SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 10 or 15(d) of the
Securities Exchange Act of 1934
MAY 7, 1997
------------------------------------------------
Date of Report (date of earliest event reported)
NETWORK LONG DISTANCE, INC.
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-23172 77-1122018
- --------------- ----------- ------------------
(State or Other (Commission (IRS Employer Iden-
Jurisdiction of File Number) tification Number)
Incorporation)
525 Florida Street
Baton Rouge, Louisiana 70801
---------------------------------------
(Address of Principal Executive Offices
Including Zip Code)
(504) 343-3125
------------------------------
(Registrant's telephone number,
including area code)
Page 1 of 146.
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Item 1. Changes in Control of Registrant
--------------------------------
N/A
Item 2. Acquisition or Disposition of Assets
------------------------------------
On April 25, 1997, Network Long Distance, Inc. (the
"Registrant" or "Network") entered into, and on May 7, 1997
closed, an Agreement and Plan of Merger (the "Agreement") with
Eastern Telecom International Corporation, a Virginia corporation,
("Eastern") wherein Eastern merged with and into a wholly-owned
subsidiary of the Registrant with Eastern continuing on as the
surviving corporation. The separate corporate existence of the
subsidiary ceased and Eastern thereafter became a wholly-owned
subsidiary of Network as a result of Network owning all
outstanding shares of Eastern. For accounting purposes this
business combination will be treated as a purchase.
Each outstanding share of Eastern common stock was converted
into the right to receive shares of the Registrant's Common Stock
in accordance with the Exchange Ratio (as defined below), or (ii)
the right to receive cash equal to the Per Share Consideration
(also defined below). All shares of Eastern common stock to be
converted into shares of the Registrant's Common Stock or the
right to receive cash are hereinafter referred to as the
"Converted Shares."
The Exchange Ratio was defined as a number of shares of the
Registrant's Common Stock determined by dividing (x) the Per
Share Consideration by (y) $7.875, and rounding the result to
three decimal places. The Per Share Consideration equaled
approximately $31.5 million divided by the number of Eastern's
issued and outstanding shares of common stock.
The Agreement provided that Network send to each
Eastern shareholder a cash election form providing for such
shareholder (i) to elect to receive Network Common Stock with
respect to all or any portion of such Shareholder's shares of
Eastern common stock or (ii) to elect to receive cash with
respect to all or any portion of such Shareholder's shares of
Eastern Common. The number of shares of Eastern common stock to
be converted in the merger into the right to receive cash shall
not exceed $1.5 million. In the event more Eastern shareholders
request cash in excess of $1.5 million, the Escrow Agent will
make allocations of cash and Network shares in accordance with
the Agreement.
Also, the Registrant delivered to a designated Escrow Agent (i)
that number of shares from the Share Consideration that are
valued at $200,000, based on a price of $7.875 per share, and
(ii) $200,000 in cash or cash equivalents as a reserve for any
adjustments from the Closing Date in Eastern's long-term debt
and/or working capital when verified by the Registrant's
auditors.
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The Registrant has reserved for issuance a total of
approximately 3,633,272 shares of its Common Stock to consummate
the transaction.
The Agreement provided for the appointment of John D.
Crawford and Thomas G. Keefe, current Officers and Directors of
Eastern, to be appointed to the Registrant's Board of Directors.
In addition, Mr. Crawford will be appointed as the Registrant's
Chairman of the Board of Directors and Mr. Keefe, Chief Financial
Officer. For a period of two years from the Effective Date of
the merger, the Registrant has agreed to use its best efforts to
allow Eastern to designate for nomination such number of
Directors as will give Eastern representation on Registrant's
Board equal to the product of (x) the number of Directors on
Registrant's Board multiplied by (y) the percentage that the
Registrant's Common Stock held by Eastern shareholders in
relation to the total aggregate number of the Registrant's Common
Stock then outstanding.
The Agreement contains numerous representations, warranties
and covenants by both parties. A complete description of all
warranties, representations and covenants are set forth in the
Agreement included as an Exhibit to this Report.
Concurrent with the execution of the Agreement and the closing,
the Registrant and Eastern entered into a registration rights
agreement (the "Registration Rights Agreement") pursuant to which
Eastern and its successors and assigns will have the right,
commencing on June 30, 1997, to cause the Registrant to register
the Registrant's Common Stock for sale under the Securities Act
of 1933, as amended (the "Securities Act"), and to cause the
Registrant to include the Registrant's Shares in any registration
Statement filed under the Securities Act offering any other
shares of the Registrant's Common Stock. The Registration Rights
is attached to this Report as an Exhibit to the Agreement.
Item 3. Bankruptcy or Receivership
--------------------------
N/A
Item 4. Changes in Registrant's Certifying Accountants
----------------------------------------------
N/A
Item 5. Other Events
------------
On May 7, 1997, Mr. Crawford was appointed by the Board of
Directors to Chairman of the Board of Directors and Chief
Executive Officer of the Registrant, replacing Mr. Michael M. Ross,
who remains as a Director of the Reigstrant.
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<PAGE>
Item 6. Resignations of Registrant's Directors
--------------------------------------
N/A
Item 7. Financial Statements and Exhibits
---------------------------------
(a) and (b) The pro forma financial information and audited
financial statements required by this Item will
be filed as an amendment to this Report no later
than sixty (60) days from the date of this
Report.
(c) Exhibits: Filed herewith pursuant to Reg. S-K
Item 601 is the following exhibit.
Exhibit No. Page Description
- ----------- ---- -----------
10.1 6 Agreement and Plan of Merger dated April 21,
1997 between the Registrant and Eastern
Telecom International Corporation.
10.2 142 Amendment No. 1 To Agreement and Plan of
Merger.
-4-
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NETWORK LONG DISTANCE, INC.
Dated: May 7, 1997 By: /s/ MARC I. BECKER
----------------------------
Marc I. Becker,
Executive Vice President
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NETWORK LONG DISTANCE, INC.,
WATER ACQUISITION CORP.,
EASTERN TELECOM INTERNATIONAL CORPORATION,
AND
THE SHAREHOLDERS OF EASTERN TELECOM
INTERNATIONAL CORPORATION
APRIL 25, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . .1
Section 1.2 Effective Time . . . . . . . . . . . . . . . . . . .1
Section 1.3 Effects of the Merger. . . . . . . . . . . . . . . .2
Section 1.4 Articles of Incorporation and Bylaws . . . . . . . .2
Section 1.5 Officers and Directors . . . . . . . . . . . . . . .2
Section 1.6 Further Actions. . . . . . . . . . . . . . . . . . .2
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES, CLOSING. . . . . . . . . . . . .2
Section 2.1 Conversion and Exchange of Shares. . . . . . . . . .2
Section 2.2 Date, Time and Place of Closing. . . . . . . . . . .5
Section 2.3 Deliveries by EASTERN and the
Shareholders at Closing. . . . . . . . . . . . . . .5
Section 2.4 Deliveries by NETWORK at Closing . . . . . . . . . .6
Section 2.5 Post Closing Adjustments . . . . . . . . . . . . . .7
Section 2.6 Payments of Adjusted Merger Consideration. . . . . 10
Section 2.7 Shareholders' Representative . . . . . . . . . . . 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EASTERN AND THE SHAREHOLDERS. . 11
Section 3.1 Corporate Existence. . . . . . . . . . . . . . . . 11
Section 3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . 11
Section 3.3 Capitalization . . . . . . . . . . . . . . . . . . 11
Section 3.4 Binding Effect . . . . . . . . . . . . . . . . . . 12
Section 3.5 Execution and Delivery Permitted . . . . . . . . . 12
Section 3.6 Financial Statements . . . . . . . . . . . . . . . 13
Section 3.7 Absence of Certain Changes . . . . . . . . . . . . 14
Section 3.8 No Undisclosed Liabilities . . . . . . . . . . . . 15
Section 3.9 Evaluation Materials . . . . . . . . . . . . . . . 16
Section 3.10 Benefit Plans; ERISA . . . . . . . . . . . . . . . 16
Section 3.11 Litigation . . . . . . . . . . . . . . . . . . . . 18
Section 3.12 Compliance with Laws . . . . . . . . . . . . . . . 19
Section 3.13 Tax Returns. . . . . . . . . . . . . . . . . . . . 19
Section 3.14 Indebtedness . . . . . . . . . . . . . . . . . . . 20
Section 3.15 Banks. . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.16 Contracts. . . . . . . . . . . . . . . . . . . . . 20
Section 3.17 Titles, Real Property Matters. . . . . . . . . . . 20
Section 3.18 Environmental Matters. . . . . . . . . . . . . . . 21
Section 3.19 Broker's Fees. . . . . . . . . . . . . . . . . . . 22
<PAGE>
Section 3.20 Labor Matters. . . . . . . . . . . . . . . . . . . 22
Section 3.21 Conflicts of Interest. . . . . . . . . . . . . . . 22
Section 3.22 Insurance Coverage . . . . . . . . . . . . . . . . 22
Section 3.23 Full Disclosure. . . . . . . . . . . . . . . . . . 22
Section 3.24 Correct Records. . . . . . . . . . . . . . . . . . 23
Section 3.25 Investment Representations . . . . . . . . . . . . 23
Section 3.26 Expenses . . . . . . . . . . . . . . . . . . . . . 24
Section 3.27 Board of Directors Representation. . . . . . . . . 24
Section 3.28 Advisability of Merger . . . . . . . . . . . . . . 24
ARTICLE IV
COVENANTS OF EASTERN AND THE SHAREHOLDERS . . . . . . . . . . . . 24
Section 4.1 Maintenance of Business. . . . . . . . . . . . . . 24
Section 4.2 Negative Covenants . . . . . . . . . . . . . . . . 25
Section 4.3 Organization, Goodwill . . . . . . . . . . . . . . 26
Section 4.4 Access to Facilities, Files and Records. . . . . . 26
Section 4.5 Third Party Consents . . . . . . . . . . . . . . . 26
Section 4.6 Securities Laws. . . . . . . . . . . . . . . . . . 27
Section 4.7 Communications Laws. . . . . . . . . . . . . . . . 27
Section 4.8 Notice of Proceedings. . . . . . . . . . . . . . . 27
Section 4.9 Delivery of EASTERN's Shareholder Lists. . . . . . 27
Section 4.10 Confidentiality. . . . . . . . . . . . . . . . . . 28
Section 4.11 No Solicitation. . . . . . . . . . . . . . . . . . 28
Section 4.12 Recommendation and Approval of Merger. . . . . . . 28
Section 4.13 Audited Financial Statements . . . . . . . . . . . 28
Section 4.14 Public Announcements . . . . . . . . . . . . . . . 29
Section 4.15 Adverse Events . . . . . . . . . . . . . . . . . . 29
Section 4.16 Employees. . . . . . . . . . . . . . . . . . . . . 29
Section 4.17 Broker's Fees. . . . . . . . . . . . . . . . . . . 30
Section 4.18 Retention of Staff . . . . . . . . . . . . . . . . 30
Section 4.19 Shareholders' Approval . . . . . . . . . . . . . . 30
Section 4.20 Tax Returns. . . . . . . . . . . . . . . . . . . . 30
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NETWORK AND
ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.1 Corporate Existence. . . . . . . . . . . . . . . . 30
Section 5.2 Corporate Power and Authority. . . . . . . . . . . 30
Section 5.3 Capitalization . . . . . . . . . . . . . . . . . . 31
Section 5.4 Execution and Delivery Permitted . . . . . . . . . 31
Section 5.5 Binding Effect . . . . . . . . . . . . . . . . . . 31
Section 5.6 Reports and Financial Statements . . . . . . . . . 32
Section 5.7 Absence of Certain Changes . . . . . . . . . . . . 32
Section 5.8 Litigation . . . . . . . . . . . . . . . . . . . . 34
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Section 5.9 Compliance with Laws . . . . . . . . . . . . . . . 34
Section 5.10 Issuance of Shares . . . . . . . . . . . . . . . . 35
Section 5.11 No Undisclosed Liabilities . . . . . . . . . . . . 35
Section 5.12 Benefit Plans; ERISA.. . . . . . . . . . . . . . . 35
Section 5.13 Broker's Fees. . . . . . . . . . . . . . . . . . . 36
Section 5.14 Labor Matters . . . . . . . . . . . . . . . . . . 36
Section 5.15 Full Disclosure. . . . . . . . . . . . . . . . . . 36
Section 5.16 Expenses . . . . . . . . . . . . . . . . . . . . . 36
Section 5.17 Environmental Matters. . . . . . . . . . . . . . . 36
Section 5.18 Correct Records. . . . . . . . . . . . . . . . . . 37
Section 5.19 Board of Directors Representation. . . . . . . . . 37
Section 5.20 Advisability of Merger . . . . . . . . . . . . . . 37
ARTICLE VI
COVENANTS OF NETWORK. . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.1 Maintenance of Business. . . . . . . . . . . . . . 37
Section 6.2 Negative Covenants . . . . . . . . . . . . . . . . 38
Section 6.3 Organization, Goodwill . . . . . . . . . . . . . . 38
Section 6.4 Access to Facilities, Files and Records. . . . . . 39
Section 6.5 Corporate Action . . . . . . . . . . . . . . . . . 39
Section 6.6 Confidentiality. . . . . . . . . . . . . . . . . . 39
Section 6.7 Notice of Proceedings. . . . . . . . . . . . . . . 40
Section 6.8 Director Representation. . . . . . . . . . . . . . 40
Section 6.9 Third Party Consents; Guarantees . . . . . . . . . 41
Section 6.10 Securities Laws. . . . . . . . . . . . . . . . . . 41
Section 6.11 Communications Laws. . . . . . . . . . . . . . . . 41
Section 6.12 Notice of Proceedings. . . . . . . . . . . . . . 41
Section 6.13 Adverse Events . . . . . . . . . . . . . . . . . . 42
Section 6.14 Broker's Fees. . . . . . . . . . . . . . . . . . . 42
Section 6.15 Other Transactions . . . . . . . . . . . . . . . . 42
ARTICLE VII
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.1 NETWORK and Acquisition Conditions to Closing. . . 42
Section 7.2 EASTERN and Shareholder Conditions to Closing. . . 44
Section 7.3 Mutual Covenants and Conditions to Obligations of
EASTERN and NETWORK. . . . . . . . . . . . . . . . 46
ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.1 Shareholders' Litigation Indemnity Agreements. . . 46
Section 8.2 Shareholders' Other Indemnity Agreements . . . . . 47
Section 8.3 NETWORK's Indemnity Agreements . . . . . . . . . . 47
Section 8.4 Limitation . . . . . . . . . . . . . . . . . . . . 47
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Section 8.5 Procedure for General Claims . . . . . . . . . . . 48
Section 8.6 Procedure for Third Party Claims . . . . . . . . . 48
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.1 Survival . . . . . . . . . . . . . . . . . . . . . 50
Section 9.2 Termination of Transactions; Termination Fee . . . 50
Section 9.3 Effect of Termination or Abandonment . . . . . . . 51
Section 9.4 Liabilities. . . . . . . . . . . . . . . . . . . . 51
Section 9.5 Assignment . . . . . . . . . . . . . . . . . . . . 51
Section 9.6 Further Assurances . . . . . . . . . . . . . . . . 52
Section 9.7 Notices. . . . . . . . . . . . . . . . . . . . . . 52
Section 9.8 Entire Agreement . . . . . . . . . . . . . . . . . 53
Section 9.9 Rules of Construction. . . . . . . . . . . . . . . 53
Section 9.10 Law Governing. . . . . . . . . . . . . . . . . . . 54
Section 9.11 Waiver of Provisions . . . . . . . . . . . . . . . 54
Section 9.12 Successors . . . . . . . . . . . . . . . . . . . . 54
Section 9.13 Counterparts . . . . . . . . . . . . . . . . . . . 54
Section 9.14 Public Statements or Releases. . . . . . . . . . . 54
Section 9.15 Severability . . . . . . . . . . . . . . . . . . . 54
Section 9.16 No Third Party Beneficiaries . . . . . . . . . . . 55
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and
entered into as of the 25th day of April, 1997, by and among NETWORK LONG
DISTANCE, INC., a Delaware corporation ("NETWORK"), WATER ACQUISITION
CORP., a Virginia corporation ("Acquisition"), EASTERN TELECOM
INTERNATIONAL CORPORATION, a Virginia corporation ("EASTERN"), and the
shareholders of EASTERN who have executed this Agreement (collectively, the
"Shareholders").
WHEREAS, EASTERN is engaged in the business of providing
communications services;
WHEREAS, NETWORK has formed Acquisition as a wholly-owned subsidiary
in order to effect the merger of Acquisition with and into EASTERN (the
"Merger") in accordance with this Agreement and in accordance with the laws
of the Commonwealth of Virginia so that, upon consummation of the Merger,
EASTERN will be a wholly-owned subsidiary of NETWORK, and Acquisition will
cease to exist;
WHEREAS, it is the intent of the parties that the Merger qualify as a
reorganization under Section 368(a)(1)(A) and 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, this Agreement has been approved by the respective boards of
directors of NETWORK, Acquisition and EASTERN; and
WHEREAS, the parties desire to induce each other to enter into this
Agreement by making certain representations, warranties and covenants
contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations, warranties and promises set forth
herein, and in order to prescribe the terms and conditions of the Merger,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. At the Effective Time (as defined in
Section 1.2), upon the terms and subject to the conditions hereof, and in
accordance with the Virginia Stock Corporation Act ("VSCA"), Acquisition
will be merged with and into EASTERN in the Merger whereupon EASTERN shall
continue as the surviving corporation (the "Surviving Corporation"), and
the separate corporate existence of Acquisition shall cease.
SECTION 1.2 EFFECTIVE TIME. Subject to the terms and conditions
hereof, the Merger shall be consummated on the Closing Date (as defined in
Section 2.2, and simultaneously therewith or as soon as practicable
thereafter, the parties shall cause to be filed Articles of
<PAGE>
Merger (the "Articles of Merger") with the Virginia State Corporation
Commission, in such form as is required by, and executed in accordance
with, the relevant provisions of the VSCA and shall be effective at such
time as such Articles of Merger have been so filed with the Virginia State
Corporation Commission and the Virginia State Corporation Commission has
accepted for record the Articles of Merger and issued a Certificate of
Merger pursuant to Section 13.1-176 of the VSCA (the "Effective Time").
SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 13.1-176 of the VSCA.
SECTION 1.4 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and the Bylaws of Acquisition as in effect immediately prior
to the Effective Time shall be the Articles of Incorporation and the Bylaws
of the Surviving Corporation until thereafter amended as provided by law.
SECTION 1.5 OFFICERS AND DIRECTORS. The officers and directors of
EASTERN as of the Effective Time shall be the officers and directors of the
Surviving Corporation and will hold office from the Effective Time until
their respective successors are duly elected or appointed and qualified in
the manner provided in the Articles of Incorporation and Bylaws of the
Surviving Corporation or as otherwise provided by law.
SECTION 1.6 FURTHER ACTIONS. At and after the Effective Time, the
Surviving Corporation shall take all action as shall be required in
connection with the Merger, including, but not limited to, the execution
and delivery of any further deeds, assignments, instruments or
documentation as are necessary or desirable to carry out the provisions of
this Agreement.
ARTICLE II
CONVERSION AND EXCHANGE
OF SHARES, CLOSING
SECTION 2.1 CONVERSION AND EXCHANGE OF SHARES. As of the Effective
Time, by virtue of the Merger and without any action on the part of any
holder of any shares of common stock, no par value, of EASTERN (the
"EASTERN Common"):
(a) All shares of EASTERN Common which are held by EASTERN shall
be canceled and retired and shall cease to exist and no stock of
NETWORK or other consideration shall be delivered in exchange
therefor. All shares of preferred stock of EASTERN which remain
outstanding at the Effective Time shall be canceled and retired and
shall cease to exist and no stock of NETWORK or other consideration
shall be delivered in exchange therefor. Each share of common stock,
$.01 par value, of Acquisition shall become a share of the Surviving
Corporation's common stock.
2
<PAGE>
(b) At the Effective Time, by virtue of the Merger and without
any action on the part of NETWORK, EASTERN or the holders of any
shares of the EASTERN Common, (i) each share of EASTERN Common, issued
and outstanding immediately prior to the Effective Time which under
the terms of Section 2.1(d) is to be converted into the right to
receive a number of shares of common stock, par value $.0001 per share
of NETWORK (the "NETWORK Common") shall be converted into the right to
receive a number of shares of NETWORK Common equal to the Exchange
Ratio (as hereinafter defined) (collectively, the "Share
Consideration"), and (ii) each share of EASTERN Common issued and
outstanding immediately prior to the Effective Time which under the
terms of Section 2.1(d) is to be converted into the right to receive
cash shall be converted into the right to receive an amount in cash
equal to the Per Share Consideration (the "Cash Consideration," and
together with the Share Consideration, the "Merger Consideration").
All shares of EASTERN Common to be converted into shares of NETWORK
Common or the right to receive cash pursuant to this Section 2.1(b)
are hereinafter referred to as the "Converted Shares." The Exchange
Ratio shall mean a number of shares of NETWORK Common determined by
dividing (x) the Per Share Consideration by (y) $8.00, and rounding
the result to three decimal places. The Per Share Consideration shall
be equal to $31,500,000.00 less the amount of adjusted working capital
set forth on Schedule 2.1(b), divided by the number of issued and
outstanding shares of EASTERN Common at the Effective Time.
(c) As soon as practicable following execution of this
Agreement, and in no event less than one day prior to the Closing
Date, NETWORK will send to each holder of Converted Shares a cash
election form (the "Election Form") and other appropriate materials
providing for such Shareholder, all in form reasonably satisfactory to
EASTERN, subject to the provisions of Section 2.1(d), (i) to elect to
receive the Share Consideration with respect to all or any portion of
such Shareholder's shares of EASTERN Common ("Share Election") or (ii)
to elect to receive the Cash Consideration with respect to all or any
portion of such Shareholder's shares of EASTERN Common ("Cash
Election"). As of the Election Deadline (as hereinafter defined), any
shares of EASTERN Common with respect to which no submission to a
designee of NETWORK (the "Exchange Agent") of an effective, properly
completed Election Form has been made shall be deemed to be
"No-Election Shares."
(i) Any election to receive the Cash Consideration or the
Share Consideration shall have been validly made only if the
Exchange Agent shall have received by 8:00 a.m., Kansas City
time, on the day prior to the Closing Date (the "Election
Deadline") an Election Form properly completed. An election by
a Shareholder shall be validly made only if the Exchange Agent
shall have received an Election Form properly completed and
executed by such Shareholder, together with such Shareholder's
stock certificates, duly endorsed for transfer as required in the
Election Form. NETWORK shall have the right to make reasonable
determinations and to establish reasonable procedures (not
inconsistent with the terms of this Agreement) in guiding the
Exchange Agent in its
3
<PAGE>
determination as to the validity of Election Forms and of any
revision, revocation or withdrawal thereof.
(ii) Any Shareholder who has made an election by submitting
an Election Form to the Exchange Agent may at any time prior to
the Election Deadline change such Shareholder's election by
submitting a revised Election Form, properly completed and
signed, that is received by the Exchange Agent prior to the
Election Deadline. Any Shareholder may at any time prior to the
Election Deadline revoke such Shareholder's election by written
notice to the Exchange Agent received at any time prior to the
Election Deadline.
(d) As soon as practicable after the Election Deadline (the
"Allocation Date"), the Exchange Agent shall effectuate the allocation
among Shareholders of rights to receive the Share Consideration or the
Cash Consideration in the Merger in accordance with the terms of this
Section 2.1(d). As is more fully set forth below, the number of
shares of EASTERN Common to be converted in the Merger into the right
to receive cash shall not exceed $1,500,000.00 divided by the Per
Share Consideration (such shares are referred to herein as the
"Maximum Cash Election Shares").
(i) The Exchange Agent shall determine the numbers of
Converted Shares for which Cash Elections (the "Cash Election
Shares") and Share Elections (the "Share Election Shares") have
been received.
(ii) Each Share Election Share and No-Election Share shall
be converted in the Merger into the right to receive the Share
Consideration.
(iii) If Cash Election Shares constitute more than the
Maximum Cash Election Shares of the Converted Shares, the Cash
Election Shares shall be converted in the Merger into the right
to receive cash and shares of NETWORK Common in the following
manner: the number of Cash Election Shares covered by a Cash
Election which shall be converted into the right to receive the
Cash Consideration shall equal the amount obtained by multiplying
(x) the number of shares of EASTERN Common covered by such Cash
Election by (y) a fraction of which the numerator shall be the
Maximum Cash Election Shares and the denominator shall be the
aggregate number of Cash Election Shares. The balance of such
Cash Election Shares shall each be converted into the right to
receive the Share Consideration.
(iv) If Cash Election Shares constitute the Maximum Cash
Election Shares or less of the Converted Shares, each Cash
Election Share shall be converted in the Merger into the right to
receive the Cash Consideration.
(e) No fractional share of NETWORK Common shall be issued in the
Merger. In lieu of such fractional securities, each holder of shares
of EASTERN Common who
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would have otherwise been entitled to a fraction of a share of NETWORK
Common upon surrender of certificates for exchange pursuant to this
Article II will be paid an amount (in cash without interest), equal to
the fair value of such fractional share based on the Per Share
Consideration.
SECTION 2.2 DATE, TIME AND PLACE OF CLOSING. The Closing of the
Merger (the "Closing") shall be held on the fifth business day following
the satisfaction or waiver of all of the conditions set forth in Article
VII hereof, beginning at 9:00 a.m. Central Time in the offices of Blackwell
Sanders Matheny Weary & Lombardi L.C., 2300 Main Street, Kansas City,
Missouri or at such other place, time and date as the parties hereto shall
mutually agree. The date of the Closing is referred to herein as the
"Closing Date."
SECTION 2.3 DELIVERIES BY EASTERN AND THE SHAREHOLDERS AT CLOSING.
At the Closing, and thereafter as may be reasonably requested by NETWORK,
EASTERN and the Shareholders shall deliver to NETWORK the following, all in
form and content reasonably acceptable to NETWORK and its counsel:
(a) Certified copies of duly adopted resolutions of the Board of
Directors of EASTERN authorizing, approving, and consenting to the
execution and delivery of this Agreement, to the consummation of the
transactions contemplated herein, and to performance of the agreements
set forth herein;
(b) The waiver, release, consent, estoppel certificate or other
document of any person, corporation, association, or other entity of
any nature whatsoever, in form reasonably acceptable to NETWORK, which
NETWORK in its reasonable judgment deems necessary to consummate the
transactions contemplated hereby, and to make the warranties and
representations made by EASTERN and the Shareholders in this Agreement
true;
(c) Certificate of Good Standing dated within ten (10) days of
the Closing Date from the Virginia Secretary of State;
(d) An opinion of EASTERN's counsel dated as of the Closing Date
in substantially the form set forth on Exhibit 2.3(d) to this
Agreement;
(e) A duly executed Registration Rights Agreement in the form of
Exhibit 2.3(e) hereto;
(f) A duly executed Escrow Agreement in the form of Exhibit
2.3(f) hereto;
(g) A duly executed Working Capital Escrow Agreement in the
form of Exhibit 2.3(g) hereto;
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(h) Duly executed Employment Agreements in the forms attached as
Exhibits 2.3(h) hereto;
(i) All corporate minute books, stock ledger and transfer books
and all other books and records, and the corporate seal of EASTERN;
and
(j) Such other documents as NETWORK or its counsel may
reasonably request.
SECTION 2.4 DELIVERIES BY NETWORK AT CLOSING. At the Closing,
NETWORK will deliver the following, all in form and content reasonably
acceptable to EASTERN and the Shareholders' Representative and their
counsel:
(a) Certified copies of duly adopted resolutions of the Board of
Directors of NETWORK authorizing, approving, and consenting to the
execution and delivery of this Agreement, to the consummation of the
transactions contemplated herein, and to performance of the agreements
set forth herein;
(b) The waiver, release, consent, estoppel certificate or other
document of any person, corporation, association, or other entity of
any nature whatsoever, in form reasonably acceptable to EASTERN, which
EASTERN in its reasonable judgment deems necessary to consummate the
transactions contemplated hereby, and to make the warranties and
representations made by NETWORK in this Agreement true;
(c) To the Shareholders, the Cash Consideration by cashier's or
certified check, or by wire transfer of immediately available funds to
accounts designated by the Shareholders, and the Share Consideration,
less the number of shares escrowed pursuant to Sections 2.4(d) and
2.4(e), through delivery of stock certificates representing such
shares;
(d) To the escrow agent named in the Escrow Agreement (the
"Escrow Agent"), that number of shares from the Share Consideration
that are valued at $300,000, based upon a price of $8.00 per share,
together with executed stock powers from the Shareholders, to be held
pursuant to the terms of the Escrow Agreement attached hereto as
Exhibit 2.3(f) (the "Escrow Agreement"), to satisfy all or part of any
claims for indemnity pursuant to Article VIII hereof;
(e) To the escrow agent named in the Working Capital Escrow
Agreement (the "Working Capital Escrow Agent") (i) that number of
shares from the Share Consideration that are valued at $200,000, based
upon a price of $8.00 per share, together with executed stock powers
from the Shareholders and (ii) $200,000 in cash equivalents as a
reserve for all or part of any adjustments pursuant to Section 2.5;
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(f) An opinion of NETWORK's counsel dated as of the Closing Date
substantially in the form of Exhibit 2.4(f) hereto;
(f) A duly executed Registration Rights Agreement in the form of
Exhibit 2.3(e);
(g) A duly executed Escrow Agreement in the form of Exhibit
2.3(f) hereto;
(h) A duly executed Working Capital Escrow Agreement in the form
of Exhibit 2.3 (g) hereto;
(h) Duly executed Employment Agreements in the forms attached as
Exhibits 2.3(h) hereto;
(i) Certificates of Good Standing dated within ten (10) days of
the Closing Date from the Delaware Secretary of State for NETWORK and
the Virginia Secretary of State for Acquisition; and
(j) Such other documents as the Shareholders or their counsel
may reasonably request.
SECTION 2.5 POST CLOSING ADJUSTMENTS. The Merger Consideration set
forth in Section 2.1 hereof delivered to the Working Capital Escrow Agent
pursuant to Section 2.4 hereof shall be subject to adjustment after the
Closing Date as follows:
(a) As promptly as possible following the Closing Date, the
Shareholders' Representative (as defined below) shall cause KPMG Peat
Marwick, independent public accountants for EASTERN ("EASTERN's
Auditors"), to conduct an audit of the books and records of EASTERN as
of March 31, 1997. Not later than forty-five (45) days after the
Closing Date, the Shareholders' Representative shall cause EASTERN's
Auditors to deliver a consolidated balance sheet of EASTERN as of
March 31, 1997, which shall accrue (or disclose in footnotes thereto)
all of the adjustments set forth on Schedule 2.1(b) and all other
appropriate adjustments (as corrected pursuant to Section 2.5(c)
hereof, the "Closing Balance Sheet") to each of the parties to this
Agreement and to the Escrow Agent. The Closing Balance Sheet shall be
prepared in accordance with generally accepted accounting principles
applied consistently with EASTERN's past practice (to the extent that
such past practice was in accordance with generally accepted
accounting principles), without any adjustments applicable solely as
a result of the Merger, and shall be certified without qualification
by EASTERN's Auditors. The Closing Balance Sheet shall be accompanied
by a statement prepared by EASTERN's Auditors setting forth the basis
for the determination of the items and values reflected on the Closing
Balance Sheet.
