitled to any broker's or finder's or similar fee or other commission as
a result of this Agreement or such transactions.
3.7 ACCURACY OF INFORMATION. As of the date of this Agreement,
the Prospectus does not contain any untrue statement of a material fact, or fail
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
3.8 NO MATERIAL ADVERSE CHANGE. Since June 30, 1999, there has
not been any Material Adverse Effect.
3.9 CONFORMITY WITH LAW; LITIGATION. To the knowledge of the
Company, the Company has complied with all Laws applicable to it or to the
operation of its business and has not received any written notice of any
violation of, liability or potential responsibility under, any such Law which
has not heretofore been cured and for which there is no remaining liability,
other than, in each case, those not having a Material Adverse Effect.
3.10 ERISA. Each Company employee benefit plan that is subject
to ERISA has been administered in compliance with the applicable requirements of
ERISA, except for such noncompliance, if any, that in the aggregate, would not
have a Material Adverse Effect.
3.11 ENVIRONMENTAL MATTERS. To the knowledge of the Company,
all real property now or previously owned, operated or leased by the Company and
located in the United States has been operated by the Company in compliance with
all applicable Environmental Laws, except for such noncompliance, if any, that
would not have a Material Adverse Effect. As used herein, "ENVIRONMENTAL LAW"
means any federal, state, or local law, statute, rule or regulation governing or
relating to the environment or to occupational health and safety.
3.12 GOVERNMENT AUTHORIZATIONS. The Company has all federal,
state and local governmental licenses, permits and other authorizations,
including without limitation all licenses and authorizations required by the
United States Federal Communications Commission and by state public utilities
commissions necessary to conduct the Company's business as presently conducted,
except where the failure to hold any such licenses, permits and other
authorizations would not result in a Material Adverse Effect.
3.13 TAXES. To the knowledge of the Company, all Taxes owed by
the Company have been paid or accrued on the Company's financial statements,
except where the failure to pay or accrue such Taxes would not result in a
Material Adverse Effect.
3.14 INSURANCE. SCHEDULE 3.14 sets forth a true and correct
description of the directors and officers liability insurance policy currently
maintained by the Company. There have been no claims made against such
insurance policy.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants that:
4.1 ORGANIZATION AND CORPORATE POWER. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the British Virgin Islands.
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The Purchaser has all requisite corporate power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
4.2 AUTHORIZATION. The execution, delivery and performance of
this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Purchaser. This Agreement constitutes the legally valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
4.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby, by
the Purchaser will not violate, or constitute a breach or default whether upon
lapse of time and/or the occurrence of any act or event or otherwise under
(i) the charter documents or bylaws of the Purchaser, (ii) any Material Contract
to which the Purchaser is a party, or (iii) any material Law or Order to which
the Purchaser is subject.
4.4 NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firm engaged by or acting on
behalf of the Purchaser or its Affiliates in connection with the negotiation,
execution or performance of this Agreement or the transactions contemplated by
this Agreement, is or will be entitled to any broker's or finder's or similar
fee or other commission as a result of this Agreement or such transactions.
4.5 INVESTMENT REPRESENTATIONS.
4.5.1 This Agreement is made with the Purchaser in reliance upon
the Purchaser's representation to the Company, which by the
Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that (i) the Shares are being acquired for investment
for the Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof,
and that the Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same;
and (ii) the Purchaser does not have any Contract, undertaking,
agreement or arrangement with any Person to sell, transfer or
grant participations to any Person with respect to the Shares.
4.5.2 The Purchaser has not been attracted to the purchase of the
Shares by any publication or any advertising, and the transactions
contemplated by this Agreement are not being effected by or
through a broker-dealer.
4.5.3 The Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated by the SEC, as
presently in effect.