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(b) NETWORK (as defined below) and one firm of independent
certified accountants acting on behalf of NETWORK ("NETWORK's
Auditors") shall have the right to review the work papers of EASTERN's
Auditors utilized in preparing the Closing Balance Sheet, and shall
have full access to the books, records, properties and personnel of
EASTERN for purposes of verifying the accuracy and fairness of the
presentation of the Closing Balance Sheet. NETWORK shall work in good
faith and cooperate with the Shareholders' Representative and
EASTERN's Auditors in the preparation of the Closing Balance Sheet and
the resolution of any dispute in connection therewith pursuant to
subparagraph (c) below.
(c) The values or amounts for each item reflected on the Closing
Balance Sheet shall be binding upon NETWORK, unless NETWORK gives
written notice within thirty (30) days after receipt of the Closing
Balance Sheet, of disagreement with any of the values or amounts shown
on the Closing Balance Sheet, specifying as to each such item in
reasonable detail, the nature and extent of such disagreement (the
"Dispute Notice"). If NETWORK and the Shareholders' Representative
are unable to resolve any such disagreement within thirty (30) days
after the date of the Dispute Notice, the disagreement shall be
submitted to an independent public accounting firm which has not
previously provided services to NETWORK or EASTERN. Such independent
public accounting firm shall be designated by NETWORK and the
Shareholders' Representative to resolve the dispute. If NETWORK and
the Shareholders' Representative cannot agree on an independent public
accounting firm, they shall ask NETWORK'S Auditor's and EASTERN's
Auditors, respectively, to agree upon a "Big Six" accounting firm that
has not previously provided services to NETWORK or EASTERN, and the
parties shall be deemed to have agreed upon that firm. The firm thus
designated shall have sixty (60) days to complete its determination,
which shall be final and binding for all purposes. The costs charged
by such firm to resolve such dispute shall be borne equally by the
parties. If as a result of the resolution of any disputes pursuant to
this Section 2.5, any amount shown in the Closing Balance Sheet is
determined to be erroneous, such erroneous amount shall be deleted
from the Closing Balance Sheet and the correct amount shall be
inserted in lieu thereof. The Closing Balance Sheet, as so corrected,
shall constitute the Closing Balance Sheet for purposes of this
Agreement.
(d) NETWORK shall pay the fees and disbursements of EASTERN'S
Auditors. The fees and disbursements of NETWORK's Auditors in the
review of the Closing Balance Sheet shall be paid by NETWORK.
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(e) Immediately upon the expiration of the 30-day period for
giving the Dispute Notice, if no Dispute Notice is given, or
immediately upon the resolution of disputes, if any, pursuant to this
Section 2.5, the Merger Consideration shall be adjusted by the
aggregate of the adjustments set forth below (as so adjusted, the
"Adjusted Merger Consideration"):
(i) If the Long Term Debt of EASTERN (as defined below) as
reflected on the Closing Balance Sheet is less than
$1,200,000.00, the difference between such Long Term Debt and
$1,200,000.00 shall be added to the Merger Consideration.
(ii) If the Long Term Debt of EASTERN reflected on the
Closing Balance Sheet is greater than $1,200,000.00, the
difference between such Long Term Debt and $1,200,000.00 shall be
subtracted from the Merger Consideration.
(iii) If the Working Capital of EASTERN (as defined
below) reflected on the Closing Balance Sheet is less than $0,
the difference between such Working Capital and $0 shall be
subtracted from the Merger Consideration.
(iv) If the Working Capital of EASTERN reflected on the
Closing Balance Sheet is greater than $0, the difference between
such Working Capital and $0 shall be added to the Merger
Consideration.
(v) The term "Long Term Debt" is defined as all capital
leases and notes payable, including current maturities thereof.
(vi) The term "Working Capital" is defined as (x) the sum of
all cash, marketable securities, cash equivalents, accounts
receivable, prepaid expenses and inventory, (y) less the sum of
accounts payable, accrued personnel costs, accrued transmission
expense, accrued commission expense, accrued taxes payable,
reserve for bad debt and credits, margin loan, and an additional
$300,000.00, all of which are set forth on Schedule 2.1(b), (z)
after provision for payment of fees and expenses of EASTERN and
the Shareholders associated with this Agreement and the Merger.
For purposes of this calculation, the reserve for bad debt and
credits, expressed as a percentage of accounts receivable that
includes unbilled accounts receivable and billed accounts
receivable on EASTERN's Aging Report attached as Schedule
2.5(e)(vi) (all as audited pursuant to Section 2.5(a)), shall not
exceed the actual percentage calculated in the same manner that
existed on EASTERN's internally prepared financial reports as of
February 28, 1997, as previously disclosed. EASTERN has
previously delivered to Network the detail underlying the Aging
Report.
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SECTION 2.6 PAYMENTS OF ADJUSTED MERGER CONSIDERATION. Immediately
upon expiration of the 30-day period for giving the Dispute Notice, or
immediately upon final resolution of any dispute:
(a) In the event the Adjusted Merger Consideration is less than
the Merger Consideration, the number of shares of NETWORK Common
(valued at $8.00 per share) representing a value equal to the
difference between the Merger Consideration and the Adjusted Merger
Consideration shall be returned to NETWORK from the Share
Consideration held in escrow pursuant to the Working Capital Escrow
Agreement.
(b) In the event the Adjusted Merger Consideration exceeds the
Merger Consideration, the Share Consideration held in escrow pursuant
to the Working Capital Escrow Agreement shall be delivered to the
Shareholders and, if enough shares of NETWORK Common to make up the
difference are not held in escrow (based upon a valuation of $8.00 per
share), that amount of funds escrowed pursuant to the Working Capital
Escrow Agreement which, when combined with such escrowed shares, is
sufficient to make up the difference, shall be delivered to the
Shareholders' Representative on behalf of the Shareholders.
(c) Any remaining obligations of EASTERN and the Shareholders to
pay to Michael E. Lincoln an amount equal to three percent of the net
proceeds upon a sale of EASTERN shall be satisfied from Share
Consideration otherwise payable to the Shareholders and held pursuant
to the Working Capital Escrow Agreement.
SECTION 2.7 SHAREHOLDERS' REPRESENTATIVE.
(a) In order to efficiently administer (i) the determination of
the Long Term Debt of EASTERN, Working Capital of EASTERN, and the
Adjusted Merger Consideration, (ii) the waiver of any condition to the
obligations of the Shareholders to consummate the transactions
contemplated hereby, and (iii) the defense and/or settlement of any
claims for which the Shareholders may be required to indemnify NETWORK
pursuant to Article VIII hereof, the Shareholders hereby designate
Shareholder John D. Crawford as their representative (the
"Shareholders' Representative").
(b) The Shareholders hereby authorize the Shareholders'
Representative (i) to make all decisions relating to the determination
of the Long Term Debt of EASTERN, the Working Capital of EASTERN, and
the Adjusted Merger Consideration, (ii) to take all action necessary
in connection with the waiver of any condition to the obligations of
the Shareholders to consummate the transactions contemplated hereby,
or the defense and/or settlement of any claims for which the
Shareholders may be required to indemnify NETWORK pursuant to Article
VIII hereof, (iii) to give and receive all notices required to be
given under the Agreement, and (iv) to take any and all additional
action as is contemplated to be taken by or on behalf of the
Shareholders by the terms of this Agreement.
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(c) All decisions and actions by the Shareholders'
Representative, including, without limitation, any agreement between
the Shareholders' Representative and NETWORK relating to the
determination of the Long Term Debt of EASTERN, Working Capital of
EASTERN, and the Adjusted Merger Consideration, or the defense or
settlement of any claims for which the Shareholders may be required to
indemnify NETWORK pursuant to Article VIII hereof, shall be binding
upon all of the Shareholders, and no Shareholder shall have the right
to object, dissent, protest or otherwise contest the same.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EASTERN
AND THE SHAREHOLDERS
EASTERN and Shareholders John D. Crawford and Thomas G. Keefe hereby
jointly and severally make the representations and warranties set forth in
this Article III to NETWORK and Acquisition. All of the Shareholders
severally make the representations and warranties set forth in Section 3.3
to NETWORK and EASTERN. The Shareholders acknowledge that (i) the
representations and warranties made by them are made as an inducement to
NETWORK and Acquisition to enter this Agreement and to consummate the
transactions contemplated hereby; and (ii) NETWORK and Acquisition have
entered into this Agreement specifically in reliance upon each of such
representations and warranties.
SECTION 3.1 CORPORATE EXISTENCE. EASTERN is duly organized,
validly existing, and in good standing under the laws of the Commonwealth
of Virginia. Attached hereto as Exhibit 3.1 is a complete and correct copy
of the Articles of Incorporation and Bylaws (together with all amendments
thereto) of EASTERN. EASTERN has all necessary power and authority to own
and operate its properties and assets, to enter into this Agreement, and to
carry on its business as now conducted. EASTERN is duly qualified,
certified or licensed in each such state and jurisdiction where such
qualification, certification or licensing is necessary or required to
conduct its business and offer communications services.
SECTION 3.2 SUBSIDIARIES. EASTERN has no subsidiary corporations
or any other interest in any corporation, partnership, association or joint
venture, other than as described on Schedule 3.2.
SECTION 3.3 CAPITALIZATION.
(a) The authorized capital stock of EASTERN consists of: (i)
1,000 shares of common stock, no par value, of which 606 shares are
issued and outstanding and no shares are held as treasury stock, and
(ii) 100,000 shares of $10.00 par value preferred stock, of which
30,785.04 shares are issued and outstanding and no shares are held as
treasury stock. There are no other classes of equity, options,
warrants, calls, rights or commitments or any other agreements of any
character relating to the sale, issuance or voting of any shares of
EASTERN Common, or any securities convertible into or
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evidencing the right to purchase any shares of EASTERN Common. All
such issued and outstanding shares are validly issued, fully paid and
nonassessable. All of the outstanding capital stock of EASTERN is
held of record by the persons or entities in the amounts set forth on
Schedule 3.3, and there is no outstanding agreement (written or oral),
option, warrant, note or any other type of security of EASTERN which
would entitle any person to acquire any equity securities of EASTERN.
There are no restrictions imposed by the Articles of Incorporation or
Bylaws of EASTERN, and there are no other agreements, understandings
or commitments, which would in any way affect or impair the
transactions contemplated hereby.
(b) Each Shareholder is the lawful record and beneficial owner
of the EASTERN Common set forth opposite his name on Schedule 3.3.
The shares of EASTERN Common are now and as of the Closing will be
free and clear of any claims, pledges, security interests, liens or
encumbrances or other restrictions or limitations of any kind, other
than those arising under this Agreement. None of the Shareholders or
EASTERN is a party to, or bound by, any shareholder agreement, voting
agreement, voting trust, buy-sell agreement, option agreement or any
similar agreement, understanding or commitment with respect to any of
the EASTERN Common.
SECTION 3.4 BINDING EFFECT. This Agreement and each other
agreement required to be executed and delivered by EASTERN or the
Shareholders in connection herewith, when executed and delivered, will be
the legal, valid and binding obligation of EASTERN or the Shareholders, as
applicable, enforceable against them in accordance with their terms, except
as enforceability may be limited by (i) applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the
enforcement of creditors' rights generally, and (ii) general equitable
principles (regardless of whether enforceability is considered in a
proceeding in equity or at law).
SECTION 3.5 EXECUTION AND DELIVERY PERMITTED. The execution,
delivery and performance of this Agreement and the other agreements
contemplated hereby and the consummation of the transactions contemplated
hereby or thereby will not violate or result in a breach of any term of
EASTERN's Articles of Incorporation or Bylaws, result in a breach of or
constitute a default under any term in any agreement, tariff or other
instrument to which EASTERN is a party or by which it is bound, violate any
law or any order, rule or regulation applicable to EASTERN of any court or
any regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over EASTERN or its properties; and
will not result in the creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever upon any of its assets, which lien,
charge or encumbrance has not been removed prior to Closing. The Board of
Directors of EASTERN and the Shareholders have taken all actions required
by law and by EASTERN's Articles of Incorporation and Bylaws to authorize
the execution, delivery and performance of this Agreement, together with
its Schedules and Exhibits, and the consummation of the transactions
contemplated by this Agreement or by any of the Exhibits. Except as set
forth on Schedule 3.5 hereto, none of the execution, delivery or
performance of this Agreement or any of the other agreements executed in
connection herewith,
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or the consummation of the transactions contemplated hereby or thereby
requires any filing with or the consent or approval of any third party,
including but not limited to any governmental body or entity other than the
filing with, and the acceptance for record by, the Virginia State
Corporation Commission of Articles of Merger in accordance with the VSCA.
None of the Shareholders or EASTERN is required to obtain the consent or
approval of any other person or entity with respect to the transactions
contemplated hereunder, except as set forth on Schedule 3.5.
SECTION 3.6 FINANCIAL STATEMENTS.
(a) The audited Balance Sheets of EASTERN as of April 30, 1995
and 1996 and the related Statements of Income, Stockholder's Equity,
and the Statements of Cash Flows for the three years then ended of
EASTERN, together with the notes thereon, audited by the independent
certified public accountants of EASTERN, have been delivered by
EASTERN to NETWORK. Such audited financial statements and notes were
prepared in accordance with generally accepted accounting principles
("GAAP") are in accordance with the books and records of EASTERN, and
except as set forth in Schedule 3.6(i) contain and reflect adequate
reserves for (i) all liabilities or obligations of any nature, whether
absolute, contingent or otherwise, in accordance with GAAP and (ii)
all reasonably anticipated losses and costs in excess of expected
revenue, and present fairly the financial position of EASTERN, as of
such dates and for such periods. Except as set forth in Schedule
3.6(ii), all transactions between EASTERN and the Shareholders related
to the business or operations of EASTERN have been identified in such
audited financial statements.
(b) The unaudited Balance Sheet of EASTERN as of December 31,
1996 (together, with the audited Balance Sheets described in (a)
above, the "Balance Sheets"), and the related Statements of Income and
Statements of Cash Flows for the period then ended of EASTERN have
been delivered by EASTERN to NETWORK. Except as set forth in Schedule
3.6(i), the unaudited financial statements as of and for the period
ended December 31, 1996 have been similarly prepared in accordance
with GAAP, contain and reflect adequate reserves for (i) all
liabilities or obligations of any nature, whether absolute, contingent
or otherwise, in accordance with GAAP and (ii) all reasonably
anticipated losses, and present fairly the financial condition and
results of operations of EASTERN as of such date and for such period,
except for the lack of explanatory footnote disclosures required by
GAAP. Such footnote disclosures, if included with the financial
statements as of and for the eight month period ended December 31,
1996, would be substantially similar in description and content to the
footnote disclosures in the audited financial statements for the
fiscal year ended April 30, 1996. Except as set forth on Schedule
3.6(ii), all transactions between EASTERN and the Shareholders related
to the business or operations of EASTERN have been identified in such
unaudited financial statements.
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(c) For purposes of this Agreement, the Balance Sheet of EASTERN
at December 31, 1996 is sometimes referred to as the "Balance Sheet"
and the date thereof is referred to as the "Balance Sheet Date."
EASTERN shall deliver to NETWORK (i) the unaudited consolidated
financial statements of EASTERN for the months ended after December
31, 1996, no later than thirty (30) days after the end of each such
month until Closing shall have occurred; (ii) the audited financial
statements of EASTERN for the eleven (11) month period ended March 31,
1997, no later than June 15, 1997; and (iii) any subsequent unaudited
compiled financial statements of EASTERN for each fiscal quarter
thereafter no later than thirty-five (35) days after the end of each
such fiscal quarter until the Closing shall have occurred. Such
financial statements will be prepared in accordance with GAAP, will
present fairly the financial condition and results of operations of
EASTERN as of such dates and for such periods, and will be in
accordance with the books and records of EASTERN.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES. Except as set forth on
Schedule 3.7, since the Balance Sheet Date, there has not been:
(a) Any material adverse change in the financial condition,
operations, business or prospects of EASTERN, including, but not
limited to, any state or federal regulatory proceedings which could
culminate in an order or other action which could have such an adverse
change, excluding generally known industry trends and competitive
conditions affecting the industry generally;
(b) Any material physical damage or destruction, whether or not
covered by insurance, adversely affecting the properties, business, or
operations of EASTERN;
(c) Any labor dispute or threat thereof or any attempt to
organize or reorganize the employees of EASTERN for the purpose of
collective bargaining;
(d) Any direct or indirect redemption, purchase or other
acquisition by EASTERN of any of the EASTERN Common, or declaration of
or payment or distribution of any kind of cash or other assets to any
Shareholder;
(e) Any employment, severance, consulting or other compensation
contract entered into by EASTERN with any director, officer or
employee, or any increase of compensation payable or to become payable
to any of its officers, employees or agents, except for increases in
compensation in the ordinary course of business;
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(f) Any communication, whether oral or written, to EASTERN or
the Shareholders from EASTERN's customers or suppliers or agencies
regulating EASTERN; nor does EASTERN or any Shareholder, after making
due inquiry, have any knowledge of any potential development affecting
EASTERN which would reasonably lead it or any of them to expect a
material adverse change in EASTERN's business;
(g) Any satisfaction or discharge of any lien by EASTERN or
payment by EASTERN of any obligation or liability, other than an
obligation or liability included in the Balance Sheet of EASTERN,
current liabilities incurred since the Balance Sheet Date in the
ordinary course of business, liabilities incurred in carrying out the
transactions contemplated by this Agreement and obligations and
liabilities under the contracts and agreements listed in Schedule 3.16
hereof;
(h) Any guaranty, endorsement or indemnification by EASTERN of
the obligations of any third person, firm or corporation;
(i) Any sale or transfer of any assets or cancellation by
EASTERN of debts or claims having a value, in the aggregate, of more
than $50,000, except, in each case, in the ordinary course of
business;
(j) Any knowing waiver by EASTERN of any rights having a value
in excess of $100,000;
(k) Any transactions entered into, other than in the ordinary
course of business;
(l) Any mortgage, pledge or lien or other encumbrance of any of
its assets, tangible or intangible; or
(m) Any assignment, sale or transfer of any patent, trademark,
trade name, trade secret, copyright or other intangible asset.
SECTION 3.8 NO UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 3.8 attached hereto and made a part hereof, as of March 31, 1997,
EASTERN had no material liabilities, absolute or contingent, which are not
shown on the Balance Sheet. All liabilities, absolute or contingent, of
EASTERN incurred subsequent to March 31, 1997 will have been incurred only
in the ordinary course of business and EASTERN will, prior to the Closing,
have obtained the consent of NETWORK to incur any single such liability
incurred subsequent to the date of this Agreement in excess of $25,000.
The accounts, notes and other receivables, whether current or non-current,
of EASTERN shown on the most recent Balance Sheet before the Closing, and
all such receivables of EASTERN as at the Closing, were and shall be good
and collectible, subject only to any allowance for doubtful accounts,
losses or reserves for returns which may be provided for in such Balance
Sheet or, in the case of receivables subsequently created, on the books of
EASTERN as of the Closing.
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SECTION 3.9 EVALUATION MATERIALS. The written materials, data and
documents provided by EASTERN and the Shareholders to NETWORK related to
EASTERN's historical revenue generation, customer retention and
acquisition, costs of access and other network costs remain true as of the
date hereof and the results of EASTERN's operations as of the date hereof
are consistent with such written materials, data and documents. All
written projections of future operations provided by EASTERN and the
Shareholders to NETWORK are consistent with such written materials, data
and documents and are based upon assumptions of future conditions which
EASTERN and the Shareholders believed reasonable at the time delivered to
NETWORK.
SECTION 3.10 BENEFIT PLANS; ERISA.
(a) Schedule 3.10(a) lists all contracts, agreements,
arrangements and understandings, whether written or oral, with respect
to the payment or delivery to any person of compensation, bonuses,
perquisites, benefits and other items of value by EASTERN.
(b) Schedule 3.10(b) lists each employee of EASTERN whose annual
base salary is $50,000 or more and identifies the salary, commissions,
bonuses, perquisites and benefits for each employee whose annual base
salary is $50,000 or more. Such Schedule also sets forth the names of
all directors and officers of EASTERN and a description of any
agreement with respect to the election or tenure of any of them as
such.
(c) No employee of EASTERN will be entitled to severance pay by
virtue of the transactions contemplated by this Agreement. Schedule
3.10(c) sets forth each employee of EASTERN who has any right to
severance pay in excess of $25,000 for any reason, listing the
employee name, severance amount or method of calculation, and the
basis for such right.
(d) Schedule 3.10(d) contains a true and complete list of each
pension, profit sharing, other deferred compensation, bonus, incentive
compensation, stock purchase, stock option, retirement, supplemental
retirement, severance or termination pay, medical, hospitalization,
life insurance, dental, disability, salary continuation, vacation,
supplemental unemployment benefits plan, program, arrangement or
contract, and each other employee benefit plan, program, arrangement
or contract, maintained, contributed to, or required to be contributed
to, or promised by EASTERN or any Related Party (hereinafter defined)
for the benefit of any current or former employee, director or agent
of EASTERN or any Related Party, whether or not any of the foregoing
is funded, whether formal or informal, whether or not subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(collectively, the "Benefit Plans"). EASTERN and its Related Parties
do not have any express or implied commitment or contract to create
any additional Benefit Plan or modify any existing Benefit Plan, other
than as may be required to comply with ERISA or the Code. EASTERN has
delivered to NETWORK, with respect to each applicable Benefit Plan (1)
true and complete copies
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of all documents embodying or relating to each Benefit Plan including,
without limitation, the plan and trust or other funding arrangement
relating thereto, summary plan descriptions, employee handbooks or
personnel manuals, and all amendments and supplements thereto; (2) the
most recent annual report (Series 5500 and all schedules thereto), if
any, required by ERISA; and (3) the most recent determination letter
received from the Internal Revenue Service ("IRS"), if any. "Related
Party" means any member of a controlled group of corporations, a group
of trades or businesses under common control or an affiliated service
group, within the meaning of Section 414(b), (c), (m) or (o) of the
Code, of EASTERN.
(e) None of the Benefit Plans are intended by EASTERN or any
Related Party to meet, or are required to meet, the requirements of
Section 401(a) of the Code and no Benefit Plan is subject to Title IV
of ERISA.
(f) EASTERN and any Related Party have performed the obligations
required to be performed by them under, and are not in default under
or in violation of, any and all of the Benefit Plans, and each Benefit
Plan has been operated in all material respects in accordance with the
requirements of all applicable laws and regulations. Neither any
Benefit Plan or fiduciary nor EASTERN or any Related Party has taken
any action, or failed to take any action, that could subject it or any
other person to any material liability for any excise tax under
Chapter 43 of the Code or for breach of fiduciary duty with respect to
or in connection with a Benefit Plan.
(g) At no time has EASTERN or any Related Party been required to
contribute to any "multi employer plan" (within the meaning of Section
3(37) of ERISA) and EASTERN and its Related Parties have no liability
(contingent or otherwise) relating to the withdrawal or partial
withdrawal from a multi employer plan. EASTERN and its Related
Parties do not participate in any "multiple employer plans," within
the meaning of ERISA.
(h) No Benefit Plan provides or is required to provide group
health, medical, death or survivor benefits to any former or retired
employee of EASTERN or beneficiary thereof, except to the extent (I)
required under any state insurance law providing for a conversion
option under a group insurance policy or (ii) under Section 601 of
ERISA.
(i) No Benefit Plan or fiduciary has nor does EASTERN or any
Related Party have any liability to any participant, beneficiary or
other person under any provision of ERISA or any other applicable law
by reason of any payment of, or failure to pay, benefits or other
amounts with respect to or in connection with any Benefit Plan.
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(j) Each Benefit Plan may be terminated by EASTERN or its
Related Parties within a period of thirty (30) days following the
Closing Date without acceleration or additional vesting of any
benefits and without payment of any amount as a penalty, bonus,
premium, severance pay or other compensation or amount.
SECTION 3.11 LITIGATION. Except as set forth in Schedule 3.11:
(a) There are no claims, suits, actions, or proceedings of any
nature whatsoever in law or in equity, pending before any court,
governmental department, commission, agency, instrumentality or
authority or any arbitrator, or, to the best knowledge of EASTERN and
the Shareholders, threatened, nor are there, to the best knowledge of
EASTERN and the Shareholders, any investigations, whether or not
purportedly on behalf of EASTERN, complaints or reviews by any court,
governmental department, commission, agency, instrumentality or
authority or any arbitrator pending or threatened against, relating to
or affecting EASTERN.
(b) EASTERN is not operating under or subject to, nor in default
with respect to, any order, writ, injunction, garnishment, levy or
decree of any federal, state, municipal or other governmental court,
department, commission, board, bureau, agency or instrumentality. The
use or ownership of EASTERN's assets, the use or occupancy of
EASTERN's real property, and any interests related thereto, and the
Merger does not constitute a default thereunder.
(c) During the past five years, there has not been nor is there
now pending, any claim(s) against any person in his or her capacity as
either a director or officer of EASTERN. The Shareholders have no
actual knowledge or information of any act, error, or omission which
would give rise to such a claim. Neither EASTERN nor the Shareholders
have been involved in or have knowledge of any facts or circumstances
involving the following which would give rise to such a claim: (i)
antitrust, copyright, trade name, trademark or patent claims or
litigation; (ii) charges in any civil or criminal action or
administrative proceeding involving a violation of any federal or
state security law or regulation; (iii) charges in any civil or
criminal action or administrative proceeding involving a violation of
any federal or state antitrust or fair trade law or consumer
protection law or regulation, whether general or specific to the
communications services industry; (iv) actions involving
representative actions, class actions or derivative suits.
(d) There is no claim, legal action, suit, arbitration,
governmental investigation or other legal or other administrative
proceeding, including any bankruptcy proceeding, nor any order,
decree or judgment in progress, pending, in effect or, to the
knowledge of EASTERN or the Shareholders threatened, against or
relating to EASTERN or the Shareholders, which would negatively affect
the transactions contemplated by this Agreement.
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SECTION 3.12 COMPLIANCE WITH LAWS. Except as set forth on Schedule
3.12, EASTERN has not received written notice and neither EASTERN nor any
of the Shareholders has any knowledge, having made due inquiry, of any
violation by EASTERN of its tariffs or of laws, regulations and orders from
any governmental entity having authority to enforce such tariffs, laws,
regulations and orders, including, but not limited to, the Communications
Act of 1934 as amended by (i) the Telecommunications Act of 1996, and by
(ii) the Telephone Consumer Protection Act of 1991, and the Shareholders do
not have any actual knowledge, having made due inquiry, that any
requirements of insurance carriers applicable to its business are not being
adhered to. The present uses by EASTERN of its properties do not violate
any such laws, regulations, orders or requirements. To the Shareholders'
actual knowledge, having made due inquiry, no consent or approval by any
governmental or quasi-governmental authority, other than the approval of
the Federal Communications Commission, the utility regulatory commissions
in those states in which EASTERN offers communications services, and
certain regulatory authorities of foreign countries, if any, in which
EASTERN offers international communications services, (together, the
"Commissions") all of which are set forth in Schedule 3.5, and compliance
with applicable federal and state securities and corporation laws, is
required in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
SECTION 3.13 TAX RETURNS. Except as set forth in Schedule 3.13, (i)
all federal income tax returns, and other federal tax returns, declarations
of estimated tax or estimated tax deposit forms of every nature required to
be filed by EASTERN have been duly and timely filed or will be duly and
timely filed as of Closing, and (ii) all state, county and local tax
returns and declarations of estimated tax or estimated tax deposit forms
required to be filed by EASTERN, have been duly and timely filed except
where failure to timely file such returns, declarations or forms described
in this clause (ii) would not have a material adverse effect, and all of
the returns, declarations and forms referred to in clauses (i) and (ii)
were or will be when filed true, correct and complete in all material
respects and EASTERN has paid all taxes which have become due and owing or
pursuant to any assessment received by it and has paid all installments of
estimated tax due. Where such returns and reports have not been audited
and approved or settled, there has not been any waiver or extension of any
applicable statute of limitations, and EASTERN has not received any notice
of deficiency or adjustment. The Balance Sheet contains liabilities which
are and will be sufficient for the payment of all respective federal,
state, county and local taxes, whether current or deferred.
All taxes and other assessments and levies which EASTERN is required
by law to withhold or to collect have been duly withheld and collected, and
have been paid over to the proper governmental authorities or are held by
EASTERN in its bank accounts for such payment. All statements and reports
required to be filed under any chapter of the Code by EASTERN have been
duly filed.
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Except as described on Schedule 3.13, attached hereto and made a part
hereof, the Balance Sheet contains provisions for liabilities which are and
will be sufficient for payment of all federal, state, county, city and
local taxes and assessments, whether current or deferred.
SECTION 3.14 INDEBTEDNESS. Schedule 3.14 is a correct and complete
list of all instruments, agreements or arrangements pursuant to which
EASTERN has borrowed any money, guaranteed or incurred any indebtedness or
established any line of credit which represents any liability, contingent
or otherwise, of EASTERN on the date hereof. True and complete copies of
all such written instruments, agreements or arrangements have been
delivered to NETWORK prior to the date of this Agreement.
SECTION 3.15 BANKS. Schedule 3.15 is a correct and complete list
setting forth the name of each bank in which EASTERN has an account or safe
deposit box, the names of all persons authorized to draw thereon or to have
access thereto, and the name of each person holding a power of attorney
from EASTERN.
SECTION 3.16 CONTRACTS. Schedule 3.16 lists (or, in the case of
oral contracts, plans, agreements, arrangements and leases, describes) all
of the following contracts, plans, agreements, arrangements and leases to
which EASTERN is a party: (i) each contract for the future purchase of
materials, services, supplies or equipment which (a) has a term in excess
of one year or (b) obligates EASTERN to pay, in one installment or in the
aggregate over its term or one year, whichever is shorter, an amount in
excess of $100,000; (ii) each contract and letter of authorization with a
customer made in the ordinary course of business which generates revenues
for EASTERN over its term or in any one twelve (12) month period, whichever
is shorter, in excess of $100,000; (iii) each contract not made in the
ordinary and usual course of business; (iv) each employment, severance and
consulting contract; (v) each contract with any labor union or other labor
organization; (vi) each guarantee and accommodation; (vii) each license and
franchise relating to the business of EASTERN; (viii) each lease of real
and personal property which (a) has a term in excess of one year or (b)
obligates EASTERN to pay, in one installment or in the aggregate over its
term or one year, whichever is shorter, an amount in excess of $100,000,
which leases shall be set forth separately in Schedule 3.16; and (ix) each
contract and agreement with affiliates of EASTERN, including the
Shareholders. EASTERN holds a current, valid letter of authorization from
each of its business and residential customers. Except as set forth on
Schedule 3.16 hereto, EASTERN has performed all obligations required to be
performed by it to date and has not breached and is not in default under
any agreement listed in Schedule 3.16 or to which it is a party or by which
it is bound, and all of the same are enforceable in accordance with their
terms. EASTERN has previously furnished to NETWORK true and complete
copies of any of the above-described written contracts, plans, agreements,
arrangements and leases.
SECTION 3.17 TITLES, REAL PROPERTY MATTERS. Schedule 3.17 contains
descriptions by categories of EASTERN's real property (including all plants
and structures located thereon) as of the date of this Agreement. Except
as set forth in Schedule 3.17, EASTERN has good and marketable title in fee
simple to such properties, free and clear of all liens and encumbrances
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and use restrictions. EASTERN will obtain title insurance policies on all
real estate listed as owned in fee simple on Schedule 3.17 hereto, prior to
the Closing. EASTERN owns or leases all the furniture, equipment and
leasehold improvements located in the structures referred to in Schedule
3.17. All other assets and property used in the business of EASTERN, and
all assets and property reflected in the Balance Sheets, the Balance Sheet,
or acquired after the Balance Sheet Date (other than assets or property
sold or otherwise disposed of in the ordinary course of its business
subsequent to such date) are in each case free and clear of all security
interests, mortgages, pledges, liens, conditional sales, agreements,
leases, encumbrances or charges of any nature whatsoever except as
expressly stated in Schedule 3.17. All real estate owned or leased by
EASTERN, their uses, appurtenances and improvements substantially comply
with all applicable ordinances and regulations, building, and zoning laws.