4.5.4 The Purchaser understands that (i) neither the Shares nor
the sale thereof to it have or has been registered under the
Securities Act, or under any state securities law, (ii) no
registration statement has been filed with the SEC, nor with any
other regulatory authority and that, as a result, any benefit
which might normally accrue to an investor such as the Purchaser
by an impartial review of such a registration statement by the SEC
or other regulatory commission will not be forthcoming; and (iii)
the Shares are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from
the
8
Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities
may be resold without registration under the Securities Act only
in certain limited circumstances. In this connection, the
Purchaser represents that it is familiar with the Rule 144 under
the Securities Act, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act.
4.5.5 The Purchaser acknowledges that (i) it is represented by
counsel, (ii) it has received and carefully reviewed a copy of the
Prospectus and this Agreement; (iii) it has received all
information it considers necessary or appropriate for deciding
whether to purchase the Shares; (iv) as a result of its knowledge
of the telecommunications industry, its study of the
aforementioned documents and its prior overall experience in
financial matters, it is properly able to evaluate the capital
structure of the Company, the business of the Company and its
Subsidiaries and the risks inherent therein; and (v) it has been
given the opportunity to obtain any additional information or
documents from, and to ask questions and receive answers of, the
officers and representatives of the Company to the extent
necessary to evaluate the merits and risks related to its
investment in the Company.
5. TRANSFER OF SHARES. Neither the Shares nor the Stock into which the
Shares are convertible are transferable except upon the conditions specified in
this SECTION 5, which conditions are intended to assure compliance with the
provisions of the Securities Act and state securities laws in respect of the
transfer of any of the Shares or the Stock into which the Shares are
convertible.
5.1 RESTRICTIVE LEGENDS. Unless and until otherwise permitted
by this Agreement, the Shares issued to the Purchaser pursuant to this
Agreement, and any Stock issued to Purchaser pursuant to the conversion of the
Shares, shall be stamped or otherwise imprinted with legends in substantially
the following forms:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND THUS MAY NOT BE TRANSFERRED UNLESS
REGISTERED OR QUALIFIED UNDER THAT ACT OR SUCH LAWS OR UNLESS AN
EXEMPTION FROM REGISTRATION OR QUALIFICATION IS AVAILABLE."
"SUCH SECURITIES ARE ALSO SUBJECT TO THE RESTRICTIONS ON
TRANSFER CONTAINED IN A STOCK PURCHASE AGREEMENT, DATED AUGUST 16,
1999, BY AND BETWEEN COMMUNICATION TELESYSTEMS INTERNATIONAL D.B.A.
WORLDXCHANGE COMMUNICATIONS AND GOLD & APPEL TRANSFER S.A., COPIES OF
WHICH MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY."
The Company may order its transfer agents to stop the transfer of any Shares or
shares of Stock bearing a legend required by this SECTION 5.1 until the
conditions herein with respect to transfer of such securities have been
satisfied.
9
5.2 NOTICE OF PROPOSED TRANSFERS. Subject to SECTION 5.1,
prior to any transfer or attempted transfer of the Shares or shares of Stock
bearing the legend in SECTION 5.1, the Purchaser or its permitted assignee,
transferee or donee (the "HOLDER") shall give the Company written notice of its
intention to do so, describing briefly the nature of any such proposed transfer.
If, in the written opinion of counsel for Holder, addressed to the Company and
the Holder, in form and substance reasonably acceptable to the Company, the
proposed transfer may be effected without registration of such Shares or shares
of Stock, the Shares or shares of Stock proposed to be transferred may be
transferred in accordance with the terms of said notice and in compliance with
applicable state securities laws and regulations. The Company shall not be
required to effect any such transfer prior to the receipt of such favorable
opinion; provided that if the proposed transfer is governed by Rule 144
promulgated by the SEC, or any successor rule, such opinion shall not be
required, but the Company may prevent such transfer until it receives evidence
satisfactory to it and its counsel that the transfer complies with Rule 144.
Each transfer shall comply with all applicable SEC rules and applicable state
securities laws.
5.3 PERMITTED TRANSFERS. Notwithstanding anything to the
contrary in this Agreement, Purchaser may transfer the Shares and shares of
Stock to any Affiliate of Purchaser in accordance with the provisions of
SECTIONS 5.1 and 5.2; provided that the transferee shall hold such Shares or
shares of Stock subject to the same restrictions applicable to its transferor
and shall agree in writing to be bound by the terms of this Agreement.
6. CERTAIN COVENANTS.
6.1 PREEMPTIVE RIGHTS.
6.1.1 Purchaser shall have the right to subscribe to any
additional (i) issuances of shares of capital stock of the
Company, (ii) issuances of securities convertible into shares of
capital stock of the Company, or (iii) grants of options to
purchase shares of capital stock of the Company, other than grants
to employees, directors or consultants of the Company (and the
issuance of shares upon exercise of such options), for cash, on
the same terms of such offerings to the extent equal to the
proportion which the number of shares of Stock (on a fully diluted
basis assuming the conversion of the Shares) then held by
Purchaser bears to the Company's fully-diluted capitalization (on
an as-converted and as-exercised basis). Such right is
exercisable within ten (10) days after the receipt of written
notice relating to such issuances by the Purchaser. Such right
extends to the same proportion of the new issue of shares,
convertible securities or options as the Purchaser's proportion of
the outstanding shares.
6.1.2 Purchaser's right to purchase new issues of shares or
convertible securities or options does not extend to (i) the
issuance of shares upon the conversion or exercise of options or
other convertible securities either (A) outstanding on the date
hereof or (B) with respect to which options or other convertible
securities Purchaser had preemptive rights under this SECTION 6.1,
or (ii) securities issued solely in exchange for shares,
convertible securities or options issued in connection with any
merger, reorganization or acquisition (including, without
limitation, shares of Stock to be issued in connection with the
contemplated acquisition of the minority interest in WorldxChange
Pty. Ltd.).
10
6.1.3 The preemptive rights held by the Purchaser pursuant to
this SECTION 6.1 supersede and replace (i) the preemptive rights
held by the Purchaser pursuant to the First Gold & Appel Agreement
and (ii) the preemptive rights held by the Purchaser pursuant to
the Second Gold & Appel Agreement such that the preemptive rights
held by the Purchaser pursuant to the First Gold & Appel Agreement
and the Second Gold & Appel Agreement shall terminate as of the
Closing.
6.1.4 The preemptive rights held by the Purchaser pursuant to
this SECTION 6.1 shall terminate immediately prior to the closing
of an initial public offering of the Company's securities and
shall not apply to any issuance of securities in such offering.
6.2 REGISTRATION RIGHTS. The Company and Purchaser,
concurrently with the Closing, shall execute and deliver the Registration Rights
Agreement.
6.3 RULE 144 FILING. After the Company's Common Stock is
registered under the Exchange Act, and until the Shares (and shares of Stock
issued upon conversion of the Shares) held by Purchaser have all been publicly
sold or are eligible for sale under Rule 144(k) under the Securities Act, the
Company shall use best efforts to file the reports required under Rule 144(c)(1)
under the Securities Act in order to permit sales of the Shares (and shares of
Stock issued upon conversion of the Shares) by Purchaser pursuant to Rule 144.
6.4 CHANGES IN CAPITAL STOCK.
6.4.1 If, prior to the Closing Date, the Stock is subdivided,
combined or reclassified, or if shares of capital stock of the
Company are issued as a dividend thereon, the number of shares of
Stock which constitute the Shares shall be adjusted so that the
Purchaser shall be entitled to purchase the kind and number of
shares or other securities of the Company which it would have been
entitled to receive after the happening of any of the events
described above, had the Shares been purchased immediately prior
to the happening of such event or any record date with respect
thereto.