The buildings, machinery and equipment of EASTERN are in good and
serviceable condition, reasonable wear and tear excepted.
SECTION 3.18 ENVIRONMENTAL MATTERS.
(a) Operations conducted at the Real Property at all times
complied in all respects with Environmental Laws (as defined below),
except for noncompliance that would not have a material adverse effect
on the business, operations or property of EASTERN. EASTERN has
obtained all governmental authorizations and permits under
Environmental Laws necessary for its operations. EASTERN is in
material compliance with each term and condition of such
authorizations and permits.
(b) The Real Property and EASTERN's operations thereon are not
subject to (i) any federal, state, or local investigation, to the best
knowledge of EASTERN and the Shareholders, (ii) any judicial or
administrative proceeding alleging the violation of or liability under
any Environmental Law, or (iii) any outstanding written order or
agreement with any governmental authority or private party relating to
any Environmental Law.
(c) For the purpose of this Agreement, the term "Environmental
Laws" shall mean:
the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986,; the
Emergency Planning and Community Right-to-Know Act; the
Resource Conservation and Recovery Act,; the Hazardous
Materials Transportation Act of 1974; the Federal Water
Pollution Control Act; the Clean Air Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Safe
Drinking Water Act; the Toxic Substances Control Act;
the Oil Pollution Act of 1990; any laws regulating the
use of biological agents or substances including
medical or infectious wastes, each as amended or
supplemented, and any analogous future or present
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state and federal statutes and regulations promulgated
pursuant thereto which may be applicable, as any such
acts may be amended.
SECTION 3.19 BROKER'S FEES. Except for The Toronto Dominion Bank,
no person or entity has been authorized to act as a broker, finder,
financial advisor or in any other similar capacity as to give rise to any
claim for brokerage or finder's fees or commissions with respect to the
transactions contemplated hereby by anyone claiming to have acted on behalf
of the Shareholders or EASTERN.
SECTION 3.20 LABOR MATTERS. No group of employees of EASTERN is
presently organized into a collective bargaining unit. No labor union has
recently attempted, or is presently attempting, to organize any of
EASTERN's employees into a collective bargaining unit. No employees of
EASTERN are on strike or threatening to strike.
SECTION 3.21 CONFLICTS OF INTEREST. Except as set forth on Schedule
3.21, neither the Shareholders nor any director, officer, or employee of
EASTERN or any relative of any of them, has (i) loaned to or guaranteed the
loan of a third party to EASTERN or borrowed any money from EASTERN or (ii)
any interest in any property, real or personal whether owned or leased,
tangible or intangible, including but not limited to, software, inventions,
patents, trade names or trademarks used in connection with or pertaining to
the business of EASTERN or any lender, supplier, customer, sales
representatives or distributor of EASTERN; provided, however, that the
Shareholder or such director, officer, or employee or relative thereof
shall not be deemed to have such interest solely by virtue of the ownership
of less than five percent of any stock or indebtedness of any publicly-held
company, the stock or indebtedness of which is traded on a recognized stock
exchange.
SECTION 3.22 INSURANCE COVERAGE. Schedule 3.22 is a correct and
complete list of all insurance held by EASTERN including the policy number,
name of carrier, coverage, term, expiration date and premium. EASTERN has
its buildings, plants and properties, including, but not limited to
telecommunications equipment and inventories, insured for its actual cash
value, but not exceeding the amount it would cost to repair or replace such
properties, against loss or damage by fire and all other hazards and risks
of the character usually insured against by persons operating similar
properties in the localities where such properties are located under valid
and enforceable policies issued by insurers of recognized responsibility.
Such insurance coverage will be continued in full force and effect through
the Closing. EASTERN has not been refused any insurance by an insurance
carrier to which it has applied for insurance during the past three years.
SECTION 3.23 FULL DISCLOSURE. No representation or warranty by
EASTERN or the Shareholders in this Agreement, nor any statement or
certificate furnished, or to be furnished, by or on behalf of EASTERN or
the Shareholders, nor any document or certificate delivered to NETWORK
pursuant to this Agreement, or in connection with the transactions
contemplated hereby, contains any untrue statement of material fact, or
omits to state any material fact
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necessary to make any statement contained therein not misleading. EASTERN
and the Shareholders have performed or complied, or will perform or comply,
in all material respects with all covenants, agreements and conditions
contained in this Agreement on their part required to be performed or
complied with at or prior to the Closing Date.
SECTION 3.24 CORRECT RECORDS. The financial records, ledgers,
account books, minute books, stock certificate books, stock registers, and
other corporate records of EASTERN are current, correct and complete in all
material respects and all signatures therein are the true signatures of the
persons who are purported to have signed.
SECTION 3.25 INVESTMENT REPRESENTATIONS.
(a) Each Shareholder is acquiring the NETWORK Stock for his own
account for investment, not as a nominee or agent, and not with a view
to the resale or distribution of the NETWORK Stock or any part
thereof, and no Shareholder has a plan or intention of selling,
granting any participation in, or otherwise distributing the same. By
executing this Agreement, each Shareholder further represents that
there is no contract, undertaking, agreement or arrangement with any
person for resale in connection with a distribution to any person with
respect to any of the NETWORK Stock. Each Shareholder acknowledges
that the offering of the NETWORK Stock, other than the Registered
Shares (as defined in Section 6.5 below), pursuant to this Agreement
will not be registered under the Securities Act of 1933, as amended
(the "Securities Act") or any state securities or blue sky law, on the
grounds that the offering and sale of the NETWORK Stock contemplated
by this Agreement are exempt from registration pursuant to exemptions
available under such laws, and that NETWORK's reliance upon such
exemptions is predicated upon each Shareholder's representations set
forth in this Agreement. Each Shareholder acknowledges and
understands that the NETWORK Stock, other than the Registered Shares,
must be held for an indefinite period of time unless the NETWORK Stock
is subsequently registered under the Securities Act and/or applicable
state securities or blue sky laws or an exemption from such
registration is available.
(b) Each Shareholder has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of an investment in the NETWORK Shares and is able to
bear the economic risk of an investment in the NETWORK Shares,
including, without limiting the generality of the foregoing, the risk
of losing part or all of his investment in the NETWORK Shares and the
possible inability to sell or transfer the NETWORK Shares for an
indefinite amount of time.
(c) The transfer of any or all of the NETWORK Shares may be
refused by NETWORK's transfer agent unless the NETWORK Shares for
which transfer is sought are registered under the Securities Act and
all other applicable federal securities or blue sky laws or unless the
Shareholder seeking such transfer provides such information as is
deemed necessary by NETWORK to show that such registration is not
required, including an opinion of legal counsel acceptable to NETWORK.
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(d) Each Shareholder's principal residence is located within the
state designated under his name on Schedule 3.3.
(e) The Shareholders acknowledge and agree that the certificates
representing the NETWORK Shares shall bear the following legend:
The Shares represented by this certificate have
not been registered under the Securities Act of 1933,
as amended, or under any applicable state securities
laws, and may not be sold or otherwise transferred in
the absence of such registration or an exemption
therefrom under such Act.
SECTION 3.26 EXPENSES. The legal expenses allocated to EASTERN in
connection with the transactions contemplated by this Agreement shall be
reasonable and shall not exceed in the aggregate $40,000, unless EASTERN
shall have received written approval to exceed such fee amount from
NETWORK, which approval shall not be unreasonably withheld. All other
expenses allocated to EASTERN or incurred by it in connection with this
Agreement shall not exceed $900,000. As soon as practicable after the
Closing, EASTERN shall submit to NETWORK a list of such expenses incurred
up to the Closing.
SECTION 3.27 BOARD OF DIRECTORS REPRESENTATION. None of EASTERN or
Shareholders John D. Crawford or Thomas G. Keefe know of any fact that
could cause them to believe that (i) election of Mr. Crawford or Mr. Keefe
to NETWORK's Board of Directors, (ii) election of Mr. Crawford as Chairman
of the Board of NETWORK or (iii) appointment of Mr. Keefe as Chief
Financial Officer of NETWORK, could have a material adverse effect on
NETWORK.
SECTION 3.28 ADVISABILITY OF MERGER. None of EASTERN or
Shareholders John D. Crawford or Thomas G. Keefe know of any fact that
would constitute grounds whereby they would deem it inadvisable to proceed
with the Merger.
ARTICLE IV
COVENANTS OF EASTERN AND THE SHAREHOLDERS
The Shareholders and EASTERN jointly and severally covenant and agree
that from the date hereof to and including the Closing:
SECTION 4.1 MAINTENANCE OF BUSINESS. EASTERN shall continue to
carry on its business, maintain its plants and equipment and keep its books
of account, records and files in substantially the same manner as
heretofore, except that EASTERN shall seek NETWORK's consent prior to
incurring any expense other than in the ordinary course of business or
capital expenditure which individually or in the aggregate would exceed
$50,000. Schedule 4.1 contains a true and complete list of all expenses
outside the ordinary course of business that EASTERN or the Shareholders
anticipate making prior to or at Closing, including without limitation all
legal, professional and investment advisor fees incurred in connection with
the Merger and all
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accelerated payments on long-term debt. EASTERN will maintain in full
force and effect insurance policies now in effect. EASTERN may, however,
continue to carry on such activities, plans, capital and operating programs
which were approved by it prior to the date hereof, provided that such
activities, plans and programs shall not involve expenditures exceeding
$50,000 for each such activity, plan or program. If any such activities,
plans or programs exceed $50,000 they shall, prior to the execution of this
Agreement, have been submitted to NETWORK in detail and in writing, and
shall have been approved by NETWORK.
SECTION 4.2 NEGATIVE COVENANTS. Except for the permitted actions
of EASTERN set forth on Schedule 4.2, without the prior written consent of
NETWORK, EASTERN shall not, and the Shareholders shall do all things and
take all reasonable and proper action to provide that EASTERN shall not:
(a) Issue, sell, purchase or redeem, or grant options to
purchase or otherwise agree to issue, sell, purchase or redeem any
shares of its capital stock or any other securities of EASTERN,
provided, however, that EASTERN and the Shareholders shall take all
steps necessary to redeem, and shall redeem, all issued and
outstanding shares of EASTERN preferred stock no fewer than five days
prior to the Closing Date;
(b) Amend its Articles of Incorporation or amend its Bylaws;
(c) Incur or prepay any liability for borrowed money, short term
debt or long term debt (as those terms are defined in GAAP), other
than in the ordinary course of business and consistent with past
practices;
(d) Pay or guarantee any obligation or liability other than
obligations or liabilities reflected in the Balance Sheets, or the
Balance Sheet, when due, liabilities incurred since the Balance Sheet
Date in the ordinary course of business and obligations under
contracts and agreements referred to in Schedules annexed hereto or
entered into in the ordinary course of business;
(e) Adopt or modify any severance, consulting, bonus, pension,
profit sharing, benefit or other compensation plan or arrangement or
increase its overall work force, other than in the normal course of
business, or enter into any contract of employment;
(f) Enter into or modify any contract or commitment, incur any
liability, absolute or contingent, waive or fail to enforce any right
or enter into any other transactions, other than in the ordinary
course of business;
(g) Take any action that would or might reasonably be expected
to result in any representation or warranty set forth in this
Agreement being or becoming untrue in any respect or in any of the
conditions to the consummation of the transactions contemplated by
this Agreement set forth in Article VII hereof not being satisfied;
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(h) Have made or become obligated to make any dividend payment
or other distribution to the Shareholders; or
(i) Enter into or modify any contracts for the purchase of
communications services unless such contracts are first approved by
NETWORK.
SECTION 4.3 ORGANIZATION, GOODWILL. EASTERN shall preserve its
business organization intact, retain the services of its present officers
and use its best efforts to substantially retain its present employees, and
preserve the good will of its suppliers, customers and others having
business relations with it.
SECTION 4.4 ACCESS TO FACILITIES, FILES AND RECORDS. EASTERN and
the Shareholders acknowledge that as of the date this Agreement is executed
NETWORK has not completed Due Diligence (defined as those actions and
investigations described in subsections (i) through (iv) below).
Therefore, at the reasonable request of NETWORK, EASTERN shall, from time
to time, give or cause to be given to NETWORK, its officers, employees,
accountants, counsel and authorized representatives full access to (i) all
of the property, accounts, books and other financial records, minute books,
deeds, title papers, insurance policies, certificates, licenses,
agreements, contracts, tariffs, commitments, tax returns, records and files
of every character, employees, equipment, machinery, fixtures, furniture,
vehicles, notes and accounts payable and receivable and inventories of
EASTERN; (ii) all such other information concerning the affairs of EASTERN
as NETWORK may reasonably request; (iii) consult with the independent
auditors of and counsel to EASTERN with respect to all matters, including,
but not limited to, the financial condition of EASTERN and the audit of
EASTERN's financial statements and any legal and regulatory matters
affecting EASTERN; (iv) at NETWORK's own cost and expense, the facilities,
properties and operations of EASTERN in order to perform a Phase I
environmental audit (the "Environmental Audit"). The Environmental Audit,
if conducted, shall be instituted within thirty (30) days after this
Agreement is fully executed by both parties. A copy of the report of the
Environmental Audit will be delivered promptly to the Shareholders and the
Shareholders shall, at their expense, be afforded an opportunity to
undertake a Phase II audit, if necessary, to prove to NETWORK's
satisfaction that no hazards exist. The Shareholders, at their expense,
shall be afforded a thirty (30) day period after discovery to cure any
environmental hazards which the Environmental Audit discloses exist and
NETWORK shall keep confidential all information regarding any such hazards
unless legally required to disclose it.
SECTION 4.5 THIRD PARTY CONSENTS.
(a) EASTERN or the Shareholders will obtain or cause to be
obtained the consent of any third party whose consent is required in
order that the transactions contemplated by this Agreement may be
consummated without violation of any representation, warranty or
covenant made by any of them in this Agreement; provided, however,
that EASTERN shall not spend any money or otherwise incur any
obligation in order to obtain any such consent without the prior
written approval of NETWORK. Provided further, that if in the
reasonable business judgment of EASTERN and
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NETWORK, it would be impracticable to obtain regulatory approval of
the Merger in a jurisdiction, the failure to obtain such approval will
not be a breach of this covenant.
(b) EASTERN and the Shareholders will use their reasonable best
efforts to cooperate with NETWORK to obtain or cause to be obtained
the consent of any third party whose consent is required in order that
the transactions contemplated by this Agreement may be consummated
without violation of any representation, warranty or covenant made by
any of them in this Agreement.
SECTION 4.6 SECURITIES LAWS. EASTERN and the Shareholders will
cooperate with NETWORK in taking all action and providing all information
necessary to permit the transactions contemplated herein to be consummated
in compliance with all applicable federal and state securities laws and
regulations.
SECTION 4.7 COMMUNICATIONS LAWS.
(a) EASTERN and the Shareholders will take all action necessary
to permit the transactions contemplated herein to be consummated in
compliance with all applicable federal, state and local
telecommunications laws governing or applicable to EASTERN and its
business.
(b) EASTERN and the Shareholders will use their reasonable best
efforts to cooperate with NETWORK to permit the transactions
contemplated herein to be consummated in compliance with all
applicable federal, state and local telecommunications laws governing
or applicable to NETWORK and its business.
SECTION 4.8 NOTICE OF PROCEEDINGS. EASTERN will, upon becoming
aware of any order or decree or any complaint praying for an order or
decree restraining or enjoining the consummation of the Agreement or the
transactions contemplated hereunder, or upon receiving any notice from any
governmental department, court, agency or commission of its intention to
institute an investigation into, or institute a suit or proceeding to
restrain or enjoin the consummation of this Agreement or such transactions,
or to nullify or render ineffective this Agreement or such transactions if
consummated, promptly notify NETWORK in writing of such order, decree,
complaint or notice.
SECTION 4.9 DELIVERY OF EASTERN'S SHAREHOLDER LISTS. The list of
shareholders in Schedule 3.3 hereof is a true and complete list setting
forth the identity of all of the common shareholders of EASTERN, their
holdings of all of the stock of EASTERN, the certificate number of each
share certificate issued to each of them and the date of such issuance.
Prior to the Closing, EASTERN will deliver an updated list of its common
shareholders and their holdings and NETWORK may rely completely on such
updated list of shareholders.
SECTION 4.10 CONFIDENTIALITY. EASTERN and each Shareholder, shall
maintain all information gained from NETWORK in connection with the
transactions contemplated by this
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Agreement and the terms of this Agreement (the "NETWORK Confidential
Information") in strict confidence, and shall take all precautions
necessary to prevent disclosure, access to, or transmission of the NETWORK
Confidential Information, or any part thereof, to any third party, except
(i) for the exclusive purpose of evaluating the Merger and (ii) as required
by law or order of any court having competent jurisdiction; provided,
however, that before disclosing any NETWORK Confidential Information under
this exception, EASTERN and the Shareholders shall give NETWORK sufficient
notice to allow it to seek an appropriate protective order. EASTERN and
the Shareholders shall use their reasonable best efforts to ensure that any
person or entity to whom they disclose NETWORK Confidential Information
shall keep such information confidential. The NETWORK Confidential
Information shall be used only for the purposes of evaluating the
transactions contemplated hereby and in the event the Closing does not
occur for any reason, each Shareholder and EASTERN shall, immediately upon
NETWORK's request, return all copies and recordings of the NETWORK
Confidential Information in their possession or under their control and
delete all records thereof in any data storage system maintained by or for
such Shareholder or EASTERN.
SECTION 4.11 NO SOLICITATION. EASTERN agrees that, prior to the
Effective Time, it shall not, nor shall any of its directors, officers,
employees, agents or representatives, directly or indirectly, solicit,
initiate or encourage (including by way of furnishing or disclosing
information) inquiries or proposals concerning any merger, consolidation or
acquisition or purchase of all or any substantial portion of the assets or
capital stock of EASTERN (an "Acquisition Transaction") or negotiate or
enter into any discussions or other communications with any prospective
purchaser (other than NETWORK or its affiliates) with respect to any
Acquisition Transaction. EASTERN shall immediately advise NETWORK of any
inquiries or proposals relating to any Acquisition Transaction.
SECTION 4.12 RECOMMENDATION AND APPROVAL OF MERGER. The Board of
Directors of EASTERN has approved and recommended the Merger to the
Shareholders. Each of the Shareholders agrees to vote their EASTERN Common
in favor of the Merger and to take such actions as may be necessary to
consummate the transactions contemplated hereby.
SECTION 4.13 AUDITED FINANCIAL STATEMENTS. EASTERN shall promptly
take any action necessary in order that, no later than July 15, 1997,
EASTERN can obtain and deliver to NETWORK an audited balance sheet of
EASTERN for each of the two immediately preceding fiscal years, and an
audited income statement, statement of cash flows and statement of retained
earnings for each of the three preceding years (the "Audited Financial
Statements") with an unqualified opinion thereon from a certified public
accountant reasonably acceptable to NETWORK, together with the consent of
the applicable auditor, in form and content reasonably acceptable to
NETWORK, to the effect that such financial statements may be included in
future public filings of NETWORK with the Securities and Exchange
Commission (the "SEC"). EASTERN shall also deliver to NETWORK unaudited
financial statements for any short periods as might be required under
Regulation S-X. Such audited and unaudited financial statements shall be
prepared in accordance with generally accepted accounting principles and
the reporting requirements of the SEC, including the rules applicable under
Regulation S-X. Such statements
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of income do not contain any items of special or non-recurring income or
any other income not earned in the ordinary course of business except as
expressly specified therein, and the Audited Financial Statements include
all adjustments, which consist of normal recurring accruals and all
elements of allocable overhead, necessary for such fair presentation.
SECTION 4.14 PUBLIC ANNOUNCEMENTS. EASTERN and each of the
Shareholders acknowledges that NETWORK is a publicly-held company and
dissemination of information concerning this transaction or trading in
NETWORK's stock by any party to this transaction or any party receiving
information from any party to this transaction prior to public release
could result in violation of SEC insider trading regulations. Therefore,
EASTERN and each of the Shareholders agrees not to disseminate any
information or make any public statement concerning the transactions other
than what is in press releases of NETWORK.
SECTION 4.15 ADVERSE EVENTS. Promptly after the occurrence, or
failure to occur, of any event, the occurrence or failure of which (i)
would materially adversely affect, or could reasonably be expected to
materially adversely affect, the assets, properties, operations, business,
prospects, or condition (financial or otherwise) of EASTERN or the ability
of any Shareholder or EASTERN to perform any of its obligations under this
Agreement, or (ii) if known as of the date of this Agreement, would have
been required to be disclosed to NETWORK or (iii) causes any representation
or warranty contained in this Agreement or any Schedule or Exhibit hereto
to be untrue or inaccurate at any time from the date of this Agreement to
and including the Closing, EASTERN and/or such Shareholder shall provide to
NETWORK all relevant information related thereto.
SECTION 4.16 EMPLOYEES. On or before the Closing Date, EASTERN
shall deliver to NETWORK a list of EASTERN's employees as of the end of the
calendar month immediately preceding the Closing, indicating the following
information for each employee:
(a) his or her compensation and any applicable severance
arrangement;
(b) whether remunerated on an hourly, weekly, or monthly basis;
(c) date of most recent commencement of service with EASTERN;
and
(d) accrued holiday, vacation, sick leave, long service
entitlement (if any) and permitted time-off due as compensation for
additional time worked.
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SECTION 4.17 BROKER'S FEES. Shareholders shall indemnify and hold
harmless NETWORK and EASTERN in respect of any expenses or claims for fees
in excess of the amounts set forth in Section 3.27 hereof with respect to
the transactions contemplated herein by anyone claiming to have acted for
the benefit of, or on behalf of, EASTERN or the Shareholders.
SECTION 4.18 RETENTION OF STAFF. Shareholders John D. Crawford and
Thomas G. Keefe agree, upon election as Chairman of the Board of NETWORK
and Chief Financial Officer of NETWORK, respectively, as set forth in
Section 6.4 hereof, to use their best efforts, consistent with their
managerial responsibilities to NETWORK, to retain the current financial
reporting staff and independent auditors of NETWORK.
SECTION 4.19 SHAREHOLDERS' APPROVAL. EASTERN and the Shareholders
have taken, or will take no later than April 24, 1997, all action necessary
in accordance with applicable law, and the EASTERN Articles of
Incorporation and Bylaws, to consider and vote upon the approval of this
Agreement and the Merger. All of the Shareholders have voted or will vote
their EASTERN Shares in favor of the Merger. The Shareholders hereby waive
any rights to request appraisal of their EASTERN shares under the
provisions of Article 15 of the VSCA.
SECTION 4.20 TAX RETURNS. EASTERN shall provide to NETWORK for its
review any tax returns (i) with respect to the fiscal year ended April 30,
1997 and (ii) for any stub periods, due to be filed between the date of
this Agreement and the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NETWORK AND ACQUISITION
As an inducement to the Shareholders to enter into this Agreement and
to consummate the transactions contemplated hereby, NETWORK and Acquisition
represent and warrant to the Shareholders as follows:
SECTION 5.1 CORPORATE EXISTENCE. Each of NETWORK and Acquisition
is a corporation duly organized, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation and is
duly qualified, certified or licensed in each state and jurisdiction where
such qualification, certification or licensing is necessary or required to
conduct their businesses and offer communication services.
SECTION 5.2 CORPORATE POWER AND AUTHORITY. Each of NETWORK and
Acquisition has all requisite corporate power and authority to own its
properties and assets, and to carry on the business in which it is now
engaged. Each of NETWORK and Acquisition has the corporate power and
authority to execute and deliver this Agreement and the other agreements
contemplated hereby, and to perform the covenants of NETWORK and
Acquisition set forth in this Agreement.
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SECTION 5.3 CAPITALIZATION. The authorized capital stock of
NETWORK consists of: (i) 20,000,000 shares of common stock, par value
$.0001 per share, of which 6,767,639 shares are issued and outstanding and
396,390 shares are held as treasury stock and (ii) 25,000,000 shares of
$.01 par value preferred stock, of which no shares are issued and
outstanding and no shares are held as treasury stock. Except as set forth
on Schedule 5.12(d), there are no other classes of equity, options,
warrants, calls, rights or commitments or any other agreements of any
character relating to the sale, issuance or voting of any shares of NETWORK
stock, or any securities convertible into or evidencing the right to
purchase any shares of NETWORK stock. All such issued and outstanding
shares are validly issued, fully paid and nonassessable. There are no
restrictions imposed by the Articles of Incorporation or Bylaws of NETWORK,
and there are no other agreements, understandings or commitments, which
would in any way affect or impair the transactions contemplated hereby.
SECTION 5.4 EXECUTION AND DELIVERY PERMITTED. The execution,
delivery and performance of this Agreement, and the other agreements
contemplated hereby and the consummation of the transactions contemplated
hereby or thereby will not violate or result in a breach of any term of
NETWORK's Articles of Incorporation or Bylaws or result in a breach of
constitute a default under any term in any agreement, tariff, or other
instrument to which NETWORK or Acquisition is a party or by which either of
them is bound, such default having not been previously waived by the other
party to such agreements, or violate any law or any order, rule or
regulation applicable to them, of any court or any regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over them or their properties. Each of NETWORK's and
Acquisition's Board of Directors has taken all action required by law, and
by their respective Articles of Incorporation and their respective Bylaws,
and otherwise, to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement or by any of its Exhibits, including the issuance of the NETWORK
Shares. Neither the execution, delivery or performance of this Agreement
or any of the other agreements executed in connection herewith, or the
consummation of the transactions contemplated hereby or thereby requires
any filing with or the consent or approval of any third party, including
but not limited to any governmental body or entity, other than (i)
compliance with the Securities Act and the Securities Exchange Act of 1934,
as amended, (ii) applications to certain state utility regulatory
commissions in states in which NETWORK offers services, and (iii) the
filing with, and the acceptance for record by, the Virginia State
Corporation Commission of Articles of Merger in accordance with the VSCA.
SECTION 5.5 BINDING EFFECT. This Agreement, and each other
agreement required to be delivered by NETWORK or Acquisition in connection
herewith, when executed and delivered will be the legal, valid and binding
obligation of NETWORK or Acquisition, as applicable, enforceable against
them in accordance with their terms, except as enforceability may be
limited by (i) applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the enforcement of creditors' rights
generally and (ii) general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law).
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SECTION 5.6 REPORTS AND FINANCIAL STATEMENTS. Since March 31,
1996, to the extent NETWORK has been required to make filings under the
Securities Act, the Exchange Act or applicable state laws and regulations,
NETWORK has filed with the SEC or the applicable state regulatory
authority, as the case may be, all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by it under each of the Securities Act, the Exchange Act and
applicable state laws and regulations, and the respective rules and
regulations thereunder, all of which complied in all material respects with
all applicable requirements of the appropriate act and the rules and
regulations thereunder. NETWORK has previously delivered to the
Shareholders true and complete copies of its (i) Annual Reports on Form 10-K
for the fiscal year ended March 31, 1996, as filed with the SEC, which
includes the audited consolidated financial statements of NETWORK for the
fiscal year ended March 31, 1996 (the "NETWORK Financial Statements") (ii)
proxy and information statements relating to all meetings of its
shareholders (whether annual or special), and actions by written consent in
lieu of a shareholders' meeting, from March 31, 1996 until the date hereof,
(iii) all other reports or registration statements filed by NETWORK with
the SEC since March 31, 1996 (collectively, the "NETWORK SEC Reports").
As of their respective dates, the NETWORK SEC Reports did 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,
in light of the circumstances under which they were made, not misleading.
The audited consolidated financial statements and unaudited interim
financial statements of NETWORK included in the NETWORK SEC Reports and the
NETWORK Financial Statements have been prepared in accordance with GAAP
(except as may be indicated therein or in the notes thereto) and fairly
present in all material respects the financial position of NETWORK and its
subsidiaries as of the dates thereof and the results of their operations
and changes in financial position for the periods then ended, subject, in
the case of the unaudited interim financial statements, to normal year-end
and audit adjustments. The NETWORK Financial Statements contain and
reflect adequate reserves for (i) all liabilities or obligations of any
nature, whether absolute, contingent or otherwise, in accordance with GAAP,
and (ii) all reasonably anticipated losses and costs in excess of expected
revenue. The unaudited interim financial statements of NETWORK included in
the NETWORK SEC Reports, have been similarly prepared and contain and
reflect adequate reserves for (i) all liabilities or obligations of any
nature, whether absolute, contingent or otherwise, in accordance with GAAP,
and (ii) all reasonably anticipated losses.
SECTION 5.7 ABSENCE OF CERTAIN CHANGES. Except as set forth on
Schedule 5.7, attached hereto and made a part hereof, since the date of the
most recent balance sheet included in the NETWORK Financial Statements,
there has not been:
(a) Any material adverse change in the financial condition,
operations, business or prospects of NETWORK, including, but not
limited to, any state or federal regulatory proceedings which could
culminate in an order or other action which could have such an adverse
change, excluding generally known industry trends and competitive
conditions affecting the industry generally;
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(b) Any material physical damage or destruction, whether or not
covered by insurance, adversely affecting the properties, business, or
operations of NETWORK;
(c) Any labor dispute or threat thereof or any attempt to
organize or reorganize the employees of NETWORK for the purpose of
collective bargaining;
(d) Any direct or indirect redemption, purchase or other
acquisition by NETWORK of any shares of NETWORK Common, or declaration
of or payment or distribution of any kind of cash or other assets to
any shareholder of NETWORK;
(e) Any employment, severance, consulting or other compensation
contract entered into by NETWORK with any director, officer or
employee, or any increase of compensation payable or to become payable
to any of its officers, employees or agents, except for increases in
compensation in the ordinary course of business;
(f) Any communication, whether oral or written, to NETWORK from
NETWORK's customers or suppliers or agencies regulating NETWORK, nor
does NETWORK, after making due inquiry, have any knowledge of any
potential development affecting NETWORK, which would reasonably lead
it to expect a material adverse change in NETWORK's business;
(g) Any satisfaction or discharge of any lien by NETWORK or
payment by NETWORK of any obligation or liability, other than an
obligation or liability included in the unaudited interim balance
sheet of NETWORK as of December 31, 1996, current liabilities incurred
since December 31, 1996 in the ordinary course of business and
liabilities incurred in carrying out the transactions contemplated by
this agreement;
(h) Any guaranty, endorsement or indemnification by NETWORK of
the obligations of any third person, firm or corporation;
(i) Any sale or transfer of any assets or cancellation by
NETWORK of debts or claims having a value, in the aggregate, of more
than $50,000, except, in each case, in the ordinary course of
business;
(j) Any knowing waiver by NETWORK of any rights having a value
in excess of $100,000;
(k) Any transactions entered into, other than in the ordinary
course of business;
(l) Any mortgage, pledge or lien or other encumbrance of any of
its assets, tangible or intangible; or
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(m) Any assignment, sale or transfer of any patent, trademark,
trade name, trade secret, copyright or other intangible asset.
SECTION 5.8 LITIGATION. Except as set forth in Schedule 5.8:
(a) There are no claims, suits, actions, or proceedings of any
nature whatsoever in law or in equity, pending before any court,
governmental department, commission, agency, instrumentality or
authority or any arbitrator, or, to the best knowledge of NETWORK,
threatened, nor are there, to the best knowledge of NETWORK, any
investigations, whether or not purportedly on behalf of NETWORK,
complaints or reviews by any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator
pending or threatened against, relating to or affecting NETWORK.