6.4.2 If, prior to the Closing Date, there is a reclassification
of the securities of the Company or a consolidation of the Company
with or merger of the Company into another corporation or in case
of a sale or conveyance to another corporation of the property,
assets or business of the Company as an entirety or substantially
as an entirety, the Company shall provide, or shall cause such
successor or purchasing corporation to provide, as the case may
be, that the Purchaser shall have the right thereafter to purchase
for the same consideration provided in this Agreement, the kind
and amount of shares and other securities and property which the
Purchaser would have owned or have been entitled to receive after
the happening of such reclassification, consolidation, merger,
sale or conveyance had the Shares been purchased immediately prior
to the happening of such event.
6.5 HSR FILINGS. The Company and the Purchaser each agree to
use best efforts to cause the HSR Filings to be made promptly after the earliest
date after the date of this Agreement that the HSR Filings may properly be made.
The Company and the Purchaser each
11
agree to furnish each other with such necessary information and reasonable
assistance as the other may request in connection with the HSR Filings.
7. INDEMNIFICATION.
7.1 OBLIGATIONS OF THE COMPANY. The Company agrees to
indemnify and hold harmless the Purchaser from and against any and all Losses of
the Purchaser based upon or arising from any inaccuracy in or breach or
nonperformance of any of the representations, warranties or covenants made or
obligations undertaken by the Company in this Agreement.
7.2 OBLIGATIONS OF THE PURCHASER. The Purchaser agrees to
indemnify and hold harmless the Company from and against any and all Losses of
the Company based upon or arising from, any inaccuracy in or breach or
nonperformance of any of the representations, warranties or covenants made by
the Purchaser in this Agreement.
7.3 PROCEDURE.
7.3.1 NOTICE. Any party seeking indemnification with respect to
any Loss shall give notice to the party required to provide
indemnity hereunder (the "INDEMNIFYING PARTY").
7.3.2 DEFENSE. If any claim, demand or liability is asserted by
any third party against any Indemnified Party, the Indemnifying
Party shall upon the written request of the Indemnified Party,
defend any actions or proceedings brought against the Indemnified
Party in respect of matters embraced by the indemnity. If, after
a request to defend any action or proceeding, the Indemnifying
Party does not defend the Indemnified Party, a recovery against
the latter suffered by it in good faith, is conclusive in its
favor against the Indemnifying Party, provided however that, if
the Indemnifying Party has not received reasonable notice of the
action or proceeding against the Indemnified Party, or is not
allowed to control its defense, judgment against the Indemnified
Party is only presumptive evidence against the Indemnifying Party.
The parties shall cooperate in the defense of all third party
claims which may give rise to Indemnifiable Claims hereunder. In
connection with the defense of any claim, each party shall make
available to the party controlling such defense, any books,
records or other documents within its control that are reasonably
requested in the course of such defense.
7.4 EXCLUSIVE REMEDY. This SECTION 7 shall be the exclusive
remedy of the parties for any Loss of such party based upon or arising from any
inaccuracy in or breach or nonperformance of any of the representations,
warranties, or covenants made by any other party to this Agreement.
Notwithstanding the foregoing, Purchaser shall have the right to the remedy of
specific performance with respect to SECTIONS 2.1, 6.1, 6.3 AND 6.4.
8. GENERAL.
8.1 AMENDMENTS; WAIVERS. This Agreement and any schedule
attached hereto may be amended only by agreement in writing of all parties. No
waiver of any provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and
12
signed by the party to be bound and then only to the specific purpose, extent
and instance so provided.
8.2 PRIOR AGREEMENTS. Except as provided in SECTION 6.1 or as
otherwise expressly provided in this Agreement, the terms and provisions of the
First Gold & Appel Agreement and Second Gold & Appel Agreement (i) are hereby
ratified and confirmed, (ii) shall continue in full force and effect, and (iii)
shall be unaffected by any provisions of this Agreement.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as set
forth in the following sentence, all representations and warranties of the
Company and the Purchaser set forth in this Agreement or expressly incorporated
herein by reference shall, as of the first anniversary of the date of this
Agreement, expire and terminate and be of no further force or effect.