(b) NETWORK is not operating under or subject to, nor in default
with respect to, any order, writ, injunction, garnishment, levy or
decree of any federal, state, municipal or other governmental court,
department, commission, board, bureau, agency or instrumentality. The
use or ownership of NETWORK's assets, the use or occupancy of
NETWORK's real property, and any interests related thereto, and the
issuance of shares of NETWORK Common in the Merger will not constitute
a default thereunder.
(c) During the past five years, there has not been nor is there
now pending, any claim(s) against any person in his or her capacity as
either a director or officer of NETWORK. NETWORK has no actual
knowledge or information of any act, error or omission which would
give rise to such a claim.
(d) There is no claim, legal action, suit, arbitration,
governmental investigation or other legal or other administrative
proceeding, including any bankruptcy proceeding, nor any order, decree
or judgement in progress, pending, in effect, or, to the knowledge of
NETWORK threatened, against or relating to NETWORK or Acquisition,
which would negatively affect NETWORK's ability to consummate the
transactions contemplated by this Agreement.
SECTION 5.9 COMPLIANCE WITH LAWS. Except as set forth on Schedule
5.9, NETWORK has not received written notice and NETWORK has no knowledge,
having made due inquiry, of any violation by NETWORK of its tariffs or of
laws, regulations and orders from any governmental entity having authority
to enforce such tariffs, laws, regulations and orders, including, but not
limited to, the Communications Act of 1934 as amended by (i) the
Telecommunications Act of 1996, and by (ii) the Telephone Consumer
Protection Act of 1991, and NETWORK does not have any actual knowledge,
having made due inquiry, that any requirements of insurance carriers
applicable to its business are not being adhered to. The present uses by
NETWORK of its properties do not violate any such laws, regulations, orders
or requirements. To the actual knowledge of NETWORK, having made due
inquiry, no
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consent or approval by any governmental or quasi-governmental authority,
other than the approval of the Federal Communications Commission, the
utility regulatory commissions in those states in which NETWORK offers
communications services, and certain regulatory authorities of foreign
countries, if any, in which NETWORK offers international communications
services, and compliance with applicable federal and state securities and
corporation laws, is required in connection with the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 5.10 ISSUANCE OF SHARES. Upon issuance of shares of the
NETWORK Common in the Merger as Merger Consideration or Adjusted Merger
Consideration, the NETWORK Shares will be duly authorized, validly issued,
fully paid and nonassessable, free and clear of any lien, security interest
or other encumbrance of any kind and free of any claim, except for the
rights of NETWORK pursuant to this Agreement or the Escrow Agreement.
SECTION 5.11 NO UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 5.11 attached hereto and made a part hereof, as of March 31, 1997,
NETWORK had no material liabilities, absolute or contingent, which are not
shown on the NETWORK Financial Statements. All liabilities, absolute or
contingent, of NETWORK incurred subsequent to March 31, 1997 will have
been incurred only in the ordinary course of business of NETWORK will,
prior to the Closing, have obtained the consent of EASTERN to incur any
single such liability incurred subsequent to the date of this Agreement in
excess of $25,000. The total amount of debt owed by NETWORK to banks or
other third party lenders does not, and will not as of the Closing, exceed
$3,500,000.
SECTION 5.12 BENEFIT PLANS; ERISA.
(a) Schedule 5.12(a) lists all contracts, agreements,
arrangements and understandings, whether written or oral, with respect
to the payment or delivery to any person, compensation, bonuses,
perquisites, benefits and other items of value by NETWORK.
(b) Schedule 5.12(b) lists each employee of NETWORK whose annual
base salary is $50,000 or more and identifies the salary, commissions,
bonuses, perquisites and benefits for each employee whose annual base
salary is $50,000 or more. Such Schedule also sets forth the name of
all directors and officers of NETWORK and a description of any
agreement with respect to the election or tenure of any of them as
such.
(c) No employee of NETWORK will be entitled to severance pay by
virtue of the transactions contemplated by this Agreement. Schedule
5.12(c) sets forth each employee of NETWORK who has any right to
severance pay in excess of $25,000 for any reason, listing the
employee name, severance amount or method of calculation, and the
basis for such right.
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(d) Schedule 5.12(d) contains a true and complete list of each
pension, profit sharing, other deferred compensation, bonus, incentive
compensation, stock purchase, stock option, retirement, supplemental
retirement, severance or termination pay, medical, hospitalization,
life insurance, dental, disability, salary continuation, vacation,
supplemental unemployment benefits plan, program, arrangement or
contract, maintained, contributed to or required to be contributed to,
or promised by NETWORK or any Related Party for the benefit of any
current or former employee, director or agent of NETWORK or any
Related Party, whether or not any of the foregoing is funded, whether
formal or informal, whether or not subject to ERISA.
SECTION 5.13 BROKER'S FEES. Except for Seruus Ventures, no person
or entity has been authorized to act as a broker, finder, financial advisor
or in any other similar capacity as to give rise to any claim for brokerage
or finder's fees or commissions with respect to the transactions
contemplated hereby by anyone claiming to have acted on behalf of NETWORK.
SECTION 5.14 LABOR MATTERS. No group of employees of NETWORK is
presently organized into a collective bargaining unit. No labor union has
recently attempted, or is presently attempting, to organize any of
NETWORK's employees into a collective bargaining unit. No employees of
NETWORK are on strike or threatening to strike.
SECTION 5.15 FULL DISCLOSURE. No representation or warranty by
NETWORK in this Agreement, nor any statement or certificate furnished, or
to be furnished, by or on behalf of NETWORK, nor any document or
certificate delivered to EASTERN or the Shareholders pursuant to this
Agreement, or in connection with the transactions contemplated hereby,
contains any untrue statement of material fact, or omits to state any
material fact necessary to make any statement contained therein not
misleading. NETWORK has performed or complied, or will perform or comply
in all material respects with all covenants, agreements and conditions
contained in this Agreement on its part required to be performed or
complied with at or prior to the Closing Date.
SECTION 5.16 EXPENSES. The legal expenses allocated to NETWORK in
connection with the transactions contemplated by this Agreement shall be
reasonable and shall not exceed in the aggregate $40,000, unless NETWORK
shall have received written approval to exceed such fee amount from
EASTERN, which approval shall not be unreasonably withheld. All other
expenses allocated by NETWORK or accrued by it in connection with this
Agreement shall not exceed $900,000. As soon as practicable after the
Closing, NETWORK shall submit to EASTERN a list of such expenses incurred
up to the Closing.
SECTION 5.17 ENVIRONMENTAL MATTERS.
(a) Operations conducted on the real property of NETWORK at all
times complied in all respects with Environmental Laws, except for
non-compliance that would not have a material adverse effect on the
business, operations or property of NETWORK. NETWORK has obtained all
governmental authorizations and permits under
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Environmental Laws necessary for its operations. NETWORK is in
material compliance with each term and condition of such
authorizations and permits.
(b) The real property occupied by NETWORK in connection with its
business and NETWORK's operations thereon are not subject to (i) any
federal, state, or local investigation, to the best knowledge of
NETWORK, (ii) any judicial or administrative proceeding alleging a
violation of or liability under any Environmental Law, or (iii) any
outstanding written order or agreement with any governmental authority
or private party relating to any Environmental Law.
SECTION 5.18 CORRECT RECORDS. The financial records, ledgers,
account books, minute books, stock certificate books, stock registers, and
other corporate records of NETWORK are current, correct and complete in all
material respects and all signatures therein are the true signatures of the
persons who are purported to have signed.
SECTION 5.19 BOARD OF DIRECTORS REPRESENTATION. NETWORK does not
know of any fact that could cause it to believe that (i) election of Mr.
Crawford or Mr. Keefe to NETWORK's Board of Directors, (ii) election of Mr.
Crawford as Chairman of the Board of NETWORK or (iii) appointment of Mr.
Keefe as Chief Financial Officer of NETWORK, could have a material adverse
effect on NETWORK.
SECTION 5.20 ADVISABILITY OF MERGER. NETWORK does not know of any
fact that would constitute grounds whereby it would deem it inadvisable to
proceed with the Merger.
ARTICLE VI
COVENANTS OF NETWORK
NETWORK covenants and agrees that:
SECTION 6.1 MAINTENANCE OF BUSINESS. NETWORK shall continue to
carry on its business, maintain its plants and equipment and keep its books
of account, records and files in substantially the same manner as
heretofore, except that NETWORK shall seek EASTERN's consent prior to
incurring any expense other than in the ordinary course of business or
capital expenditure which individually or in the aggregate would exceed
$50,000. NETWORK will maintain in full force and effect insurance policies
now in effect. NETWORK may, however, continue to carry on such activities,
plans, capital and operating programs which were approved by it prior to
the date hereof, provided that such activities, plans and programs shall
not involve expenditures exceeding $50,000 for each such activity, plan or
program. If any such activities, plans or programs exceed $50,000 they
shall, prior to the execution of this Agreement, have been submitted to
EASTERN in detail and in writing, and shall have been approved by EASTERN.
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SECTION 6.2 NEGATIVE COVENANTS. Except for the permitted actions
of NETWORK set forth on Schedule 6.2, without the prior written consent of
EASTERN, NETWORK shall not, and the Shareholders shall do all things and
take all reasonable and proper action to provide that NETWORK shall not:
(a) Issue, sell, purchase or redeem, or grant options to
purchase or otherwise agree to issue, sell, purchase or redeem any
shares of its capital stock or any other securities of NETWORK.
(b) Amend its Articles of Incorporation or amend its Bylaws;
(c) Incur or prepay any liability for borrowed money, short term
debt or long term debt (as those terms are defined in GAAP), other
than in the ordinary course of business and consistent with past
practices;
(d) Pay or guarantee any obligation or liability other than
obligations or liabilities reflected in the unaudited interim balance
sheet of NETWORK as of December 31, 1996, when due, liabilities
incurred since the date of such balance sheet in the ordinary course
of business and obligations under contracts and agreements entered
into in the ordinary course of business;
(e) Adopt or modify any severance, consulting, bonus, pension,
profit sharing, benefit or other compensation plan or arrangement or
increase its overall work force, other than in the normal course of
business, or enter into any contract of employment;
(f) Enter into or modify any contract or commitment, incur any
liability, absolute or contingent, waive or fail to enforce any right
or enter into any other transactions, other than in the ordinary
course of business;
(g) Take any action that would or might reasonably be expected
to result in any representation or warranty set forth in this
Agreement being or becoming untrue in any respect or in any of the
conditions to the consummation of the transactions contemplated by
this Agreement set forth in Article VII hereof not being satisfied;
(h) Have made or become obligated to make any dividend payment
or other distribution to the NETWORK shareholders; or
(i) Enter into or modify any contracts for the purchase of
communications services unless such contracts are first approved by
EASTERN.
SECTION 6.3 ORGANIZATION, GOODWILL. NETWORK shall preserve its
business organization intact and use its best efforts to substantially
retain its present employees, and preserve the good will of its suppliers,
customers and others having business relations with it.
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SECTION 6.4 ACCESS TO FACILITIES, FILES AND RECORDS. NETWORK
acknowledges that as of the date this Agreement is executed EASTERN has not
completed Due Diligence (defined as those actions and investigations
described in subsections (i) through (iv) below). Therefore, at the
reasonable request of EASTERN, NETWORK shall, from time to time, give or
cause to be given to EASTERN, its officers, employees, accountants, counsel
and authorized representatives full access to (i) all of the property,
accounts, books and other financial records, minute books, deeds, title
papers, insurance policies, certificates, licenses, agreements, contracts,
tariffs, commitments, tax returns, records and files of every character,
employees, equipment, machinery, fixtures, furniture, vehicles, notes and
accounts payable and receivable and inventories of NETWORK; (ii) all such
other information concerning the affairs of NETWORK as EASTERN may
reasonably request; (iii) consult with the independent auditors of and
counsel to NETWORK with respect to all matters, including, but not limited
to, the financial condition of NETWORK and the audit of NETWORK's financial
statements and any legal and regulatory matters affecting NETWORK; (iv) at
EASTERN's own cost and expense, the facilities, properties and operations
of NETWORK in order to perform a Phase I environmental audit (the
"Environmental Audit"). The Environmental Audit, if conducted, shall be
instituted within thirty (30) days after this Agreement is fully executed
by both parties. A copy of the report of the Environmental Audit will be
delivered promptly to NETWORK and NETWORK shall, at its expense, be
afforded an opportunity to undertake a Phase II audit, if necessary, to
prove to EASTERN's satisfaction that no hazards exist. NETWORK, at its
expense, shall be afforded a thirty (30) day period after discovery to cure
any environmental hazards which the Environmental Audit discloses exist and
EASTERN shall keep confidential all information regarding any such hazards
unless legally required to disclose it.
SECTION 6.5 CORPORATE ACTION. Subject to the provisions of this
Agreement, NETWORK shall take, and shall cause Acquisition to take, all
necessary corporate and other action required of it to carry out the
transactions contemplated by this Agreement; provided, however, that
nothing in this Article VI or anywhere else in this Agreement shall require
NETWORK to carry out such transactions if a Final Order of a Commission (as
those terms are defined in Section 7.3 of this Agreement) contains a term,
condition or provision which, in NETWORK's sole determination, is unduly
burdensome.
SECTION 6.6 CONFIDENTIALITY. NETWORK shall maintain all
information gained from EASTERN in connection with its evaluation of the
transactions contemplated by this Agreement (the "EASTERN Confidential
Information") in strict confidence, and shall take all precautions
necessary to prevent disclosure, access to, or transmission of the EASTERN
Confidential Information, or any part thereof, to any third party, except
(i) for the exclusive purpose of evaluating the Merger, (ii) as required by
law or an order of any court having competent jurisdiction; provided,
however, that before disclosing any EASTERN Confidential Information under
this exception, NETWORK shall give EASTERN sufficient notice to allow it to
seek an appropriate protective order, and (iii) as is necessary or required
for NETWORK to satisfy its disclosure obligations under the federal and
state securities laws. NETWORK shall use its reasonable best efforts to
ensure that any person or entity to whom it discloses EASTERN Confidential
Information shall keep such information confidential. In the event the
Closing does
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not occur for any reason, NETWORK shall, immediately upon EASTERN's
request, return all copies and recordings of the EASTERN Confidential
Information in its possession or under its control and delete all records
thereof in any data storage system maintained by or for NETWORK.
SECTION 6.7 NOTICE OF PROCEEDINGS. NETWORK will, upon becoming
aware of any order or decree or any complaint praying for an order or
decree restraining or enjoining the consummation of this Agreement or the
transactions contemplated hereunder, or upon receiving any notice from any
governmental department, court, agency or commission of its intention to
institute an investigation into, or institute a suit or proceeding to
restrain or enjoin the consummation of this Agreement or such transactions
if consummated, promptly notify EASTERN in writing of such order, decree,
complaint or notice.
SECTION 6.8 DIRECTOR REPRESENTATION.
(a) At the Effective Time, the NETWORK Board of Directors shall
take all necessary action to (i) increase by two the number of seats
on the NETWORK Board of Directors, (ii) elect John D. Crawford and
Thomas G. Keefe to fill the newly-created vacancies, and (iii) elect
John D. Crawford as Chairman of the NETWORK Board of Directors;
provided, however, that the NETWORK Board of Directors shall not be
required to take any of such actions if they would have a material
adverse effect on NETWORK.
(b) After the Effective Date of the Merger, and for a period of
two years thereafter, NETWORK shall use its best efforts to allow
EASTERN or the Shareholders to designate for nomination such number of
directors, rounded up to the next whole number, as will give the
Shareholders representation on NETWORK's Board of Directors equal to
the product of (x) the number of directors on NETWORK's Board of
Directors (giving effect to any increase in the number of directors
pursuant to this Section 6.8) multiplied by (y) the percentage that
the NETWORK Shares held by the Shareholders bears to the total
aggregate number of NETWORK Shares outstanding (such number being, the
"Board Percentage"), and the NETWORK Board of Directors shall use its
best efforts to satisfy the Board Percentage. The provisions of this
Section 6.8 are in addition to and shall not limit any rights which
EASTERN, NETWORK or any of their affiliates may have as a holder or
beneficial owner of shares as a matter of law with respect to the
election of directors or otherwise; provided, however, that NETWORK's
duties hereunder are subject to its ability to comply with all
applicable federal and state securities laws and governing corporate
law.
(c) At the Effective Time, the NETWORK Board of Directors shall
elect Thomas G. Keefe to the position of Chief Financial Officer of
NETWORK; provided, however, that the NETWORK Board of Directors shall
not be required to take such action if it would have a material
adverse effect on NETWORK.
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SECTION 6.9 THIRD PARTY CONSENTS; GUARANTEES.
(a) NETWORK will obtain or cause to be obtained the consent of
any third party whose consent is required in order that the
transactions contemplated by this Agreement may be consummated without
violation of any representation, warranty or covenant made by any of
them in this Agreement; provided, however, that NETWORK shall not
spend any money or otherwise incur any obligation in order to obtain
any such consent without the prior written approval of EASTERN.
Provided further, that if in the reasonable business judgment of
EASTERN and NETWORK, it would be impracticable to obtain regulatory
approval of the Merger in a jurisdiction, the failure to obtain such
approval will not be a breach of this covenant.
(b) NETWORK will use its reasonable best efforts to cooperate
with EASTERN and the Shareholders to obtain or cause to be obtained
the consent of any third party whose consent is required in order that
the transactions contemplated by this Agreement may be consummated
without violation of any representation, warranty or covenant made by
any of them in this Agreement. NETWORK will use its reasonable best
efforts to assist John D. Crawford in obtaining the release of his
personal guarantees of EASTERN obligations following the Closing Date.
SECTION 6.10 SECURITIES LAWS. NETWORK will take all action
necessary to permit the transactions contemplated herein to be consummated
in compliance with all applicable federal and state securities laws and
regulations.
SECTION 6.11 COMMUNICATIONS LAWS.
(a) NETWORK will take all action necessary to permit the
transactions contemplated herein to be consummated in compliance with
all applicable federal, state and local telecommunications laws
governing or applicable to NETWORK and its business.
(b) NETWORK will use its reasonable best efforts to cooperate
with EASTERN to permit the transactions contemplated herein to be
consummated in compliance with all applicable federal, state and local
telecommunications laws governing or applicable to EASTERN and its
business.
SECTION 6.12 NOTICE OF PROCEEDINGS. NETWORK will, upon becoming
aware of any order or decree or any complaint praying for an order or
decree restraining or enjoining the consummation of the Agreement or the
transactions contemplated hereunder, or upon receiving any notice from any
governmental department, court, agency or commission or its intention to
institute an investigation into, or institute a suit or proceeding to
restrain or enjoin the consummation of this Agreement or such transactions,
or to nullify or render ineffective this Agreement or such transactions if
consummated, promptly notify EASTERN in writing of such order, decree,
complaint, or notice.
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SECTION 6.13 ADVERSE EVENTS. Promptly after the occurrence, or
failure to occur, of any event, the occurrence or failure of which (i)
would materially adversely affect, or could reasonably be expected to
materially adversely affect, the assets, properties, operations, business,
prospects, or condition (financial or otherwise) of NETWORK or the ability
of NETWORK to perform any of its obligations under this Agreement, or (ii)
if known as of the date of this Agreement, would have been required to be
disclosed to EASTERN or the Shareholders or (iii) causes any representation
or warranty of NETWORK contained in this Agreement or any Schedule or
Exhibit hereto to be untrue or inaccurate at any time from the date of this
Agreement to and including the Closing, NETWORK shall provide to EASTERN
all relevant information related thereto.
SECTION 6.14 BROKER'S FEES. NETWORK shall indemnify and hold
harmless the Shareholders in respect of any claim for brokerage or finder's
fees or commissions with respect to the transactions contemplated herein by
anyone claiming to have acted on behalf of NETWORK.
SECTION 6.15 OTHER TRANSACTIONS. NETWORK shall keep Shareholder
John D. Crawford informed of the progress of the negotiations with other
prospective merger and/or acquisition candidates and shall consult with Mr.
Crawford on material aspects of such matters.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 NETWORK AND ACQUISITION CONDITIONS TO CLOSING. The
obligations of NETWORK and Acquisition hereunder are subject to the
satisfaction of each of the following conditions at or before Closing, the
occurrence of which may, at the option of NETWORK, be waived:
(a) All representations and warranties of EASTERN and the
Shareholders in this Agreement and any certificate, Exhibit or
Schedule to be delivered pursuant hereto, which Exhibit or Schedule
shall not be amended by EASTERN or the Shareholders without NETWORK's
prior written consent, shall be true and accurate in all material
respects on the date hereof and on and as of the Closing, and EASTERN
and the Shareholders shall have delivered to NETWORK a certificate to
such effect dated as of the Closing Date;
(b) There shall be no material adverse change in the operations
of the business of EASTERN from the date hereof through the Closing
Date;
(c) EASTERN and the Shareholders shall perform and comply with
all of their obligations under this Agreement which are to be
performed or complied with by each of them prior to the Closing Date;
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(d) EASTERN and the Shareholders shall have delivered to NETWORK
and Acquisition all of the documents required to be delivered by them
pursuant to this Agreement.
(e) NETWORK and NETWORK's counsel shall approve the form and
substance of the documents delivered by EASTERN and the Shareholders
pursuant to this Agreement;
(f) There shall be no claims, actions or suits pending or
threatened against EASTERN or the Shareholders that would restrict or
prohibit EASTERN or the Shareholders from consummating the
transactions contemplated herein;
(g) 100% of the outstanding EASTERN Common shall have been voted
in favor of this Agreement and the Merger;
(h) Prior to the Closing, there shall not have occurred any
damage, destruction or loss not covered by insurance exceeding
$100,000;
(i) If required by NETWORK in writing, each instrument or other
agreement or document under which EASTERN has incurred or may incur
debt or bank borrowings or other performance obligations shall have
been amended where necessary or appropriate, without the assumption by
NETWORK or EASTERN of any additional obligation or cost and in a
manner satisfactory in form and substance to NETWORK and EASTERN so as
to permit the transactions contemplated by this Agreement without a
default or acceleration of any obligation thereunder and to provide
that neither NETWORK nor EASTERN shall become liable, contingently or
otherwise, by reason of consummation of such transactions, for
acceleration of payment or other performance of such debt, bank
borrowings or obligations;
(j) EASTERN's authorized and issued and outstanding capital
stock shall be as stated in Section 3.3 and EASTERN shall have no
agreement, obligation or commitment of any character to issue shares
of its capital stock, or debentures, bonds, or other evidences of
indebtedness convertible, in whole or in part, into shares of its
capital stock;
(k) EASTERN shall have delivered to NETWORK at the Closing
certified copies of resolutions adopted by the Board of Directors of
EASTERN adopting and approving this Agreement;
(l) EASTERN shall have delivered to NETWORK a Certificate of
Good Standing (or its equivalent) issued by the Virginia State
Corporation Commission to the effect that EASTERN is duly incorporated
and in good standing under the laws of the Commonwealth of Virginia,
as of the Closing Date;
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(m) EASTERN shall have furnished to NETWORK a copy of its
Articles of Incorporation, including all amendments thereto, which
shall have been certified by the Virginia State Corporation Commission
as of a date reasonably near the Closing Date;
(n) EASTERN shall have furnished to NETWORK a copy of the Bylaws
of EASTERN, including all amendments thereto, which shall have been
certified by the Secretary of EASTERN as of the Closing Date;
(o) On or before the Closing (i) the Board of Directors or the
Executive Committee thereof of NETWORK shall have ratified this
Agreement and authorized the transactions contemplated hereby and (ii)
EASTERN shall have taken, and the Shareholders shall cause EASTERN to
have taken, all corporate action as may be necessary and satisfactory
to NETWORK in its sole discretion, to formalize, update, bolster and
ratify the past actions of the employees, officers, directors and
Shareholders of EASTERN;
(p) Prior to the Closing if Closing occurs after June 15, 1997,
EASTERN shall have delivered to NETWORK its audited balance sheet and
the related statements of income and retained earnings and statements
of cash flows for the eleven (11) month period ended March 31, 1997,
reflecting results consistent with those reflected on the interim
unaudited financial statements provided by EASTERN to NETWORK prior to
the date of this Agreement;
(q) Prior to the Closing, EASTERN shall have taken all actions
necessary to terminate and fulfill all of EASTERN's obligations under
the Executive Stock Ownership Agreements listed on Schedule 7.1(q)
hereto and shall have delivered evidence satisfactory to NETWORK in
its sole discretion of such actions;
(r) Prior to or at Closing, EASTERN shall have taken all actions
necessary to terminate and fulfill all of EASTERN's obligations to
Michael E. Lincoln and shall have delivered evidence satisfactory to
NETWORK in its sole discretion of such actions; and
(s) The Merger shall have been declared effective by the
Virginia State Corporation Commission.
SECTION 7.2 EASTERN AND SHAREHOLDER CONDITIONS TO CLOSING. The
obligations of EASTERN and the Shareholders hereunder are subject to the
satisfaction of each of the following conditions at or before Closing, the
occurrence of which may, at the option of EASTERN, be waived:
(a) All representations and warranties of NETWORK and
Acquisition in this Agreement and any certificate, Exhibit or Schedule
to be delivered pursuant hereto, which Exhibit or Schedule shall not
be amended by NETWORK without EASTERN's
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prior written consent, shall be true and accurate in all material
respects on the date hereof and on and as of the Closing, and NETWORK
and Acquisition shall have delivered to the Shareholders a certificate
to such effect dated as of the Closing Date;
(b) There shall be no material adverse change in the operations
of the business of NETWORK from the date hereof through the Closing
Date;
(c) NETWORK and Acquisition shall perform and comply with all of
their obligations under this Agreement which are to be performed or
complied with by NETWORK or Acquisition prior to or on the Closing
Date;
(d) NETWORK and Acquisition shall have delivered to EASTERN and
the Shareholders all of the documents required to be delivered by them
by this Agreement;
(e) EASTERN and EASTERN's counsel shall have approved the form
and substance of the documents delivered by NETWORK and Acquisition
pursuant to this Agreement;
(f) There shall be no claims, actions or suits pending or
threatened against NETWORK or Acquisition that would restrict or
prohibit NETWORK or Acquisition from consummating the transactions
contemplated herein;
(g) The Merger shall have been declared effective by the
Virginia State Corporation Commission;
(h) NETWORK shall have delivered to EASTERN at the Closing
certified copies of resolutions adopted by the Board of Directors of
NETWORK adopting and approving this Agreement;
(i) NETWORK shall have delivered to EASTERN Certificates of Good
standing (or their equivalent) issued by the Virginia State
Corporation Commission for Acquisition and by the Delaware Secretary
of State for NETWORK, as of the Closing Date;
(j) NETWORK shall have furnished to EASTERN a copy of its
Certificate of Incorporation, including all amendments thereto, which
shall have been certified by the Delaware Secretary of State as of a
date reasonably near the Closing Date;
(k) NETWORK shall have furnished to EASTERN a copy of the Bylaws
of NETWORK, including all amendments thereto, which shall have been
certified by the Secretary of NETWORK as of the Closing Date;
(l) On or before the Closing (i) the Board of Directors or the
Executive Committee thereof of NETWORK shall have ratified this
Agreement and authorized the
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transactions contemplated hereby (ii) EASTERN shall have taken, and
the Shareholders shall cause EASTERN to have taken, all corporate
action as may be necessary and satisfactory to NETWORK in its sole
discretion, to formalize, update, bolster and ratify the past actions
of the employees, officers, directors and Shareholders of EASTERN; and
(m) Prior to the Closing, there shall not have occurred any
damage, destruction or loss not covered by insurance exceeding
$100,000.
SECTION 7.3 MUTUAL COVENANTS AND CONDITIONS TO OBLIGATIONS OF
EASTERN AND NETWORK.
(a) As soon as practicable after execution of this Agreement,
EASTERN and NETWORK shall join in applications to the Commissions
requesting the approvals and authorizations of each such Commission of
the transactions contemplated by this Agreement. NETWORK shall pay
the fees of the Commissions charged in connection with or incidental
to the filing and processing of the aforesaid applications, as well as
all other fees and expenses incurred in connection therewith.
(b) The obligations of EASTERN, NETWORK and the Shareholders
under this Agreement are subject to the receipt prior to the Closing
of an acceptable legal opinion of Nowalsky & Bronston, L.L.P. to the
effect that Final Orders (as defined below) of the Commissions
approving and authorizing the transactions contemplated herein are
likely to be issued and that such Final Orders will likely not be
unduly burdensome. For the purposes of this Section 7.3(b), a "Final
Order" shall mean an order of any Commission which is not subject to
rehearing by such Commission or to judicial review.
(c) Each of the parties to this Agreement agrees that if
NETWORK, using its reasonable judgment, determines that an application
to any other state or federal agency for its approval or authorization
of the transactions contemplated herein is required, then NETWORK
shall file such application and EASTERN and the Shareholders shall
join in such application with NETWORK and otherwise act in accordance
with the provisions of Section 7.3(a) of this Agreement with respect
to such application.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 SHAREHOLDERS' LITIGATION INDEMNITY AGREEMENTS. Subject
to the limitations set forth in Section 8.4 below, the Shareholders,
severally and not jointly, shall indemnify EASTERN, NETWORK and their
affiliates and hold their affiliates harmless from any and all claims,
actions, suits, liabilities, losses, damages and expenses of every nature
and character (including, but not by way of limitation, all reasonable
attorneys' fees and all amounts paid in settlement of any claim, action or
suit) ("Losses") which arise or result directly or indirectly from matters
set forth on Schedule 3.11 hereof, or which should have been listed on
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such Schedule, provided, however, that the indemnification obligation
contained in this Section 8.1 shall not apply to any Losses which arise or
result directly or indirectly from any such matters unless a notice of
claim with respect to any such matter has been delivered to the
Shareholders prior to August 1, 1997. The Shareholders' indemnification
obligation with respect to such Losses shall be net of any recovery
received by NETWORK with respect to any matter set forth on Schedule 3.11
or any matter that should have been set forth on Schedule 3.11 (except for
matters that were not disclosed due to fraud) on or before August 1, 1997.
If a notice of claim has been delivered prior to such date, any and all
such Losses arising from the matters described on Schedule 3.11 to which
the notice of claim pertained, whether or not incurred prior to or after
such date, shall be subject to indemnification under this Section 8.1.
SECTION 8.2 SHAREHOLDERS' OTHER INDEMNITY AGREEMENTS. All
representations and warranties made in this Agreement by the Shareholders
are made to and for the benefit of both NETWORK and EASTERN. Subject to
the limitations set forth in Section 8.4 below, with respect to all such
representations or warranties in this Agreement (and/or in the Exhibits or
Schedules attached hereto and the documents to be delivered by the
Shareholders at the Closing), the Shareholders, severally and not jointly,
shall indemnify NETWORK and EASTERN against and hold NETWORK and EASTERN
harmless from any and all Losses which arise or result directly or
indirectly from any breach of any such representation or warranty.
SECTION 8.3 NETWORK'S INDEMNITY AGREEMENTS. Subject to the
limitations set forth in Section 8.4 below, with respect to all
representations and warranties made by NETWORK in this Agreement (and/or in
the Exhibits and Schedules attached hereto and the documents to be
delivered by NETWORK at the Closing), NETWORK shall indemnify the
Shareholders against and hold the Shareholders harmless from any and all
Losses which arise or result directly or indirectly from any breach of any
such representation or warranty.
SECTION 8.4 LIMITATION ON INDEMNIFICATION; TIME TO ASSERT CLAIMS.
(a) Notwithstanding any other provision of this Agreement,
NETWORK and EASTERN shall not be entitled to recover from the
Shareholders any amount in excess of the value of the Escrow Shares
placed in escrow pursuant to Section 2.4(d) except for Losses
described on Schedule 8.4. Recovery against the Escrow Shares shall be
made in accordance with the terms of the Escrow Agreement.
(b) Any claim for indemnification hereunder by NETWORK or
EASTERN shall be asserted by written notice to the Shareholders'
Representative (or, if given after Closing, to the Escrow Agent) on or
before August 1, 1997, except for claims for Losses arising out of or
in connection with fraud by EASTERN or any Shareholder(s), which
claims may be made at any time after the date of this Agreement. Any
claim for indemnification hereunder by the Shareholders shall be
asserted by written notice given to NETWORK on or before August 1,
1997.
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SECTION 8.5 PROCEDURE FOR GENERAL CLAIMS. NETWORK shall give
reasonably prompt written notice to the Shareholders' Representative of any
claim or event other than Third Party Claims (as defined below) with
respect to which NETWORK believes it or its affiliates is or may be
entitled to indemnification pursuant to this Article VIII and the
Shareholders' Representative shall give reasonably prompt notice to NETWORK
of any claim or event other than Third Party Claims with respect to which
the Shareholders believe they are or may be entitled to indemnification
pursuant to this Article VIII (in each case, a "Notice of Claim"),
provided, however, that the failure to give notice as provided in this
Section 8.5 shall not relieve the other party of its indemnification
obligations hereunder, except to the extent that the indemnifying party is
prejudiced by such failure to give notice. The Notice of Claim shall state
the nature and basis of said claim or event, the amount thereof to the
extent known and the basis of such party's belief that it (or its
affiliates, in the case of NETWORK) may be entitled to indemnification with
respect thereto, including, without limitation, identifying the
representation, warranty, covenant or agreement which such party believes
has been breached.
SECTION 8.6 PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NETWORK, on the one hand, and the Shareholders'
Representative, on the other, (the "Indemnified Party"), shall give
reasonably prompt written notice to the other (the "Indemnifying
Party") of any claim or event with respect to which the Indemnified
Party believes it or its affiliates is or may be entitled to
indemnification pursuant to this Article VIII resulting from any
claim, action, suit or proceeding brought by any third party in
connection with any litigation, administrative proceedings or similar
actions (including, without limitation, claims by any assignee or
successor of a party hereto or any governmental agency) (collectively,
"Third Party Claims"), together with an estimate of the amount in
dispute thereunder and a copy of any claim, process, legal pleadings
or correspondence with respect thereto received by the Indemnified
Party, provided, however, that the failure of the Indemnified Party to
give such notice shall not relieve the Indemnifying Party of its
obligations hereunder, except to the extent that the Indemnifying
Party is prejudiced by such failure to give notice. Within ten (10)
days of receipt of such notice, the Indemnifying Party may, by written
notice to the Indemnified Party, assume the defense of such Third
Party Claim through counsel of its own choosing (which counsel shall
be reasonably acceptable to the Indemnified Party) with all fees and
expenses thereof to be paid by the Indemnifying Party, in which event
the Indemnified Party may participate in the defense thereof at its
sole expense, provided that such Indemnified Party shall have the
right to employ separate counsel to represent such Indemnified Party
if, in such Indemnified Party's reasonable judgment, a conflict of
interest between the Indemnifying Party and such Indemnified Party
exists with respect to such Third Party Claim, with all fees and
expenses of such separate counsel to be paid by the Indemnifying
Party. If the Indemnifying Party fails to assume the defense of such
Third Party Claim by failing to deliver a written notice of the
Indemnifying Party's intention to assume such defense within ten (10)
days after receipt of the initial notice thereof, or thereafter
abandons or fails to diligently pursue such defense (and only in
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such circumstances), the Indemnified Party may assume such defense and
the fees and expenses of its counsel will be paid by the Indemnifying
Party.
If the Indemnifying Party exercises its right to undertake the
defense against any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party all pertinent
records, materials, and information in its possession or under its
control relating thereto as is reasonably required by the Indemnifying
Party, with all expenses incurred in connection therewith to be paid
by the Indemnifying Party. Similarly, if the Indemnified Party is,
directly or indirectly, conducting the defense against any such Third
Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the
Indemnified Party all such records, materials and information in the
Indemnifying Party's control relating thereto as is reasonably
required by the Indemnified Party, with all expenses incurred in
connection therewith to be paid by the Indemnifying Party.
Notwithstanding anything in this Section 8.6 to the contrary, however,
if a claim shall be made with respect to which the Indemnifying Party
has agreed to assume the defense thereof, the Indemnifying Party shall
not thereafter be entitled to dispute, and hereby agrees not to
dispute, the Indemnified Party's right to indemnification therefor
pursuant to Article VIII hereof or any subsequent claims of the
Indemnified Party with respect to such Third Party Claim.
(b) The Indemnifying Party shall not, without the written
consent of the Indemnified Party, (i) settle or compromise any Third
Party Claim or consent to the entry of any judgment which does not
include as an unconditional term thereof the delivery by the claimant
or plaintiff to the Indemnified Party of a written release from all
liability in respect of such Third Party Claim, (ii) settle or
compromise any Third Party Claim in any manner that may adversely
affect the Indemnified Party or (iii) upon the issuance of an order of
a court of competent jurisdiction or an arbitrator with respect to
such Third Party Claim, appeal or otherwise challenge such order.
Upon the settlement or compromise of any Third Party Claim, the order
of a court of competent jurisdiction or arbitrator (if the Indemnified
Party has failed to consent to the appeal or challenge thereof) with
respect thereto or the final, non-appealable order of any appellate
court (if the Indemnified Party has consented to the appeal or
challenge thereof) with respect thereto, as the case may be, any
resulting settlement, award, damages or judgment shall be paid (i) in
the case of any such Third Party Claim with respect to which the
Shareholders are the Indemnifying Party, by the Shareholders, and (ii)
in the case of any such Third Party Claim with respect to which
NETWORK is the Indemnifying Party, by NETWORK.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SURVIVAL. The several representations and warranties
of the parties contained in or made pursuant to this Agreement shall be
deemed to have been made on and as of the Closing and shall remain
operative and in full force and effect until the fifth anniversary of the
Closing Date, regardless of any investigation or statement as to the
results thereof, made by or on behalf of any such party. Except for the
provisions of Articles VIII, and Sections 9.6, 9.7, 9.9, 9.12 and 9.14,
inclusive, of this Agreement, the several covenants and agreements of the
parties contained in this Agreement shall expire on the Closing Date and,
except for the provisions of Sections 9.3, 9.4, 9.6, 9.7, 9.9, and 9.12,
inclusive, of this Agreement, the several covenants and agreements of the
parties contained in this Agreement shall expire on the termination or
abandonment of this Agreement.
SECTION 9.2 TERMINATION OF TRANSACTIONS; TERMINATION FEE.
(a) The transactions contemplated hereby may be abandoned, and
this Agreement terminated, upon notice, at any time after the date of
this Agreement, but not later than the Closing, by:
(i) The mutual consent of the Board of Directors of EASTERN
and NETWORK; or
(ii) NETWORK, if NETWORK discovers facts or circumstances in
the course of Due Diligence, whether or not NETWORK was informed
of the matter to which such discovered facts and circumstances
relate prior to the execution of this Agreement, which are such
that in the good faith judgment of NETWORK would make it
inadvisable to proceed with the transactions contemplated by this
Agreement; or
(iii) EASTERN, if EASTERN discovers facts or
circumstances in the course of Due Diligence, whether or not
EASTERN was informed of the matter to which such discovered facts
and circumstances relate prior to the execution of this
Agreement, which are such that in the good faith judgment of
EASTERN would make it inadvisable to proceed with the
transactions contemplated by this Agreement; or
(iv) NETWORK, if EASTERN or any Shareholder is in willful
breach of any of its representations, warranties, covenants or
agreements under this Agreement in any material respect; or
(v) EASTERN, if NETWORK or Acquisition is in willful breach
of any of its representations, warranties, covenants or
agreements under this Agreement in any material respect; or
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(vi) Either EASTERN or NETWORK, if the consummation of the
Merger contemplated herein has been enjoined and such injunction
is not subject to appeal or if a Final Order which contains an
unduly burdensome term, condition or provision is issued and no
appeal is taken therefrom; or
(vii) The Board of Directors of EASTERN or NETWORK if
the Merger contemplated herein shall not have become effective on
or before June 15, 1997.
(b) Upon termination of this Agreement by EASTERN pursuant to
subsection (v) of Section 9.2(a), or upon withdrawal of the NETWORK
Board of Directors' recommendation of the Merger pursuant to Section
6.5, NETWORK agrees to pay EASTERN a fee in immediately available
funds equal to $250,000.
(c) Upon termination of this Agreement by NETWORK pursuant to
subsection (iv) of Section 9.2(a), or upon withdrawal of the EASTERN
Board of Directors' recommendation of the Merger pursuant to Section
4.12 or the failure of all of the Shareholders to vote all of their
shares of EASTERN Common in favor of the Merger pursuant to Section
4.19, EASTERN agrees to pay NETWORK a fee in immediately available
funds equal to $250,000.
SECTION 9.3 EFFECT OF TERMINATION OR ABANDONMENT. If for any
reason the transactions contemplated hereby are terminated or abandoned
pursuant to Section 9.2 hereof, all written schedules and other information
and all copies of material from the books and records of any party
heretofore furnished to any other party shall be returned promptly to the
party furnishing the same and, in such event, the provisions of this
Agreement relating to confidential information shall survive the
termination of this Agreement and the abandonment of the reorganization.
SECTION 9.4 LIABILITIES. In the event this Agreement is
terminated and the contemplated transactions are abandoned pursuant to
Section 9.2 hereof, no party hereto shall have any duty or liability to the
other either for costs, expenses, loss of anticipated profits or otherwise,
except with respect to any liability or damages incurred or suffered by a
party as a result of the breach by the other party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, and except for any termination fee payable under Section 9.2(b)
or 9.2(c).
SECTION 9.5 ASSIGNMENT. This Agreement shall not be assigned by
EASTERN or the Shareholders, or by NETWORK or Acquisition without the other
parties' prior written consent; provided, however, this Agreement may be
assigned by operation of law without consent of the other parties in the
event of a merger, consolidation or other change of control of a party.
SECTION 9.6 FURTHER ASSURANCES. From time to time prior to, at
and after the Closing, the Shareholders, EASTERN and NETWORK will and will
cause their respective directors and officers to execute all such
instruments and take all such actions as the
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<PAGE>
Shareholders, NETWORK or EASTERN, being advised by counsel, shall
reasonably request in connection with the carrying out and effectuating of
the intent and purpose hereof and all transactions and things contemplated
by this Agreement including, without limitation, the execution and delivery
of any and all confirmatory and other instruments in addition to those to
be delivered on the Closing, and any and all actions which may reasonably
be necessary or desirable to complete the transactions contemplated hereby.
SECTION 9.7 NOTICES. All notices, demands and other
communications which may or are required to be given hereunder or with
respect hereto shall be given by EASTERN on behalf of itself and the
Shareholders, and by NETWORK on behalf of itself. All such notices,
demands and other communications shall be in writing, shall be given either
by personal delivery or by nationally recognized overnight courier or by
telecopier, and shall be deemed to have been given or made when personally
delivered, one business day after delivered to a nationally recognized
overnight courier, postage prepaid and receipt requested, or one business
day after transmission by telecopier, receipt confirmed, addressed as
follows:
(i) If to NETWORK:
Network Long Distance, Inc.
7000 Squibb, Suite 310
Mission, KS 66202
Fax: (913) 262-3731
Attention: Timothy A. Barton
with a copy to:
Blackwell Sanders Matheny Weary & Lombardi L.C.
2300 Main Street, Suite 1100
Kansas City, MO 64108
Fax: (816) 274-6914
Attention: Merry Evans, Esq.
or to such other address as NETWORK may from time to time designate by
notice to EASTERN and the Shareholders;
(ii) If to EASTERN or the Shareholders:
Eastern Telecom International Corporation
11817 Caron Blvd., Suite 600
Newport News, VA 23606
Fax: (757) 873-1309
Attention: John D. Crawford
52
<PAGE>
with a copy to:
Pender & Coward, P.C.
192 Ballard Court
Virginia Beach, VA 23462
Fax: (757) 497-1914
Attention: Douglas Kahle, Esq.
or to such other address as EASTERN and the Shareholders may from time
to time designate by notice to NETWORK.
SECTION 9.8 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the parties and supersedes and cancels any and all
prior agreements between the parties relating to the subject matter hereof.
SECTION 9.9 RULES OF CONSTRUCTION. This Agreement shall be
construed as follows:
(a) except as otherwise defined in this Agreement, words shall
be given their commonly understood meaning in agreements of this
nature, except that accounting terms shall be given the meaning
ascribed thereto by generally accepted accounting principles and
interpretations;
(b) this Agreement has been negotiated on behalf of the parties
hereto with the advice of counsel and no general rule of contract
construction requiring an agreement to be more stringently construed
against the drafter or proponent of any particular provision shall be
applied in construction of this Agreement;
(c) the captions of Articles and Sections hereof are for
convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement;
(d) throughout this Agreement, the masculine, feminine or neuter
genders shall be deemed to include the masculine, feminine and neuter,
and the singular and plural, and vice versa.
SECTION 9.10 LAW GOVERNING. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of
Delaware, but not including the choice of law rules thereof.
SECTION 9.11 WAIVER OF PROVISIONS. The terms, covenants,
representations, warranties or conditions of this Agreement may be waived
only by a written instrument executed by the party
53
<PAGE>
waiving compliance. Such waiver shall be authorized solely by the
individual or his personal representative, if the Shareholders, or the
majority vote of the Board of Directors or the Executive Committee of the
corporate party waiving compliance or by officers authorized by such Board
or Committee. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right at
a later time to enforce the same. No waiver by any party of any condition,
or the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, whether by conduct or otherwise, in any one or
more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
The representations and warranties of the Shareholders and EASTERN, on the
one hand, and NETWORK, on the other hand, contained in this Agreement or in
any certificate or other document delivered pursuant hereto or in
connection herewith prior to or at the Closing shall not be deemed waived
or otherwise amended or modified by any investigation made by any party
hereto.
SECTION 9.12 SUCCESSORS. All of the terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the successors
and permitted assigns of NETWORK and of EASTERN and the successors and
personal representatives of the Shareholders. For the purpose of this
Agreement, the term "successors" shall include but not be limited to heirs,
legatees, and devisees, and the term "personal representatives" shall
include administrators, executors, guardians, and conservators.
SECTION 9.13 COUNTERPARTS. This Agreement may be executed in
several counterparts, and all so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all parties are
not signatory to the original or the same counterpart.
SECTION 9.14 PUBLIC STATEMENTS OR RELEASES. EASTERN, the
Shareholders and NETWORK each agree not to make, issue or release any
public announcement, statement or acknowledgment of the existence of, or
reveal the terms, conditions and status of, the transactions provided for
in this Agreement, without first attempting to the extent reasonably
possible (and in all cases with regard to written matters) to clear such
announcement, statement, acknowledgment or revelation with the other
parties hereto. Each party agrees that it will not unreasonably withhold
any such consent or clearance from another party.
SECTION 9.15 SEVERABILITY. In the event that any provision in this
Agreement be held invalid or unenforceable, by a court of competent
jurisdiction, such provision shall be severable from, and such invalidity
or unenforceability shall not be construed to have any effect on, the
remaining provisions of this Agreement, unless such provision goes to the
essence of this Agreement in which case the entire Agreement may be
declared invalid and not binding upon any of the parties.
54
<PAGE>
SECTION 9.16 NO THIRD PARTY BENEFICIARIES. This Agreement and the
obligations of NETWORK hereunder shall operate exclusively for the benefit
of the parties executing this Agreement and their permitted successors and
assigns and not for the benefit of any other person or entity, including,
without limitation, any other shareholder, creditor, employee or former
employee of EASTERN and no such person or entity shall have any rights or
remedies hereunder.
[SIGNATURE PAGES FOLLOW]
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this day, month and year first above written.
NETWORK LONG DISTANCE, INC.
By:/s/
_________________________________
Name:
_________________________________
Title:
_________________________________
WATER ACQUISITION CORP.
By: /s/
_________________________________
Name:
_________________________________
Title:
_________________________________
EASTERN TELECOM INTERNATIONAL CORPORATION
By: /s/
_________________________________
Name:
_________________________________
Title:
_________________________________
SHAREHOLDERS:
_________________________________
John D. Crawford
_________________________________
Thomas G. Keefe
_________________________________
Donna L. Raoust
<PAGE>
_________________________________
Glenn Callahan
_________________________________
Rick Davis
_________________________________
Layne Levine
_________________________________
Lisa Brown
_________________________________
Dean Young
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
2.3(d) EASTERN Opinion
2.3(e) Registration Rights Agreement
2.3(f) Escrow Agreement
2.3(g) Working Capital Escrow Agreement
2.3(h) Employment Agreements
2.4(f) NETWORK Opinion
3.1 EASTERN Articles of Incorporation and Bylaws
SCHEDULES
EASTERN Schedules:
2.1(b) Adjusted Working Capital
2.5(e) EASTERN Aging Report
3.2 EASTERN Subsidiaries, Other Interests
3.3 Ownership of EASTERN Common
3.5 Consents and Approvals
3.6(i) Exceptions to Financial Statements
3.6(ii) Related Party Transactions
3.7 Material Adverse Changes
3.8 Undisclosed Liabilities
3.10(a) Employment Contracts
3.10(b) Employee Salary and Benefit Information
3.10(c) Employee Severance Information
3.10(d) Benefit Plans
3.11 Litigation
3.12 Exceptions to Compliance with Laws, Tariffs
3.13 Tax Filings and Audits
3.14 Indebtedness
3.15 Bank Accounts
3.16 Other Contracts, Agreements, Leases, etc.
3.17 Owned Real Property and Liens and Encumbrances
3.21 Conflicts of Interest
3.22 Insurance
4.1 Expenses Outside Ordinary Course
4.2 Permitted Actions
7.1(q) Executive Stock Ownership Agreements
<PAGE>
NETWORK Schedules:
5.7 Material Adverse Changes
5.8 Litigation
5.9 Exceptions to Compliance with Laws, Tariffs
5.11 Undisclosed Liabilities
5.12(a) Employment Contracts
5.12(b) Employee Salary and Benefit Information
5.12(c) Employee Severance Information
5.12(d) Benefit Plans
6.2 Permitted Actions
8.4 Losses Not Subject to Escrow Limitation
<PAGE>
EXHIBIT 2.3(d)
FORM OF OPINION OF EASTERN'S AND THE SHAREHOLDERS' COUNSEL
----------------------------------------------------------
The term "Transaction Documents" used in this Exhibit means the
Agreement and Plan of Merger dated April ___, 1997, by and among Network
Long Distance, Inc., Water Acquisition Corp., Eastern Telecom International
Corporation and the Shareholders of Eastern Telecom International
Corporation (the "Merger Agreement") and the Escrow Agreement, Registration
Rights Agreement, and Employment Agreements to be executed and delivered by
some or all of the Shareholders at the Closing.
The opinion of Eastern's counsel, shall be dated the Closing Date,
addressed to Network, satisfactory in scope and form to Network and its
counsel, and shall be to the effect that:
1. Eastern is a corporation, duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Virginia, with full
corporate power and authority and all necessary and material
authorizations, approvals, orders, licenses, certificates and permits of
and from all governmental regulatory officials and bodies to own its assets
and to carry on the businesses in which it is now engaged. The authorized
capital stock of Eastern consists of (i) 1,000 shares of common stock, no
par value, 606 of which shares are issued and outstanding and __________
shares are held as treasury stock, and (ii) 100,000 shares of preferred
stock, par value, $10.00 per share, 30,785.04 of which shares are issued
and outstanding and no shares are held as treasury stock. All such issued
and outstanding shares are validly issued, fully paid and nonassessable.
There is no existing agreement, option, warrant, note or any other type of
security of Eastern which would entitle any person to acquire any equity
securities of Eastern.
2. All necessary corporate proceedings of Eastern have been validly
taken to authorize the execution, delivery and performance of the
Transaction Documents, and the consummation of the transactions
contemplated thereby.
3. Eastern and each Shareholder has full power and authority to
execute, deliver, and perform each Transaction Document to which it is a
party; the Transaction Documents have been duly authorized, executed and
delivered by Eastern and each such Shareholder; the Transaction Documents
constitute legal, valid and binding obligations of Eastern and each such
Shareholder and (subject to applicable bankruptcy, insolvency and other
laws affecting the enforceability of creditors' rights generally) the
Transaction Documents are enforceable in accordance with their terms.
4. The execution, delivery and performance of the Transaction
Documents by Eastern will not conflict with, nor constitute a default
under, the articles of incorporation or bylaws of Eastern; nor will the
execution, delivery and performance of the Transaction Documents by Eastern
conflict with, or constitute a default under, any indenture, material
agreement or other instrument to which it is a party or by which it is
bound, or violate any law
<PAGE>
or any order, rule or regulation applicable, thereto, of any court or of
any regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over such party or its properties known
to such counsel; provided, however, that no opinion is expressed with
respect to orders, rules or regulations of the Federal Communications
Commission or of state public service commissions or similar state
regulatory commissions or authorities.
5. No authorization, approval, consent or license of any person or
entity or any governmental or regulatory body is required in connection
with the execution, delivery, and performance of the Transaction Documents
by Eastern and the Shareholders or the taking of any action contemplated
therein, or, if so required, all such authorizations, approvals, consents,
and licenses have been obtained, delivered to Eastern, and are in full
force and effect provided, however, that no opinion is expressed with
respect to authorizations, approvals, consents or licenses of the Federal
Communications Commission or of state public service commissions or similar
state regulatory commissions or authorities.
6. To counsel's actual knowledge, there is no action, suit,
proceeding, or claim pending or threatened against Eastern, its property or
businesses calling into question the validity of the Merger, or seeking to
enjoin the transactions contemplated by the Merger Agreement.
7. Prior to or at Closing, Eastern has taken all actions necessary
to terminate and fulfill all of Eastern's obligations (i) under the
Executive Stock Ownership Agreements listed on Exhibit A to the opinion and
(ii) to Michael E. Lincoln and Leon Perlin.
The opinion of counsel shall cover such other matters relating to the
transaction as Network may reasonably request. With respect to matters of
fact on which such opinion is based, such counsel may be entitled to rely
on appropriate certificates, in form and content approved by Network and
its counsel, of public officials and officers of Eastern.
<PAGE>
EXHIBIT 2.3(e)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
__________, 1997 (this "Agreement"), among Network Long Distance, Inc., a
Delaware corporation (the "Company"), and the Eastern Telecom International
Corporation shareholders listed on the signature page on this Agreement
(each a "Shareowner").
WITNESSETH:
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") dated as of _____________, 1997, among the Company, Eastern
Telecom International Corporation, a Virginia corporation ("Eastern"), and
the Shareowners, all shares of common stock, no par value of Eastern shall,
at the Closing Date (as defined in the Merger Agreement), be transferred to
the Company (the "Merger") in exchange for an aggregate of ______________
shares of common stock, par value $.0001 per share, of the Company ("Common
Stock"); and
WHEREAS, it is a condition to the obligations of the Company and the
Shareowners to consummate the Merger that this Agreement be executed and
delivered by the parties hereto.
NOW, THEREFORE, intending to be legally bound, the parties hereto
agree as follows:
REGISTRATION RIGHTS
1. CERTAIN DEFINITIONS. As used herein, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange
Commission.
"REGISTRATION EXPENSES" shall mean the expenses
described in Section 5 of this Agreement.
"REGISTRABLE SHARES" shall mean (i) any shares of the
Company's Common Stock acquired by Shareowners in accordance with the
Merger Agreement; and (ii) any other shares of Common Stock issued in
respect of such shares as a result of any stock split, stock dividend,
reclassification, recapitalization or similar event. As to any
particular Registrable Shares, once issued such securities shall cease
to be Registrable Shares when (i) a registration
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<PAGE>
statement with respect to the sale of such securities shall have
become effective under the Securities Act (as defined below) and
continued to be effective for one hundred twenty (120) days thereafter
or (ii) such securities shall have been otherwise transferred, except
transfers (x) to another Shareowner or transfers to a Shareowner's
estate, (y) pursuant to a pledge, grant of security interest or other
encumbrance effected in a bona fide transaction where the obligation
secured thereby is not past due or in default at the time of such
pledge, grant or encumbrance or (z) to transferees acquiring at least
twenty percent (20%) of the Registrable Shares.
"SECURITIES ACT" shall mean the Securities Act of 1933,
as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time.
2. REQUIRED REGISTRATION.
(a) If at any time (i) commencing after June 30, 1997
or (ii) commencing twelve (12) months after the Closing Date, the
Company shall receive a written request from a Shareowner owning at
least twenty percent (20%) of all Registrable Shares that the Company
effect the registration under the Securities Act of all or part of
such Shareowner's Registrable Shares and specifying the intended
method of disposition thereof, then the Company shall notify any
Shareowners of Registrable Shares from whom notice has not been
received and shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of
disposition specified in the notice from the requesting Shareowners,
the number of Registrable Shares specified in the notice (and in any
notices received from other Shareowners within 20 days after their
receipt of notice from the Company), PROVIDED, HOWEVER, that the
Company's obligation to effect the registration of Registrable Shares
pursuant to Section (i) above shall be limited to the registration of
the maximum of the greater of (1) twenty percent (20%) of all
Registrable Shares owned by all Shareowners or (2) Registrable Shares
with a value of $4,750,000, based upon a per share price equal to the
average closing price of the Common Stock as quoted on the Nasdaq
Stock Market for the twenty (20) days prior to the date of such
written request and that Shareowners shall have the right to request
the Company to register the Registrable Shares pursuant to Section
(ii) above on only one occasion.
(b) If such method of disposition shall be an
underwritten public offering, the Company shall select the
underwriter. In connection with any underwritten offering pursuant to
a registration statement filed pursuant to this Section 2, the Company
will enter into any underwriting agreement reasonably necessary to
effect the offer and sale of Common Stock, provided such underwriting
agreement will contain customary contribution
2
<PAGE>
provisions; and provided further that such underwriting agreement
shall not require the Company to grant a right of first refusal to
such underwriter on subsequent offerings of the Company's securities.
Shareowners desiring to have their shares of Registrable Shares
included in any such underwritten offering agree to sell their shares
on the basis provided in the underwriting arrangement, as required by
the underwriter, and to complete all questionnaires, powers of
attorney, indemnities, underwriting agreements, and other documents
reasonably requested under the terms of the underwriting agreement.
(c) The Company shall be entitled to include in any
registration statement referred to in this Section 2 for sale in
accordance with the method of disposition specified by the requesting
Shareowners shares of Common Stock to be sold by the Company for its
own account and may offer other shareholders of the Company the right
to participate except as and to the extent that, in the opinion of the
managing underwriter (if the method of disposition shall be an
underwritten public offering), the inclusion of the Company's or other
shareholders' portion of intended shares would adversely affect the
marketing of the Registrable Shares to be sold.
(d) No request may be made under this Section within
180 days after the effective date of a registration statement filed by
the Company covering a firm commitment or best efforts underwritten
public offering in which the Shareowners shall have been entitled to
join pursuant to Section 3 and in which there shall have been
effectively registered all Registrable Shares they had requested be
registered.
(e) The Company shall not be obligated to take any
action to effect any such registration, qualification or compliance
pursuant to this Agreement if the Company shall furnish to such
Shareowners a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it
would have a material adverse effect on the Company or its
shareholders for a registration statement to be filed in the near
future, then the Company's obligation to use its best efforts to
register, qualify or comply under this Section shall be deferred for
a period not to exceed 120 days from the date of receipt of written
request from the Shareowners requesting registration provided,
however, that the Company shall not exercise such right more than once
in any twelve month period. The Company will not have to undertake a
special audit in connection with the registration under Section 2.
3. INCIDENTAL REGISTRATION.
(a) If the Company proposes to register any of its
shares of Common Stock under the Securities Act, pursuant to an
underwritten public
3
<PAGE>
offering the Company will give written notice to the undersigned of
its intention so to do. Subject to Section 3(b) below, upon the
written request of the undersigned, given within 30 days after receipt
of any such notice, to register any of the Registrable Shares (which
request shall state the intended method of disposition thereof), the
Company will cause the Registrable Shares as to which registration
shall have been so requested to be included in the securities to be
covered by the registration statement proposed to be filed by the
Company, all to the extent requisite to permit the sale or other
disposition by the holder (in accordance with its written request) of
such Registrable Shares.
(b) If any registration pursuant to this Section shall
be an underwritten public offering of Common Stock, any request by a
holder pursuant to this Section to register Registrable Shares shall
specify that either (i) the Registrable Shares are to be included in
the underwriting on the same terms and conditions as the shares of
Common Stock otherwise being sold through underwriters, or (ii) the
Registrable Shares are to be sold in the open market without any
underwriting, on terms and conditions comparable to those normally
applicable to offerings of common stock in reasonably similar
circumstances. If the managing underwriter shall be of the opinion
that inclusion of all Registrable Shares which Shareowners have
requested be included would adversely affect the marketing of the
securities to be registered by the Company, the Company will include
in such registration (i) first, the securities the Company proposes to
sell and the Registrable Shares requested to be included, pro rata
among the Company and the holders of such Registrable Shares on the
basis of the number of shares the Company and the holder of such
Registrable Shares propose to sell, and (ii) second, securities of
shareholders of the Company other than Shareowners requested to be
included in such registration.
(c) Without in any way limiting the types of
registrations to which this Section 3 shall apply, if the Company
shall effect any "shelf registrations" under Rule 415 promulgated
under the Securities Act, or any other similar rule or regulation,
then for each shelf registration effected by the Company, the Company
shall take all necessary action, including, without limitation, the
filing of post-effective amendments, to permit the Shareowners to
include their shares in such registrations subject to and in
accordance with the terms of this Section 3.
(d) In connection with the Company's underwritten
offerings from and after the date hereof and subject to the terms of
Section 1 and 2, the Shareowners shall agree, if requested by the
managing underwriter or underwriters thereof, not to sell any of their
shares of Registrable Shares in any transaction other than pursuant to
such underwritten offering, provided that the Company's officers and
directors also agree to such limitations.
4
<PAGE>
4. REGISTRATION PROCEDURES AND EXPENSES. It shall be a
condition precedent to the obligations of the Company to file a
Registration Statement pursuant to this Agreement that each holder of
Registrable Shares shall furnish to the Company such information
regarding it, the Registrable Shares held by it and the intended
method of disposition thereof as the Company shall reasonably request
and as shall be required in connection with the action to be taken by
the Company, and shall otherwise cooperate with the Company. If and
whenever the Company is required by the provisions of Section 2 or 3
to effect or use its best efforts to effect the registration of any
Registrable Shares under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a
registration statement (which, in the case of an underwritten public
offering pursuant to Section 2, shall be on Form S-1 or other form of
general applicability satisfactory to the managing underwriter) with
respect to the securities and use its best efforts to cause the
registration statement to become and remain effective for the period
of the distribution contemplated thereby;
(b) prepare and file with the Commission any
amendments and supplements to the registration statement and the
prospectus used in connection therewith as may be necessary to keep
the registration statement effective for the period of distribution
and as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of Registrable Shares
covered by the registration statement in accordance with the selling
Shareowners' intended method of disposition set forth in the
registration statement;
(c) furnish to each selling Shareowner and to each
underwriter such number of copies of the registration statement and
the prospectus included therein (including each preliminary
prospectus) as such persons may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Shares covered by the registration statement;
(d) use its best efforts to register or qualify the
Registrable Shares covered by the registration statement under the
securities or blue sky laws of such states as the selling Shareowners
of Registrable Shares or, in the case of an underwritten public
offering, the managing underwriter shall reasonably request; PROVIDED,
HOWEVER, that the Company shall not be required to qualify generally
to transact business as a foreign corporation, consent to general
service of process or subject itself to taxation in any jurisdiction;
(e) immediately notify each selling Shareowner under
the registration statement and each underwriter, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of
5
<PAGE>
the happening of any event as a result of which the Company believes
the prospectus contained in the registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and, at the request of any
such selling Shareowner, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus will not
contain an 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;
(f) make available for inspection by each selling
Shareowner, any underwriter participating in any distribution pursuant
to the registration statement, and any attorney, accountant or other
agent retained by a selling Shareowner or underwriter, all financial
and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such selling
Shareowner, underwriter, attorney, accountant or agent in connection
with the registration statement.