Notwithstanding the foregoing, (i) the representations and warranties set forth
in SECTION 3.7 (Accuracy of Information) shall survive until the thirtieth day
following delivery by the Company to the Purchaser of audited financial
statements for the fiscal year ended September 30, 1999, and (ii) the
representations and warranties set forth in SECTION 3.2 (Capital Stock and
Related Matters) shall survive indefinitely. As of the termination of the
respective representations, warranties and covenants as provided in this
Agreement, the Company and the Purchaser shall be deemed to have irrevocably
waived and released any and all rights and remedies any of them may have with
respect to any inaccuracy in or breach or nonperformance of any of the
representations, warranties or covenants made by any party to this Agreement.
8.4 SCHEDULES; EXHIBITS; INTEGRATION. Each schedule and
exhibit delivered pursuant to the terms of this Agreement shall be in writing
and shall constitute a part of this Agreement. This Agreement, together with
such schedules and exhibits, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings of the parties in connection therewith.
8.5 BEST EFFORTS; FURTHER ASSURANCES.
8.5.1 STANDARD. Each party will use its best efforts to fulfill
all obligations on its part to be performed and fulfilled under
this Agreement, to the end that the transactions contemplated by
this Agreement shall be effected substantially in accordance with
its terms as soon as reasonably practicable. The parties shall
cooperate with each other in such actions and in securing
requisite Approvals. Each party shall deliver such further
documents and take such other actions as the other party may
reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
8.5.2 LIMITATION. As used in this Agreement, the term "best
efforts" shall not mean efforts which require the performing party
to do any act that is unreasonable under the circumstances, to
make any capital contribution or to expend any funds other than
reasonable out-of-pocket expenses incurred in satisfying its
obligations hereunder, including but not limited to the fees,
expenses and disbursements of its accountants, actuaries, counsel
and other professionals.
8.6 GOVERNING LAW AND FORUM SELECTION. This Agreement is to be
construed and enforced in accordance with the internal laws of the State of
California. The parties consent
13
to the jurisdiction of all federal and state courts in California. Any civil
action or other legal proceeding arising out of or relating to this Agreement
shall be brought and heard only in a federal or state court located in
California, and all parties waive any right to have such action or proceeding
transferred to another location.
8.7 NO ASSIGNMENT. Neither this Agreement nor any rights or
obligations under it are assignable, except pursuant to a permitted transfer by
Purchaser in accordance with SECTION 5.3 above.
8.8 HEADINGS. The descriptive headings of the Sections and
Subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
8.9 COUNTERPARTS. This Agreement and any amendment hereto or
any other document delivered pursuant hereto may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement (or other document) and
shall become effective (unless otherwise provided therein) when one or more
counterparts have been signed by each party and delivered to the other party.
8.10 PUBLICITY AND REPORTS. The Company and the Purchaser shall
coordinate all publicity relating to the transactions contemplated by this
Agreement and no party shall issue any press release, publicity statement or
other public notice relating to this Agreement, or the transactions contemplated
by this Agreement, without obtaining the prior written consent of each of the
parties to this Agreement except to the extent that a particular action is
required by applicable Law.
8.11 CONFIDENTIALITY. All information disclosed by any party (or
its representatives) whether before or after the date hereof, in connection with
the transactions contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party (or its representatives) shall be kept
confidential by such other party and its representatives and shall not be used
by any such Persons other than as contemplated by this Agreement, except to the
extent that such information (i) was known by the recipient when received,
(ii) it is or hereafter becomes lawfully obtainable from other sources, (iii) is
necessary or appropriate to disclose to a Governmental Entity having
jurisdiction over the parties, provided that the disclosing party give
reasonable notice to the other parties and the opportunity to protect any such
confidential information, (iv) as may otherwise be required by Law or (v) to the
extent such duty as to confidentiality is waived in writing by the other party.
8.12 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure to the benefit of each party, and nothing in this Agreement, express
or implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement is intended to relieve or discharge the obligation of any third person
to any party to this Agreement.