(g) The period of distribution of Registrable Shares
in a firm commitment or best efforts underwritten public offering
shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of
distribution of Registrable Shares in any other registration shall be
deemed to extend until the sale of all Registrable Shares covered
thereby, provided, however, that such period shall not exceed one
hundred twenty (120) days.
(h) In connection with each registration hereunder,
the selling Shareowners of Registrable Shares will furnish to the
Company in writing such information with respect to themselves and the
proposed distribution by them as shall be reasonably necessary in
order to assure compliance with Federal and applicable state
securities laws.
(i) In connection with each registration pursuant to
Sections 2 and 3 hereof covering an underwritten public offering, the
Company and the Shareowners agree to enter into a written agreement
with the managing underwriter selected in the manner herein provided
in such form and containing such provisions as are customary in the
securities business for such an arrangement, including continuing
representations, covenants and indemnification.
(j) Each Shareowner agrees that, upon receipt of any
notice from the Company of the happening of any event described in
clause (e) of this Section 4, such Shareowner will forthwith
discontinue disposition of the
6
<PAGE>
Registrable Shares pursuant to the registration statement covering
such Registrable Shares until such Shareowner's receipt of the copies
of the supplemented or amended prospectus contemplated by clause (e)
of this Section 4, and, if so directed by the Company each Shareowner
will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Shareowners possession,
of the prospectus covering such Registrable Shares current at the time
off receipt of such notice.
5. EXPENSES. All expenses incurred by the Company in
complying with Sections 2, 3 and 4, including, without limitation, all
registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the
Company, fees of the National Association of Securities Dealers, Inc.,
state Blue Sky fees and expenses, fees of transfer agents and
registrars and costs of insurance, are herein called "Registration
Expenses." All underwriting discounts, selling commissions and
transfer taxes with respect to the registration of shares included in
the Registration Statement shall be deemed "Selling Expenses." The
Company will pay all Registration Expenses in connection with any
registration statement filed pursuant to Sections 2 and 3. All
Selling Expenses in connection with any registration statement filed
pursuant to Section 2 and 3 hereof shall be borne by the selling
Shareowners and the Company in proportion to the number of shares sold
by each.
6. INDEMNIFICATION.
(a) In the event of a registration of any Registrable
Shares under the Securities Act pursuant to Section 2 or 3, the
Company will indemnify and hold harmless each selling Shareowner of
Registrable Shares thereunder, against any and all losses, claims,
damages, liabilities or actions, joint or several, to which such
selling Shareowner may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which Registrable Shares were registered under the
Securities Act pursuant to Section 2 or 3, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and will reimburse each such selling Shareowner, for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the Company will not be liable in any
such case if and to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon (i) an untrue
statement or alleged untrue statement or omission or alleged omission
so made in conformity with information furnished by
7
<PAGE>
such selling Shareowner in writing specifically for use in the
registration statement, any preliminary prospectus or final prospectus
or (i) the breach by such selling Shareowner of Section 4(j) hereof.
(b) In the event of a registration of any of the
Registrable Shares under the Securities Act pursuant to Section 2 or
3, each selling Shareowner of Registrable Shares thereunder, severally
and not jointly, will indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, against any and all losses,
claims, damages, liabilities or actions, joint or several, to which
the Company or such officer or director may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained
in the registration statement under which Registrable Shares were
registered under the Securities Act pursuant to Section 2 or 3, and
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer and
director, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that such selling
Shareowner will be liable hereunder in any such case if and only to
the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such selling Shareowner, as
such, furnished in writing to the Company by such selling Shareowner
specifically for use in such registration statement, preliminary
prospectus or final prospectus.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying
party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it
may have to any indemnified party other than under this Section 6. In
case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel satisfactory to such indemnified party in its
reasonable judgment and, after notice from the indemnifying party to
such indemnified party of its election so to assume and undertake the
defense thereof,
8
<PAGE>
the indemnifying party shall not be liable to such indemnified party
under this Section 6 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so
selected.
(d) No indemnifying party, in defense of any such
claim or litigation shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation, and no indemnified
party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the indemnifying
party, such consent not to be unreasonably withheld.
7. CHANGES IN COMMON STOCK. If, and as often as, there
are any changes in the Common Stock by way of stock split, stock
dividend, combination or reclassification, or through merger,
consolidation, reorganization or recapitalization or by any other
means, appropriate adjustment shall be made in the provisions hereof,
as may be required, so that the rights and privileges granted hereby
shall continue with respect to the Common Stock as so changed.
8. SALES RESTRICTIONS. In connection with any
registration under Section 2 above, the Company will use its best
efforts to obtain agreements from each holder of five percent (5%) or
more of its Common Stock, or any securities convertible into or
exercisable or exchangeable for its Common Stock, that such holder
will not sell or otherwise dispose of any such securities (other than
those included in the registration) during a period of 120 days
beginning on the effective date of any such registration without first
obtaining the written consent of the managing underwriter of the
offering.
9. TRANSFER OF REGISTRATION RIGHTS; TERMINATION OF
REGISTRATION RIGHTS.
(a) The registration rights provided to the holders of
Registrable Shares under this Agreement may be transferred to any
other person or entity and shall inure to the parties hereto and
persons to whom the Registrable Shares may from time to time be
transferred.
10. STANDOFF AGREEMENT. Each holder of Registrable Shares
agrees that , so long as such person holds at least five percent (5%)
of the Company's outstanding voting equity securities, upon request of
the Company or the underwriters managing any underwritten offering of
the Company's securities, not to sell, make any short sale of, loan,
grant any option for the purchase of, or
9
<PAGE>
otherwise dispose of any Registrable Shares (other than those included
in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the effective date of
such registration as may be reasonably requested by the underwriters;
provided, that all other holders of five percent (5%) or more of the
Company's outstanding securities and the officers and directors of the
Company who own securities of the Company also agree to such
restrictions.
11. RULE 144 REPORTING. With a view to making available
the benefits of certain rules and regulations of the Commission which
may permit the sale of the Registrable Shares to the public without
registration, the Company shall agree to:
(a) Use its best efforts to make and keep public
information available as those terms are understood and defined in
Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission
in a timely manner all reports and other documents required of the
Company under the Securities Act and the Securities Exchange Act of
1934 (the "Exchange Act"); and
(c) So long as a holder owns any Registrable Shares,
furnish to the holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of
Rule 144, and of the Securities Act and the Exchange Act, a copy of
the most recent annual or quarterly report of the Company, and such
other reports and documents so filed as the holder may reasonably
request in availing itself of any rule or regulation of the Commission
allowing the holder to sell any such securities without registration.
13. MISCELLANEOUS.
(a) GOVERNING LAW. This agreement shall be governed
by and interpreted and enforced in accordance with the laws of the
State of Delaware without giving effect to any conflicts of law
provisions.
(b) REMEDIES.
(i) Each of the Company, on the one hand, and the
Shareowners, on the other, acknowledges and agrees that the other
would not have an adequate remedy at law for money damages in the
event that any of the covenants or agreements in this Agreement of
such party were not performed in accordance with its
10
<PAGE>
terms, and it is therefore agreed that each of the Shareowners and the
Company, in addition to and without limiting any other remedy or right
such party may have, will have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any
such breach and enforcing specifically the terms and provisions
hereof. Each of the Shareowners and the Company hereby waive any and
all defenses they may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable
relief.
(ii) All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise
or beginning of the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right,
power or remedy.
(c) NOTICES. All notices, demands, requests,
certificates or other communications under this Agreement and all
legal process in regard hereto shall be in writing and shall be
decreed to be validly given, made or served when delivered personally
or deposited in the U.S. mail, postage prepaid, for delivery by
express, registered or certified mail, or delivered to a recognized
overnight courier service and guaranteeing next business day delivery,
addressed as follows:
If to the Company:
__________________________
__________________________
__________________________
__________________________
with a copy to:
__________________________
__________________________
__________________________
__________________________
If to the Shareowners:
__________________________
__________________________
__________________________
__________________________
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<PAGE>
With a required copy to:
__________________________
__________________________
__________________________
__________________________
Notices to be given to any other Shareowner shall
be sent or delivered to the address of such other Shareowner as shown
in the stock record book of the Company, or to such other address as
any of the above shall have specified in a notice given pursuant to
this Section (c) to all of the others above.
Any notice delivered after business hours or on a
Saturday, Sunday or legal holiday shall be deemed for purposes of
computing any time period hereunder to have been delivered on the next
business day.
(d) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remainder of
the terms, provisions, covenants and restrictions shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated. The parties agree that they will use their best efforts
at all times to support and defend this Agreement.
(e) AMENDMENTS. This Agreement may be amended only by
an agreement in writing signed by all of the parties hereto.
(f) DESCRIPTIVE HEADINGS. Descriptive headings are
for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
(g) COUNTERPARTS. This Agreement shall become binding
when one or more counterparts hereof, individually or taken together,
bears the signatures of each of the parties hereto. This Agreement
may be executed in any number of counterparts, each of which shall be
an original as against the party whose signature appears thereon, or
on whose behalf such counterpart is executed, but all of which taken
together shall be one and the same statement.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
successors and assigns of the parties hereto.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
have duly executed this Agreement, all as of the day and year first above
written.
COMPANY
______________________________
By: ______________________________
Title: ______________________________
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<PAGE>
SHAREOWNERS
___________________________________
John D. Crawford
___________________________________
Thomas G. Keefe
___________________________________
Donna L. Raoust
___________________________________
Glenn Callahan
___________________________________
Rick Davis
___________________________________
Layne Levine
___________________________________
Lisa Brown
___________________________________
Dean Young
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<PAGE>
EXHIBIT 2.3(f)
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (the "Escrow Agreement") is made and entered
into this _____ day of April, 1997, by and among NETWORK LONG DISTANCE,
INC., a Delaware corporation ("NETWORK"), the individuals listed on the
signature page hereto (collectively "the Shareholders"), owners of all of
the outstanding capital stock of EASTERN TELECOM INTERNATIONAL CORPORATION,
INC., a Virginia corporation ("EASTERN"), and _______________ ("Escrow
Agent").
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated
as of April ___, 1997, by and among NETWORK, Water Acquisition Corp., a
Virginia corporation ("Acquisition"), the Shareholders and EASTERN (the
"Merger Agreement"), at Closing (as defined therein), Acquisition will be
merged with and into EASTERN and the Shareholders will receive shares of
the common stock, par value $.0001 per share, of NETWORK (the "NETWORK
Common");
WHEREAS, pursuant to the terms of the Merger Agreement, NETWORK will
deposit with the Escrow Agent hereunder 37,500 shares of NETWORK Common
(the "Escrow Shares");
WHEREAS, execution of this Escrow Agreement is a condition of Closing
under the Merger Agreement; and
WHEREAS, unless otherwise defined herein, all defined terms used in
this Escrow Agreement are used herein with the meaning assigned to them in
the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations, warranties and promises set forth
herein, the parties agree as follows:
SECTION 1. CREATION OF ESCROW; DISTRIBUTION OF ESCROW SHARES
SECTION 1.1 DEPOSIT OF ESCROW SHARES. On the date hereof, NETWORK
shall deposit with the Escrow Agent stock certificates representing the
Escrow Shares, in the amounts and names as set forth on Schedule A hereto,
together with stock transfer powers executed by each Shareholder with
respect to the Escrow Shares issued in his name, to be held by Escrow Agent
and disposed of in accordance with the terms of this Escrow Agreement.
<PAGE>
SECTION 1.2 INDEMNIFICATION DISTRIBUTION.
(a) Any and all claims, actions, suits, liabilities, losses,
damages, costs and expenses incurred by NETWORK, EASTERN, or NETWORK's
officers, directors, agents, employees and affiliates which is subject
to indemnification by the Shareholders pursuant to Section 8.1 of the
Merger Agreement shall be referred to herein collectively as
"Reimbursable Losses" and individually as a "Reimbursable Loss". In
the event that any claim is made or threatened against NETWORK which
NETWORK believes will result in NETWORK or EASTERN incurring any
Reimbursable Loss or if NETWORK believes it has incurred any
Reimbursable Loss, on one or more such occasions during the term
hereof NETWORK may deliver to Escrow Agent and the Shareholders a
Distribution Notice setting forth the relevant facts concerning and
the amount of the Reimbursable Loss. Unless, within twenty (20)
business days (a business day being any day other than a Saturday or
Sunday or a day on which banks in Kansas City, Missouri are closed for
business) after receipt by the Shareholders of the Distribution
Notice, Escrow Agent has received from the Shareholders a notice, a
copy of which shall be delivered by the Shareholders to NETWORK,
disputing the facts or the amount of the Reimbursable Loss stated in
such Distribution Notice, (a "Dispute Notice") Escrow Agent shall
promptly deliver the Escrow Shares (or a portion thereof) to NETWORK
in accordance with Section 1.2(d).
(b) In the event that within such twenty (20) day period Escrow
Agent and NETWORK receive a Dispute Notice from the Shareholders,
NETWORK and the Shareholders shall attempt to resolve such dispute
within twenty (20) business days after receipt of the Dispute Notice.
In the event NETWORK and the Shareholders are not able to resolve such
dispute within such time period, or, in the event that either NETWORK
or the Shareholders or both refuse to participate therein, then either
NETWORK or the Shareholders or both may submit the dispute to
arbitration effected by arbitrators selected as hereinafter provided
and conducted in accordance with the rules, existing at the date of
the submission, of the American Arbitration Association. In the event
of any such arbitration, there shall be three arbitrators, one to be
selected by NETWORK, one to be selected by the Shareholders, and one
to be selected by the two arbitrators selected by the parties. If
such arbitrators cannot agree on a third arbitrator, such third
arbitrator shall be selected by the American Arbitration Association.
In the event the Shareholders or NETWORK shall not, within thirty (30)
days after submission of a dispute to arbitration, have selected their
or its arbitrator and given notice thereof to the other party, such
arbitrator shall be selected by the American Arbitration Association.
The meetings of the arbitrators shall be held in such place or places
as may be agreed upon by them.
(c) If the arbitrators shall determine that NETWORK has incurred
a Reimbursable Loss, the arbitrators shall promptly notify Escrow
Agent of such finding, including the amount of the Reimbursable Loss
and Escrow Agent shall promptly deliver to NETWORK the Escrow Shares
(or a portion thereof) in accordance with Section 1.2(d). Such
finding shall be final, binding and non-appealable as to the parties
hereto.
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<PAGE>
(d) Whenever a determination has been made pursuant to Section
1.2(a), (b) or (c) that NETWORK or EASTERN has incurred a Reimbursable
Loss, Escrow Agent shall promptly deliver to NETWORK all of the stock
certificates representing the Escrow Shares, together with the related
stock transfer powers. NETWORK shall cancel such stock certificates
and return to Escrow Agent stock certificates registered in the names
of the Shareholders representing the Escrow Shares (with new stock
transfer powers) less the number of Escrow Shares necessary to satisfy
the amount of the Reimbursable Loss, valued as set forth below. The
Escrow Shares transferred to NETWORK pursuant to this Section 1.2
shall be taken from the individual Shareholders in proportion to the
number of Escrow Shares registered in such Shareholder's name, rounded
to the nearest whole share. Any Escrow Shares distributed pursuant to
this Section 1.2 shall be valued at $8.00 per share.
(e) Each of NETWORK and the Shareholders shall bear their own
costs and expenses related to the arbitration, except that the
arbitrators, in their sole discretion, may award costs and expenses to
the prevailing party. Escrow Agent shall not be responsible for the
payment of any such amount.
SECTION 2. EXPIRATION OF ESCROW AGREEMENT. As of the close of
business on August 1, 1997 (the "Expiration Date"), Escrow Agent shall
promptly deliver any Escrow Shares not previously distributed hereunder to
the Shareholders; PROVIDED, HOWEVER, that if any Distribution Notice
delivered by NETWORK pursuant to Section 1.2 hereof prior to the close of
business on the Expiration Date has not been resolved, all obligations of
the Shareholders shall continue as to such claim until the determination of
the existence or nonexistence of any Reimbursable Loss with respect thereto
shall have been made pursuant to Section 1.2 hereof. Escrow Shares with a
value equal to the remaining Reimbursable Loss (valued as set forth in
Section 1.2(d)) shall remain subject to the terms of this Escrow Agreement
and shall be retained by Escrow Agent. Escrow Agent shall promptly deliver
to NETWORK all stock certificates representing the Escrow Shares and all
related stock transfer powers. NETWORK shall cancel such stock
certificates and deliver to Escrow Agent stock certificates registered in
the names of the Shareholders representing the remaining Reimbursable Loss,
with new stock powers. All other Escrow Shares, if any, shall be delivered
to the Shareholders in proportion to the number of all Escrow Shares
registered in such Shareholder's name.
SECTION 3. REGISTRATION OF THE ESCROW SHARES, DIVIDENDS AND
RELATED MATTERS. Each certificate for the Escrow Shares shall, when
deposited with Escrow Agent, be accompanied by a duly executed stock
transfer power in blank, and each signature on each such stock transfer
power shall be guaranteed by an Eligible Guarantor Institution as defined
by Securities and Exchange Commission Rule 17Ad-15 (17 C.F.R. 240-17Ad-15).
All cash dividends received by the Escrow Agent on the Escrow Shares shall
be promptly paid over to the Shareholders. All additional or different
shares resulting from any recapitalization, exchange, merger,
consolidation, stock split, or stock dividend on the Escrow Shares shall be
deemed to be, and shall be held as part of, the Escrow Shares.
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<PAGE>
SECTION 4. OTHER REMEDIES. Subject to the limitations of Section
8.4 of the Merger Agreement, in the event the Escrow Shares are not
sufficient to satisfy a Reimbursable Loss, or a Reimbursable Loss occurs
after the expiration of this Escrow Agreement, NETWORK shall be entitled to
any other remedies available to it, whether in equity or at law, to recover
from the Shareholders the Reimbursable Loss in accordance with the terms of
the Merger Agreement.
SECTION 5. REGISTRATION RIGHTS. Until the expiration of this
Escrow Agreement, and the subsequent delivery of the Escrow Shares, if any,
to the Shareholders, the Escrow Shares shall not be entitled to any of the
benefits of the Registration Rights Agreement among NETWORK and the
Shareholders dated of even date herewith.
SECTION 6. DUTIES AND RESPONSIBILITIES OF ESCROW AGENT.
(a) Escrow Agent, by signing this Escrow Agreement, acknowledges
receipt of the Escrow Shares and agrees to hold and dispose of them in
accordance with the terms hereof. The duties and responsibilities of
Escrow Agent shall be limited to those expressly set forth in this
Escrow Agreement and it shall not be subject to, nor obligated to
comply with or to recognize, any other agreement (including the Merger
Agreement and the Registration Rights Agreement) between, or direction
or instruction of, any or all of the other parties hereto even though
reference thereto may be made herein; PROVIDED, HOWEVER, with the
written consent of Escrow Agent, this Escrow Agreement may be amended
at any time or times by an instrument in writing signed by all the
parties hereto.
(b) Escrow Agent is authorized, in its sole discretion, to
disregard any and all notices or instructions given by any of the
undersigned or by any other person, firm or corporation, except only
such notices and instructions as are herein provided for and orders or
process of any court duly entered. If any property subject hereto is
at any time attached, garnished or levied upon under any court order
or in case the payment, assignment, transfer, conveyance or delivery
of any such property shall be stayed or enjoined by any court order,
or in case any order, writ, judgment or decree shall be made or
entered by any court effecting such property or any part thereof, then
and in any of such events, Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ,
judgment or decree which it is advised by legal counsel of its own
choosing is binding upon it; and if Escrow Agent complies in good
faith with any such order, writ, judgment or decree it shall not be
liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, even though such order,
writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
(c) Escrow Agent shall not be personally liable for any act
taken or omitted hereunder if taken or omitted by it in good faith and
in the exercise of its own best judgment. Escrow Agent also shall be
fully protected in relying upon any written notice, demand,
certificate, waiver, opinion of counsel or other document which it in
good faith believes to be genuine or what it purports to be.
-4-
<PAGE>
(d) Escrow Agent acts hereunder as a depository only and shall
not be responsible for the sufficiency or accuracy or the form,
execution, validity or genuineness of documents or securities now or
hereafter deposited hereunder or of any endorsement thereon, or for
lack of endorsement thereon, or for any description therein, nor shall
it be responsible or liable in any respect on the account of the
identity, authority or rights of the persons executing or delivering
or purporting to execute or deliver any such document, security or
endorsement under this Escrow Agreement.
(e) The Escrow Agent may consult with legal counsel in the event
of any dispute or question as to the construction of any of the
provisions hereof or its duties hereunder, and it shall incur no
liability and shall be fully protected in acting in accordance with
the opinion and instructions of such counsel.
(f) NETWORK agrees to indemnify and save the Escrow Agent
harmless from all loss, cost, damages, fees and expenses, including,
but not limited to attorney's fees suffered or incurred by the Escrow
Agent as a result thereof.
(g) In the event of any disagreement, except those submitted to
arbitration pursuant to Section 1.2 hereof, between any party hereto,
or any other person, resulting in adverse claims and demands being
made in connection with or for any papers, money or property involved
herein, or affected hereby, the Escrow Agent shall be entitled to
refuse to comply with any demand or claim, as long as such
disagreement shall continue, and in so refusing to make any delivery
or other disposition of any money, papers or property involved or
affected hereby, the Escrow Agent shall not be or become liable to any
party hereto or to any other person for its refusal to comply with
such conflicting or adverse demands, and the Escrow Agent shall be
entitled to refuse and refrain to act until:
(i) The rights of the adverse claimants shall have been
fully and finally adjudicated in a court assuming and having
jurisdiction of the parties and money, papers and property
involved herein or affected hereby; or
(ii) All differences shall have been adjusted by agreement
and the Escrow Agent shall have been notified thereof in writing,
signed by all the parties interested.
(h) The Escrow Agent may resign at any time from its obligations
under this Escrow Agreement by providing written notice to NETWORK and
the Shareholders. Such resignation shall be effective not less than
thirty (30) days after such written notice has been delivered. The
Escrow Agent shall have no responsibility for the appointment of a
successor escrow agent.
(i) In the event of resignation of the Escrow Agent, a successor
escrow agent shall be appointed as soon as practicable by NETWORK,
subject to the approval of the
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<PAGE>
Shareholders, which approval shall not be unreasonably withheld.
Should such successor not be appointed within thirty (30) days after
Escrow Agent shall have delivered notice of its resignation, the
resigning Escrow Agent shall be entitled to petition a court of proper
jurisdiction to appoint a successor.
SECTION 7. MISCELLANEOUS.
SECTION 7.1. ENTIRE AGREEMENT. This Escrow Agreement sets forth the
entire understanding of the parties hereto and supersedes all prior
agreements or understandings, whether written or oral, with respect to the
subject matter hereof. No terms, conditions, warranties, other than those
contained herein, and no amendments or modifications hereto shall be
binding unless made in writing and signed by the parties hereto.
SECTION 7.2. NOTICES. Any notices to be given hereunder by any
party to any other shall be in writing and shall be made either by personal
delivery, certified or overnight mail or telecopy. Each notice shall be
effective only upon receipt. A copy of the notice, or the certified or
overnight mail receipt, dated and signed by the party receiving notice,
shall be deemed adequate proof of receipt. Mailed notices shall be
addressed as follows:
a. If to NETWORK:
Network Long Distance, Inc.
7000 Squibb, Suite 310
Mission, KS 66202
Fax: (913) 262-3731
Attention: Timothy A. Barton
With a copy to:
Blackwell Sanders Matheny Weary & Lombardi L.C.
2300 Main Street, Suite 1100
Kansas City, MO 64108
Fax: (816) 274-6914
Attention: Merry Evans, Esq.
b. If to the Shareholders:
Eastern Telecom International Corporation
11817 Caron Blvd., Suite 600
Newport News, VA 23606
Fax: (757) 873-1309
Attention: John D. Crawford
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<PAGE>
with a copy to:
Pender & Coward, P.C.
192 Ballard Court
Virginia Beach, VA 23462
Fax: (757) 497-1914
Attention: Douglas Kahle, Esq.
c. If to Escrow Agent:
_________________________________
_________________________________
_________________________________
Either party may change its address for notice by giving notice in
accordance with the terms of this Section 7.2.
SECTION 7.3. FEES. All Escrow Agent's fees and charges hereunder
shall be as set forth in Schedule B hereto and shall be paid, along with
the reasonable expenses of Escrow Agent, by NETWORK. The fees and charges
agreed to be paid are intended as full compensation for Escrow Agent's
services as contemplated by this Escrow Agreement; however, if the
conditions of this Escrow Agreement are not fulfilled or Escrow Agent
renders any material service not contemplated in this Escrow Agreement, or
any material modification hereof, or if any material controversy arises
hereunder, Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs and expenses, including
reasonable attorney's fees, occasioned by any delay, controversy,
litigation or event, and the same may be recoverable from NETWORK.
SECTION 7.4. WAIVER. The waiver by any party hereto of a breach of
any term or provision of this Escrow Agreement shall not operate or be
construed as a waiver of a subsequent breach of the same provision by any
party or of the breach of any other term or provision of this Escrow
Agreement.
SECTION 7.5. BINDING EFFECT. This Escrow Agreement shall extend to
and be binding upon and inure to the benefit of the parties hereto, their
respective heirs, representatives, successors and assigns. This Escrow
Agreement may not be assigned by the Shareholders.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Escrow Agreement
does not create, and shall not be construed as creating, any rights
enforceable by any person not a party to this Escrow Agreement.
SECTION 7.7. INVALID PROVISIONS. If any provision of this Escrow
Agreement is held to be illegal, invalid, or unenforceable, such provision
shall be fully severable and this Escrow Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall remain
in full force
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<PAGE>
and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance here from. Furthermore, in
lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Escrow Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable provision as
may be possible and still be legal, valid or enforceable.
SECTION 7.8. HEADINGS. The headings in this Escrow Agreement are
solely for convenience of reference and shall be given no effect in
construction or interpretation of this Escrow Agreement.
SECTION 7.9. COUNTERPARTS: GOVERNING LAW. This Escrow Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but which together shall constitute one and the same instrument.
This Escrow Agreement shall be governed by and construed in accordance with
the laws of the State of Missouri.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow Agreement on the day and year first above mentioned.
NETWORK, INC.
By:_________________________________
Name: ______________________________
Title: _____________________________
SHAREHOLDERS
____________________________________
John D. Crawford
____________________________________
Thomas G. Keefe
____________________________________
Donna L. Raoust
____________________________________
Glenn Callahan
____________________________________
Rick Davis
____________________________________
Layne Levine
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<PAGE>
____________________________________
Lisa Brown
____________________________________
Dean Young
ESCROW AGENT
By:_________________________________
Name: ______________________________
Title: _____________________________
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<PAGE>
SCHEDULE A
SHAREHOLDERS/ESCROW SHARES
<PAGE>
SCHEDULE B
ESCROW AGENT FEES
<PAGE>
EXHIBIT 2.3(g)
WORKING CAPITAL ESCROW AGREEMENT
--------------------------------
THIS WORKING CAPITAL ESCROW AGREEMENT (the "Escrow Agreement") is made
and entered into this _____ day of April, 1997, by and among NETWORK LONG
DISTANCE, INC., a Delaware corporation ("NETWORK"), the individuals listed
on the signature page hereto (collectively "the Shareholders"), owners of
all of the outstanding capital stock of EASTERN TELECOM INTERNATIONAL
CORPORATION, INC., a Virginia corporation ("EASTERN"), and _______________
("Escrow Agent").
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated
as of April ___, 1997, by and among NETWORK, Water Acquisition Corp., a
Virginia corporation ("Acquisition"), the Shareholders and EASTERN (the
"Merger Agreement"), at Closing (as defined therein), Acquisition will be
merged with and into EASTERN and the Shareholders will receive shares of
the common stock, par value $.0001 per share, of NETWORK (the "NETWORK
Common");
WHEREAS, pursuant to the terms of the Merger Agreement, NETWORK will
deposit with the Escrow Agent hereunder (i) 25,000 shares of NETWORK
Common (the "Escrow Shares") and (ii) $200,000 in cash equivalents (the
"Escrow Funds");
WHEREAS, execution of this Escrow Agreement is a condition of Closing
under the Merger Agreement; and
WHEREAS, unless otherwise defined herein, all defined terms used in
this Escrow Agreement are used herein with the meaning assigned to them in
the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations, warranties and promises set forth
herein, the parties agree as follows:
SECTION 1. CREATION OF ESCROW; DISTRIBUTION OF ESCROW SHARES AND
ESCROW FUNDS
SECTION 1.1 DEPOSIT OF ESCROW SHARES AND ESCROW FUNDS. On the date
hereof, NETWORK shall deposit with the Escrow Agent:
(a) Stock certificates representing the Escrow Shares, in the
amounts and names as set forth on Schedule A hereto, together with
stock transfer powers executed by each Shareholder with respect to the
Escrow Shares issued in his name, to be held by Escrow Agent and
disposed of in accordance with the terms of this Escrow Agreement; and
<PAGE>
(b) $200,000 in cash equivalents, to be held by Escrow Agent and
disposed of in accordance with the terms of this Escrow Agreement.
SECTION 1.2 TOTAL ADJUSTMENT. Promptly following calculation of
the Adjusted Merger Consideration pursuant to Section 2.5 of the Merger
Agreement, NETWORK shall deliver to Escrow Agent a notice ("Distribution
Notice") which shall state the amount of the Adjusted Merger Consideration
and the amount by which the Adjusted Merger Consideration is greater than
or less than the Merger Consideration. The Distribution Notice shall
request that Escrow Agent deliver to NETWORK all of the Escrow Shares for
the purpose of facilitating the transfer to NETWORK or the Shareholders, as
the case may be, of that number of Escrow Shares which, when valued
according to this Section, equals the difference between the Merger
Consideration and the Adjusted Merger Consideration. Escrow Agent shall
promptly, after receipt of the Distribution Notice, deliver to NETWORK all
of the stock certificates representing the Escrow Shares and all of the
related stock transfer powers. NETWORK shall cancel such stock
certificates and deliver to Escrow Agent stock certificates registered in
the names of the Shareholders representing the Escrow Shares (with new
stock transfer powers) less the number of shares, if any, when valued
according to this Section 1.2, equals the amount by which the Adjusted
Merger Consideration is less than the Merger Consideration. The Escrow
Shares, if any, distributed to NETWORK hereunder shall be valued using a
per share price equal to $8.00 per share. Any Escrow Shares transferred to
NETWORK pursuant to this Section 1.2 shall be taken from the individual
Shareholders in proportion to the number of Escrow Shares registered in
their respective names, rounded to the nearest whole share. Any Escrow
Shares returned to the Shareholders pursuant to this Section 1.2 shall be
distributed to the individual Shareholders in proportion to the number of
Escrow Shares registered in their respective names, rounded to the nearest
whole share. If the Adjusted Merger Consideration is greater than the
Merger Consideration, Escrow Agent shall deliver to John D. Crawford, as
representative of the Shareholders, that amount of Escrow Funds equal to
such difference.
SECTION 2. EXPIRATION OF ESCROW AGREEMENT. If Escrow Agent has
not received a Distribution Notice, as of the close of business on August
1, 1997 (the "Expiration Date"), Escrow Agent shall promptly deliver all
Escrow Shares to the Shareholders and all Escrow Funds to NETWORK. If
Escrow Agent has received a Distribution Notice by such time, it shall
promptly distribute the Escrow Funds and Escrow Shares in accordance with
Section 1.2 even if such distribution cannot be completed until after the
Expiration Date.
SECTION 3. REGISTRATION OF THE ESCROW SHARES, DIVIDENDS AND
RELATED MATTERS. Each certificate for the Escrow Shares shall, when
deposited with Escrow Agent, be accompanied by a duly executed stock
transfer power in blank, and each signature on each such stock transfer
power shall be guaranteed by an Eligible Guarantor Institution as defined
by Securities and Exchange Commission Rule 17Ad-15 (17 C.F.R. 240-17Ad-15).
All cash dividends received by the Escrow Agent on the Escrow Shares shall
be promptly paid over to
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<PAGE>
the Shareholders. All additional or different shares resulting from any
recapitalization, exchange, merger, consolidation, stock split, or stock
dividend on the Escrow Shares shall be deemed to be, and shall be held as
part of, the Escrow Shares.
SECTION 4. OTHER REMEDIES. In the event the Escrow Shares or
Escrow Funds, as the case may be, are not sufficient to satisfy the payment
of the difference between the Adjusted Merger Consideration and the Merger
Consideration, NETWORK and the Shareholders, as the case may be, shall be
entitled to any other remedies available to them, whether in equity or at
law, to recover from the other party such difference in accordance with the
terms of, and subject to the limitations set forth in, the Merger
Agreement.
SECTION 5. REGISTRATION RIGHTS. Until the expiration of this
Escrow Agreement, and the subsequent delivery of any remaining Escrow
Shares to the Shareholders, the Escrow Shares shall not be entitled to any
of the benefits of the Registration Rights Agreement among NETWORK and the
Shareholders dated of even date herewith.
SECTION 6. DUTIES AND RESPONSIBILITIES OF ESCROW AGENT.
(a) Escrow Agent, by signing this Escrow Agreement, acknowledges
receipt of the Escrow Shares and agrees to hold and dispose of them in
accordance with the terms hereof. The duties and responsibilities of
Escrow Agent shall be limited to those expressly set forth in this
Escrow Agreement and it shall not be subject to, nor obligated to
comply with or to recognize, any other agreement (including the Merger
Agreement and the Registration Rights Agreement) between, or direction
or instruction of, any or all of the other parties hereto even though
reference thereto may be made herein; PROVIDED, HOWEVER, with the
written consent of Escrow Agent, this Escrow Agreement may be amended
at any time or times by an instrument in writing signed by all the
parties hereto.
(b) Escrow Agent is authorized, in its sole discretion, to
disregard any and all notices or instructions given by any of the
undersigned or by any other person, firm or corporation, except only
such notices and instructions as are herein provided for and orders or
process of any court duly entered. If any property subject hereto is
at any time attached, garnished or levied upon under any court order
or in case the payment, assignment, transfer, conveyance or delivery
of any such property shall be stayed or enjoined by any court order,
or in case any order, writ, judgment or decree shall be made or
entered by any court effecting such property or any part thereof, then
and in any of such events, Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ,
judgment or decree which it is advised by legal counsel of its own
choosing is binding upon it; and if Escrow Agent complies in good
faith with any such order, writ, judgment or decree it shall not be
liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, even though such order,
writ, judgment or decree may be subsequently
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<PAGE>
reversed, modified, annulled, set aside or vacated.
(c) Escrow Agent shall not be personally liable for any act
taken or omitted hereunder if taken or omitted by it in good faith and
in the exercise of its own best judgment. Escrow Agent also shall be
fully protected in relying upon any written notice, demand,
certificate, waiver, opinion of counsel or other document which it in
good faith believes to be genuine or what it purports to be.
(d) Escrow Agent acts hereunder as a depository only and shall
not be responsible for the sufficiency or accuracy or the form,
execution, validity or genuineness of documents or securities now or
hereafter deposited hereunder or of any endorsement thereon, or for
lack of endorsement thereon, or for any description therein, nor shall
it be responsible or liable in any respect on the account of the
identity, authority or rights of the persons executing or delivering
or purporting to execute or deliver any such document, security or
endorsement under this Escrow Agreement.
(e) The Escrow Agent may consult with legal counsel in the event
of any dispute or question as to the construction of any of the
provisions hereof or its duties hereunder, and it shall incur no
liability and shall be fully protected in acting in accordance with
the opinion and instructions of such counsel.
(f) NETWORK agrees to indemnify and save the Escrow Agent
harmless from all loss, cost, damages, fees and expenses, including,
but not limited to attorney's fees suffered or incurred by the Escrow
Agent as a result thereof.
(g) In the event of any disagreement between any party hereto,
or any other person, resulting in adverse claims and demands being
made in connection with or for any papers, money or property involved
herein, or affected hereby, the Escrow Agent shall be entitled to
refuse to comply with any demand or claim, as long as such
disagreement shall continue, and in so refusing to make any delivery
or other disposition of any money, papers or property involved or
affected hereby, the Escrow Agent shall not be or become liable to any
party hereto or to any other person for its refusal to comply with
such conflicting or adverse demands, and the Escrow Agent shall be
entitled to refuse and refrain to act until:
(i) The rights of the adverse claimants shall have been
fully and finally adjudicated in a court assuming and having
jurisdiction of the parties and money, papers and property
involved herein or affected hereby; or
(ii) All differences shall have been adjusted by agreement
and the Escrow Agent shall have been notified thereof in writing,
signed by all the parties interested.
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<PAGE>
(h) The Escrow Agent may resign at any time from its obligations
under this Escrow Agreement by providing written notice to NETWORK and
the Shareholders. Such resignation shall be effective not less than
thirty (30) days after such written notice has been delivered. The
Escrow Agent shall have no responsibility for the appointment of a
successor escrow agent.
(i) In the event of resignation of the Escrow Agent, a successor
escrow agent shall be appointed as soon as practicable by NETWORK,
subject to the approval of the Shareholders, which approval shall not
be unreasonably withheld. Should such successor not be appointed
within thirty (30) days after Escrow Agent shall have delivered notice
of its resignation, the resigning Escrow Agent shall be entitled to
petition a court of proper jurisdiction to appoint a successor.
SECTION 7. MISCELLANEOUS.
SECTION 7.1. ENTIRE AGREEMENT. This Escrow Agreement sets forth the
entire understanding of the parties hereto and supersedes all prior
agreements or understandings, whether written or oral, with respect to the
subject matter hereof. No terms, conditions, warranties, other than those
contained herein, and no amendments or modifications hereto shall be
binding unless made in writing and signed by the parties hereto.
SECTION 7.2. NOTICES. Any notices to be given hereunder by any
party to any other shall be in writing and shall be made either by personal
delivery, certified or overnight mail or telecopy. Each notice shall be
effective only upon receipt. A copy of the notice, or the certified or
overnight mail receipt, dated and signed by the party receiving notice,
shall be deemed adequate proof of receipt. Mailed notices shall be
addressed as follows:
a. If to NETWORK:
Network Long Distance, Inc.
7000 Squibb, Suite 310
Mission, KS 66202
Fax: (913) 262-3731
Attention: Timothy A. Barton
With a copy to:
Blackwell Sanders Matheny Weary & Lombardi L.C.
2300 Main Street, Suite 1100
Kansas City, MO 64108
Fax: (816) 274-6914
Attention: Merry Evans, Esq.
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<PAGE>
b. If to the Shareholders:
Eastern Telecom International Corporation
11817 Caron Blvd., Suite 600
Newport News, VA 23606
Fax: (757) 873-1309
Attention: John D. Crawford
with a copy to:
Pender & Coward, P.C.
192 Ballard Court
Virginia Beach, VA 23462
Fax: (757) 497-1914
Attention: Douglas Kahle, Esq.
c. If to Escrow Agent:
_________________________________
_________________________________
_________________________________
Either party may change its address for notice by giving notice in
accordance with the terms of this Section 7.2.
SECTION 7.3. FEES. All of Escrow Agent's fees and charges hereunder
shall be as set forth in Schedule B hereto and shall be paid, along with
the reasonable expenses of Escrow Agent, by NETWORK. The fees and charges
agreed to be paid are intended as full compensation for Escrow Agent's
services as contemplated by this Escrow Agreement; however, if the
conditions of this Escrow Agreement are not fulfilled or Escrow Agent
renders any material service not contemplated in this Escrow Agreement, or
any material modification hereof, or if any material controversy arises
hereunder, Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs and expenses, including
reasonable attorney's fees, occasioned by any delay, controversy,
litigation or event, and the same may be recoverable from NETWORK.
SECTION 7.4. WAIVER. The waiver by any party hereto of a breach of
any term or provision of this Escrow Agreement shall not operate or be
construed as a waiver of a subsequent breach of the same provision by any
party or of the breach of any other term or provision of this Escrow
Agreement.
SECTION 7.5. BINDING EFFECT. This Escrow Agreement shall extend to
and be binding upon and inure to the benefit of the parties hereto, their
respective heirs, representatives, successors and assigns. This Escrow
Agreement may not be assigned by the Shareholders.
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<PAGE>
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Escrow Agreement
does not create, and shall not be construed as creating, any rights
enforceable by any person not a party to this Escrow Agreement.
SECTION 7.7. INVALID PROVISIONS. If any provision of this Escrow
Agreement is held to be illegal, invalid, or unenforceable, such provision
shall be fully severable and this Escrow Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall remain
in full force and effect and shall not be affected by the illegal, invalid,
or unenforceable provision or by its severance here from. Furthermore, in
lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Escrow Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable provision as
may be possible and still be legal, valid or enforceable.
SECTION 7.8. HEADINGS. The headings in this Escrow Agreement are
solely for convenience of reference and shall be given no effect in
construction or interpretation of this Escrow Agreement.
SECTION 7.9. COUNTERPARTS: GOVERNING LAW. This Escrow Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but which together shall constitute one and the same instrument.
This Escrow Agreement shall be governed by and construed in accordance with
the laws of the State of Missouri.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow Agreement on the day and year first above mentioned.
NETWORK, INC.
By:_________________________________
Name: ______________________________
Title: _____________________________
SHAREHOLDERS
____________________________________
John D. Crawford
____________________________________
Thomas G. Keefe
____________________________________
Donna L. Raoust
____________________________________
Glenn Callahan
____________________________________
Rick Davis
____________________________________
Layne Levine
-8-
<PAGE>
____________________________________
Lisa Brown
____________________________________
Dean Young
ESCROW AGENT
By:_________________________________
Name: ______________________________
Title: _____________________________
-9-
<PAGE>
SCHEDULE A
SHAREHOLDERS/ESCROW SHARES
<PAGE>
SCHEDULE B
ESCROW AGENT FEES
<PAGE>
EXHIBIT 2.3(h)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, effective as of the ______ day of __________, 1997, between
EASTERN TELECOM INTERNATIONAL CORPORATION ("ETIC"), a wholly-owned
subsidiary of NETWORK LONG DISTANCE, INC. ("Company") and John Crawford
(the "Executive").
WITNESSETH
----------
WHEREAS, the Executive is to be employed by the Company; and
WHEREAS, the Executive possesses an intimate knowledge of the business
and affairs of the Company, its policies, methods, personnel and problems;
and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the services of the Executive are important to the growth
and success of the Company; and
WHEREAS, the Board desires to assure the Company of the Executive's
continued employment on an objective and impartial basis; and
WHEREAS, the Executive is desirous of committing himself to serve the
Company on the terms herein provided;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements of the parties herein contained, the parties agree as
follows:
1. EMPLOYMENT. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth
herein for the period of two (2) years commencing as of ___________________
and continuing through ____________________.
2. POSITION AND DUTIES. The Executive shall serve as the Chairman
of the Board of the Company, reporting to the Board of the Company, and
shall have supervision and
<PAGE>
control over, and responsibility for, the general management and operation
of that area of the company, and shall have such other powers and duties as
are reasonably assigned to the Executive by the Board. The Executive shall
devote all of his working time and efforts to the business and affairs of
the Company.
3. COMPENSATION.
(a) BASE SALARY. The Executive shall receive a base salary at
the annual rate of at least One Hundred Eighty Thousand ($180,000.00) or
such greater rate as the Board shall from time to time determine ("Base
Salary"). The Base Salary shall be payable in substantially equal monthly
installments or, at the Company's option, more frequently. Any increase in
Base Salary or other compensation shall in no way limit or reduce any other
obligation of the Company hereunder; provided, however, if the Base Salary
is established at an increased rate, the Base Salary shall not thereafter
be reduced during the term of this Agreement.
(b) INCENTIVE COMPENSATION. In addition to Base Salary, the
Executive shall be entitled to receive such incentive compensation payments
as the Board may determine pursuant to the Company's incentive compensation
plans, if any, such as the existing incentive bonus program. For any
period less than a full fiscal year during the term of this Agreement, the
Executive shall receive an amount equal to the prorated portion of the
incentive compensation payable pursuant to such incentive compensation
plans.
(c) EXPENSES. During the term of the Executive's employment
hereunder, he shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him (in accordance with the policies and
procedures presently established by the Board for its
2
<PAGE>
senior executive officers) in performing services hereunder, provided that
the Executive properly accounts therefore in accordance with Company
policy. Such expenses shall include, if the Company relocates its
principal executive offices, reasonable relocation expenses.
(d) FRINGE BENEFITS. The Executive shall be entitled to
participate in or receive benefits under any pension plan, profit-sharing
plan, savings plan, stock option plan, life insurance, health-and-accident
plan or other fringe benefit type of arrangement made available by the
Company at the commencement of this Agreement or made available in the
future to its executives and key management employees, subject to and on a
basis consistent with the terms, conditions and overall administration of
such plan or arrangement presently in effect or made available in the
future.
4. TERMINATION.
(a) DEATH. The Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY; RETIREMENT. This Agreement may be terminated
due to the Executive's "Disability", as follows: (i) within thirty (30)
days after written notice of termination is given by the Company, if the
Executive shall not have returned to the performance of his duties
hereunder on a full time basis within the time set forth in such notice, if
the Executive is unable to work on a full time basis for six (6)
consecutive months, or for shorter periods aggregating eight (8) months in
any fifteen (15) month period, due to Executive's mental or physical
condition, or (ii) immediately upon written notice by the Company or the
Executive if the Executive's mental or physical condition poses a direct
threat to the health or safety of the Executive or others and such threat
cannot be reasonably be
3
<PAGE>
eliminated by a reasonable accommodation. Termination by the Company of
the Executive of his employment based on "Retirement" shall mean
termination in accordance with the Company's retirement policy, including
early retirement, generally applicable to its salaried employees or in
accordance with any retirement arrangement established with the Executive's
consent with respect to the Executive.
(c) CAUSE. In the event that the Executive: (I) commits any
material breach of this Agreement or substantially fails to perform duties
hereunder, and such breach or failure to perform results in, or is a
material factor contributing to, a material adverse change in the business
of the Company or any of its affiliates, their businesses or reputations
(other than by reason of the Executive's death or Disability); (ii) commits
any fraudulent or felonious act in respect to duties either to the Company
or any of its affiliates, or any act involving moral turpitude; or (iii)
commits any willful malfeasance or gross negligence (in the discharge of
duties to the Company or any of its affiliates) having a material adverse
effect on the Company or any of its affiliates, their businesses, or
reputations; then the Company shall have the right to (A) terminate this
Agreement for "Cause" (as defined above) immediately upon written notice to
the Executive specifying the reason for termination, or (B) suspend the
Executive from duty, with or without pay, or (C) take such other action as
the Board determines is in the best interest of the Company which action
may be in lieu of or pending a decision as to whether to terminate this
Agreement. Notwithstanding the foregoing, this Agreement shall not be
terminated for Cause unless and until the Executive is: (i) provided
reasonable advance written notice of any proposed termination for Cause;
(ii) provided reasonable advance opportunity to be heard by the Board, with
counsel; and (iii) provided a
4
<PAGE>
Notice of Termination (as defined below) adopted by resolution of the Board
in accordance with the Company's bylaws and applicable law.
(d) NOTICE OF TERMINATION. Any purported termination by the
Company or by the Executive shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 4 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination.
(e) DATE OF TERMINATION, ETC. "Date of Termination" shall mean
(i) if the Executive's employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that the Executive
shall not have returned to the performance of his duties on a full time
basis during such thirty (30) days period), (ii) upon the Executive's
death, and (iii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination.
5. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DEATH. If the Executive's employment shall be terminated
by reason of his death, the Company shall pay to his estate an amount equal
to 100% of the Executive's compensation (Base Salary and incentive bonus)
paid to the Executive during the year preceding his death. This amount
shall be exclusive of and in addition to any payments the Executive's
widow, beneficiaries or estate may be entitled to receive pursuant to any
pension or employee benefit plan or life insurance policy presently
maintained by the Company. Not later than the fifth day following the date
the Company receives any benefits payable upon the
5
<PAGE>
death of the Executive from any policy of life insurance owned by the
Company insuring the life of the Executive, the Company shall pay to his
estate all such benefits. The Company agrees that all policies of
insurance on the life of the Executive owned by the Company as of the date
of this Agreement shall remain in force and effect (except as otherwise set
forth in such policies) and the Company hereby agrees not to withdraw
dividends earned or cash value accumulations paid or payable thereunder
without the written consent of the Executive.
(b) DISABILITY. During any period that the Executive fails to
perform his duties hereunder as a result of any Disability, the Executive
shall continue to receive his full Base Salary at the rate then in effect
and benefits all compensation paid during the period until the Executive's
employment is terminated by the Company pursuant to Section 4(b) hereof, or
until the Executive terminates his employment pursuant to Section 4(b)
hereof, whichever first occurs. Thereafter, the Executive shall be paid
100% of his Base Salary at the rate then in effect for one (1) year
following the Date of Termination and thereafter an annual amount equal to
60% of the Base Salary at the rate in effect immediately prior to the
Notice of Termination, less, in each case, any disability payments
otherwise payable by or pursuant to plans or insurance programs provided by
the Company and actually paid to the Executive, in equal monthly
installments until he reaches the age of sixty-five (65) or dies, whichever
first occurs.
(c) CAUSE. If the Executive's employment shall be terminated
by Cause, the Company shall pay the Executive his full Base Salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
the Executive under this Agreement.
6
<PAGE>
(d) COMPANY TERMINATION. If the Executive's employment by the
Company shall be terminated by the Company other than for Cause, Retirement
or Disability then the Executive shall be entitled to the benefits provided
below:
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
severance pay to the Executive, not later than the fifth day following the
Date of Termination, a lump sum severance payment equal to 100% of the
Executive compensation (Base Salary and incentive bonus) paid or payable to
the Executive for the year preceding his termination;
(B) In addition to all other amounts payable to the Executive under
this Subsection 5(d), the Executive shall be entitled to receive all
benefits payable to him under any other plan or agreement relating to
retirement benefits or to compensation previously earned and deferred, in
accordance with the respective terms of such plans or agreements; not later
than the fifth day following the Date of Termination, the Company shall
transfer, assign and convey to the Executive at no charge to the Executive,
all policies of life insurance owned by the Company insuring the life of
the Executive, together with all accumulated cash value thereon, and all
health and disability policies with the Executive to assume liability for
all premium payments thereafter. The Company agrees that all policies of
insurance on the life of the Executive owned by the Company as of the date
of this Agreement shall remain in force and effect and the Company hereby
agrees not to withdraw dividends earned or cash value accumulations paid or
payable thereunder.
(e) MITIGATION. The Executive shall not be required to mitigate the
amount of any payment provided for in Section 5 by seeking other employment
or otherwise, nor shall the
7
<PAGE>
amount of any payment or benefit provided for in Section 5 be reduced by
any compensation earned by the Executive as the result of employment by
another employer or by retirement benefits after the Date of Termination or
otherwise.
6. SUCCESSORS: BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Company in the same amount and on the same terms as
the Executive would be entitled in accordance with 5(d) hereunder if the
Executive were terminated by the Company. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined any successor to
is business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be
payable to him hereunder if he had continued to lie, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisees, legatee or other
designee or if there is no such designee, to the Executive's estate. This
Agreement is personal to the Executive and may not be assigned by him.
8
<PAGE>
7. UNAUTHORIZED DISCLOSURE. During the term of this Agreement, and
for a period of three (3) years thereafter, except as required by law, the
Executive shall not, without the written consent of the Board or a person
authorized thereby, disclose to any person, other than an employee of the
Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his
duties as an executive of the Company, any confidential information
obtained by him while in the employ of the Company with respect to any of
the Company's methods of manufacture or trade secrets; provided, however
that confidential information shall not include any information known
generally to the public (other than as a result of unauthorized disclosure
by the Executive) or any information of a type not otherwise considered
confidential by persons engaged in the same business or businesses similar
to that conducted by the Company. The Executive shall by subject to all
applicable common law restrictions on the use and disclosure by him of
confidential information of the type described above. The provisions of
this Section shall be binding upon the Executive's heirs, successors and
legal representatives.
8. NON-SOLICITATION. AS an additional material inducement to the
Company to enter into this Agreement, the Executive agrees that without the
prior written consent of the Company, he will not, either directly or
indirectly, for himself or for any other person, firm or other business
entity, at any time during the this Agreement or for one (1) year following
the Date of Termination of this Agreement, solicit any business
relationship with (a) any person(s) or entities that were customers (or
employees of such customers) of the Company within the preceding two (2)
years, (b) any person(s) or entities which had been solicited by
9
<PAGE>
the Company to become customers during the preceding two (2) years, (c) any
person(s) or entities the Company had documented plans to solicit during
the Executive's employment at the time of the termination of this Agreement
for the purposes of providing services similar to those provided by the
Company, including, without limitation, as a consultant, director, officer,
manager, supervisor or employee of any entity. This provision shall not
apply if the Executive is terminated by the Company other than for Cause.
9. VIOLATION. The Executive agrees that his violation or
threatened violation of any of the provision of Sections 7 and 8 of this
Agreement shall cause immediate and irreparable harm to the Company, and,
in such event, an injunction restraining the Executive from such violation
may be entered against the Executive in addition to any other relief
available to the Company. In the event an injunction is issued against any
such conduct by the Executive, the periods referred to in Section 7 and 8
of this Agreement shall continue for a minimum of six (6) months from the
date a final judgment enforcing such provisions is entered and the time for
appeal has lapsed. In the event any court finds the restrictions in
Sections 7 and/or 8 to be unreasonable in scope, time, or geographic area,
the court may modify such provision as necessary to make such restriction
reasonable.
10. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
______________________________
10
<PAGE>
______________________________
______________________________
______________________________
If to the Company:
NETWORK LONG DISTANCE, INC.
525 Florida Street
Baton Rouge, LA 70801
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
laws of the State of Louisiana.
12. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth
of Virginia. The parties hereto hereby submit to the exclusive
jurisdiction of the courts of the Commonwealth of Virginia and the United
States District Court located in Newport News, Virginia, and each
11
<PAGE>
waives any objection based on forum non conveniens, and any objection to
venue of any action instituted hereunder. The parties hereto each hereby
agree that the exclusive and appropriate forums for any dispute hereunder
are the courts of the Commonwealth of Virginia and the United States
District Court located in Newport News, Virginia, and agree not to
institute any action in any other forum.
13. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not effect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
14. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
NETWORK LONG DISTANCE, INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
THE EXECUTIVE
__________________________________________
12
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, effective as of the ______ day of _______________, 1997,
between EASTERN TELECOM INTERNATIONAL CORPORATION ("ETIC"), a wholly-owned
subsidiary of NETWORK LONG DISTANCE, INC. ("Company") and Thomas Keefe (the
"Executive").
WITNESSETH
----------
WHEREAS, the Executive is to be employed by the Company; and
WHEREAS, the Executive possesses an intimate knowledge of the business
and affairs of the Company, its policies, methods, personnel and problems;
and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the services of the Executive are important to the growth
and success of the Company; and
WHEREAS, the Board desires to assure the Company of the Executive's
continued employment on an objective and impartial basis; and
WHEREAS, the Executive is desirous of committing himself to serve the
Company on the terms herein provided;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements of the parties herein contained, the parties agree as
follows:
1. EMPLOYMENT. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth
herein for the period of two (2) years commencing as of
_______________________ and continuing through ____________________.
<PAGE>
2. POSITION AND DUTIES. The Executive shall serve as the Chief
Financial Officer of the Company, reporting to the Board of the Company,
and shall have supervision and control over, and responsibility for, the
general management and operation of that area of the company, and shall
have such other powers and duties as are reasonably assigned to the
Executive by the Board. The Executive shall devote all of his working time
and efforts to the business and affairs of the Company.
3. COMPENSATION.
(a) BASE SALARY. The Executive shall receive a base salary at
the annual rate of at least Ninety-Seven Thousand Five Hundred Dollars
($97,500.00) or such greater rate as the Board shall from time to time
determine ("Base Salary"). The Base Salary shall be payable in
substantially equal monthly installments or, at the Company's option, more
frequently. Any increase in Base Salary or other compensation shall in no
way limit or reduce any other obligation of the Company hereunder;
provided, however, if the Base Salary is established at an increased rate,
the Base Salary shall not thereafter be reduced during the term of this
Agreement.
(b) INCENTIVE COMPENSATION. In addition to Base Salary, the
Executive shall be entitled to receive such incentive compensation payments
as the Board may determine pursuant to the Company's incentive compensation
plans, if any, such as the existing incentive bonus program. For any
period less than a full fiscal year during the term of this Agreement, the
Executive shall receive an amount equal to the prorated portion of the
incentive compensation payable pursuant to such incentive compensation
plans.
2
<PAGE>
(c) EXPENSES. During the term of the Executive's employment
hereunder, he shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him (in accordance with the policies and
procedures presently established by the Board for its senior executive
officers) in performing services hereunder, provided that the Executive
properly accounts therefore in accordance with Company policy. Such
expenses shall include, if the Company relocates its principal executive
offices, reasonable relocation expenses.
(d) FRINGE BENEFITS. The Executive shall be entitled to
participate in or receive benefits under any pension plan, profit-sharing
plan, savings plan, stock option plan, life insurance, health-and-accident
plan or other fringe benefit type of arrangement made available by the
Company at the commencement of this Agreement or made available in the
future to its executives and key management employees, subject to and on a
basis consistent with the terms, conditions and overall administration of
such plan or arrangement presently in effect or made available in the
future.
4. TERMINATION.
(a) DEATH. The Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY; RETIREMENT. This Agreement may be terminated
due to the Executive's "Disability", as follows: (i) within thirty (30)
days after written notice of termination is given by the Company, if the
Executive shall not have returned to the performance of his duties
hereunder on a full time basis within the time set forth in such notice, if
the Executive is unable to work on a full time basis for six (6)
consecutive months, or for shorter periods aggregating eight (8) months in
any fifteen (15) month period, due to Executive's
3
<PAGE>
mental or physical condition, or (ii) immediately upon written notice by
the Company or the Executive if the Executive's mental or physical
condition poses a direct threat to the health or safety of the Executive or
others and such threat cannot be reasonably be eliminated by a reasonable
accommodation. Termination by the Company of the Executive of his
employment based on "Retirement" shall mean termination in accordance with
the Company's retirement policy, including early retirement, generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with the Executive's consent with respect to the
Executive.
(c) CAUSE. In the event that the Executive: (i) commits any
material breach of this Agreement or substantially fails to perform duties
hereunder, and such breach or failure to perform results in, or is a
material factor contributing to, a material adverse change in the business
of the Company or any of its affiliates, their businesses or reputations
(other than by reason of the Executive's death or Disability); (ii) commits
any fraudulent or felonious act in respect to duties either to the Company
or any of its affiliates, or any act involving moral turpitude; or (iii)
commits any willful malfeasance or gross negligence (in the discharge of
duties to the Company or any of its affiliates) having a material adverse
effect on the Company or any of its affiliates, their businesses, or
reputations; then the Company shall have the right to (A) terminate this
Agreement for "Cause" (as defined above) immediately upon written notice to
the Executive specifying the reason for termination, or (B) suspend the
Executive from duty, with or without pay, or (C) take such other action as
the Board determines is in the best interest of the Company which action
may be in lieu of or pending a decision as to whether to terminate this
Agreement. Notwithstanding the foregoing, this Agreement shall not be
terminated for
4
<PAGE>
Cause unless and until the Executive is: (i) provided reasonable advance
written notice of any proposed termination for Cause; (ii) provided
reasonable advance opportunity to be heard by the Board, with counsel; and
(iii) provided a Notice of Termination (as defined below) adopted by
resolution of the Board in accordance with the Company's bylaws and
applicable law.
(d) NOTICE OF TERMINATION. Any purported termination by the
Company or by the Executive shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 4 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination.
(e) DATE OF TERMINATION, ETC. "Date of Termination" shall mean
(i) if the Executive's employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that the Executive
shall not have returned to the performance of his duties on a full time
basis during such thirty (30) days period), (ii) upon the Executive's
death, and (iii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination.
5. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DEATH. If the Executive's employment shall be terminated
by reason of his death, the Company shall pay to his estate an amount equal
to 100% of the Executive's compensation (Base Salary and incentive bonus)
paid to the Executive during the year preceding his death. This amount
shall be exclusive of and in addition to any payments the Executive's
widow, beneficiaries or estate may be entitled to receive pursuant to any
pension or employee
5
<PAGE>
benefit plan or life insurance policy presently maintained by the Company.
Not later than the fifth day following the date the Company receives any
benefits payable upon the death of the Executive from any policy of life
insurance owned by the Company insuring the life of the Executive, the
Company shall pay to his estate all such benefits. The Company agrees that
all policies of insurance on the life of the Executive owned by the Company
as of the date of this Agreement shall remain in force and effect (except
as otherwise set forth in such policies) and the Company hereby agrees not
to withdraw dividends earned or cash value accumulations paid or payable
thereunder without the written consent of the Executive.
(b) DISABILITY. During any period that the Executive fails to
perform his duties hereunder as a result of any Disability, the Executive
shall continue to receive his full Base Salary at the rate then in effect
and benefits all compensation paid during the period until the Executive's
employment is terminated by the Company pursuant to Section 4(b) hereof, or
until the Executive terminates his employment pursuant to Section 4(b)
hereof, whichever first occurs. Thereafter, the Executive shall be paid
100% of his Base Salary at the rate then in effect for one (1) year
following the Date of Termination and thereafter an annual amount equal to
60% of the Base Salary at the rate in effect immediately prior to the
Notice of Termination, less, in each case, any disability payments
otherwise payable by or pursuant to plans or insurance programs provided by
the Company and actually paid to the Executive, in equal monthly
installments until he reaches the age of sixty-five (65) or dies, whichever
first occurs.
(c) CAUSE. If the Executive's employment shall be terminated
by Cause, the Company shall pay the Executive his full Base Salary through
the Date of Termination at the
6
<PAGE>
rate in effect at the time Notice of Termination is given and the Company
shall have no further obligations to the Executive under this Agreement.