8.13 NOTICES. Any notice or other communication hereunder must
be given in writing and (i) delivered in person, (ii) transmitted by telex,
telefax or telecommunications mechanism or (iii) mailed by certified or
registered mail, postage prepaid), receipt requested as follows:
14
IF TO PURCHASER, ADDRESSED TO:
Gold & Appel Transfer S.A.
P.O. Box 985
Wickhams Cay Road Town
Tortula, British Virgin Islands
WITH A COPY TO:
Mr. Walt Anderson
1023 31st Street
Washington, D.C. 20007
Facsimile No:________________
IF TO THE COMPANY, ADDRESSED TO:
WORLDxCHANGE
9999 Willow Creek Road
San Diego, California 92131
Attn: Legal Department
Facsimile No: (619) 452-3780
WITH A COPY TO:
O'Melveny & Myers LLP
610 Newport Center Drive
Newport Beach, California 92660
Attn: David A. Krinsky, Esq.
Facsimile No: (949) 823-6994
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (A) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
SECTION 8.13 and an appropriate answer back is received, (B) if given by mail,
three days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (C) if given by any other means, when
actually received at such address.
8.14 EXPENSES. Each party shall pay its own expenses incident
to the negotiation, preparation and performance of this Agreement and the
transactions contemplated hereby, including but not limited to the fees,
expenses and disbursements of such party's respective investment bankers,
accountants and counsel. Purchaser will pay one-half and the Company will pay
one-half of the HSR Act filing fee with respect to the HSR Filings.
8.15 WAIVER. No failure on the part of any party to exercise or
delay in exercising any right hereunder shall be deemed a waiver thereof, nor
shall any single or partial exercise preclude any further or other exercise of
such or any other right.
8.16 REPRESENTATION BY COUNSEL; INTERPRETATION. The Company and
the Purchaser each acknowledge that each party to this Agreement has been
represented by counsel
15
in connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of Law, including but not limited to
Section 1654 of the California Civil Code, or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against
the party that drafted it has no application and is expressly waived. The
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the intent of the Purchaser and the Company.
8.17 SEVERABILITY. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any Governmental Entity,
the remaining provisions of this Agreement to the extent permitted by Law shall
remain in full force and effect provided that the economic and legal substance
of the transactions contemplated is not affected in any manner materially
adverse to any party. In event of any such determination, the parties agree to
negotiate in good faith to modify this Agreement to fulfill as closely as
possible the original intents and purposes hereof.
8.18 NO CONSEQUENTIAL DAMAGES. Notwithstanding anything to the
contrary elsewhere in this Agreement, no party (or its Affiliates) shall, in any
event, be liable to any other party (or its Affiliates) for any consequential
damages, including, but not limited to, loss of revenue or income, or loss of
business reputation or opportunity relating to the breach or alleged breach of
this Agreement. The foregoing shall not be deemed to limit Purchaser's right to
specific performance with respect to SECTIONS 2.1, 6.1, 6.3 AND 6.4.
[BALANCE OF PAGE LEFT INTENTIONALLY BLANK]
16
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
COMPANY: PURCHASER:
COMMUNICATION TELESYSTEMS GOLD & APPEL TRANSFER S.A., a British
INTERNATIONAL D.B.A. WORLDXCHANGE Virgin Islands corporation
COMMUNICATIONS, a California
corporation
By: /s/ Edward S. Solen By: /s/ [Illegible]
--------------------------- --------------------------------
Its: /s/ Executive Vice President Its: Power of Attorney in Fact
----------------------------- --------------------------------
17
LIST OF OMITTED SCHEDULES AND EXHIBITS
The following Schedules and Exhibits to the Stock Purchase
Agreement have been omitted from this Exhibit and shall be furnished
supplementally to the Commission upon request:
Schedule 3.2 - Equity Securities
Schedule 3.14 - Directors and Officers Liability Insurance
Exhibit A - Certificate of Determination
Exhibit B - Prospectus
Exhibit C - Registration Rights Agreement
Exhibit D - Form of Opinion of O'Melveny & Myers LLP