(d) COMPANY TERMINATION. If the Executive's employment by the
Company shall be terminated by the Company other than for Cause, Retirement
or Disability then the Executive shall be entitled to the benefits provided
below:
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
severance pay to the Executive, not later than the fifth day following the
Date of Termination, a lump sum severance payment equal to 100% of the
Executive compensation (Base Salary and incentive bonus) paid or payable to
the Executive for the year preceding his termination;
(B) In addition to all other amounts payable to the Executive under
this Subsection 5(d), the Executive shall be entitled to receive all
benefits payable to him under any other plan or agreement relating to
retirement benefits or to compensation previously earned and deferred, in
accordance with the respective terms of such plans or agreements; not later
than the fifth day following the Date of Termination, the Company shall
transfer, assign and convey to the Executive at no charge to the Executive,
all policies of life insurance owned by the Company insuring the life of
the Executive, together with all accumulated cash value thereon, and all
health and disability policies with the Executive to assume liability for
all premium payments thereafter. The Company agrees that all policies of
insurance on the life of the Executive owned by the Company as of the date
of this Agreement shall remain in force and effect and the Company hereby
agrees not to withdraw dividends earned or cash value accumulations paid or
payable thereunder.
7
<PAGE>
(e) MITIGATION. The Executive shall not be required to mitigate the
amount of any payment provided for in Section 5 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for
in Section 5 be reduced by any compensation earned by the Executive as the
result of employment by another employer or by retirement benefits after
the Date of Termination or otherwise.
6. SUCCESSORS: BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Company in the same amount and on the same terms as
the Executive would be entitled in accordance with 5(d) hereunder if the
Executive were terminated by the Company. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined any successor to
is business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be
payable to him hereunder if he had continued to lie, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisees,
8
<PAGE>
legatee or other designee or if there is no such designee, to the
Executive's estate. This Agreement is personal to the Executive and may
not be assigned by him.
7. UNAUTHORIZED DISCLOSURE. During the term of this Agreement, and
for a period of three (3) years thereafter, except as required by law, the
Executive shall not, without the written consent of the Board or a person
authorized thereby, disclose to any person, other than an employee of the
Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his
duties as an executive of the Company, any confidential information
obtained by him while in the employ of the Company with respect to any of
the Company's methods of manufacture or trade secrets; provided, however
that confidential information shall not include any information known
generally to the public (other than as a result of unauthorized disclosure
by the Executive) or any information of a type not otherwise considered
confidential by persons engaged in the same business or businesses similar
to that conducted by the Company. The Executive shall by subject to all
applicable common law restrictions on the use and disclosure by him of
confidential information of the type described above. The provisions of
this Section shall be binding upon the Executive's heirs, successors and
legal representatives.
8. NON-SOLICITATION. As an additional material inducement to the
Company to enter into this Agreement, the Executive agrees that without the
prior written consent of the Company, he will not, either directly or
indirectly, for himself or for any other person, firm or other business
entity, at any time during the this Agreement or for one (1) year following
the Date of Termination of this Agreement, solicit any business
relationship with (a) any person(s) or entities that were customers (or
employees of such customers) of the Company within the preceding two
9
<PAGE>
(2) years, (b) any person(s) or entities which had been solicited by the
Company to become customers during the preceding two (2) years, (c) any
person(s) or entities the Company had documented plans to solicit during
the Executive's employment at the time of the termination of this Agreement
for the purposes of providing services similar to those provided by the
Company, including, without limitation, as a consultant, director, officer,
manager, supervisor or employee of any entity. This provision shall not
apply if the Executive is terminated by the Company other than for Cause.
9. VIOLATION. The Executive agrees that his violation or
threatened violation of any of the provision of Sections 7 and 8 of this
Agreement shall cause immediate and irreparable harm to the Company, and,
in such event, an injunction restraining the Executive from such violation
may be entered against the Executive in addition to any other relief
available to the Company. In the event an injunction is issued against any
such conduct by the Executive, the periods referred to in Section 7 and 8
of this Agreement shall continue for a minimum of six (6) months from the
date a final judgment enforcing such provisions is entered and the time for
appeal has lapsed. In the event any court finds the restrictions in
Sections 7 and/or 8 to be unreasonable in scope, time, or geographic area,
the court may modify such provision as necessary to make such restriction
reasonable.
10. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
10
<PAGE>
______________________________
______________________________
______________________________
______________________________
If to the Company:
NETWORK LONG DISTANCE, INC.
525 Florida Street
Baton Rouge, LA 70801
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
11. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
laws of the State of Louisiana.
12. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth
of Virginia. The parties hereto hereby submit to the exclusive
jurisdiction of the courts of the Commonwealth of Virginia and the United
States District Court located in Newport News, Virginia, and each waives
any objection based on forum non conveniens, and any objection to venue of
any action instituted
11
<PAGE>
hereunder. The parties hereto each hereby agree that the exclusive and
appropriate forums for any dispute hereunder are the courts of the
Commonwealth of Virginia and the United States District Court located in
Newport News, Virginia, and agree not to institute any action in any other
forum.
13. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not effect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
14. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
NETWORK LONG DISTANCE, INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
THE EXECUTIVE
__________________________________________
12
<PAGE>
EXHIBIT 2.4(f)
FORM OF OPINION OF NETWORK'S COUNSEL
------------------------------------
The term "Transaction Documents" used in this Exhibit means the
Agreement and Plan of Merger dated April ___, 1997, by and among Network
Long Distance, Inc., Water Acquisition Corp., Eastern Telecom International
Corporation and the Shareholders of Eastern Telecom International
Corporation (the "Merger Agreement") and the Escrow Agreement, Registration
Rights Agreement and Employment Agreements to be executed and delivered by
some or all of the Shareholders at the Closing.
The opinion of Network's counsel shall be dated the Closing Date,
addressed to Eastern, satisfactory in scope and form to Eastern and its
counsel, and shall be to the effect that:
1. Network is a corporation, duly organized, validly existing, and
in good standing under the laws of the state of Delaware with full
corporate power and authority to own its assets and to carry on the
businesses in which it is now engaged. Acquisition is a corporation duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Virginia with full corporate power and authority to own its
assets and to carry on the business contemplated under the Merger
Agreement.
2. All necessary corporate proceedings of Network and Acquisition
have been validly taken to authorize the execution, delivery and
performance of the Transaction Documents, and the consummation of the
transactions contemplated thereby.
3. Network and Acquisition each has full power and authority to
execute, deliver, and perform each Transaction Document to which it is a
party; the Transaction Documents have been duly authorized, executed and
delivered by Network and Acquisition, as applicable; the Transaction
Documents constitute legal, valid and binding obligations of Network and
Acquisition, as applicable, and (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors' rights
generally) the Transaction Documents are enforceable in accordance with
their terms;
4. The issuance of the Share Consideration in connection with the
Merger has been duly authorized by the Board of Directors of Network. The
Share Consideration, when issued, shall be validly issued, fully paid and
nonassessable.
5. The execution, delivery and performance of the Transaction
Documents by Network and Acquisition will not conflict with, nor constitute
a default under, the certificate of incorporation or bylaws of Network or
the articles of incorporation or bylaws of Acquisition; nor will the
execution, delivery and performance of the Transaction Documents by Network
and Acquisition conflict with, or constitute a default under, any material
contract to which they are
<PAGE>
a party, or violate any law or any order, rule or regulation applicable,
thereto, of any court or of any regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over them or their
properties known to such counsel; provided, however, that no opinion is
expressed with respect to orders, rules or regulations of the Federal
Communications Commission or of state public service commissions or similar
state regulatory commissions or authorities.
6. No authorization, approval, consent or license of any
governmental or regulatory body is required in connection with the
execution, delivery, and performance of the Transaction Documents by
Network and Acquisition or the taking of any action contemplated therein,
or, if so required, all such authorizations, approvals, consents, and
licenses have been obtained, delivered to Network, and are in full force
and effect; provided, however, that no opinion is expressed with respect to
authorizations, approvals, consents or licenses of the Federal
Communications Commission or of state public service commissions or similar
state regulatory commissions or authorities.
7. To counsel's actual knowledge, there is no action, suit,
proceeding, or claim pending or threatened against Network or Acquisition,
its property or businesses calling into question the validity of the
Merger, or seeking to enjoin the transactions contemplated by the Merger
Agreement.
The opinion of counsel shall cover such other matters relating to the
transaction as Eastern may reasonably request. With respect to matters of
fact on which such opinion is based, such counsel may be entitled to rely
on appropriate certificates, in form and content approved by Eastern and
its counsel, of public officials and officers of Network.
<PAGE>
EXHIBIT 3.1
BY LAWS
OF
EASTERN TELECOM ACQUISITION COMPANY
ARTICLE 1
SHAREHOLDERS' MEETINGS
Section 1. Annual Meeting. The annual meeting of the Shareholders
for the election of directors and the transaction of such other business as
may properly come before it shall be held at the principal office of
EASTERN TELECOM ACQUISITION COMPANY (the "Corporation") in the City of
Newport News, Commonwealth of Virginia, or at such place within or without
the Commonwealth of Virginia as shall be set forth in the notice of annual
meeting. The meeting shall be held on second Tuesday of July of each and
every year, at 2:30 p.m. or at such other date and time as is designated in
the notice of annual meeting. The Secretary shall give the notice of
annual meeting, which shall include the place, date and hour of the
meeting. Such notice shall be given, either personally or by mail, not
less than ten (10) nor more than sixty (60) days before the meeting date.
If mailed, the notice shall be addressed to the Shareholder at his address
as it appears on the Corporation's record of Shareholders, unless he shall
have filed with the Secretary of the Corporation a written request that
notices intended for him are to be mailed to a different address. Notice
of annual meetings may be waived by a Shareholder by submitting a signed
waiver to the Secretary of the Corporation either before or after the
meeting, or by attendance at the meeting.
Section 2. Special Meeting. Special meetings of the Shareholders may
be called by the Chairman of the Board, the President, the Board of
Directors or upon written request of the holder(s) of not less than twenty
percent (20%) of all the shares entitled to vote at such meetings, such
request being sent by certified mail or hand-delivered to the president or
secretary. Special meetings of the Shareholders shall be held at a time
and place specified in the notice thereof, which notice shall not be less
than twenty-four (24) hours, nor more than ten (10) days after the meeting
is called in accordance with the foregoing. Only business within the
purpose(s) described in the meeting notice may be conducted at a special
Shareholders' meeting.
Section 3. Quorum. The presence, in person or by proxy, of the
holders of a majority of the outstanding shares entitled to vote shall
constitute a quorum for the transaction of business at all meetings of
Shareholders. If a quorum does not exist, less than a quorum may adjourn
the meeting to a future date at which a quorum shall be present or
represented. At such adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 4. Record Date. The Board of Directors may fix in advance
the record date for the determination of Shareholders entitled to notice of
a meeting, or for any other purposes requiring such a determination. The
record date may not be more than seventy (70) days before the meeting or
action.
A determination of Shareholders entitled to notice of, or to vote at,
a Shareholders meeting is effective for any adjournment of the meeting
unless the meeting is adjourned to a date more than one hundred twenty
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<PAGE>
(120) days after the date fixed for the original meeting. In such case, a
new record date must be fixed, and notice must be given to all persons who
are Shareholders as of the new record date.
Section 5. Voting. A Shareholder entitled to vote at a meeting may
vote in person or by proxy. Except as otherwise provided by the Virginia
Stock Corporation Act or the Articles of Incorporation, every Shareholder
shall be entitled to one vote for each share standing in his name on the
Corporation's record of Shareholders. Except as otherwise provided by
these Bylaws, the Articles of Incorporation, or the Virginia Stock
Corporation Act, the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote shall be the act of the
Shareholders.
Section 6. Proxies. Every proxy must be dated and signed by the
Shareholder or by his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date of its execution, unless
otherwise provided therein. Every proxy shall be revocable at the pleasure
of the Shareholder executing it, except where an irrevocable proxy is
permitted by statute.
Section 7. Consents. Actions required or permitted by the Virginia
Stock Corporation Act, the Articles of Incorporation or these Bylaws, to be
taken at a Shareholder meeting may be taken without a meeting if one or
more written consents are signed by all the Shareholders entitled to vote
on the action and such consents are delivered to the Secretary.
ARTICLE II
DIRECTORS
Section 1. Number and Qualifications. The Board of Directors
(hereinafter, "Board of Directors" or "Board") shall consist of at least
one (1) member and not more than nine (9). Directors need not be
Shareholders of the Corporation. The number of directors may be changed by
an amendment to the Bylaws adopted by the Shareholders.
Section 2. Manner of Election. The directors shall be elected at the
annual meeting of the Shareholders by a plurality vote.
Section 3. Term of Office. The term of office of each director shall
be until the next annual meeting of the Shareholders and until his
successors has been duly elected and has qualified.
Section 4. Duties and Powers. The Board of Directors shall control
and manage the affairs and business of the Corporation. The directors may
adopt such rules and regulations for the conduct of their meetings and the
management of the Corporation as they may deem proper, not inconsistent
with the Virginia Stock Corporation Act, the Articles of Incorporation or
these Bylaws.
Section 5. Meetings. The Board of Directors shall meet for the
election or appointment of officers and for the transaction of any other
business as soon as practicable after the adjournment of the annual meeting
of the Shareholders. Other regular meetings of the Board shall be held at
such times as the Board may from time to time determine.
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Special meetings of the Board of Directors may be called by the
President at any time. Upon the written request of any two directors, the
President must call a special meeting to be held not more than seven (7)
days after the receipt of such request.
Section 6. Notice of Meetings. No notice need be given of any
regular meeting of the Board. The Secretary shall serve notice of special
meetings upon each director in person or by certified mail, return receipt
requested, addressed to him at his last known post office address, at least
ten (10) days prior to the date of such meeting, specifying the time and
place of the meeting and the business to be transacted. At any meeting at
which all of the directors shall be present, although held without notice,
any business may be transacted which might have been transacted if the
meeting had been duly called.
Section 7. Place of Meeting. The Board of Directors may hold its
meeting within or without the Commonwealth of Virginia, at such place as
may be designated in the notice of the meeting.
Section 8. Quorum. At any meeting of the Board of Directors, the
presence of a majority of the Board shall constitute a quorum for the
transaction of business. Should a quorum not be present, a lesser number
may adjourn the meeting to some further time, not more than seven (7) days
later.
Section 9. Voting. At all meetings of the Board of Directors, each
director shall have one vote irrespective of the number of shares that he
may hold. If a quorum is present for a Board meeting, the vote of a
majority of the Board, except as otherwise provided by the Virginia Stock
Corporation Act or the Articles of Incorporation, shall be the act of the
Board.
Section 10. Compensation. Each director shall be entitled to receive
for attendance at each meeting of the Board, or of any duly constituted
committee of the Board, such fee as is fixed by the Board.
Section 11. Vacancies. Any vacancy occurring in the Board of
Directors by death, resignation, or otherwise, shall be filled promptly by
a majority vote of the remaining directors at a special meeting which shall
be called for that purpose within thirty (30) days after the occurrence of
the vacancy. The director thus chosen shall hold office for the unexpired
term of his predecessor and until the election and qualification of his
successor.
Section 12. Removal of Directors. The Shareholders may, by majority
vote, remove a director with or without cause at a special meeting
expressly called for such purpose. Notice of the meeting must specifically
state that the purpose of the meeting is to remove the director. Except as
otherwise prescribed by the Virginia Stock Corporation Act, a director may
also be removed for cause by vote of a majority of the entire Board.
Section 13. Resignation. Any director may resign his office at any
time be delivering written notice to the Board, the President or the
Secretary. A resignation is effective upon delivery of the notice.
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<PAGE>
ARTICLE III
OFFICERS
Section 1. Officers and Qualifications. The officers of the
Corporation shall consist of a President and a Secretary. Other officers
of the Corporation may include one (1) or more Vice Presidents, a Treasurer
and such other officers as the Board of Directors may appoint. The same
individual may simultaneously hold more than one (1) office.
Section 2. Election. All officers of the Corporation shall be
elected annually by the Board of Directors at its meeting held immediately
after the annual meeting of Shareholders.
Section 3. Term of Office. All officers shall hold office until
their successors have been duly elected and have qualified, or until
removed as hereinafter provided.
Section 4. Removal of Officers. Any officer may be removed with or
without cause by the vote of a majority of the Board of Directors.
Section 5. Duties of Officers. The duties and powers of the officers
of the Corporation shall be as follows and as shall hereafter be set by
resolution of the Board of Directors.
PRESIDENT
A. The President shall preside at all meetings of the Board of
Directors and at all meetings of the Shareholders.
B. He shall present at each annual meeting of the Shareholders and
directors a report of the condition of the business of the Corporation.
C. He shall cause to be called regular and special meetings of the
Shareholders and directors as required by the Virginia Stock Corporation
Act and these Bylaws.
D. He shall, subject to the approval of the Board, appoint,
discharge, and fix the compensation of all employees and agents of the
Corporation other than the duly elected officers.
E. He has authority to sign and execute, in the name of the
Corporation, all contracts, and all notes, drafts, or other orders for the
payment of money.
F. He shall sign all certificates representing shares.
G. He shall cause all books, reports, statements, and certificates to
be properly kept and filed as required by the Virginia Stock Corporation
Act.
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<PAGE>
H. He shall enforce these Bylaws and perform all duties incident to
his office required by the Virginia Stock Corporation Act. Generally, he
shall supervise and control the business and affairs of the Corporation.
I. He shall, in the absence of any officer, resume any absent
officer's duties as set forth in these Bylaws.
VICE PRESIDENT
During the absence or incapacity of the President, the Vice President
in order of seniority of election shall perform the duties of the
President, and when so acting, he shall have all the powers and be subject
to all the responsibilities of the office of President, and shall perform
such duties and functions as the Board may prescribe.
SECRETARY
A. The Secretary shall keep the minutes of the meetings of the Board
of Directors and of the Shareholders in appropriate books. He shall also
keep a record of all actions taken, with or without a meeting, by the
Shareholders, Board of Directors or any committee of the Board.
B. He shall attend to the giving of notice of special meetings of the
Board of Directors and of all the meetings of the Shareholders of the
Corporation.
C. He shall be custodian of the records and seal of the Corporation
and shall affix the seal to the certificates representing shares and other
corporate papers when required.
D. He shall keep a record of the Shareholders containing the names of
all Shareholders, their places of residence, the number and class of shares
held by each and the dates when each became owners of record. He shall
keep a record of all written communications to Shareholders generally
within the past three (3) years.
E. He shall keep all records open for inspection, daily during the
usual business hours, within the limits prescribed by the Virginia Stock
Corporation Act. At the request of the person entitled to an inspection
thereof, he shall prepare and make available a current list of the officers
and directors of the Corporation and their business addresses.
F. He shall sign all certificates representing shares and affix the
corporate seal.
G. He shall attend to all correspondence and present to the Board of
Directors at its meeting all official communications received by him.
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<PAGE>
H. He shall perform all the duties incident to the office of
Secretary of the Corporation.
TREASURER
A. The Treasurer shall have the care and custody of and be
responsible for all the funds and securities of the Corporation, and shall
deposit funds and securities in the name of the Corporation in such banks
or safe deposit companies as the Board of Directors may designate.
B. He has authority to make, sign, and endorse, in the name of the
Corporation, all checks, drafts, notes, and other orders for the payment of
money, and pay out and dispose of such under the direction of the President
or the Board of Directors.
C. He shall keep at the principal office of the Corporation accurate
books of account of all its business and transactions and shall at all
reasonable hours exhibit books and accounts to any director upon
application at the office of the Corporation during business hours.
D. He shall render a report of the condition of the finances of the
Corporation at each regular meeting of the Board of Directors and at such
other times as shall be required of him, and he shall make a full financial
report at the annual meeting of the Shareholders.
E. He shall further perform all duties incident to the office of
Treasurer of the Corporation.
F. If required by the Board of Directors, he shall give such bond as
it shall determine appropriate for the faithful performance of his duties.
OTHER OFFICERS
Other officers shall perform such duties and have such powers as may
be assigned to them by the Board of Directors.
Section 6. Vacancies. All vacancies in any office shall be filled
promptly by the Board of Directors, either at regular meetings or at a
meeting specially called for that purpose.
Section 7. Compensation of Officers. The officers shall receive such
salary or compensation as may be fixed by the Board of Directors.
Section 8. Reimbursement of Compensation of Officers. Any payments
made to an officer of the Corporation such as salary, commission, bonus,
interest, or rent, or entertainment expense incurred by him, which shall be
disallowed in whole or in part as a deductible expense by the Internal
Revenue Service, shall be reimbursed by such officer to the Corporation to
the full extent of such disallowance.
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<PAGE>
It shall be the duty of the directors, as a Board, to enforce payment
of each amount disallowed. In lieu of payment by the officer, subject to
the determination of the directors, proportionate amounts may be withheld
from his future compensation payments until the amount owed to the
Corporation has been recovered.
ARTICLE IV
SHARES
Section 1. Certificates. The shares of the Corporation shall be
represented by certificates prepared by the Board of Directors and signed
by the President and the Secretary. The certificates shall be numbered
consecutively and in the order in which they are issued, and a record shall
be maintained of the name of the person to whom the shares represented by
each such certificate is issued, and the number and class or series of such
shares, and the date of issue. Each certificate shall state the registered
holder's name, the number and class of shares represented, the date of
issue, the par value of such shares, or that they are without par value.
Section 2. Subscriptions. Subscriptions to the shares shall be paid
at such times and in such installments as the Board of Directors may
determine. If default shall be made in the payment of any installment as
required by such resolution, the Board may, in the manner prescribed by the
Virginia Stock Corporation Act, declare the shares and all previous
payments thereon forfeited for the use of the Corporation.
Section 3. Transfer of Shares. The shares of the Corporation shall
be assignable and transferable only on the books and records of the
Corporation and by the registered owner, or by his duly authorized
attorney, upon surrender of the certificate duly and properly endorsed with
proper evidence of authority to transfer. The Corporation shall issue a
new certificate for the shares surrendered to the person or persons
entitled to receive such shares.
Section 4. Return Certificates. All certificates for shares changed
or returned to the Corporation for transfer shall be marked by the
Secretary "Canceled," with the date of cancellation, and the transaction
shall be immediately recorded in the certificate book opposite the
memorandum of their issue. The returned certificate may be inserted in the
certificate book.
ARTICLE V
DISTRIBUTIONS
The Board of Directors, at any regular or special meeting, may
authorize and make distributions to its Shareholders. However, no
distribution may be made if, after giving it effect: (1) the Corporation
would not be able to pay its debts as they become due in the usual course
of business, or (2) the Corporation's total assets would be less than its
total liabilities.
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<PAGE>
ARTICLE VI
BILLS, NOTES ETC.
All bills payable, notes, checks, drafts, warrants, or other
negotiable instruments of the Corporation shall be made in the name of the
Corporation and shall be signed by the President or Secretary, or by such
officer or officers as the Board of Directors shall from time to time by
resolution direct.
No officer or agent of the Corporation, either singly or jointly with
others, shall have the power to make any bill payable, note, check, draft,
warrant, or other negotiable instrument, or endorse the same in the name of
the Corporation, or contract or cause to be contracted any debt of
liability in the name and on behalf of the Corporation except as herein
expressly prescribed and provided.
ARTICLE VII
OFFICERS
The principal office of the corporation shall be located in the City
of Newport News, Commonwealth of Virginia. The Board of Directors may
change the location of the principal office of the Corporation and may,
from time to time, designate other offices within or without the state as
the business of the Corporation may require.
ARTICLE VIII
AMENDMENTS
These Bylaws may be altered, amended, repealed, or added to by the
affirmative vote of a majority of the Shareholders entitled to vote in the
election of any director at an annual meeting or a special meeting called
for that purpose, provided that a written notice shall have been sent to
each Shareholder of record entitled to vote at such meeting at his last
known post office address at least ten (10) days before the date of such
annual or special meeting. The notice shall state the alterations,
amendments, additions, or changes which are proposed to be made in such
Bylaws. Only such changes shall be made as have been specified in the
notice. The Bylaws may also be altered, amended or repealed, or new Bylaws
adopted by a majority of the entire Board of Directors at a regular or
special meeting of the Board. However, any Bylaws adopted by the Board may
be altered, amended, or repealed by the Shareholders.
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<PAGE>
ARTICLE IX
WAIVER OF NOTICE
Whenever under the provisions of these Bylaws or the Virginia Stock
Corporation Act, any Shareholder or director is entitled to notice of any
regular or special meeting or of any action to be taken by the Corporation,
such meeting may be held or such action may be taken without the giving of
such notice, provided every Shareholder or director entitled to such notice
waives the notice requirement in a signed writing delivered to the
Secretary of the Corporation.
ARTICLE X
GENDER
All pronouns shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity of the party may require.
ARTICLE XI
INDEMNIFICATION
Section 1. Each person now or afterwards a director or officer of the
Corporation (and such person's heirs, executors and administrators) shall
(subject to Section 4 below) be indemnified by the Corporation against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Corporation) to which he was or is a party
or is threatened to be made a party by reason of the fact that he is or was
a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
if he acted in good faith and in the manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or on a plea of nolo
contendere or its equivalent, shall not of itself create a presumption that
such person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, that such person
had reasonable cause to believe that his conduct was unlawful.
Section 2. Each person now or hereafter a director or officer of the
Corporation (and such person's heirs, executors and administrators) shall
(subject to Section 4 below) be indemnified by the Corporation against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action or suit by or in the right of the
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<PAGE>
Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, if he acted in good faith and in the manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
provided that no indemnification shall be made in respect of any such
claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to
the Corporation unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability, in light of all the circumstances of the
case such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. The termination of any action,
suit or proceeding by judgment, order, settlement, shall not of itself
create a presumption that such person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation.
Section 3. To the extent that a director or officer of a Corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Sections 1 and 2, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 (unless ordered
by a court) shall be made by the Corporation only as authorized in the
specific case on a determination that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 1 and 2. Such determination
shall be made (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (c) by the stockholders.
Section 5. Expense (including attorneys' fees) incurred in defending
an action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized in
the manner provided in Section 4 on receipt of an undertaking by or on
behalf of the director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Section.
Section 6. The Board of Directors shall have the power to make any
other or further indemnity, including with respect to criminal proceedings
(by determination made by a majority vote of a quorum consisting of
directors who were not parties to such proceedings), to any officer or
director, except an indemnity against his gross negligence or willful
misconduct. Each such indemnity may continue as to a person who has ceased
to have the capacity referred to above and may inure to the benefit of the
heirs, executors and administrators of such a person.
Section 7. The Board of Directors shall have power to purchase and
maintain insurance on behalf of any person who is or was a director or
officer against any liability asserted against him and incurred by him in
any such capacity or as a result of his serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise or
arising out of his status
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<PAGE>
as any of the foregoing, whether or not the Corporation would have the
power to indemnify him against such liability under any provision of this
Article XI.
Section 8. For the purpose of this Article XI, references to
"Corporation" include all constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving corporation,
so that any person who is or was a director, officer, employee or agent of
such a constituent corporation or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as he would if he had
served the resulting or surviving corporation in the same capacity.
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AMENDMENT NO. 1 TO AGREEMENT OF AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (the "Amendment")
is made and entered into this ___ day of May, 1997, by and among NETWORK
LONG DISTANCE, INC., a Delaware corporation ("Network"), WATER ACQUISITION
CORP., a Virginia corporation ("Acquisition"), EASTERN TELECOM
INTERNATIONAL CORPORATION, a Virginia corporation ("Eastern"), and the
SHAREHOLDERS OF EASTERN TELECOM INTERNATIONAL CORPORATION (the
"Shareholders").
WHEREAS, the parties hereto have previously executed that certain
Agreement and Plan of Merger dated as of April 24, 1997 (the "Merger
Agreement"); and
WHEREAS, the parties hereto desire to amend the Merger Agreement as
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. CAPITALIZED TERMS. Capitalized terms used but not defined herein
shall have the meaning set forth in the Merger Agreement.
2. AMENDMENT TO THE MERGER AGREEMENT.
(a) Section 2.1(b) of the Merger Agreement is hereby amended so
that the next to last sentence of Section 2.1(b) reads as follows:
The Exchange Ratio shall mean a number of shares of
NETWORK Common determined by dividing (x) the Per Share
Consideration by (y) $7.875, and rounding the result to
three decimal places.
(b) Section 2.4(d) of the Merger Agreement is hereby amended to
read as follows:
(d) To the escrow agent named in the Escrow
Agreement (the "Escrow Agent"), that number of shares
from the Share Consideration that are valued at
$300,000 based upon a price of $7.875 per share,
together with executed stock powers from the
Shareholders, to be held pursuant to the terms of the
Escrow Agreement attached hereto as Exhibit 2.3(f) (the
"Escrow Agreement"), to satisfy all or part of any
claims for indemnity pursuant to Article VIII hereof;
<PAGE>
(c) Section 2.4(e) of the Merger Agreement is hereby amended to
read as follows:
(e) To the escrow agent named in the Working
Capital Escrow Agreement (the "Working Capital Escrow
Agent") (i) that number of shares from the Share
Consideration that are valued at $200,000, based upon
a price of $7.875 per share, together with executed
stock powers from the Shareholders and (ii) $200,000 in
cash equivalents, as a reserve for all or a part of any
adjustments pursuant to Section 2.5;
(d) Section 2.6(a) of the Merger Agreement is hereby amended to
read as follows:
(a) In the event the Adjusted Merger
Consideration is less than the Merger Consideration,
the number of shares of NETWORK Common (valued at
$7.875 per share) representing the value equal to the
difference between the Merger Consideration and the
Adjusted Merger Consideration shall be returned to
NETWORK from the Share Consideration held in escrow
pursuant to the Working Capital Escrow Agreement.
(d) Section 2.6(b) of the Merger Agreement is hereby amended to
read as follows:
(b) In the even the Adjusted Merger Consideration
exceeds the Merger Consideration, the Share
Consideration held in escrow pursuant to the Working
Capital Escrow Agreement shall be delivered to the
Shareholders and, if enough shares of NETWORK Common to
make up the difference are not held in escrow (based
upon a value of $7.875 per share), that amount of funds
escrowed pursuant to the Working Capital Escrow
Agreement which, when combined with such escrowed
shares, is sufficient to make up the difference, shall
be delivered to the Shareholders' Representative on
behalf of the Shareholders.
3. REFERENCES TO MERGER AGREEMENT. From and after the execution of
this Amendment by all of the parties hereto, all references in the Merger
Agreement to "this Agreement," "hereof," "herein" and similar terms shall
mean and refer to the Merger Agreement as amended by this Amendment, and
all references in other documents to the Merger Agreement shall mean such
Merger Agreement as amended by this Amendment.
4. RATIFICATION AND CONFIRMATION. The Merger Agreement is hereby
ratified and confirmed and, except as herein amended, remains in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment on the day, month and year first above written.
NETWORK LONG DISTANCE, INC.
By:/s/
_________________________________
Name:
_________________________________
Title:
_________________________________
WATER ACQUISITION CORP.
By: /s/
_________________________________
Name:
_________________________________
Title:
_________________________________
EASTERN TELECOM INTERNATIONAL CORPORATION
By: /s/
_________________________________
Name:
_________________________________
Title:
_________________________________
SHAREHOLDERS:
_________________________________
John D. Crawford
_________________________________
Thomas G. Keefe
_________________________________
Donna L. Raoust
<PAGE>
_________________________________
Glenn Callahan
_________________________________
Rick Davis
_________________________________
Layne Levine
_________________________________
Lisa Brown
_________________________________
Dean Young
